Securities Act Registration No. 333-_______________
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form N-14
Registration Statement Under the Securities Act of 1933
[ ] Pre-Effective Amendment No. __ [ ] Post Effective Amendment No. __
(Check appropriate box or boxes)
John Hancock Variable Series Trust I
(Exact Name of Registrant as Specified in Declaration of Trust)
197 Clarendon Street
Boston, Massachusetts 02117
(Address of Principal Executive Officer)
Registrant's Telephone Number: (713) 214-1456
Name and address of Agent for Services: Copy to:
ARNOLD BERGMAN, ESQUIRE THOMAS C. LAUERMAN, ESQUIRE
John Hancock Life Insurance Company Freedman, Levy, Kroll & Simonds
197 Clarendon Street 1050 Connecticut Avenue, N.W.
Boston, MA 02117 Washington, D.C. 20036
Approximate Date of Proposed public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933. It is
proposed that this filing will become effective on October 15, 2001 pursuant to
Rule 488 under the Act.
Pursuant to Rule 429 under the Act, the prospectus in this registration
statement also relates to Registrant's currently effective registration
statement on Form N-1A, File No. 33-2081. No filing fee is due in reliance on
Section 24(f) of the Act
JOHN HANCOCK VARIABLE SERIES TRUST I
CROSS-REFERENCE SHEET
Items Required by Form N-14
PART A
- ------
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Beginning of Registration COVER PAGE OF REGISTRATION
Statement and Outside Front STATEMENT; FRONT COVER PAGE OF
Cover Page of Prospectus PROSPECTUS
2. Beginning and Outside Back TABLE OF CONTENTS
Cover Page of Prospectus
3. Synopsis and Risk Factors SUMMARY; INVESTMENT RISKS
4. Information About the INTRODUCTION; SUMMARY; INVESTMENT
Transaction RISKS; INFORMATION CONCERNING THE
MEETING; PROPOSAL TO APPROVE THE
AGREEMENT AND PLAN OF REORGANIZATION;
FURTHER INFORMATION ON EACH
REORGANIZATION; CAPITALIZATION
5. Information About the PROSPECTUS COVER PAGE; INTRODUCTION;
Registrant SUMMARY; ADDITIONAL INFORMATION
ABOUT THE FUNDS' BUSINESSES
6. Information About the PROSPECTUS COVER PAGE; INTRODUCTION;
Company Being Acquired SUMMARY; ADDITIONAL INFORMATION
ABOUT THE FUNDS' BUSINESSES
7. Voting Information PROSPECTUS COVER PAGE; NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS;
SUMMARY; INFORMATION CONCERNING
THE MEETING; VOTING RIGHTS AND
REQUIRED VOTE
8. Interest of Certain Persons EXPERTS
and Experts
9. Additional Information NOT APPLICABLE
Required for Reoffering by
Persons Deemed to be
Underwriters
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. Additional Information A
About the Registrant
13. Additional Information About B
the Companies Being Acquired
14. Financial Statements C
A ADDITIONAL INFORMATION ABOUT GROWTH & INCOME FUND, MONEY MARKET FUND, EQUITY
INDEX FUND, INTERNATIONAL EQUITY FUND, FUNDAMENTAL GROWTH FUND, SMALL CAP
GROWTH FUND AND ACTIVE BOND FUND.
B ADDITIONAL INFORMATION ABOUT V.A. CORE EQUITY FUND, V.A. MONEY MARKET FUND,
V.A. BOND FUND, V.A. 500 INDEX FUND, V.A. INTERNATIONAL FUND, V.A. LARGE
CAP GROWTH FUND, V.A. MID CAP GROWTH FUND, V.A. SMALL CAP GROWTH FUND.
C ADDITIONAL INFORMATION ABOUT GROWTH & INCOME FUND, MONEY MARKET FUND, EQUITY
INDEX FUND, INTERNATIONAL EQUITY FUND, FUNDAMENTAL GROWTH FUND, SMALL CAP
GROWTH FUND AND ACTIVE BOND FUND.
PART C
- ------
Item No. Item Caption
- -------- ------------
15. Indemnification INDEMNIFICATION
16. Exhibits EXHIBITS
17. Undertakings UNDERTAKINGS
November 1, 2001
Dear Contract or Certificate Owner:
I am writing to ask for your vote on important matters concerning your
investment in certain funds within your John Hancock Variable Annuity.
Your fund's trustees are proposing the merger of certain funds in the John
Hancock Declaration Trust (the "Acquired Funds") into certain similar funds in
the John Hancock Variable Series Trust I (the "Acquiring Funds"), as described
in the enclosed proxy materials and summarized in the questions and answers on
the following pages.
The Board of Trustees considered the following matters, among others, in
approving the proposals:
|| In most cases, the Acquiring Funds' total expenses are lower. As a result,
shareholders may experience a reduction in the total amount of fees, as a
percentage of average net assets, that they indirectly pay. Consolidating
your fund's assets with a similar fund to increase the overall asset base
is a logical path for containing the fund's expense ratios going forward.
|| Combining the funds' assets into a single investment portfolio may broaden
diversification, making investors less vulnerable to weakness in any single
sector of the market.
The fund merger proposals have been unanimously approved by each fund's board of
trustees,
who believe the mergers will benefit you. The enclosed proxy statement contains
further explanation and important details of the reorganizations, which I
strongly encourage you to read before voting.
Your Vote Makes a Difference!
No matter what size your investment may be, your vote is important. Please read
the enclosed materials and to complete, sign and return the enclosed proxy
ballot(s) to us immediately. Your prompt response will help avoid the need for
additional mailings. For your convenience, we have provided a postage-paid
envelope.
If you have any questions or need additional information, please contact your
Investment Professional or call a John Hancock Service Representative at
1-800-824-0335, Monday through Friday between 8:00 A.M. and 8:00 P.M. Eastern
Time. I thank you for your prompt vote on this matter.
Sincerely,
/s/Maureen R. Ford
- ------------------
Maureen R. Ford
Chairman and Chief Executive Officer
Declaration Variable Annuity, Patriot Variable Annuity and Revolution Variable
Annuities are issued by John Hancock Life Insurance Company, or its subsidiary
John Hancock Variable Life Insurance Company*, and are distributed by John
Hancock Funds, Inc., 101 Huntington Avenue, Boston, MA 02199-7603, or Signator
Investors Inc., 200 Clarendon Street, Boston, MA 02117.
*Not licensed in New York.
Q&A
---
Q. What are the changes being proposed?
A. Generally, these proposals focus on merging funds into similar funds, which
have significantly larger assets and offer a greater opportunity for future
growth.
Specifically, the trustees of your fund(s) are proposing the following mergers:
- --------------------------------------------------------------------------------
Acquired Fund Acquiring Fund
- --------------------------------------------------------------------------------
Proposal 1 V.A. Core Equity Fund Growth & Income Fund
- --------------------------------------------------------------------------------
Proposal 2 V.A. Large Cap Growth Fund Growth & Income Fund
- --------------------------------------------------------------------------------
Proposal 3 V.A. 500 Index Fund Equity Index Fund
- --------------------------------------------------------------------------------
Proposal 4 V.A. International Fund International Equity Fund
- --------------------------------------------------------------------------------
Proposal 5 V.A. Mid Cap Growth Fund Fundamental Growth Fund
- --------------------------------------------------------------------------------
Proposal 6 V.A. Small Cap Growth Fund Small Cap Growth Fund
- --------------------------------------------------------------------------------
Proposal 7 V.A. Bond Fund Active Bond Fund
- --------------------------------------------------------------------------------
Proposal 8 V.A. Money Market Fund Money Market Fund
- --------------------------------------------------------------------------------
Q. Will this change affect the number of units I currently have? Will there be
any tax implications?
A. No. There will be no impact on the number of units you have invested in your
variable annuity and there are no tax implications (no Form 1099R will be
generated)
Q. Will the transfer count towards the 12 free transfers allowed per contract
year?
A. No, the merger transfer will be free and it will not count toward your
allowable 12 free transfers per year.
Q. What if I do not want to have any units of the acquired fund transferred to
the proposed acquiring fund?
A. Prior to the merger, you may contact an Annuity Service Representative at
1-800-824-0335, Monday through Friday between 8:00 A.M. - 8:00 P.M. Eastern Time
and request a transfer to another investment option or Fixed Account (if
available in your state). Please consult your Investment Professional prior to
reallocating your assets.
Q. How do I vote?
A. Follow two simple steps:
STEP 1: First, read the sections of the proxy statement that apply to your
fund(s). STEP 2: Finally, complete the enclosed voting card for each of your
funds and return it in the enclosed postage-paid envelope. If you have more than
one card, you need to complete, sign and mail each one.
Q. Does my vote make a difference?
A. Whether you are a large or small investor, your vote is important, and we
urge you to participate in this process to ensure that John Hancock represents
your wishes when it casts votes at the shareholder meeting. The Board voted
unanimously to recommend these changes for your fund(s), and your approval is
needed to implement the changes.
JOHN HANCOCK V.A. CORE EQUITY FUND
JOHN HANCOCK V.A. LARGE CAP GROWTH FUND
JOHN HANCOCK V.A. 500 INDEX FUND
JOHN HANCOCK V.A. INTERNATIONAL FUND
JOHN HANCOCK V.A. MID CAP GROWTH FUND
JOHN HANCOCK V.A. SMALL CAP GROWTH FUND
JOHN HANCOCK V.A. BOND FUND
JOHN HANCOCK V.A. MONEY MARKET FUND
(each a "fund", and each a series of John Hancock Declaration Trust)
101 Huntington Avenue
Boston, MA 02199
NOTICE OF MEETING OF SHAREHOLDERS
SCHEDULED FOR DECEMBER 5, 2001
This is the formal agenda for each fund's shareholder meeting. It tells you, as
contract owners, and the insurance companies that are the owners of each fund's
shares, what matters will be voted on and the time and place of the meeting. The
insurance companies will vote their fund shares as instructed by their contract
or certificate owners, who are also referred to in the proxy materials as
"shareholders" for this limited purpose.
To the shareholders of each fund:
A joint shareholder meeting for your fund(s) will be held at 101 Huntington
Avenue, Boston, Massachusetts on Wednesday, December 5, 2001 at 9:00 a.m.,
Eastern time, to consider the following:
1. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock V.A. Core Equity Fund ("V.A. Core Equity Fund") and the Growth &
Income Fund of the John Hancock Variable Series Trust I ("Growth & Income
Fund"). Under this Agreement, V.A. Core Equity Fund would transfer all of
its assets to Growth & Income Fund in exchange for shares of Growth &
Income Fund. These shares would be distributed proportionately to the
shareholders of V.A. Core Equity Fund. Growth & Income Fund would also
assume V.A. Core Equity Fund's liabilities. V.A. Core Equity Fund's Board
of Trustees recommends that shareholders vote FOR this proposal.
2. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock V.A. Large Cap Growth Fund ("V.A. Large Cap Growth Fund") and the
Growth & Income Fund of the John Hancock Variable Series Trust I ("Growth
& Income Fund"). Under this Agreement, V.A. Large Cap Growth Fund would
transfer all of its assets to Growth & Income Fund in exchange for shares
of Growth & Income Fund. These shares would be distributed proportionately
to the shareholders of V.A. Large Cap Growth Fund. Growth & Income Fund
would also assume V.A. Large Cap Growth Fund's liabilities. V.A. Large Cap
Growth Fund's Board of Trustees recommends that shareholders vote FOR this
proposal.
3. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock V.A. 500 Index Fund ("V.A. 500 Index Fund") and the Equity Index
Fund of the John Hancock Variable Series Trust I ("Equity Index Fund").
Under this Agreement, V.A. 500 Index Fund would transfer all of its assets
to Equity Index Fund in exchange for shares of Equity Index Fund. These
shares would be distributed proportionately to the shareholders of V.A.
500 Index Fund. Equity Index Fund would also assume V.A. 500 Index Fund's
liabilities. V.A. 500 Index Fund's Board of Trustees recommends that
shareholders vote FOR this proposal.
4. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock V.A. International Fund ("V.A. International Fund") and the
International Equity Fund of the John Hancock Variable Series Trust I
("International Equity Fund"). Under this Agreement, V.A. International
Fund would transfer all of its assets to International Equity Fund in
exchange for shares of International Equity Fund. These shares would be
distributed proportionately to the shareholders of V.A. International
Fund. International Equity Fund would also assume V.A. International
Fund's liabilities. V.A. International Fund's Board of Trustees recommends
that shareholders vote FOR this proposal.
5. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock V.A. Mid Cap Growth Fund ("V.A. Mid Cap Growth Fund") and the
Fundamental Growth Fund of the John Hancock Variable Series Trust I
("Fundamental Growth Fund"). Under this Agreement, V.A. Mid Cap Growth
Fund would transfer all of its assets to Fundamental Growth Fund in
exchange for shares of Fundamental Growth Fund. These shares would be
distributed proportionately to the shareholders of V.A. Mid Cap Growth
Fund. Fundamental Growth Fund would also assume V.A. Mid Cap Growth Fund's
liabilities. V.A. Mid Cap Growth Fund's Board of Trustees recommends that
shareholders vote FOR this proposal.
6. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock V.A. Small Cap Growth Fund ("V.A. Small Cap Growth Fund") and the
Small Cap Growth Fund of the John Hancock Variable Series Trust I ("VST
Small Cap Growth Fund"). Under this Agreement, V.A. Small Cap Growth Fund
would transfer all of its assets to VST Small Cap Growth Fund in exchange
for shares of VST Small Cap Growth Fund. These shares would be distributed
proportionately to the shareholders of V.A. Small Cap Growth Fund. VST
Small Cap Growth Fund would also assume V.A. Small Cap Growth Fund's
liabilities. V.A. Small Cap Growth Fund's Board of Trustees recommends
that shareholders vote FOR this proposal.
7. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock V.A. Bond Fund ("V.A. Bond Fund") and the Active Bond Fund of the
John Hancock Variable Series Trust I ("Active Bond Fund"). Under this
Agreement, V.A. Bond Fund would transfer all of its assets to Active Bond
Fund in exchange for shares of Active Bond Fund. These shares would be
distributed proportionately to the shareholders of V.A. Bond Fund. Active
Bond Fund would also assume V.A. Bond Fund's liabilities. V.A. Bond Fund's
Board of Trustees recommends that shareholders vote FOR this proposal.
8. A proposal to approve an Agreement and Plan of Reorganization between John
Hancock V.A. Money Market Fund ("V.A. Money Market Fund") and the Money
Market Fund of the John Hancock Variable Series Trust I ("VST Money Market
Fund"). Under this Agreement, V.A. Money Market Fund would transfer all of
its assets to VST Money Market Fund in exchange for shares of VST Money
Market Fund. These shares would be distributed proportionately to the
shareholders of V.A. Money Market Fund. VST Money Market Fund would also
assume V.A. Money Market Fund's liabilities. V.A. Money Market Fund's
Board of Trustees recommends that shareholders vote FOR this proposal.
9. Any other business that may properly come before the meeting.
Shareholders of record as of the close of business on September 20, 2001 are
entitled to vote at the meeting and any related follow-up meetings.
Whether or not you expect to attend the meeting, please complete and return the
enclosed proxy card (voting instruction card). If shareholders do not return
their proxies in sufficient numbers, your fund will incur the cost of extra
solicitations, which is indirectly borne by shareholders.
By order of the Board of Trustees,
Susan S. Newton
Secretary
November 1, 2001
2
PROXY STATEMENT OF
V.A. CORE EQUITY FUND
V.A. LARGE CAP GROWTH FUND
V.A. 500 INDEX FUND
V.A. INTERNATIONAL FUND
V.A. MID CAP GROWTH FUND
V.A. SMALL CAP GROWTH FUND
V.A. BOND FUND
V.A. MONEY MARKET FUND
(each an "Acquired Fund" or "your fund", and
each a series of John Hancock Declaration Trust)
PROSPECTUS FOR
GROWTH & INCOME FUND
EQUITY INDEX FUND
INTERNATIONAL EQUITY FUND
FUNDAMENTAL GROWTH FUND
SMALL CAP GROWTH FUND
ACTIVE BOND FUND
MONEY MARKET FUND
(each an "Acquiring Fund", and each a series of
John Hancock Variable Series Trust I)
This proxy statement and prospectus contains the information shareholders should
know before voting on the proposed reorganization of the Acquired Funds into the
Acquiring Funds. Please read it carefully and retain it for future reference.
How each Reorganization Will Work
o Each Acquired Fund will transfer all of its assets to the respective
Acquiring Fund. The Acquiring Fund will assume the Acquired Fund's
liabilities.
o Each Acquiring Fund will issue shares to the respective Acquired
Fund in an amount equal to the value of the Acquired Fund's shares.
These shares will be distributed to the Acquired Fund's shareholders
in proportion to their holdings on the reorganization date.
o The reorganization will be tax-free to shareholders.
o Each Acquired Fund will be liquidated and fund shareholders will
become shareholders of the corresponding Acquiring Fund.
Shares of the Acquiring Funds are not deposits or obligations of, or guaranteed
or endorsed by, any bank or other depository institution. These shares are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency.
Shares of the Acquiring Funds have not been approved or disapproved by the
Securities and Exchange Commission. The Securities and Exchange Commission has
not passed upon the accuracy or adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
1
Why the Acquired Funds' Trustees are Recommending the Reorganizations
The Acquired Funds' Trustees believe that reorganizing each fund into a larger
fund with similar investment policies will enable the shareholders of the funds
to benefit from increased diversification, the ability to achieve better net
prices on securities trades and economies of scale that may contribute to a
lower expense ratio. Therefore, the Trustees recommend that Acquired Fund
shareholders vote FOR the reorganization.
- ---------------------------------------------------------------------------------------------
Where to Get More Information
- ---------------------------------------------------------------------------------------------
Prospectuses of the Acquired Funds and the Incorporated by reference into this proxy
Acquiring Funds dated May 1, 2001. statement and prospectus and summarized in
Appendices A and B.
- ---------------------------------------------------------------------------------------------
The Acquiring Funds' annual and semiannual On file with the Securities and Exchange
reports to shareholders. Commission ("SEC") and available at no
- ------------------------------------------------ charge by calling 1-800-824-0335.
The Acquired Funds' annual and semiannual Incorporated by reference into this proxy
reports to shareholders. statement and prospectus.
- ------------------------------------------------
A statement of additional information dated
November 1, 2001. It contains additional
information about the Acquired Funds and the
Acquiring Funds.
- ---------------------------------------------------------------------------------------------
To ask questions about this proxy statement Call our toll-free telephone
and prospectus. number: 1-800-824-0335.
- ---------------------------------------------------------------------------------------------
The date of this proxy statement and prospectus is November 1, 2001.
2
TABLE OF CONTENTS
Page
INTRODUCTION............................................................. 4
PROPOSAL 1 - V.A. CORE EQUITY FUND....................................... 5
Summary................................................................. 5
Investment Risks........................................................ 11
Proposal to Approve the Agreement and Plan of Reorganization............ 12
PROPOSAL 2 - V.A. LARGE CAP GROWTH FUND.................................. 14
Summary................................................................. 14
Investment Risks........................................................ 20
Proposal to Approve the Agreement and Plan of Reorganization............ 21
PROPOSAL 3 - V.A. 500 INDEX FUND......................................... 23
Summary................................................................. 23
Investment Risks........................................................ 28
Proposal to Approve the Agreement and Plan of Reorganization............ 28
PROPOSAL 4 - V.A. INTERNATIONAL FUND..................................... 30
Summary................................................................. 30
Investment Risks........................................................ 35
Proposal to Approve the Agreement and Plan of Reorganization............ 36
PROPOSAL 5 - V.A. MID CAP GROWTH FUND.................................... 38
Summary................................................................. 38
Investment Risks........................................................ 43
Proposal to Approve the Agreement and Plan of Reorganization............ 43
PROPOSAL 6 - V.A. SMALL CAP GROWTH FUND.................................. 45
Summary................................................................. 45
Investment Risks........................................................ 50
Proposal to Approve the Agreement and Plan of Reorganization............ 50
PROPOSAL 7 - V.A. Bond Fund.............................................. 52
Summary................................................................. 52
Investment Risks........................................................ 57
Proposal to Approve the Agreement and Plan of Reorganization............ 57
PROPOSAL 8 - V.A. MONEY MARKET FUND...................................... 59
Summary................................................................. 59
Investment Risks........................................................ 64
Proposal to Approve the Agreement and Plan of Reorganization............ 65
FURTHER INFORMATION ON EACH REORGANIZATION............................... 66
CAPITALIZATION........................................................... 67
ADDITIONAL INFORMATION ABOUT
THE FUNDS' BUSINESSES................................................... 69
BOARDS' EVALUATION AND RECOMMENDATION ................................... 69
VOTING RIGHTS AND REQUIRED VOTE ......................................... 70
INFORMATION CONCERNING THE MEETING....................................... 70
OWNERSHIP OF SHARES OF THE FUNDS......................................... 72
EXPERTS.................................................................. 73
AVAILABLE INFORMATION.................................................... 74
EXHIBIT A - Form of Agreement and Plan of Reorganization................. 75
APPENDICES
A. BASIC INFORMATION ABOUT THE FUNDS (attached to this document).
B. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: DECEMBER 31, 2000
(attached to this document).
3
INTRODUCTION
This proxy statement and prospectus is being used by the Acquired Funds' Board
of Trustees to solicit proxies to be voted at a special meeting of each Acquired
Fund's shareholders. This meeting will be held at 101 Huntington Avenue, Boston,
Massachusetts on Wednesday, December 5, 2001 at 9:00 a.m., Eastern time. The
purpose of the meeting is to consider proposals to approve Agreements and Plans
of Reorganization providing for the reorganization of the Acquired Funds into
the Acquiring Funds, as described in the table below:
-----------------------------------------------------------------------------------
Acquired Fund Acquiring Fund
-----------------------------------------------------------------------------------
Proposal 1 V.A. Core Equity Fund Growth & Income Fund
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Proposal 2 V.A. Large Cap Growth Fund Growth & Income Fund
-----------------------------------------------------------------------------------
Proposal 3 V.A. 500 Index Fund Equity Index Fund
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Proposal 4 V.A. International Fund International Equity Fund
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Proposal 5 V.A. Mid Cap Growth Fund Fundamental Growth Fund
-----------------------------------------------------------------------------------
Proposal 6 V.A. Small Cap Growth Fund VST Small Cap Growth Fund
-----------------------------------------------------------------------------------
Proposal 7 V.A. Bond Fund Active Bond Fund
-----------------------------------------------------------------------------------
Proposal 8 V.A. Money Market Fund VST Money Market Fund
-----------------------------------------------------------------------------------
Who is Eligible to Vote?
Shareholders of record on September 20, 2001 (record date) are entitled to
attend and vote at the meeting or any adjourned meeting. Each share is entitled
to one vote. As of the record date, the insurance companies, on behalf of the
separate accounts, were shareholders of record of the Acquired Funds. The
insurance companies will vote shares of the Acquired Funds held by them in
accordance with voting instructions received from contract owners for whose
accounts the shares are held. The enclosed voting instruction card will be used
by the insurance companies to receive voting instructions from contract owners.
The notice of meeting, the proxy card (voting instruction card), the proxy
statement and prospectus are being mailed to the insurance companies and
contract owners on or about November 1, 2001.
Summary of each Proposal
For each proposal, this proxy statement and prospectus includes a summary of
more complete information appearing later in the proxy statement. You should
read the entire proxy statement, Appendices A and B, and Exhibit A carefully,
because they contain details that are not in the summary. You can obtain
information about rights of a holder of a variable contract from your Annuity
Prospectus.
4
PROPOSAL 1
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
V.A. CORE EQUITY FUND AND GROWTH & INCOME FUND
A proposal to approve an Agreement and Plan of Reorganization between V.A. Core
Equity Fund and Growth & Income Fund. Under this Agreement, V.A. Core Equity
Fund would transfer all of its assets to Growth & Income Fund in exchange for
shares of Growth & Income Fund. These shares would be distributed
proportionately to the shareholders of V.A. Core Equity Fund. Growth & Income
Fund would also assume V.A. Core Equity Fund's liabilities. V.A. Core Equity
Fund's Board of Trustees recommends that shareholders vote FOR this proposal.
SUMMARY
Comparison of V.A. Core Equity Fund to Growth & Income Fund
- ----------------------------------------------------------------------------------------------------------------
V.A. Core Equity Growth & Income
- ----------------------------------------------------------------------------------------------------------------
Business: A diversified series of John Hancock A non-diversified series of John Hancock
Declaration Trust. The trust is an Variable Series Trust I. The trust is an
open-end investment company organized open-end investment company organized as a
as a Massachusetts business trust. Massachusetts business trust.
- ----------------------------------------------------------------------------------------------------------------
Net assets as of June 30, $41.1 million. $2,799.9 million.
2001:
- ----------------------------------------------------------------------------------------------------------------
Investment adviser and Investment Adviser: Investment Adviser:
portfolio managers: John Hancock Advisers, Inc. John Hancock Life Insurance Company
Subadviser: Subadviser:
Independence Investment LLC Independence Investment LLC
-A subsidiary of John Hancock Portfolio Managers:
Financial Services, Inc. Investment team overseen by:
-Founded in 1982
-Supervised by the adviser Paul F. McManus
-Senior Vice President of subadviser
Portfolio Managers: -Joined team in 1996
-Joined subadviser in 1982
Team responsible for day-to-day
investment management Subadviser:
Putnam Investment Management LLC
-Managing since 1937
-Managing fund since November, 2000
Portfolio Managers:
Investment team overseen by:
C. Beth Cotner, CFA
-Managing Director and Chief Investment
Officer of subadviser
-Joined subadviser in 1995
-Began career in 1976
- ----------------------------------------------------------------------------------------------------------------
5
- ----------------------------------------------------------------------------------------------------------------
V.A. Core Equity Fund Growth & Income Fund
- ----------------------------------------------------------------------------------------------------------------
Investment objective: The fund seeks above average total return The fund is a non-diversified large and
(capital appreciation plus income). This mid cap stock fund that seeks income and
objective can be changed without long-term capital appreciation. This
shareholder approval. objective can be changed without
shareholder approval.
- ---------------------- ------------------------------------------- --------------------------------------------
Primary investments: The fund invests at least 65% of assets The fund invests primarily in a
in a diversified portfolio of equities diversified mix of common stocks of large
which are primarily large capitalization and mid-sized U.S. companies. The fund
stocks. In normal market conditions, the employs two subadvisers, Independence and
fund is almost entirely invested in Putnam, each of which employs its own
stocks. The fund's risk profile is investment approach and independently
similar to that of the Standard & Poor's manages its portion of the fund.
500 Index. Independence normally invests in 80 to 160
stocks, with at least 65% (usually higher) of
its assets in large cap companies. Putnam
normally invests in 65 to 110 stocks, with
at least 65% (usually higher) of its assets
in large and mid cap companies.
- ---------------------- ----------------------------------------------------------------------------------------
Foreign securities: The Fund may invest in foreign securities which are U.S. dollar-denominated.
- ---------------------- ------------------------------------------- --------------------------------------------
Diversification: The fund is diversified and, with respect The fund is non-diversified and can invest
to 75% of total assets, cannot invest more than 5% of total assets in securities
more than 5% of total assets in of a single issuer.
securities of a single issuer.
- ---------------------- ------------------------------------------- --------------------------------------------
Initial public Not applicable. The fund may invest in IPOs.
offerings ("IPOs"):
- ---------------------- ----------------------------------------------------------------------------------------
Derivatives: The fund may make limited use of certain derivatives (investments whose value is based
on indices or other securities).
- ---------------------- -------------------------------------------- -------------------------------------------
Temporary defensive In abnormal market conditions, the fund In abnormal market conditions, the fund
positions: may temporarily invest more than 35% of may take temporary defensive measures -
assets in investment-grade short-term such as holding unusually large amounts
securities. In these and other cases, the of cash and cash equivalents - that are
fund might not achieve its goal. inconsistent with the fund's primary
investment strategy. In taking those
measures, the fund may not achieve its
investment goal.
- ---------------------- -------------------------------------------- -------------------------------------------
6
The Funds' Expenses
Both funds pay various expenses. The first two expense tables appearing below
show the expenses for the twelve-month period ended June 30, 2001, adjusted to
reflect any changes. Future expenses may be greater or less. The examples
contained in each expense table show what you would pay if you invested $10,000
over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
examples do not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the funds serve as an investment
vehicle.) The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.
V.A. Core Equity Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.70%
Other expenses 0.17%
Total fund operating expenses 0.87%
Expense reimbursement (1) 0.00%
Actual operating expenses 0.87%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $89 $278 $483 $1075
(1) V.A. Core Equity Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.25% until 5/1/02.
7
Growth & Income Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.67%
Other expenses 0.12%
Total fund operating expenses 0.79%
Expense reimbursement (1) 0.02%
Actual operating expenses 0.77%
(1) Growth & Income Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
Example
Year 1 Year 3 Year 5 Year 10
At end of period $79 $246 $428 $954
Pro Forma Expense Table
The board of trustees of another John Hancock fund, V.A. Large Cap Growth Fund,
has recommended that V.A. Large Cap Growth Fund also reorganize into Growth &
Income Fund. The reorganization of V.A. Core Equity Fund with Growth & Income
Fund, however, does not depend upon whether the reorganization involving V.A.
Large Cap Growth Fund occurs. Your trustees do not expect the total expenses
paid by Growth & Income Fund to increase if both reorganizations do occur.
The next two expense tables show the hypothetical ("pro forma") expenses of
Growth & Income Fund assuming (1) that a reorganization with V.A. Core Equity
Fund, but not V.A. Large Cap Growth Fund, occurred on June 30, 2000 or (2) that
a reorganization with both V.A. Core Equity Fund and V.A. Large Cap Growth Fund
occurred on June 30, 2000. The expenses shown in the table for V.A. Core Equity
Fund and Growth & Income Fund are based on fees and expenses incurred during the
twelve months ended June 30, 2001, adjusted to reflect any changes. Growth &
Income Fund's actual expenses after the reorganization may be greater or less
than those shown. The example contained in the pro forma expense table shows
what you would pay on a $10,000 investment if the reorganization had occurred on
June 30, 2000. Each example assumes that you reinvested all dividends and that
the average annual return was 5%. (The examples do not reflect the fees or
expenses associated with variable annuity and variable life insurance contracts
for which the funds serve as an investment vehicle.) The pro forma examples are
for comparison purposes only and are not a representation of Growth & Income
Fund's actual expenses or returns, either past or future.
8
Growth & Income Fund (PRO FORMA)
(Assuming reorganization with V.A. Core Equity Fund only)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.67%
Other expenses 0.12%
Total fund operating expenses 0.79%
Expense reimbursement (1) 0.02%
Actual operating expenses 0.77%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $79 $246 $427 $953
(1) Growth & Income Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
Growth & Income Fund (PRO FORMA)
(Assuming reorganization with both V.A. Core Equity Fund and V.A. Large Cap
Growth Fund)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.67%
Other expenses 0.12%
Total fund operating expenses 0.79%
Expense reimbursement (2) 0.02%
Actual operating expenses 0.77%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $79 $246 $427 $953
(2) Growth & Income Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
9
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Core Equity Fund will transfer all of its assets to
Growth & Income Fund. Growth & Income Fund will assume V.A. Core
Equity Fund's liabilities. The net asset value of both funds will be
computed as of 5:00 p.m., Eastern time, on the reorganization date.
o Growth & Income Fund will issue to V.A. Core Equity Fund shares in
an amount equal to the aggregate net asset value of V.A. Core Equity
Fund's shares. These shares will be distributed immediately to V.A.
Core Equity Fund's shareholders in proportion to their holdings on
the reorganization date. As a result, shareholders of V.A. Core
Equity Fund will end up as shareholders of Growth & Income Fund.
o After the reorganization is over, V.A. Core Equity Fund will be
terminated.
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel
to V.A. Core Equity Fund.
The following diagram shows how the reorganization would be carried out.
V. A. Core Equity V. A. Core Equity Fund Growth & Income
Fund transfers assets assets and liabilities Fund receives assets
and liabilities to Growth ----------->---------- and assumes liabilities
& Income Fund of V.A. Core Equity
Fund
Shareholders -----------<---------- Issues Shares
V.A. Core Equity Fund receives Growth & Income Fund shares and
and distributes them to its shareholders.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets: V.A.
Core Equity Fund--0.70% and Growth & Income Fund 0.67%. Growth & Income Fund's
management fee rate of Fund 0.67% and its pro forma management fee rate of 0.67%
are lower than V.A. Core Equity Fund's management fee rate of 0.70%. V.A. Core
Equity Fund's gross total annual operating expenses of 0.87% are substantially
higher than those of Growth & Income Fund which are 0.79%. Even after the
reduction of each fund's other expenses as a result of the adviser's voluntary
agreement to limit the funds' other expenses, V.A. Core Equity Fund's total
annual operating expenses (0.87%) are higher than those of Growth & Income Fund
(0.77%). After the reorganization, Growth & Income Fund's pro forma total annual
operating expenses (0.77%) are less than those of V.A. Core Equity Fund's gross
total annual operating expenses (0.87%) and net total annual operating expenses
(0.87%).
Investment management fees as a percentage of average daily net assets.
V.A. Core Equity 0.70% Growth & Income 0.71% on first $150 million
0.69% on next $150 million
0.67% in excess of $300 million
10
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table shows that the
risks affecting each fund are similar and compares the risks affecting each
fund.
- ---------------------------------------------------------------------------------------------------------------------------------
V.A. Core Equity Fund Growth & Income Fund
- ---------------------------------------------------------------------------------------------------------------------------------
- ------------------------------- --------------------------------------------------------------------------------------------
Stock market risk The value of securities in the fund may go down in response to overall stock market
movements. Markets tend to move in cycles, with periods of rising prices and periods of falling
prices. Stocks tend to go up and down in value more than bonds. If the fund concentrates in
certain sectors, its performance could be worse than that of the overall stock market.
- ------------------------------- --------------------------------------------------------------------------------------------
Manager risk The manager and its strategy may fail to produce the intended results. The fund could
underperform its peers or lose money if the manager's investment strategy does not perform
as expected.
- ------------------------------- ---------------------------------------------- ---------------------------------------------
Investment category risk The large capitalization stocks in which the The large and medium capitalization stocks
fund primarily invests could fall out of in which the fund primarily invests could
favor with the market, causing the fund to fall out of favor with the market, causing
underperform funds that focus on small or the fund to underperform funds that focus
medium capitalization stocks. on small capitalization stocks.
- ------------------------------- ---------------------------------------------- ---------------------------------------------
Non-diversification risk Not applicable. The fund's larger positions in individual
companies could lead to more volatile
performance relative to more diversified
funds. The less diversified the fund's
holdings are, the more a specific stock's
poor performance is likely to hurt the
fund's performance.
- ------------------------------- --------------------------------------------------------------------------------------------
Small and medium The fund's investments in small or medium companies may be subject to capitalization
capitalization larger and more erratic price movements than investments in large capitalization companies.
company risk
- ------------------------------- ---------------------------------------------- ---------------------------------------------
Initial public offering (IPO) Not applicable. A significant part of the fund's return may
risk at times be attributable to investments in
IPOs. Many IPO stocks are issued by, and involve the
risks associated with, small and medium
capitalization companies.
- ------------------------------- --------------------------------------------------------------------------------------------
Foreign securities risk Foreign investments involve additional risks, including potentially
inadequate or inaccurate financial information and social or political instability.
- ------------------------------- --------------------------------------------------------------------------------------------
Derivatives risk Certain derivative instruments can produce disproportionate gains or losses and are riskier
than direct investments. Also, in a down market derivatives could become harder to value or
sell at a fair price.
- ------------------------------- --------------------------------------------------------------------------------------------
Turnover risk In general, the greater the volume of buying and selling by a fund (and the higher its
"turnover rate"), the greater the impact that transaction costs will have on the fund's
performance. The fund's turnover rate may exceed 100%, which is considered relatively high.
- ------------------------------- --------------------------------------------------------------------------------------------
11
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
Shareholders are being asked to approve an Agreement and Plan of Reorganization,
a form of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Core Equity Fund will transfer all of its assets to
Growth & Income Fund and Growth & Income Fund will assume all of
V.A. Core Equity Fund's liabilities. This will result in the
addition of V.A. Core Equity Fund's assets to Growth & Income Fund's
portfolio. The net asset value of both funds will be computed as of
5:00 p.m., Eastern time, on the reorganization date.
o Growth & Income Fund will issue to V.A. Core Equity Fund shares in
an amount equal to the aggregate net asset value of V.A. Core Equity
Fund's shares. As part of the liquidation of V.A. Core Equity Fund,
these shares will be distributed immediately to shareholders of
record of V.A. Core Equity Fund in proportion to their holdings on
the reorganization date. As a result, shareholders of V.A. Core
Equity Fund will end up as shareholders of Growth & Income Fund.
o After the reorganization is over, the existence of V.A. Core Equity
Fund will be terminated.
Reasons for the Proposed Reorganization
The Board of Trustees of V.A. Core Equity Fund believes that the proposed
reorganization will be advantageous to the shareholders of V.A. Core Equity Fund
for several reasons. The Board of Trustees considered the following matters,
among others, in approving the proposal.
First, V.A. Core Equity Fund is no longer being offered to new variable
insurance contract holders, making it increasingly difficult for the fund to
attract assets.
Second, shareholders may be better served by a fund offering more
diversification. Growth & Income Fund has a larger asset size than V.A. Core
Equity Fund and may invest in a broader range of securities. Combining the
funds' assets into a single investment portfolio may broaden diversification.
Third, Growth & Income Fund shares have performed similarly to V.A. Core Equity
Fund shares over the life of both funds. While past performance cannot predict
future results, the Trustees believe that Growth & Income Fund is better
positioned than V.A. Core Equity Fund to generate strong returns because of its
ability to choose from a broader range of investment opportunities.
Fourth, a combined fund may offer economies of scale that can lead to better
control over expenses than is possible for V.A. Core Equity Fund alone. Both
funds incur substantial costs for accounting, legal, transfer agency services,
insurance, and custodial and administrative services.
12
Fifth, Growth & Income Fund's total expenses are lower than V.A. Core Equity
Fund's total expenses. As a result of the reorganization, shareholders of V.A.
Core Equity Fund may experience a reduction in the total amount of fees, as a
percentage of average net assets, that they indirectly pay each month.
The Trustees believe that Growth & Income Fund shareholders will also benefit
from improved diversification as a result of the reorganization. Although Growth
& Income Fund is a larger fund than V.A. Core Equity Fund, the Trustees believe
that the addition of V.A. Core Equity Fund's assets may add to the
diversification of Growth & Income Fund's overall portfolio and therefore
provide an economic benefit to Growth & Income Fund and its shareholders.
The Boards of Trustees of both funds also considered that the adviser will also
benefit from the reorganization. For example, the adviser might realize time
savings from the need to prepare fewer reports and regulatory filings. The
Trustees believe, however, that these savings will not amount to a significant
economic benefit to the adviser.
Comparative Fees and Expense Ratios. As discussed above in the Summary, the
advisory fee rate paid by V.A. Core Equity Fund is higher than the rate paid by
Growth & Income Fund. Growth & Income Fund's management fee rate of 0.67% and
its pro forma management fee rate of 0.67% are lower than V.A. Core Equity
Fund's management fee rate of 0.70%.
V.A. Core Equity Fund's gross total annual operating expenses of 0.87% are
substantially higher that those of Growth & Income Fund which are 0.79%. Even
after the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. Core Equity Fund's
total annual operating expenses (0.87%) are higher than those of Growth & Income
Fund (0.77%). After the reorganization, Growth & Income Fund's pro forma total
annual operating expenses (0.77%) are less than those of V.A. Core Equity Fund's
gross total annual operating expenses (0.87%) and net total annual operating
expenses (0.87%).
The Trustees do not believe, given V.A. Core Equity Fund's current size and
historical growth rate, that V.A. Core Equity Fund will grow to an asset size
that would allow V.A. Core Equity Fund to realize the benefits of economies of
scale, including better control over expenses. The Trustees also do not believe
that V.A. Core Equity Fund will reach an asset size which will allow V.A. Core
Equity Fund to significantly broaden the diversification of its investment
portfolio.
Comparative Performance. The trustees also took into consideration the relative
performance of V.A. Core Equity Fund and Growth & Income Fund.
13
PROPOSAL 2
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
V.A. LARGE CAP GROWTH FUND AND GROWTH & INCOME FUND
A proposal to approve an Agreement and Plan of Reorganization between V.A. Large
Cap Growth Fund and Growth & Income Fund. Under this Agreement, V.A. Large Cap
Growth Fund would transfer all of its assets to Growth & Income Fund in exchange
for shares of Growth & Income Fund. These shares would be distributed
proportionately to the shareholders of V.A. Large Cap Growth Fund. Growth &
Income Fund would also assume V.A. Large Cap Growth Fund's liabilities. V.A.
Large Cap Growth Fund's Board of Trustees recommends that shareholders vote FOR
this proposal.
SUMMARY
Comparison of V.A. Large Cap Growth Fund to Growth & Income Fund
- -------------------------------------------------------------------------------------------------------------------
V.A. Large Cap Growth Growth & Income
- -------------------------------------------------------------------------------------------------------------------
Business: A diversified series of John Hancock A non-diversified series of John Hancock
Declaration Trust. The trust is an Variable Series Trust I. The trust is an
open-end investment company organized open-end investment company organized as a
as a Massachusetts business trust. Massachusetts business trust.
- -------------------------------------------------------------------------------------------------------------------
Net assets as of June 30, $6.3 million. $2,800.0 million.
2001:
- -------------------------------------------------------------------------------------------------------------------
Investment adviser and Investment Adviser: Investment Adviser:
portfolio managers: John Hancock Advisers, Inc. John Hancock Life Insurance Company
Portfolio Managers: Subadviser:
Independence Investment LLC
William L. Braman
-Executive Vice President and Portfolio Managers:
Chief Investment Officer of adviser Investment team overseen by:
-Joined fund team in 2000
-Joined adviser in 2000 Paul F. McManus
-Began business career in 1977 -Senior Vice President of subadviser
-Joined team in 1996
Robert J. Uek, CFA -Joined subadviser in 1982
-Vice President of adviser
-Joined fund team in 2000 Subadviser:
-Joined adviser in 1997 Putnam Investment Management LLC
-Began business career in 1990 -Managing since 1937
-Managing fund since November, 2000
Paul J. Berlinguet
-Vice President of adviser Portfolio Managers:
-Joined fund team in 2001 Investment team overseen by:
-Joined adviser in 2001
-Began business career in 1986 C. Beth Cotner, CFA
-Managing Director and Chief Investment
Officer of subadviser
-Joined subadviser in 1995
-Began career in 1976
- -------------------------------------------------------------------------------------------------------------------
14
- -------------------------------------------------------------------------------------------------------------------
V.A. Large Cap Growth Fund Growth & Income Fund
- -------------------------------------------------------------------------------------------------------------------
Investment objective: The fund seeks long-term capital The fund is a non-diversified large and mid
appreciation. This objective can be cap stock fund that seeks income and
changed without shareholder approval. long-term capital appreciation. This
objective can be changed without
shareholder approval.
- -------------------------- ------------------------------------------- ---------------------------------------------
Primary investments: The fund invests at least 65% of assets The fund invests primarily in a diversified
in stocks of large capitalization mix of common stocks of large and mid-sized
companies (companies in the U.S. companies. The fund employs two
capitalization range of the Russell Top subadvisers, Independence and Putnam, each
200 Growth Index, which was $___ million of which employs its own investment
to $___ billion as of September 30, approach and independently manages its
2001). The fund generally invests in a portion of the fund. Independence normally
diversified portfolio of U.S. companies. invests in 80 to 160 stocks, with at least
The managers favor companies for which 65% (usually higher) of its assets in large cap
they project an above-average growth rate. companies. Putnam normally invests in 65 to 110
stocks, with at least 65% (usually higher) of its
assets in large and mid cap companies.
- -------------------------- -----------------------------------------------------------------------------------------
Preferred stocks: The fund may invest in preferred stocks and other types of equity securities.
- -------------------------- ------------------------------------------- ---------------------------------------------
Foreign securities: The Fund may invest up to 15% of assets The fund may invest in foreign securities
in foreign securities. that are U.S. dollar-denominated.
- -------------------------- ------------------------------------------- ---------------------------------------------
Diversification: The fund is diversified and, with respect The fund is non-diversified and can invest
to 75% of total assets, cannot invest more than 5% of assets in securities on a
more than 5% of total assets in single issuer.
securities of a single issuer.
- -------------------------- ------------------------------------------- ---------------------------------------------
Initial public offerings Not applicable. The fund may invest in IPOs.
("IPOs"):
- -------------------------- ------------------------------------------ ---------------------------------------------
Derivatives: The fund may make limited use of certain The fund may make limited use of certain
derivatives (investments whose value is derivatives (investments whose value is
based on indices, securities, or based on indices or other securities).
currencies).
- -------------------------- ------------------------------------------ ---------------------------------------------
Temporary defensive In abnormal market conditions, the fund In abnormal market conditions, the fund may
positions: may temporarily invest extensively in take temporary defensive measures - such as
investment-grade short-term securities. holding unusually large amounts of cash and
In these and other cases, the fund might cash equivalents - that are inconsistent
not achieve its goal. with the fund's primary investment
strategy. In taking those measures, the
fund may not achieve its investment goal.
- -------------------------- ------------------------------------------ ---------------------------------------------
15
The Funds' Expenses
Both funds pay various expenses. The first two expense tables appearing below
show the expenses for the twelve-month period ended June 30, 2001, adjusted to
reflect any changes. Future expenses may be greater or less. The examples
contained in each expense table show what you would pay if you invested $10,000
over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
examples do not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the funds serve as an investment
vehicle.) The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.
16
V.A. Large Cap Growth Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.75%
Other expenses 0.31%
Total fund operating expenses 1.06%
Expense reimbursement (1) 0.06%
Actual operating expenses 1.00%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $102 $320 $555 $1,229
(1) V.A. Large Cap Growth Fund's adviser has agreed to limit expenses,
excluding management fees, to 0.25% until 5/1/02.
Growth & Income Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.67%
Other expenses 0.12%
Total fund operating expenses 0.79%
Expense reimbursement (1) 0.02%
Actual operating expenses 0.77%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $79 $246 $427 $953
(1) Growth & Income Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
17
Pro Forma Expense Tables
The board of trustees of another John Hancock fund, V.A. Core Equity Fund, has
recommended that V.A. Core Equity Fund also reorganize into Growth & Income
Fund. The reorganization of V.A. Large Cap Growth Fund with Growth & Income
Fund, however, does not depend upon whether the reorganization involving V.A.
Core Equity Fund occurs. Your trustees do not expect the total expenses paid by
Growth & Income Fund to increase if both reorganizations do occur.
The next two expense tables show the hypothetical ("pro forma") expenses of
Growth & Income Fund assuming (1) that a reorganization with V.A. Large Cap
Growth Fund, but not V.A. Core Equity Fund, occurred on June 30, 2000 or (2)
that a reorganization with both V.A. Large Cap Growth Fund and V.A. Core Equity
Fund occurred on June 30, 2000. The expenses shown in the table for V.A. Large
Cap Growth Fund and Growth & Income Fund are based on fees and expenses incurred
during the twelve months ended June 30, 2001, adjusted to reflect any changes.
Growth & Income Fund's actual expenses after the reorganization may be greater
or less than those shown. The example contained in the pro forma expense table
shows what you would pay on a $10,000 investment if the reorganization had
occurred on June 30, 2000. Each example assumes that you reinvested all
dividends and that the average annual return was 5%. (The examples do not
reflect the fees or expenses associated with variable annuity and variable life
insurance contracts for which the funds serve as an investment vehicle.) The pro
forma examples are for comparison purposes only and are not a representation of
Growth & Income Fund's actual expenses or returns, either past or future.
Growth & Income Fund (PRO FORMA)
(Assuming reorganization with V.A. Large Cap Growth Fund only)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.67%
Other expenses 0.12%
Total fund operating expenses 0.79%
Expense reimbursement (1) 0.02%
Actual operating expenses 0.77%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $79 $246 $427 $953
(1) Growth & Income Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
18
Growth & Income Fund (PRO FORMA)
(Assuming reorganization with both V.A. Large Cap Growth Fund and V.A. Core
Equity Fund)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.67%
Other expenses 0.12%
Total fund operating expenses 0.79%
Expense reimbursement (1) 0.02%
Actual operating expenses 0.77%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $79 $246 $427 $953
(1) Growth & Income Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Large Cap Growth Fund will transfer all of its assets to
Growth & Income Fund. Growth & Income Fund will assume V.A. Large
Cap Growth Fund's liabilities. The net asset value of both funds
will be computed as of 5:00 p.m., Eastern time, on the
reorganization date.
o Growth & Income Fund will issue to V.A. Large Cap Growth Fund shares
in an amount equal to the aggregate net asset value of V.A. Large
Cap Growth Fund's shares. These shares will be distributed
immediately to V.A. Large Cap Growth Fund's shareholders in
proportion to their holdings on the reorganization date. As a
result, shareholders of V.A. Large Cap Growth Fund will end up as
shareholders of Growth & Income Fund.
o After the reorganization is over, V.A. Large Cap Growth Fund will be
terminated.
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel
to V.A. Large Cap Growth Fund.
The following diagram shows how the reorganization would be carried out.
19
V.A. Large Cap Growth V.A. Large Cap Growth Fund Growth & Income
Fund transfers assets assets and liabilities Fund receives assets
and liabilities to Growth ------------->------------- and assumes liabilities
& Income Fund of V.A. Large Cap Growth
Fund
Shareholders -------------<------------- Issues Shares
V.A. Large Cap Growth Fund receives Growth & Income Fund shares and
and distributes them to its shareholders.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets: V.A.
Large Cap Growth Fund--0.75% and Growth & Income Fund 0.67%. Growth & Income
Fund's management fee rate of 0.67% and its pro forma management fee rate of
0.67% are lower than V.A. Large Cap Growth Fund's management fee rate of 0.75%.
V.A. Large Cap Growth Fund's gross total annual operating expenses of 1.06% are
substantially higher that those of Growth & Income Fund which are 0.79%. Even
after the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. Large Cap Growth
Fund's total annual operating expenses (1.00%) are higher than those of Growth &
Income Fund (0.77%). After the reorganization, Growth & Income Fund's pro forma
total annual operating expenses (0.77%) are less than those of V.A. Large Cap
Growth Fund's gross total annual operating expenses (1.06%) and net total annual
operating expenses (1.00%).
Investment advisory fees as a percentage of average daily net assets.
V.A. Large Cap Growth 0.75% Growth & Income 0.71% on first $150 million
0.69% on next $150 million
0.67% in excess of $300 million
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table shows that the
risks affecting each fund are similar and compares the risks affecting each
fund.
- ---------------------------------------------------------------------------------------------------------------------------------
V.A. Large Cap Growth Fund Growth & Income Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Stock market risk The value of securities in the fund may go down in response to overall stock market
movements. Markets tend to move in cycles, with periods of rising prices and periods of falling
prices. Stocks tend to go up and down in value more than bonds. If the fund concentrates in
certain sectors, its performance could be worse than that of the overall stock market.
- ------------------------------- ------------------------------------------------------------------------------------------
Manager risk The manager and its strategy may fail to produce the intended results. The fund could
underperform its peers or lose money if the manager's investment strategy does not perform
as expected.
- ------------------------------- --------------------------------------------- --------------------------------------------
Investment category risk The large capitalization stocks in which The large and medium capitalization stocks
the fund primarily invests could fall out in which the fund primarily invests could
of favor with the market, causing the fund fall out of favor with the market, causing
to underperform funds that focus on small the fund to underperform funds that focus
or medium capitalization stocks. on small capitalization stocks.
- ------------------------------- --------------------------------------------- --------------------------------------------
Non-diversification risk Not applicable. The fund's larger positions in individual
companies could lead to more volatile
performance relative to more diversified
funds. The less diversified the fund's
holdings are, the more a specific stock's
poor performance is likely to hurt the
fund's performance.
- ------------------------------- --------------------------------------------- --------------------------------------------
Small and medium The fund's investments in small or medium capitalization companies may be subject to
capitalization company risk larger and more erratic price movements than investments in large capitalization
companies.
- ------------------------------- ------------------------------------------------------------------------------------------
20
- ---------------------------------------------------------------------------------------------------------------------------------
V.A. Large Cap Growth Fund Growth & Income Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Initial public offering (IPO) Not applicable. A significant part of the fund's
risk return may at times be attributable to
investments in IPOs. Many IPO
stocks are issued by, and involve
the risks associated with, small
and medium capitalization
companies.
- ------------------------------- --------------------------------------------- --------------------------------------------
Foreign securities risk Foreign investments involve additional risks, including potentially
inadequate or inaccurate financial information and social or political instability.
- ------------------------------- ------------------------------------------------------------------------------------------
Derivatives risk Certain derivative instruments can produce disproportionate gains or losses and are riskier
than direct investments. Also, in a down market derivatives could become harder to value or sell
at a fair price.
- ------------------------------- ------------------------------------------------------------------------------------------
Turnover risk In general, the greater the volume of buying and selling by a fund (and the higher its
"turnover rate"), the greater the impact that transaction costs will have on the fund's
performance. The fund's turnover rate may exceed 100%, which is considered relatively high.
- ------------------------------- ------------------------------------------------------------------------------------------
21
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
Shareholders are being asked to approve an Agreement and Plan of Reorganization,
a form of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Large Cap Growth Fund will transfer all of its assets to
Growth & Income Fund and Growth & Income Fund will assume all of
V.A. Large Cap Growth Fund's liabilities. This will result in the
addition of V.A. Large Cap Growth Fund's assets to Growth & Income
Fund's portfolio. The net asset value of both funds will be computed
as of 5:00 p.m., Eastern time, on the reorganization date.
o Growth & Income Fund will issue to V.A. Large Cap Growth Fund shares
in an amount equal to the aggregate net asset value of V.A. Large
Cap Growth Fund's shares. As part of the liquidation of V.A. Large
Cap Growth Fund, these shares will be distributed immediately to
shareholders of record of V.A. Large Cap Growth Fund in proportion
to their holdings on the reorganization date. As a result,
shareholders of V.A. Large Cap Growth Fund will end up as
shareholders of Growth & Income Fund.
o After the reorganization is over, the existence of V.A. Large Cap
Growth Fund will be terminated.
Reasons for the Proposed Reorganization
The Board of Trustees of V.A. Large Cap Growth Fund believes that the proposed
reorganization will be advantageous to the shareholders of V.A. Large Cap Growth
Fund for several reasons. The Board of Trustees considered the following
matters, among others, in approving the proposal.
First, V.A. Large Cap Growth Fund is no longer being offered to new variable
insurance contract holders, making it increasingly difficult for the fund to
attract assets.
Second, shareholders may be better served by a fund offering more
diversification. Growth & Income Fund has a larger asset size than V.A. Large
Cap Growth Fund and may invest in a broader range of securities. Combining the
funds' assets into a single investment portfolio may broaden diversification.
Third, Growth & Income Fund shares have performed better than V.A. Large Cap
Growth Fund over the life of both funds. While past performance cannot predict
future results, the Trustees believe that Growth & Income Fund is better
positioned than V.A. Large Cap Growth Fund to generate strong returns because of
its ability to choose from a broader range of investment opportunities.
Fourth, a combined fund may offer economies of scale that can lead to better
control over expenses than is possible for V.A. Large Cap Growth Fund alone.
Both funds incur substantial costs for accounting, legal, transfer agency
services, insurance, and custodial and administrative services.
Fifth, Growth & Income Fund's total expenses are lower than V.A. Large Cap
Growth Fund's total expenses. As a result of the reorganization, shareholders of
V.A. Large Cap Growth Fund may experience a reduction in the total amount of
fees, as a percentage of average net assets, that they indirectly pay each
month.
The Trustees believe that Growth & Income Fund shareholders will also benefit
from improved diversification as a result of the reorganization. Although Growth
& Income Fund is a larger fund than V.A. Large Cap Growth Fund, the Trustees
believe that the addition of V.A. Large Cap Growth Fund's assets may add to the
diversification of Growth & Income Fund's overall portfolio and therefore
provide an economic benefit to Growth & Income Fund and
22
its shareholders without the obligation to pay commissions or other transaction
costs that a fund normally incurs when purchasing securities.
The Boards of Trustees of both funds also considered that the adviser will also
benefit from the reorganization. For example, the adviser might realize time
savings from the need to prepare fewer reports and regulatory filings. The
Trustees believe, however, that these savings will not amount to a significant
economic benefit to the adviser.
Comparative Fees and Expense Ratios. As discussed above in the Summary, the
advisory fee rate paid by V.A. Large Cap Growth Fund is higher than the rate
paid by Growth & Income Fund. Growth & Income Fund's management fee rate of
0.67% and its pro forma management fee rate of 0.67% are lower than V.A. Large
Cap Growth Fund's management fee rate of 0.75%.
V.A. Large Cap Growth Fund's gross total annual operating expenses of 1.06% are
substantially higher that those of Growth & Income Fund which are 0.79%. Even
after the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. Large Cap Growth
Fund's total annual operating expenses (1.00%) are higher than those of Growth &
Income Fund (0.77%). After the reorganization, Growth & Income Fund's pro forma
total annual operating expenses (0.77%) are less than those of V.A. Large Cap
Growth Fund's gross total annual operating expenses (1.06%) and net total annual
operating expenses (1.00%).
V.A. Large Cap Growth Fund has not increased its asset size. The Trustees do not
believe, given V.A. Large Cap Growth Fund's current size and historical growth
rate, that V.A. Large Cap Growth Fund will grow to an asset size that would
allow V.A. Large Cap Growth Fund to realize the benefits of economies of scale,
including better control over expenses. The Trustees also do not believe that
V.A. Large Cap Growth Fund will reach an asset size which will allow V.A. Large
Cap Growth Fund to significantly broaden the diversification of its investment
portfolio.
23
Comparative Performance. The trustees also took into consideration the relative
performance of V.A. Large Cap Growth Fund and Growth & Income Fund.
PROPOSAL 3
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
V.A. 500 INDEX FUND AND EQUITY INDEX FUND
A proposal to approve an Agreement and Plan of Reorganization between V.A. 500
Index Fund and Equity Index Fund . Under this Agreement, V.A. 500 Index Fund
would transfer all of its assets to Equity Index Fund in exchange for shares of
Equity Index Fund. These shares would be distributed proportionately to the
shareholders of V.A. 500 Index Fund. Equity Index Fund would also assume V.A.
500 Index Fund's liabilities. V.A. 500 Index Fund's Board of Trustees recommends
that shareholders vote FOR this proposal.
SUMMARY
Comparison of V.A. 500 Index Fund to Equity Index Fund
- ------------------------------------------------------------------------------------------------------------------------
V.A. 500 Index Fund Equity Index Fund
- ------------------------------------------------------------------------------------------------------------------------
Business: The fund is a diversified series of The fund is a diversified series of John Hancock
John Hancock Declaration Trust. Variable Series Trust I. The trust is an open-end
The trust is an open-end investment investment management company organized as a
company organized as a Massachusetts Business Trust.
Massachusetts business trust.
- ------------------------------------------------------------------------------------------------------------------------
Net assets as of June 30, $18.4 million. $539.1 million.
2001:
- ------------------------------------------------------------------------------------------------------------------------
Investment adviser and Investment adviser: Investment adviser:
portfolio managers: John Hancock Advisers, Inc. John Hancock Life Insurance Company
Portfolio manager: Subadviser:
SSgA Funds Management, Inc.
James D. Schantz, CFA
-Vice President of adviser Portfolio Managers:
-Joined fund team in 2000
-Joined adviser in 1998 John A. Tucker
-Began business career in 1970 -Principal of Subadviser
-Joined subadviser in 1988
James B. May
-Principal of Subadviser
-Joined subadviser in 1989
- ------------------------------------------------------------------------------------------------------------------------
Investment objective: The fund seeks to provide investment The fund is a stock fund that seeks to
results that correspond to the total track the performance of the S&P 500
return performance of the Standard & Index, which emphasizes the stocks of
Poor's 500 Stock Price Index. This large U.S. companies. This objective can
objective can be changed without be changed without shareholder approval.
shareholder approval.
- --------------------------- ----------------------------------------- -------------------------------------------
Primary investments: The fund normally invests at least 80% The fund normally invests in all stocks
of assets in common stocks of S&P 500 included in the Index. The manager
companies in approximately the same employs a passive management strategy by
proportions as they are represented in normally investing in each stock in
the index. The fund is passively roughly the same proportion as
managed. Under normal circumstances, represented in the Index. The fund is
the fund is fully invested - directly normally fully invested.
or through futures and options
contracts - in all 500 stocks
represented in the index. The fund
normally maintains less than 1% of
assets in cash or cash equivalents.
- --------------------------- -------------------------------------------------------------------------------------
Exchange traded funds: The fund may invest in Standard & Poor's Depositary Receipts ("SPDRs") and other
exchange traded funds designed to track the S&P 500 Index.
- --------------------------- -------------------------------------------------------------------------------------
Foreign securities: The fund may invest in U.S. dollar-denominated foreign securities.
- --------------------------- -------------------------------------------------------------------------------------
Diversification: The fund is diversified and, with respect to 75% of total assets, cannot invest
more than 5% of total assets in securities of a single issuer.
- --------------------------- -------------------------------------------------------------------------------------
Derivatives: The fund may invest in certain derivatives (investments whose value is based on
indices or other securities) to maintain market exposure and manage cash flow.
- --------------------------- -------------------------------------------------------------------------------------
24
The Funds' Expenses
Both funds pay various expenses. The first two expense tables appearing below
show the expenses for the twelve-month period ended June 30, 2001, adjusted to
reflect any changes. Future expenses may be greater or less. The examples
contained in each expense table show what you would pay if you invested $10,000
over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
examples do not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the funds serve as an investment
vehicle.) The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.
25
V.A. 500 Index Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee(1) 0.35%
Other expenses 0.74%
Total fund operating expenses 1.09%
Expense reimbursement (2)(1) 0.74%
Actual operating expenses 0.35%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $36 $113 $197 $445
(1) The adviser has agreed to limit the management fee to 0.10% at least until
4/30/02.
(2) V.A. 500 Index Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.25% at least until 4/30/02.
Equity Index Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.13%
Other expenses 0.04%
Total fund operating expenses 0.17%
Expense reimbursement (1) 0.00%
Actual operating expenses 0.17%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $17 $55 $96 $217
(1) Equity Index Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
Pro Forma Expense Table
26
The following expense table shows the pro forma expenses of Equity Index Fund
assuming that a reorganization with V.A. 500 Index Fund occurred on June 30,
2000. The expenses shown in the table are based on fees and expenses incurred
during the twelve months ended June 30, 2001, adjusted to reflect any changes.
Equity Index Fund's actual expenses after the reorganization may be greater or
less than those shown. The example contained in the pro forma expense table
shows what you would pay on a $10,000 investment if the reorganization had
occurred on June 30, 2000. The example assumes that you reinvested all dividends
and that the average annual return was 5%. (The example does not reflect the
fees or expenses associated with variable annuity and variable life insurance
contracts for which the fund serves as an investment vehicle.) The pro forma
example is for comparison purposes only and is not a representation of Equity
Index Fund's actual expenses or returns, either past or future.
Equity Index Fund (PRO FORMA)
(Assuming reorganization with V.A. 500 Index Fund)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.13%
Other expenses 0.04%
Total fund operating expenses 0.17%
Expense reimbursement (1) 0.00%
Actual operating expenses 0.17%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $17 $55 $96 $217
(1) Equity Index Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 14, 2001, but may occur on any later date before June
30, 2002. V.A. 500 Index Fund will transfer all of its assets to
Equity Index Fund. Equity Index Fund will assume V.A. 500 Index
Fund's liabilities. The net asset value of both funds will be
computed as of 5:00 p.m., Eastern time, on the reorganization date.
o Equity Index Fund will issue to V.A. 500 Index Fund shares in an
amount equal to the aggregate net asset value of V.A. 500 Index
Fund's shares. These shares will be distributed immediately to V.A.
500 Index Fund's shareholders in proportion to their holdings on the
reorganization date. As a result, shareholders of V.A. 500 Index
Fund will end up as shareholders of Equity Index Fund.
o After the reorganization is over, V.A. 500 Index Fund will be
terminated.
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel
to the V.A. 500 Index Fund.
27
The following diagram shows how the reorganization would be carried out.
V. A. 500 Index V. A. 500 Index Fund Equity Index
Fund transfers assets assets and liabilities Fund receives assets
and liabilities to Equity ----------->---------- and assumes liabilities
Index Fund of V.A. 500 Index
Fund
Shareholders -----------<---------- Issues Shares
V.A. 500 Index Fund receives Equity Index Fund shares and
and distributes them to its shareholders.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets: V.A.
500 Index Fund--0.35% (before the Advisers agreement to limit the management fee
to 0.10% at least until April 30, 2002) and Equity Index Fund 0.13%. Equity
Index Fund's management fee rate of 0.13% and its pro forma management fee rate
of 0.13% are less than V.A. 500 Index Fund's gross management fee rate of 0.35%.
V.A. 500 Index Fund's gross total annual operating expenses of 1.09% are
substantially higher than those of Equity Index Fund which are 0.17%. Even after
the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. 500 Index Fund's
total annual operating expenses (0.35%) are higher than those of Equity Index
Fund (0.17%). After the reorganization, Equity Index Fund's pro forma total
annual operating expenses (0.17%) are less than those of V.A. 500 Index Fund's
gross total annual operating expenses (1.09%) and net total annual operating
expenses (0.35%).
Investment advisory fees as a percentage of average daily net assets.
V.A. 500 Index 0.35%* Equity Index 0.15% on first $75 million
0.14% on next $50 million
0.13% in excess of $125 million
*Fee limited to 0.10% until 5/1/02.
28
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table shows that the
risks affecting each fund are similar and compares the risks affecting each
fund.
- ----------------------------------------------------------------------------------------------------------------------
V.A. 500 Index Fund Equity Index Fund
- ----------------------------------------------------------------------------------------------------------------------
Stock market risk The value of securities in the fund may go down in response to overall stock market
movements. Markets tend to move in cycles, with periods of rising prices and periods of
falling prices. Stocks tend to go up and down in value more than bonds. As an index
fund, the fund will be less able than most funds to take defensive positions in abnormal
market conditions. If the fund concentrates in certain sectors, its performance could
be worse than that of the overall stock market.
- ------------------------------- ------------------------------------------------------------------------------------------
Manager risk The manager and its strategy may fail to produce the intended results. The fund could
underperform its peers or lose money if the manager's investment strategy does not perform
as expected.
- ------------------------------- ------------------------------------------------------------------------------------------
Investment category risk The large capitalization stocks that make up the Standard & Poor's 500 Stock
Price Index and in which the fund primarily invests could fall out of favor with the market.
This would cause the fund to underperform funds that focus on small or medium capitalization
stocks.
- ------------------------------- ------------------------------------------------------------------------------------------
Index replication risk Certain investment practices may cause the fund's composition and performance to deviate
from those of the index.
o The securities selected by the manager may not be fully representative of the index.
o Transaction costs may reduce the fund's performance below that of the index.
o The size and timing of the fund's cash flows may cause its performance to differ
from that of the index.
o The relative proportions of stocks in the fund's portfolio could drift overtime,
which could increase tracking error.
- ------------------------------- ------------------------------------------------------------------------------------------
Correlation risk The performance of S&P index-based futures, The performance of S&P index-based futures
options and exchange traded funds may and options may correlate less closely
correlate less closely than direct stock than direct stock investments with the
investments with the performance of the performance of the index.
index.
- ------------------------------- --------------------------------------------- --------------------------------------------
Derivatives risk Certain derivative instruments can produce disproportionate gains or losses and are riskier
than direct investments. Also, in a down market derivatives could become harder to value or sell
at a fair price.
- ------------------------------- ------------------------------------------------------------------------------------------
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
Shareholders are being asked to approve an Agreement and Plan of Reorganization,
a copy of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 14, 2001, but may occur on any later date before June
30, 2002. V.A. 500 Index Fund will transfer all of its assets to
Equity Index Fund and Equity Index Fund will assume all of V.A. 500
Index Fund's liabilities. This will result in the addition of V.A.
500 Index Fund's assets to Equity Index Fund's portfolio. The net
asset value of both funds will be computed as of 5:00 p.m., Eastern
time, on the reorganization date.
o Equity Index Fund will issue to V.A. 500 Index Fund shares in an
amount equal to the aggregate net asset value of V.A. 500 Index
Fund's shares. As part of the liquidation of V.A. 500 Index Fund,
these shares will be distributed immediately to shareholders of
record of V.A. 500 Index
29
Fund in proportion to their holdings on the reorganization date. As
a result, shareholders of V.A. 500 Index Fund will end up as
shareholders of Equity Index Fund.
o After the reorganization is over, the existence of V.A. 500 Index
Fund will be terminated.
Reasons for the Proposed Reorganization.
The Board of Trustees of V.A. 500 Index Fund believes that the proposed
reorganization will be advantageous to the shareholders of V.A. 500 Index Fund
for several reasons. The Board of Trustees considered the following matters,
among others, in approving the proposal.
First, V.A. 500 Index Fund is no longer being offered to new variable insurance
contract holders, making it increasingly difficult for the fund to attract
assets.
Second, shareholders may be better served by a fund offering more
diversification. Equity Index Fund has a larger asset size than V.A. 500 Index
Fund. Combining the funds' assets into a single investment portfolio may broaden
diversification.
Third, Equity Index Fund shares have performed better than V.A. 500 Index Fund
over the life of both funds. While past performance cannot predict future
results, the Trustees believe that Equity Index Fund is better positioned than
V.A. 500 Index Fund to continue to generate strong returns.
Fourth, a combined fund may offer economies of scale that can lead to better
control over expenses than is possible for V.A. 500 Index Fund alone. Both funds
incur substantial costs for accounting, legal, transfer agency services,
insurance, and custodial and administrative services.
Fifth, Equity Index Fund's total expenses are lower than V.A. 500 Index Fund's
total expenses. As a result of the reorganization, shareholders of V.A. 500
Index Fund may experience a reduction in the total amount of fees, as a
percentage of average net assets, that they indirectly pay each month.
The Trustees believe that Equity Index Fund shareholders will also benefit from
improved diversification as a result of the reorganization. Although Equity
Index Fund is a larger fund than V.A. 500 Index Fund, the Trustees believe that
the addition of V.A. 500 Index Fund's assets may add to the diversification of
Equity Index Fund's overall portfolio and therefore provide an economic benefit
to Equity Index Fund and its shareholders.
The Boards of Trustees of both funds also considered that the adviser will also
benefit from the reorganization. For example, the adviser might realize time
savings from a consolidated portfolio management effort and from the need to
prepare fewer reports and regulatory filings as well as prospectus disclosure
for one fund instead of two. The Trustees believe, however, that these savings
will not amount to a significant economic benefit to the adviser.
Comparative Fees and Expense Ratios. As discussed above in the Summary, the
advisory fee rate paid by V.A. 500 Index Fund is more than the rate paid by
Equity Index Fund. Equity Index Fund's management fee rate of 0.13% and its pro
forma management fee rate of 0.13% are less than V.A. 500 Index Fund's
management fee rate of 0.35%.
V.A. 500 Index Fund's gross total annual operating expenses of 1.09% are
substantially higher that those of Equity Index Fund, which are 0.17%. Even
after the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. 500 Index Fund's
total annual operating expenses (0.35%) are higher than those of Equity Index
Fund (0.17%). After the reorganization, Equity Index Fund's pro forma total
annual operating expenses (0.17%) are less than those of V.A. 500 Index Fund's
gross total annual operating expenses (1.09%) and net total annual operating
expenses (0.35%).
V.A. 500 Index Fund has not increased its asset size. The Trustees do not
believe, given V.A. 500 Index Fund's current size and historical growth rate,
that V.A. 500 Index Fund will grow to an asset size that would allow V.A. 500
Index Fund to realize the benefits of economies of scale, including better
control over expenses. The Trustees also do not believe that V.A. 500 Index Fund
will reach an asset size which will allow V.A. 500 Index Fund to significantly
broaden the diversification of its investment portfolio.
30
Comparative Performance. The trustees also took into consideration the relative
performance of V.A. 500 Index Fund and Equity Index Fund.
PROPOSAL 4
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
V.A. INTERNATIONAL FUND AND INTERNATIONAL EQUITY FUND
A proposal to approve an Agreement and Plan of Reorganization between V.A.
International Fund and International Equity Fund. Under this Agreement, V.A.
International Fund would transfer all of its assets to International Equity Fund
in exchange for shares of International Equity Fund. These shares would be
distributed proportionately to the shareholders of V.A. International Fund.
International Equity Fund would also assume V.A. International Fund's
liabilities. V.A. International Fund's Board of Trustees recommends that
shareholders vote FOR this proposal.
SUMMARY
Comparison of V.A. International Fund to International Equity Fund
- -------------------------------------------------------------------------------------------------------------------
V.A. International International Equity
- -------------------------------------------------------------------------------------------------------------------
Business: A diversified series of John Hancock A diversified series of John Hancock
Declaration Trust. The trust is an Variable Series Trust I. The trust is an
open-end investment company organized open-end investment company organized as a
as a Massachusetts business trust. Massachusetts business trust.
- -------------------------------------------------------------------------------------------------------------------
Net assets as of $5.0 million. $21.1 million.
June 30, 2001:
- -------------------------------------------------------------------------------------------------------------------
Investment adviser and Investment Adviser: Investment Adviser:
portfolio managers: John Hancock Advisers, Inc. John Hancock Life Insurance Company
Subadviser: Subadviser:
Nicholas-Applegate Capital Management Goldman Sachs Asset
Management
-U.S. based team responsible for day- -Managing since 1988
to-day investment management -Managed fund since August 1999
-Managed fund since December 2000
-Founded in 1984 Fund Managers:
-Supervised by the adviser Management by investment team overseen by:
Shogo Maeda
-Managing director of subadviser
-Joined subadviser in 1994
Susan Noble
-Managing director of subadviser
-Joined subadviser in 1997
Andrew Orchard
-Executive director of subadviser
-Joined subadviser in 1999
- -------------------------------------------------------------------------------------------------------------------
31
- --------------------------------------------------------------------------------------------------------------------
V.A. International Fund International Equity Fund
- --------------------------------------------------------------------------------------------------------------------
Investment objective: The fund seeks long-term growth of The fund is an international stock fund that
capital. This objective can be seeks long-term capital appreciation. This
changed without shareholder approval. objective can be changed without shareholder
approval.
- --------------------------- --------------------------------------- -----------------------------------------------
Primary investments: The fund invests at least 80% of The fund primarily invests in a diversified
assets in stocks of foreign mix of common stocks of large established and
companies. The fund does not medium-sized foreign companies located
maintain a fixed allocation of primarily in developed countries outside the
assets, either with respect to U.S. The fund normally invests at least 65%
securities type or geography. The of its assets in securities of non-U.S.
managers allocate the fund's assets entities. The fund invests in at least 3
among securities of countries that different countries other than the U.S., but
are expected to provide the best normally invests in 10 to 35 countries. The
opportunities for meeting the fund's fund normally invests in 120 to 200 stocks
investment objective. and normally has 10% or less (usually lower)
of its assets in cash and cash equivalents.
- --------------------------- ---------------------------------------------------------------------------------------
Other Investments: The fund may invest in American Depositary Receipts ("ADRs"), European Depositary
Receipts ("EDRs") and Global Depositary Receipts ("GDRs").
- --------------------------- --------------------------------------- -----------------------------------------------
Emerging market The fund may invest up to 30% of The fund will invest no more than 10% of
securities: assets in emerging markets. assets in emerging market stocks.
- --------------------------- --------------------------------------- -----------------------------------------------
Diversification: The fund is diversified and cannot The fund is diversified and, with respect to
invest more than 5% of total assets 75% of total assets, cannot invest more than
in any one security. 5% of total assets in securities of a single
issuer.
- --------------------------- --------------------------------------- -----------------------------------------------
Initial public offerings Not applicable. The fund may invest in IPOs.
("IPOs"):
- --------------------------- ---------------------------------------------------------------------------------------
Derivatives: The fund may make limited use of certain derivatives (investments whose value is
based on indices, securities, or currencies).
- --------------------------- ------------------------------------------- -------------------------------------------
Temporary defensive In abnormal market conditions, the fund In abnormal market conditions, the fund
positions: may temporarily invest more than 20% of may take temporary defensive measures -
assets in investment-grade short-term such as holding unusually large amounts
securities. In these and other cases, of cash and cash equivalents - that are
the fund might not achieve its goal. inconsistent with the fund's primary
investment strategy. In taking those
measures, the fund may not achieve its
investment goal.
- --------------------------- ------------------------------------------- -------------------------------------------
32
The Funds' Expenses
Both funds pay various expenses. The first two expense tables appearing below
show the expenses for the twelve-month period ended June 30, 2001, adjusted to
reflect any changes. Future expenses may be greater or less. The examples
contained in each expense table show what you would pay if you invested $10,000
over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
examples do not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the funds serve as an investment
vehicle.) The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.
33
V.A. International Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.90%
Other expenses 2.70%
Total fund operating expenses 3.60%
Expense reimbursement (1) 2.45%
Actual operating expenses 1.15%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $117 $366 $634 $1,399
(1) V.A. International Fund's adviser has agreed to limit expenses, excluding
management fees, to 0.25% until 5/1/02.
International Equity Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 1.20%
Other expenses 0.80%
Total fund operating expenses 2.00%
Expense reimbursement (1) 0.70%
Actual operating expenses 1.30%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $133 $413 $714 $1,571
(1) International Equity Fund's adviser has agreed to limit the fund's
expenses, excluding management fees, to 0.10%.
34
Pro Forma Expense Table
The following expense table shows the pro forma expenses of International Equity
Fund assuming that a reorganization with V.A. International Fund occurred on
June 30, 2000. The expenses shown in the table are based on fees and expenses
incurred during the twelve months ended June 30, 2001, adjusted to reflect any
changes. International Equity Fund's actual expenses after the reorganization
may be greater or less than those shown. The example contained in the pro forma
expense table shows what you would pay on a $10,000 investment if the
reorganization had occurred on June 30, 2000. The example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
example does not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the fund serves as an investment
vehicle.) The pro forma example is for comparison purposes only and is not a
representation of International Equity Fund's actual expenses or returns, either
past or future.
International Equity Fund (PRO FORMA)
(Assuming reorganization with V.A. International Fund)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 1.20%
Other expenses 0.80%
Total fund operating expenses 2.00%
Expense reimbursement (1) 0.70%
Actual operating expenses 1.30%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $132 $413 $714 $1,571
(1) International Equity Fund's adviser has agreed to limit the fund's
expenses, excluding management fees, to 0.10%.
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 14, 2001, but may occur on any later date before June
30, 2002. V.A. International Fund will transfer all of its assets to
International Equity Fund. International Equity Fund will assume
V.A. International Fund's liabilities. The net asset value of both
funds will be computed as of 5:00 p.m., Eastern time, on the
reorganization date.
o International Equity Fund will issue to V.A. International Fund
shares in an amount equal to the aggregate net asset value of V.A.
International Fund's share. These shares will be distributed
immediately to V.A. International Fund's shareholders in proportion
to their holdings on the reorganization date. As a result,
shareholders of V.A. International Fund will end up as shareholders
of International Equity Fund.
o After the reorganization is over, V.A. International Fund will be
terminated.
35
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel
to V.A. International Fund.
The following diagram shows how the reorganization would be carried out.
V.A. International V.A. International Fund International Equity
Fund transfers assets assets and liabilities Fund receives assets
and liabilities to International ----------->------------ and assumes liabilities
Equity Fund of V.A. International
Fund
Shareholders -----------<------------ Issues Shares
V.A. International Fund receives International Equity Fund shares and
and distributes them to its shareholders.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets: V.A.
International Fund-- 0.90% and International Equity -1.20%. International Equity
Fund's management fee rate of 1.20% and its pro forma management fee rate of
1.20% are higher than V.A. International Fund's management fee rate of 0.90%.
V.A. International Fund's gross total annual operating expenses of 3.60% are
substantially higher than those of International Equity Fund which are 2.00%.
After the reduction of each fund's other expenses as a result of the
adviser's voluntary agreement to limit the funds' other expenses, V.A.
International Fund's total annual operating expenses (1.15%) are lower than
those of International Equity Fund (1.30%). After the reorganization,
International Equity Fund's pro forma total annual operating expenses (2.00%)
are less than those of V.A. International Fund's gross total annual operating
expenses (3.60%) but not net total annual operating expenses (1.15%).
Investment advisory fees as a percentage of average daily net assets.
V.A. International 0.90% International Equity 1.20% on first $50 million
1.05% on next $150 million
1.00% in excess of $200 million
36
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table shows that the
risks affecting each fund are similar and compares the risks affecting each
fund.
- -----------------------------------------------------------------------------------------------------------------------------
V.A. International Fund International Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------
- ------------------------------- --------------------------------------------------------------------------------------------
Stock market risk The value of securities in the fund may go down in response to overall stock market
movements. Markets tend to move in cycles, with periods of rising prices and periods of falling
prices. Stocks tend to go up and down in value more than bonds. If the fund concentrates in
certain sectors or geographic regions, its performance could be worse than that of the
overall stock market.
- ------------------------------- --------------------------------------------------------------------------------------------
Foreign investment risk Foreign investments are riskier than investments in U.S. companies. The special risks of
foreign investments include:
o Economic, political and social instability
o Lack of reliable, publicly available information
o Limited or excessive government regulation
o Adverse governmental actions ranging from tax law changes to the collapse of governments
o Lack of liquidity
o Foreign currency exchange rate fluctuations
o Restrictions on currency transfers
o Foreign ownership limits
These risks are more severe in emerging market countries.
- ------------------------------- --------------------------------------------------------------------------------------------
Manager risk The manager and its strategy may fail to produce the intended results. The fund could
underperform its peers or lose money if the manager's investment strategy does not perform
as expected.
- ------------------------------- ---------------------------------------------- ---------------------------------------------
Investment category risk Not applicable because the fund does not The large and medium capitalization stocks
allocate a fixed amount of assets to any in which the fund primarily invests could
particular region, country, industry, fall out of favor with the market, causing
capitalization level or other investment the fund to underperform funds that focus
category. on small capitalization stocks.
- ------------------------------- ---------------------------------------------- ---------------------------------------------
Initial public offering (IPO) Not applicable. A significant part of the fund's return may
risk at times be attributable to investments in
IPOs. Many IPO stocks are issued by
small and medium capitalization
companies. These stocks may be
subject to larger and more erratic
price movements than investments in
large capitalization companies.
- ------------------------------- --------------------------------------------------------------------------------------------
Derivatives risk Certain derivative instruments can produce disproportionate gains or losses and are riskier
than direct investments. Also, in a down market derivatives could become harder to value or sell
at a fair price.
- ------------------------------- --------------------------------------------------------------------------------------------
Liquidity and valuation risks In a down or unstable market, the fund's investments could become
harder to value accurately or to sell at a fair price.
- ------------------------------- ---------------------------------------------- ---------------------------------------------
Turnover risk In general, the greater the volume of buying The fund's turnover rate generally does not
and selling by a fund (and the higher its exceed 100%.
"turnover rate"), the greater the impact
that transaction costs will have on the
fund's performance. The fund's turnover
rate may exceed 100%, which is considered
relatively high.
- ------------------------------- ---------------------------------------------- ---------------------------------------------
37
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
Shareholders are being asked to approve an Agreement and Plan of Reorganization,
a form of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 14, 2001, but may occur on any later date before June
30, 2002. V.A. International Fund will transfer all of its assets to
International Equity Fund and International Equity Fund will assume
all of V.A. International Fund's liabilities. This will result in
the addition of V.A. International Fund's assets to International
Equity Fund's portfolio. The net asset value of both funds will be
computed as of 5:00 p.m., Eastern time, on the reorganization date.
o International Equity Fund will issue to V.A. International Fund
shares in an amount equal to the aggregate net asset value of V.A.
International Fund's shares. As part of the liquidation of V.A.
International Fund, these shares will be distributed immediately to
shareholders of record of V.A. International Fund in proportion to
their holdings on the reorganization date. As a result, shareholders
of V.A. International Fund will end up as shareholders of
International Equity Fund.
o After the reorganization is over, the existence of V.A.
International Fund will be terminated.
Reasons for the Proposed Reorganization
The Board of Trustees of V.A. International Fund believes that the proposed
reorganization will be advantageous to the shareholders of V.A. International
Fund for several reasons. The Board of Trustees considered the following
matters, among others, in approving the proposal.
First, V.A. International Fund is no longer being offered to new variable
insurance contract holders, making it increasingly difficult for the fund to
attract assets.
Second, shareholders may be better served by a fund offering more
diversification. International Equity Fund has a larger asset size than V.A.
International Fund and may invest in a broader range of securities. Combining
the funds' assets into a single investment portfolio may broaden
diversification.
Third, International Equity Fund shares have performed better than V.A.
International Fund over the one year period ended June 30, 2001. While past
performance cannot predict future results, the Trustees believe that
International Equity Fund is better positioned than V.A. International Fund to
generate strong returns because of its greater flexibility to choose from among
a broader range of investment opportunities.
Fourth, a combined fund may offer economies of scale that can lead to better
control over expenses than is possible for V.A. International Fund alone. Both
funds incur substantial costs for accounting, legal, transfer agency services,
insurance, and custodial and administrative services.
The Trustees believe that International Equity Fund shareholders will also
benefit from improved diversification as a result of the reorganization.
Although International Equity Fund is a larger fund than V.A. International
Fund, the Trustees believe that the addition of V.A. International Fund's assets
may add to the diversification of International Equity Fund's overall portfolio
and therefore provide an economic benefit to International Equity Fund and its
shareholders.
The Boards of Trustees of both funds also considered that the adviser will also
benefit from the reorganization. For example, the adviser might realize time
savings from the need to prepare fewer reports and regulatory filings. The
Trustees believe, however, that these savings will not amount to a significant
economic benefit to the adviser.
38
Comparative Fees and Expense Ratios. As discussed above in the Summary, the
advisory fee rate paid by V.A. International Fund is lower than the rate paid by
International Equity Fund. International Equity Fund's management fee rate of
1.20% and its pro forma management fee rate of 1.20% are higher than V.A.
International Fund's management fee rate of 0.90%.
V.A. International Fund's gross total annual operating expenses of 3.60% are
substantially higher that those of International Equity Fund which are 2.00%.
After the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. International
Fund's total annual operating expenses (1.15%) are lower than those of
International Equity Fund (1.30%). After the reorganization, International
Equity Fund's pro forma total annual operating expenses (2.00%) are less than
those of V.A. International Fund's gross total annual operating expenses (3.60%)
but not net total annual operating expenses (1.15%).
V.A. International Fund has not increased its asset size. The Trustees do not
believe, given V.A. International Fund's current size and historical growth
rate, that V.A. International Fund will grow to an asset size that would allow
V.A. International Fund to realize the benefits of economies of scale, including
better control over expenses. The Trustees also do not believe that V.A.
International Fund will reach an asset size which will allow V.A. International
Fund to significantly broaden the diversification of its investment portfolio.
Comparative Performance. The trustees also took into consideration the relative
performance of V.A. International Fund and International Equity Fund.
39
PROPOSAL 5
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
V.A. MID CAP GROWTH FUND AND FUNDAMENTAL GROWTH FUND
A proposal to approve an Agreement and Plan of Reorganization between V.A. Mid
Cap Growth Fund and Fundamental Growth Fund. Under this Agreement, V.A. Mid Cap
Growth Fund would transfer all of its assets to Fundamental Growth Fund in
exchange for shares of Fundamental Growth Fund. These shares would be
distributed proportionately to the shareholders of V.A. Mid Cap Growth Fund.
Fundamental Growth Fund would also assume V.A. Mid Cap Growth Fund's
liabilities. V.A. Mid Cap Growth Fund's Board of Trustees recommends that
shareholders vote FOR this proposal.
SUMMARY
Comparison of V.A. Mid Cap Growth Fund to Fundamental Growth Fund
- -------------------------------------------------------------------------------------------------------------------
V.A. Mid Cap Growth Fundamental Growth Fund
- -------------------------------------------------------------------------------------------------------------------
Business: A diversified series of John Hancock A diversified series of John Hancock
Declaration Trust. The trust is an Variable Series Trust I. The trust is an
open-end investment company organized open-end investment company organized as a
as a Massachusetts business trust. Massachusetts business trust.
- -------------------------------------------------------------------------------------------------------------------
Net assets as of June 30, $6.3 million. $40.3 million.
2001:
- -------------------------------------------------------------------------------------------------------------------
Investment adviser and Investment adviser: Investment adviser:
portfolio managers: John Hancock Advisers, Inc. John Hancock Life Insurance Company
Portfolio Managers: Subadviser:
-Team responsible for day-to-day Putnam Investment Management, LLC
investment management -Managing since 1937
-Managed fund since August 2000
Fund Managers:
-Management by investment team overseen by:
Eric M. Wetlaufer, CFA
-Managing Director and Chief Investment
Officer of subadviser
-Joined subadviser in 1997
-Began business career in 1985
- -------------------------------------------------------------------------------------------------------------------
40
- ----------------------------------------------------------------------------------------------------------------
V.A. Mid Cap Growth Fund Fundamental Growth Fund
- ----------------------------------------------------------------------------------------------------------------
Investment objective: The fund seeks long-term capital The fund is a stock fund with a growth
appreciation. This objective can be emphasis that seeks long-term capital
changed without shareholder approval. appreciation. This objective can be
changed without shareholder approval.
- ----------------------- -------------------------------------------- -------------------------------------------
Primary investments: The fund invests at least 80% of assets in The fund invests primarily in common
stocks of medium-capitalization companies stocks of large-sized and mid-sized U.S.
(companies in the capitalization range of companies that are believed to offer
the Russell Midcap Growth Index, which was above-average potential for growth in
$____ million to $___ billion on September revenues and earnings. The fund normally
30, 2001). In managing the portfolio, the invests in 90 to 150 stocks, with at
mangers seek to identify companies with least 65% of its assets (usually higher)
above-average earnings growth. in large and mid cap companies.
- ----------------------- -------------------------------------------- -------------------------------------------
Foreign securities: The Fund may invest up to 10% of assets in The fund may invest in foreign securities
foreign securities. that are U.S. dollar-denominated.
- ----------------------- -------------------------------------------- -------------------------------------------
Diversification: The fund is diversified and cannot invest The fund is diversified and, with respect
more than 5% of total assets in any one to 75% of total assets, cannot invest
security. more than 5% of total assets in
securities of a single issuer.
- ----------------------- ----------------------------------------------------------------------------------------
Cash and cash The fund normally has less than 10% of assets in cash and cash equivalents.
equivalents:
- ----------------------- ----------------------------------------------------------------------------------------
Initial public The fund may invest in IPOs.
offerings ("IPOs"):
- ----------------------- ------------------------------------------- --------------------------------------------
Derivatives: The fund may make limited use of certain The fund may make limited use of certain
derivatives (investments whose value is derivatives (investments whose value is
based on indices or currencies). based on indices or other securities).
- ----------------------- ------------------------------------------- --------------------------------------------
Temporary defensive In abnormal market conditions, the fund In abnormal market conditions, the fund
positions: may temporarily invest in U.S. government may take temporary defensive measures -
securities with maturities of up to three such as holding unusually large amounts of
years, and may also invest more than 10% cash and cash equivalents - that are
of assets in cash and/or cash inconsistent with the fund's primary
equivalents. In these and other cases, investment strategy. In taking those
the fund might not achieve its goal. measures, the fund may not achieve its
investment goal.
- ----------------------- ------------------------------------------- --------------------------------------------
41
The Funds' Expenses
Both funds pay various expenses. The first two expense tables appearing below
show the expenses for the twelve-month period ended June 30, 2001, adjusted to
reflect any changes. Future expenses may be greater or less. The examples
contained in each expense table show what you would pay if you invested $10,000
over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
examples do not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the funds serve as an investment
vehicle.) The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.
V.A. Mid Cap Growth Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.75%
Other expenses 0.35%
Total fund operating expenses 1.10%
Expense reimbursement (1) 0.10%
Actual operating expenses 1.00%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $102 $317 $550 $1,219
(1) V.A. Mid Cap Growth Fund's adviser has agreed to limit expenses, excluding
management fees, to 0.25% at least until 4/30/02.
42
Fundamental Growth Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.90%
Other expenses 0.24%
Total fund operating expenses 1.14%
Expense reimbursement (1) 0.14%
Actual operating expenses 1.00%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $102 $318 $551 $1,222
(1) Fundamental Growth Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
Pro Forma Expense Table
The following expense table shows the pro forma expenses of Fundamental Growth
Fund assuming that a reorganization with V.A. Mid Cap Growth Fund occurred on
June 30, 2000. The expenses shown in the table are based on fees and expenses
incurred during the twelve months ended June 30, 2001, adjusted to reflect any
changes. Fundamental Growth Fund's actual expenses after the reorganization may
be greater or less than those shown. The example contained in the pro forma
expense table shows what you would pay on a $10,000 investment if the
reorganization had occurred on June 30, 2000. The example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
example does not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the fund serves as an investment
vehicle.) The pro forma example is for comparison purposes only and is not a
representation of Fundamental Growth Fund's actual expenses or returns, either
past or future.
43
Fundamental Growth Fund (PRO FORMA)
(Assuming reorganization with V.A. Mid Cap Growth Fund)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.90%
Other expenses 0.23%
Total fund operating expenses 1.13%
Expense reimbursement (1) 0.13%
Actual operating expenses 1.00%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $102 $318 $552 $1,225
(1) Fundamental Growth Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Mid Cap Growth Fund will transfer all of its assets to
Fundamental Growth Fund. Fundamental Growth Fund will assume V.A.
Mid Cap Growth Fund's liabilities. The net asset value of both funds
will be computed as of 5:00 p.m., Eastern time, on the
reorganization date.
o Fundamental Growth Fund will issue to V.A. Mid Cap Growth Fund
shares in an amount equal to the aggregate net asset value of V.A.
Mid Cap Growth Fund's shares. These shares will be distributed
immediately to V.A. Mid Cap Growth Fund's shareholders in proportion
to their holdings on the reorganization date. As a result,
shareholders of V.A. Mid Cap Growth Fund will end up as shareholders
of Fundamental Growth Fund.
o After the reorganization is over, V.A. Mid Cap Growth Fund will be
terminated.
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel
to V.A. Mid Cap Growth Fund.
44
The following diagram shows how the reorganization would be carried out.
V. A. Mid Cap Growth V. A. Mid Cap Growth Fund Fundamental Growth
Fund transfers assets assets and liabilities Fund receives assets
and liabilities to ------------>------------ and assumes liabilities
Fundamental Growth of V.A. Mid Cap Growth
Fund Fund
Shareholders ------------<------------ Issues Shares
V.A. Mid Cap Growth Fund receives Fundamental Growth Fund shares and
and distributes them to its shareholders.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets: V.A.
Mid Cap Growth Fund--0.75% and Fundamental Growth Fund 0.90%. Fundamental Growth
Fund's management fee rate of 0.90% and its pro forma management fee rate of
0.90% are higher than V.A. Mid Cap Growth Fund's management fee rate of 0.75%.
V.A. Mid Cap Growth Fund's gross total annual operating expenses of 1.10% are
lower than those of Fundamental Growth Fund which are 1.14%. After the reduction
of each fund's other expenses as a result of the adviser's voluntary agreement
to limit the funds' other expenses, V.A. Mid Cap Growth Fund's total annual
operating expenses (1.00%) are the same as Fundamental Growth Fund (1.00%).
After the reorganization, Fundamental Growth Fund's pro forma total annual
operating expenses (1.13%) are higher than those of V.A. Mid Cap Growth Fund's
gross total annual operating expenses (1.10%) and net total annual operating
expenses (1.00%).
Investment advisory fees as a percentage of average daily net assets.
V.A. Mid Cap Growth 0.75% Fundamental Growth 0.90% on first $250 million
0.85% in excess of $250 million
45
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table shows that the
risks affecting each fund are similar and compares the risks affecting each
fund.
- --------------------------------------------------------------------------------------------------------------------------
V.A. Mid Cap Growth Fund Fundamental Growth Fund
- --------------------------------------------------------------------------------------------------------------------------
Stock market risk The value of securities in the fund may go down in response to overall stock market
movements. Markets tend to move in cycles, with periods of rising prices and periods of falling
prices. Stocks tend to go up and down in value more than bonds. If the fund concentrates in
certain sectors, its performance could be worse than that of the overall stock market.
- ------------------------------- --------------------------------------------------------------------------------------------
Manager risk The manager and its strategy may fail to produce the intended results. The fund could
underperform its peers or lose money if the manager's investment strategy does not perform
as expected.
- ------------------------------- ---------------------------------------------- ---------------------------------------------
Investment category risk The medium capitalization growth stocks in The small and medium capitalization growth
which the fund primarily invests could fall stocks in which the fund primarily invests
out of favor with the market. This could could fall out of favor with the market.
cause the fund to underperform funds that This could cause the fund to underperform
focus on large or small capitalization funds that focus on large capitalization
stocks or on value stocks. stocks or on value stocks.
- ------------------------------- --------------------------------------------------------------------------------------------
Small and medium The fund's investments in small or medium capitalization companies may be subject to
capitalization company risk larger and more erratic price movements than investments in large capitalization companies.
- ------------------------------- --------------------------------------------------------------------------------------------
Initial public offering (IPO) A significant part of the fund's return may at times be attributable to investments in
risk IPOs. Many IPO stocks are issued by, and involve the risks associated with, small and
medium capitalization companies.
- ------------------------------- --------------------------------------------------------------------------------------------
Foreign securities risk Foreign investments involve additional risks, including potentially
inadequate or inaccurate financial information and social or political instability.
- ------------------------------- --------------------------------------------------------------------------------------------
Derivatives risk Certain derivative instruments can produce disproportionate gains or losses and are riskier
than direct investments. Also, in a down market derivatives could become harder to value or sell
at a fair price.
- ------------------------------- --------------------------------------------------------------------------------------------
Liquidity and valuation risks In a down or unstable market, the fund's investments could become
harder to value accurately or to sell at a fair price.
- ------------------------------- --------------------------------------------------------------------------------------------
Turnover risk In general, the greater the volume of buying and selling by a fund (and the higher its
"turnover rate"), the greater the impact that transaction costs will have on the fund's
performance. The fund's turnover rate may exceed 100%, which is considered relatively high.
- ------------------------------- --------------------------------------------------------------------------------------------
46
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
Shareholders are being asked to approve an Agreement and Plan of Reorganization,
a form of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Mid Cap Growth Fund will transfer all of its assets to
Fundamental Growth Fund and Fundamental Growth Fund will assume all
of V.A. Mid Cap Growth Fund's liabilities. This will result in the
addition of V.A. Mid Cap Growth Fund's assets to Fundamental Growth
Fund's portfolio. The net asset value of both funds will be computed
as of 5:00 p.m., Eastern time, on the reorganization date.
o Fundamental Growth Fund will issue to V.A. Mid Cap Growth Fund
shares in an amount equal to the aggregate net asset value of V.A.
Mid Cap Growth Fund's shares. As part of the liquidation of V.A. Mid
Cap Growth Fund, these shares will be distributed immediately to
shareholders of record of V.A. Mid Cap Growth Fund in proportion to
their holdings on the reorganization date. As a result, shareholders
of V.A. Mid Cap Growth Fund will end up as shareholders of
Fundamental Growth Fund.
o After the reorganization is over, the existence of V.A. Mid Cap
Growth Fund will be terminated.
Reasons for the Proposed Reorganization
The Board of Trustees of V.A. Mid Cap Growth Fund believes that the proposed
reorganization will be advantageous to the shareholders of V.A. Mid Cap Growth
Fund for several reasons. The Board of Trustees considered the following
matters, among others, in approving the proposal.
First, V.A. Mid Cap Growth Fund is no longer being offered to new variable
insurance contract holders, making it increasingly difficult for the fund to
attract assets.
Second, shareholders may be better served by a fund offering more
diversification. Fundamental Growth Fund has a larger asset size than V.A. Mid
Cap Growth Fund and may invest in a broader range of securities. Combining the
funds' assets into a single investment portfolio may broaden diversification.
Third, Fundamental Growth Fund shares have performed better than V.A. Mid Cap
Growth Fund over the life of both funds. While past performance cannot predict
future results, the Trustees believe that Fundamental Growth Fund is better
positioned than V.A. Mid Cap Growth Fund to generate strong returns because of
its ability to choose from a broader range of investment opportunities.
47
Fourth, a combined fund may offer economies of scale that can lead to better
control over expenses than is possible for V.A. Mid Cap Growth Fund alone. Both
funds incur substantial costs for accounting, legal, transfer agency services,
insurance, and custodial and administrative services.
The Trustees believe that Fundamental Growth Fund shareholders will also benefit
from improved diversification as a result of the reorganization. Although
Fundamental Growth Fund is a larger fund than V.A. Mid Cap Growth Fund, the
Trustees believe the addition of V.A. Mid Cap Growth Fund's assets may add to
the diversification of Fundamental Growth Fund's overall portfolio and therefore
provide an economic benefit to Fundamental Growth Fund and its shareholders.
The Boards of Trustees of both funds also considered that the adviser will also
benefit from the reorganization. For example, the adviser might realize time
savings from the need to prepare fewer reports and regulatory filings. The
Trustees believe, however, that these savings will not amount to a significant
economic benefit to the adviser.
Comparative Fees and Expense Ratios. As discussed above in the Summary, the
advisory fee rate paid by V.A. Mid Cap Growth Fund is lower than the rate paid
by Fundamental Growth Fund. Fundamental Growth Fund's management fee rate of
0.90% and its pro forma management fee rate of 0.90% are higher than V.A. Mid
Cap Growth Fund's management fee rate of 0.75%.
V.A. Mid Cap Growth Fund's gross total annual operating expenses of 1.10% are
lower than those of Fundamental Growth Fund which are 1.14%. After the reduction
of each fund's other expenses as a result of the adviser's voluntary agreement
to limit the funds' other expenses, V.A. Mid Cap Growth Fund's total annual
operating expenses (1.00%) are equal to those of Fundamental Growth Fund
(1.00%). After the reorganization, Fundamental Growth Fund's pro forma gross
total annual operating expenses (1.13%) are higher than those of V.A. Mid Cap
Growth Fund's gross total annual operating expenses (1.10%) and net total annual
operating expenses (1.00%).
V.A. Mid Cap Growth Fund has not increased its asset size. The Trustees do not
believe, given V.A. Mid Cap Growth Fund's current size and historical growth
rate, that V.A. Mid Cap Growth Fund will grow to an asset size that would allow
V.A. Mid Cap Growth Fund to realize the benefits of economies of scale,
including better control over expenses. The Trustees also do not believe that
V.A. Mid Cap Growth Fund will reach an asset size which will allow V.A. Mid Cap
Growth Fund to significantly broaden the diversification of its investment
portfolio.
Comparative Performance. The trustees also took into consideration the relative
performance of V.A. Mid Cap Growth Fund and Fundamental Growth Fund.
48
PROPOSAL 6
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
V.A. SMALL CAP GROWTH FUND AND VST SMALL CAP GROWTH FUND
A proposal to approve an Agreement and Plan of Reorganization between V.A. Small
Cap Growth Fund and VST Small Cap Growth Fund. Under this Agreement, V.A. Small
Cap Growth Fund would transfer all of its assets to VST Small Cap Growth Fund in
exchange for shares of VST Small Cap Growth Fund. These shares would be
distributed proportionately to the shareholders of V.A. Small Cap Growth Fund.
VST Small Cap Growth Fund would also assume V.A. Small Cap Growth Fund's
liabilities. V.A. Small Cap Growth Fund's Board of Trustees recommends that
shareholders vote FOR this proposal.
SUMMARY
Comparison of V.A. Small Cap Growth Fund to VST Small Cap Growth Fund
- -------------------------------------------------------------------------------------------------------------------
V.A. Small Cap Growth VST Small Cap Growth
- -------------------------------------------------------------------------------------------------------------------
Business: A diversified series of John Hancock A diversified series of John Hancock
Declaration Trust. The trust is an Variable Series Trust I. The trust is an
open-end investment company organized open-end investment company organized as a
as a Massachusetts business trust. Massachusetts business trust.
- -------------------------------------------------------------------------------------------------------------------
Net assets as of $13.3 million. $202.1 million.
June 30, 2001:
- -------------------------------------------------------------------------------------------------------------------
Investment adviser and Investment Adviser: Investment Adviser:
portfolio managers: John Hancock Advisers, Inc. John Hancock Life Insurance Company
Portfolio Managers: Subadviser:
John Hancock Advisers, Inc.
Bernice S. Behar, CFA
-Senior Vice President of adviser -Owned by John Hancock
-Joined fund team in 1996 -Managing since 1968
-Joined adviser in 1991 -Managing Fund since May 1996
-Began business career in 1986
Portfolio Manager:
Anurag Pandit, CFA
-Vice President of adviser Bernice S. Behar, CFA
-Joined team in 1996 -Senior Vice President of subadviser
-Joined adviser in 1996 -Joined fund team in 1996
-Began business career in 1984 -Joined subadviser in 1991
-Began business career in 1986
- -------------------------------------------------------------------------------------------------------------------
49
- ----------------------------------------------------------------------------------------------------------------
V.A. Small Cap Growth Fund VST Small Cap Growth Fund
- ----------------------------------------------------------------------------------------------------------------
Investment objective: The fund seeks long-term capital The fund is a small cap stock fund with a
appreciation. This objective can be growth emphasis that seeks long-term
changed without shareholder approval. capital appreciation. This objective can
be changed without shareholder approval.
- ----------------------- -------------------------------------------- -------------------------------------------
Primary investments: The fund invests at least 80% of assets in The fund invests primarily in common
stocks of small capitalization companies stocks of small U.S. companies that are
(companies in the capitalization range of believed to offer above-average potential
the Russell 2000 Growth Index, which was for growth in revenues and earnings.
$___ million to $___ billion as of Stocks are purchased that are expected to
September 30, 2001). The managers look have rapid earnings growth that is not
for companies in the emerging growth phase yet widely recognized by the investment
of development that are not yet widely community. The fund normally invests in
recognized. The fund may also invest in 140 to 220 stocks, with at least
established companies that offer the 65%(usually higher) of its assets in
possibility of accelerating earnings. To small cap companies.
manage risk, the fund typically invests in
150 to 220 companies across many
industries.
- ----------------------- -------------------------------------------- -------------------------------------------
Foreign securities: The fund may invest up to 10% of assets in The fund may invest in foreign securities
foreign securities. that are U.S. dollar-denominated.
- ----------------------- ----------------------------------------------------------------------------------------
Preferred stocks: The fund may invest in preferred stocks and other types of equity securities.
- ----------------------- ----------------------------------------------------------------------------------------
Cash and cash The fund normally has less than 10% of assets in cash and cash equivalents.
equivalents:
- ----------------------- -------------------------------------------- -------------------------------------------
Diversification: The fund is diversified and cannot invest The fund is diversified and, with respect
more than 5% of total assets in any one to 75% of total assets, cannot invest
security. more than 5% of total assets in
securities of a single issuer.
- ----------------------- ----------------------------------------------------------------------------------------
Initial public The fund may invest in IPOs.
offerings ("IPOs"):
- ----------------------- -------------------------------------------- -------------------------------------------
Derivatives: The fund may make limited use of certain The fund may make limited use of certain
derivatives (investments whose value is derivatives (investments whose value is
based on indices or currencies). based on indices or other securities).
- ----------------------- -------------------------------------------- -------------------------------------------
Temporary defensive In abnormal market conditions, the fund In abnormal market conditions, the fund
positions: may temporarily invest in U.S. government may take temporary defensive measures -
securities with maturities of up to three such as holding unusually large amounts
years, and may also invest more than 10% of cash and cash equivalents - that are of
assets in cash and/or cash inconsistent with the fund's primary
equivalents. In these and other cases, investment strategy. In taking those
the fund might not achieve its goal. measures, the fund may not achieve its
investment goal.
- ----------------------- -------------------------------------------- -------------------------------------------
50
The Funds' Expenses
Both funds pay various expenses. The first two expense tables appearing below
show the expenses for the twelve-month period ended June 30, 2001, adjusted to
reflect any changes. Future expenses may be greater or less. The examples
contained in each expense table show what you would pay if you invested $10,000
over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
examples do not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the funds serve as an investment
vehicle.) The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.
V.A. Small Cap Growth Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.75%
Other expenses 0.37%
Total fund operating expenses 1.12%
Expense reimbursement (1) 0.12%
Actual operating expenses 1.00%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $102 $317 $550 $1,220
(1) V.A. Small Cap Growth Fund's adviser has agreed to limit the fund's
expenses, excluding management fees, to 0.25% at least until 4/30/02.
51
VST Small Cap Growth Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 1.05%
Other expenses 0.09%
Total fund operating expenses 1.14%
Expense reimbursement (1) 0.00%
Actual operating expenses 1.14%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $116 $362 $627 $1,385
(1) VST Small Cap Growth Fund's adviser has agreed to limit the fund's
expenses, excluding management fees, to 0.10%.
Pro Forma Expense Table
The following expense table shows the pro forma expenses of VST Small Cap Growth
Fund assuming that a reorganization with V.A. Small Cap Growth Fund occurred on
June 30, 2000. The expenses shown in the table are based on fees and expenses
incurred during the twelve months ended June 30, 2001, adjusted to reflect any
changes. VST Small Cap Growth Fund's actual expenses after the reorganization
may be greater or less than those shown. The example contained in the pro forma
expense table shows what you would pay on a $10,000 investment if the
reorganization had occurred on June 30, 2000. The example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
example does not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the fund serves as an investment
vehicle.) The pro forma example is for comparison purposes only and is not a
representation of VST Small Cap Growth Fund's actual expenses or returns, either
past or future.
52
VST Small Cap Growth Fund (PRO FORMA)
(Assuming reorganization with V.A. Small Cap Growth Fund)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 1.05%
Other expenses 0.09%
Total fund operating expenses 1.14%
Expense reimbursement (1) 0.00%
Actual operating expenses 1.14%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $116 $362 $627 $1,385
(1) VST Small Cap Growth Fund's adviser has agreed to limit the fund's
expenses, excluding management fees, to 0.10%.
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Small Cap Growth Fund will transfer all of its assets to
VST Small Cap Growth Fund. VST Small Cap Growth Fund will assume
V.A. Small Cap Growth Fund's liabilities. The net asset value of
both funds will be computed as of 5:00 p.m., Eastern time, on the
reorganization date.
o VST Small Cap Growth Fund will issue to V.A. Small Cap Growth Fund
shares in an amount equal to the aggregate net asset value of V.A.
Small Cap Growth Fund's shares. These shares will be distributed
immediately to V.A. Small Cap Growth Fund's shareholders in
proportion to their holdings on the reorganization date. As a
result, shareholders of V.A. Small Cap Growth Fund will end up as
shareholders of VST Small Cap Growth Fund.
o After the reorganization is over, V.A. Small Cap Growth Fund will be
terminated.
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel
to V.A. Small Cap Growth Fund.
53
The following diagram shows how the reorganization would be carried out.
V. A. Small Cap Growth V. A. Small Cap Growth Fund VST Small Cap Growth
Fund transfers assets assets and liabilities Fund receives assets
and liabilities to VST ------------->------------- and assumes liabilities
Small Cap Growth of V.A. Small Cap Growth
Fund Fund
Shareholders -------------<------------- Issues Shares
V.A. Small Cap Growth Fund receives VST Small Cap Growth Fund shares and
and distributes them to its shareholders.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets: V.A.
Small Cap Growth Fund--0.75% and VST Small Cap Growth Fund 1.05%. VST Small Cap
Growth Fund's management fee rate of 1.05% and its pro forma management fee rate
of 1.05% are higher than V.A. Small Cap Growth Fund's management fee rate of
0.75%. V.A. Small Cap Growth Fund's gross total annual operating expenses of
1.12% lower than those of VST Small Cap Growth Fund which are 1.14%. Even after
the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. Small Cap Growth
Fund's total annual operating expenses (1.00%) are lower than those of VST Small
Cap Growth Fund (1.14%). After the reorganization, VST Small Cap Growth Fund's
pro forma total annual operating expenses (1.14%) are higher than those of V.A.
Small Cap Growth Fund's gross total annual operating expenses (1.12%) and net
total annual operating expenses (1.00%).
Investment advisory fees as a percentage of average daily net assets.
V.A. Small Cap Growth 0.75% VST Small Cap Growth 1.05%
54
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table shows that the
risks affecting each fund are similar and compares the risks affecting each
fund.
- --------------------------------------------------------------------------------------------------------------------------
V.A. Small Cap Growth Fund VST Small Cap Growth Fund
- --------------------------------------------------------------------------------------------------------------------------
Stock market risk The value of securities in the fund may go down in response to overall stock market
movements. Markets tend to move in cycles, with periods of rising prices and periods of falling
prices. Stocks tend to go up and down in value more than bonds. If the fund concentrates in
certain sectors, its performance could be worse than that of the overall stock market.
- ------------------------------- --------------------------------------------------------------------------------------------
Manager risk The manager and its strategy may fail to produce the intended results. The fund could
underperform its peers or lose money if the manager's investment strategy does not perform
as expected.
- ------------------------------- --------------------------------------------------------------------------------------------
Investment category risk The small capitalization growth stocks in which the fund primarily invests could
fall out of favor with the market. This could cause the fund to underperform funds that focus
on large or medium capitalization stocks or on value stocks.
- ------------------------------- --------------------------------------------------------------------------------------------
Small and medium The fund's investments in small or medium capitalization companies may be subject to
capitalization company risk larger and more erratic price movements than investments in established large
capitalization companies. Many smaller companies have short track records, narrow product lines
or niche markets, making them highly vulnerable to isolated business setbacks.
- ------------------------------- --------------------------------------------------------------------------------------------
Initial public offering (IPO) A significant part of the fund's return may at times be attributable to investments in
risk IPOs. Many IPO stocks are issued by, and involve the risks associated with, small and
medium capitalization companies.
- ------------------------------- --------------------------------------------------------------------------------------------
Foreign securities risk Foreign investments involve additional risks, including potentially
inadequate or inaccurate financial information and social or political instability.
- ------------------------------- --------------------------------------------------------------------------------------------
Derivatives risk Certain derivative instruments can produce disproportionate gains or losses and are riskier
than direct investments. Also, in a down market derivatives could become harder to value or sell
at a fair price.
- ------------------------------- --------------------------------------------------------------------------------------------
Liquidity and valuation risks In a down or unstable market, the fund's investments could become
harder to value accurately or to sell at a fair price.
- ------------------------------- --------------------------------------------------------------------------------------------
Turnover risk In general, the greater the volume of buying and selling by a fund (and the higher its
"turnover rate"), the greater the impact that transaction costs will have on the fund's
performance. The fund's turnover rate may exceed 100%, which is considered relatively high.
- ------------------------------- --------------------------------------------------------------------------------------------
55
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
Shareholders are being asked to approve an Agreement and Plan of Reorganization,
a form of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern
time, on December 7, 2001, but may occur on any later date
before June 30, 2002. V.A. Small Cap Growth Fund will transfer
all of its assets to VST Small Cap Growth Fund and VST Small
Cap Growth Fund will assume all of V.A. Small Cap Growth
Fund's liabilities. This will result in the addition of V.A.
Small Cap Growth Fund's assets to VST Small Cap Growth Fund's
portfolio. The net asset value of both funds will be computed
as of 5:00 p.m., Eastern time, on the reorganization date.
o VST Small Cap Growth Fund will issue to V.A. Small Cap Growth
Fund shares in an amount equal to the aggregate net asset
value of V.A. Small Cap Growth Fund's shares. As part of the
liquidation of V.A. Small Cap Growth Fund, these shares will
be distributed immediately to shareholders of record of V.A.
Small Cap Growth Fund in proportion to their holdings on the
reorganization date. As a result, shareholders of V.A. Small
Cap Growth Fund will end up as shareholders of VST Small Cap
Growth Fund.
o After the reorganization is over, the existence of V.A. Small
Cap Growth Fund will be terminated.
Reasons for the Proposed Reorganization
The Board of Trustees of V.A. Small Cap Growth Fund believes that the proposed
reorganization will be advantageous to the shareholders of V.A. Small Cap Growth
Fund for several reasons. The Board of Trustees considered the following
matters, among others, in approving the proposal.
First, V.A. Small Cap Growth Fund is no longer being offered to new variable
insurance contract holders, making it increasingly difficult for the fund to
attract assets.
Second, shareholders may be better served by a fund offering more
diversification. VST Small Cap Growth Fund has a larger asset size than V.A.
Small Cap Growth Fund and invests in the same types of securities. Combining the
funds' assets into a single investment portfolio may broaden diversification.
Third, VST Small Cap Growth Fund shares have performed better than V.A. Small
Cap Growth Fund over the life of both funds. While past performance cannot
predict future results, the Trustees believe that VST Small Cap Growth Fund is
better positioned than V.A. Small Cap Growth Fund to continue to generate strong
return.
Fourth, a combined fund may offer economies of scale that can lead to better
control over expenses than is possible for V.A. Small Cap Growth Fund alone.
Both funds incur substantial costs for accounting, legal, transfer agency
services, insurance, and custodial and administrative services.
The Trustees believe that VST Small Cap Growth Fund shareholders will also
benefit from improved diversification as a result of the reorganization.
Although VST Small Cap Growth Fund is a larger fund than V.A. Small Cap Growth
Fund, the Trustees believe that the addition of V.A. Small Cap Growth Fund's
assets may add to the diversification of VST Small Cap Growth Fund's overall
portfolio and therefore provide an economic benefit to VST Small Cap Growth Fund
and its shareholders without the obligation to pay commissions or other
transaction costs that a fund normally incurs when purchasing securities.
The Boards of Trustees of both funds also considered that the adviser will also
benefit from the reorganization. For example, the adviser might realize time
savings from the need to prepare fewer reports and regulatory filings. The
Trustees believe, however, that these savings will not amount to a significant
economic benefit to the adviser.
56
Comparative Fees and Expense Ratios. As discussed above in the Summary, the
advisory fee rate paid by V.A. Small Cap Growth Fund is lower than the rate
paid by VST Small Cap Growth Fund. VST Small Cap Growth Fund's management fee
rate of 1.05% and its pro forma management fee rate of 1.05% are higher than
V.A. Small Cap Growth Fund's management fee rate of 0.75%.
V.A. Small Cap Growth Fund's gross total annual operating expenses of 1.12% are
lower than those of VST Small Cap Growth Fund which are 1.14%. Even after the
reduction of each fund's other expenses as a result of the adviser's voluntary
agreement to limit the funds' other expenses, V.A. Small Cap Growth Fund's total
annual operating expenses (1.00%) are lower than those of VST Small Cap Growth
Fund (1.14%). After the reorganization, VST Small Cap Growth Fund's pro forma
total annual operating expenses (1.14%) are more than those of V.A. Small Cap
Growth Fund's gross total annual operating expenses (1.12%) and net total annual
operating expenses (1.00%).
V.A. Small Cap Growth Fund has not increased its asset size. The Trustees do not
believe, given V.A. Small Cap Growth Fund's current size and historical growth
rate, that V.A. Small Cap Growth Fund will grow to an asset size that would
allow V.A. Small Cap Growth Fund to realize the benefits of economies of scale,
including better control over expenses. The Trustees also do not believe that
V.A. Small Cap Growth Fund will reach an asset size which will allow V.A. Small
Cap Growth Fund to significantly broaden the diversification of its investment
portfolio.
Comparative Performance. The trustees also took into consideration the relative
performance of V.A. Small Cap Growth Fund and VST Small Cap Growth Fund.
57
PROPOSAL 7
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
V.A. BOND FUND AND ACTIVE BOND FUND
A proposal to approve an Agreement and Plan of Reorganization between V.A. Bond
Fund and Active Bond Fund. Under this Agreement, V.A. Bond Fund would transfer
all of its assets to Active Bond Fund in exchange for shares of Active Bond
Fund. These shares would be distributed proportionately to the shareholders of
V.A. Bond Fund. Active Bond Fund would also assume V.A. Bond Fund's liabilities.
V.A. Bond Fund's Board of Trustees recommends that shareholders vote FOR this
proposal.
SUMMARY
Comparison of V.A. Bond Fund to Active Bond Fund
- -------------------------------------------------------------------------------------------------------------------
V.A. Bond Fund Active Bond Fund
- -------------------------------------------------------------------------------------------------------------------
Business: The fund is a diversified series of The fund is a diversified series of John
John Hancock Declaration Trust. The Hancock Variable Series Trust I. The trust is
trust is an open-end investment an open-end investment company organized as a
company organized as a Massachusetts business trust.
Massachusetts business trust.
- -------------------------------------------------------------------------------------------------------------------
Net assets as of June 30, $67.7 million. $816.3 million.
2001:
- -------------------------------------------------------------------------------------------------------------------
Investment adviser and Investment Adviser: Investment Adviser:
portfolio managers: John Hancock Advisers, Inc. John Hancock Life Insurance Company
Portfolio managers: Subadviser:
John Hancock Advisers, Inc.
James K. Ho, CFA
-Executive V.P. of adviser Portfolio manager:
-Joined fund team in 1996
-Joined adviser in 1985 James K. Ho, CFA
-Began business career in 1977 -Executive V.P. of subadviser
-Joined fund team in 1995
Benjamin A. Matthews -Joined adviser in 1985
-Vice President of adviser -Began business career in 1977
-Joined fund team in 1998
-Joined adviser in 1995
-Began business career in 1970
- -------------------------------------------------------------------------------------------------------------------
58
- ----------------------------------------------------------------------------------------------------------------
V.A. Bond Fund Active Bond Fund
- ----------------------------------------------------------------------------------------------------------------
Investment objective: The fund seeks to generate a high level of The fund is an intermediate term bond
current income consistent with prudent fund of medium credit quality that seeks
investment risk. This objective can be income and capital appreciation.
changed without shareholder approval. This objective can be changed without
shareholder approval.
---------------------- -------------------------------------------- -------------------------------------------
Primary investments: The fund normally invests at least 65% of The fund primarily invests in a
assets in a diversified portfolio of debt diversified mix of debt securities
securities. These include corporate bonds including:
and debentures as well as U.S. government
and agency securities. Most of these are o U.S. Treasury and agency
investment grade. securities;
o foreign government and agency
securities (if dollar-denominated);
o corporate bonds, both U.S. and
foreign (if dollar-denominated); and
o mortgage and asset-backed
securities.
The fund normally has an average credit
rating of "A" or higher.
---------------------- -------------------------------------------- -------------------------------------------
Junk bonds: The fund may invest up to 25% of assets in The fund may invest up to 25% of assets
junk bonds rated as low as CC/Ca and their in junk bonds.
unrated equivalents.
---------------------- -------------------------------------------- -------------------------------------------
Foreign securities: The fund does not invest more than 25% of The fund may invest in foreign securities
assets in foreign securities (excluding that are U.S. dollar-denominated.
U.S. dollar-denominated Canadian
securities).
---------------------- ----------------------------------------------------------------------------------------
Mortgage-backed and The fund invests in mortgage-backed and asset-backed securities.
asset-backed
securities:
---------------------- ----------------------------------------------------------------------------------------
Cash and cash Under normal conditions, the fund does not invest more than 10% of assets in cash or
equivalents: cash equivalents.
---------------------- -------------------------------------------- -------------------------------------------
Average maturity: There is no limit on the fund's average The fund is an intermediate term bond
maturity. fund with an average maturity that is
typically between four and ten years.
---------------------- ----------------------------------------------------------------------------------------
Diversification: The fund is diversified and, with respect to 75% of total assets, cannot invest more
than 5% of total assets in securities of a single issuer.
---------------------- ------------------------------------------- --------------------------------------------
Derivatives: The fund may invest in certain The fund may invest in certain derivatives
derivatives (investments whose value is (investments whose value is based on
based on indices, securities or indices or other securities.)
currencies).
---------------------- ------------------------------------------- --------------------------------------------
Temporary defensive In abnormal market conditions, the fund In abnormal market conditions, the fund
positions: may temporarily invest more than 35% of may take temporary defensive measures -
assets in investment-grade short-term such as holding unusually large amounts of
securities. In these and other cases, cash and cash equivalents - that are
the fund might not achieve its goal. inconsistent with the fund's primary
investment strategy. In taking those
measures, the fund may not achieve its
investment goal.
---------------------- ------------------------------------------- --------------------------------------------
The Funds' Expenses
Both funds pay various expenses. The first two expense tables appearing below
show the expenses for the twelve-month period ended June 30, 2001, adjusted to
reflect any changes. Future expenses may be greater or less. The examples
contained in each expense table show what you would pay if you invested $10,000
over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
examples do not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the funds serve as an investment
vehicle.) The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.
59
V.A. Bond Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.50%
Other expenses 0.25%
Total fund operating expenses 0.75%
Expense reimbursement (1) 0.00%
Actual operating expenses 0.75%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $76 $238 $415 $925
(1) V.A. Bond Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.25% until 5/1/02.
Active Bond Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.62%
Other expenses 0.15%
Total fund operating expenses 0.77%
Expense reimbursement (1) 0.05%
Actual operating expenses 0.72%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $73 $229 $398 $889
(1) Active Bond Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
60
Pro Forma Expense Table
The following expense table shows the pro forma expenses of Active Bond Fund
assuming that a reorganization with V.A. Bond Fund occurred on June 30, 2000.
The expenses shown in the table are based on fees and expenses incurred during
the twelve months ended June 30, 2001, adjusted to reflect any changes. Active
Bond Fund's actual expenses after the reorganization may be greater or less than
those shown. The example contained in the pro forma expense table shows what you
would pay on a $10,000 investment if the reorganization had occurred on June 30,
2000. The example assumes that you reinvested all dividends and that the average
annual return was 5%. (The example does not reflect the fees or expenses
associated with variable annuity and variable life insurance contracts for which
the fund serves as an investment vehicle.) The pro forma example is for
comparison purposes only and is not a representation of Active Bond Fund's
actual expenses or returns, either past or future.
Active Bond Fund (PRO FORMA)
(Assuming reorganization with V.A. Bond Fund)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.61%
Other expenses 0.12%
Total fund operating expenses 0.73%
Expense reimbursement (1) 0.02%
Actual operating expenses 0.71%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $73 $228 $396 $884
(1) Active Bond Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
61
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Bond Fund will transfer all of its assets to Active Bond
Fund. Active Bond Fund will assume V.A. Bond Fund's liabilities. The
net asset value of both funds will be computed as of 5:00 p.m.,
Eastern time, on the reorganization date.
o Active Bond Fund will issue to V.A. Bond Fund shares in an amount
equal to the aggregate net asset value of V.A. Bond Fund's shares.
These shares will be distributed immediately to V.A. Bond Fund's
shareholders in proportion to their holdings on the reorganization
date. As a result, shareholders of V.A. Bond Fund will end up as
shareholders of Active Bond Fund.
o After the reorganization is over, V.A. Bond Fund will be terminated.
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel
to V.A. Bond Fund.
The following diagram shows how the reorganization would be carried out.
V. A. Bond V. A. Bond Fund Active Bond
Fund transfers assets assets and liabilities Fund receives assets
and liabilities to Active --------------->--------------- and assumes liabilities
Bond Fund of V.A. Bond
Fund
Shareholders ---------------<--------------- Issues Shares
V.A. Bond Fund receives Active Bond Fund shares and
and distributes them to its shareholders.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets: V.A.
Bond Fund--0.50% and Active Bond Fund 0.62%. Active Bond Fund's management fee
rate of 0.62% and its pro forma management fee rate of 0.61% are higher than`
V.A. Bond Fund's management fee rate of 0.50%. V.A. Bond Fund's gross total
annual operating expenses of 0.75% are lower than those of Active Bond Fund
which are 0.77%. After the reduction of each fund's other expenses as a result
of the adviser's voluntary agreement to limit the funds' other expenses, V.A.
Bond Fund's total annual operating expenses (0.75%) are higher than those of
Active Bond Fund (0.72%). After the reorganization, Active Bond Fund's pro forma
total annual operating expenses (0.73%) are less than those of V.A. Bond Fund's
gross total annual operating expenses (0.75%) and net total annual operating
expenses (0.75%).
Investment advisory fees as a percentage of
average daily net assets.
V.A. Bond 0.50% Active Bond Fund 0.70% on first $100 million
0.65% on next $150 million
0.61% on next $250 million
0.575% on next $500 million
0.55% in excess of $1 billion
62
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table shows that the
risks affecting each fund are similar and compares the risks affecting each
fund.
- -------------------------------------------------------------------------------------------------------------------------
V.A. Bond Fund Active Bond Fund
- -------------------------------------------------------------------------------------------------------------------------
Interest rate risk When interest rates rise, bond prices usually fall. Generally, an increase in the
fund's average maturity will make it more sensitive to interest rate risk.
- ------------------------------- --------------------------------------------------------------------------------------------
Prepayment (call) and If interest rate movements cause the fund's mortgage-related and callable securities to be
extension risks paid off earlier or later than expected, the fund's share price or yield could be hurt.
- ------------------------------- --------------------------------------------------------------------------------------------
Credit risk The fund could lose money if the credit rating of any bond in its portfolio is
downgraded or if the issuer of the bond defaults on its obligations. In general, lower-rated
bonds involve more credit risk. The prices of lower-rated bonds may also be more volatile and
more sensitive to adverse economic developments.
- ------------------------------- --------------------------------------------------------------------------------------------
Sector concentration risk If the fund concentrates in certain sectors of the bond market, its
performance could be worse than that of the overall bond market.
- ------------------------------- --------------------------------------------------------------------------------------------
Manager risk The manager and its strategy may fail to produce the intended results. The fund could
underperform its peers or lose money if the manager's investment strategy does not perform
as expected.
- ------------------------------- --------------------------------------------------------------------------------------------
Foreign securities risk Foreign investments involve additional risks, including potentially
inaccurate financial information and social or political instability. The prices of foreign
bonds may also be more volatile and more sensitive to adverse economic developments
occuring outside the U.S.
- ------------------------------- ---------------------------------------------- ---------------------------------------------
Foreign currency risk Unfavorable foreign currency exchange rates Not applicable because the fund invests
could reduce the value of bonds denominated only in U.S. dollar-denominated bonds.
in foreign currencies.
- ------------------------------- --------------------------------------------------------------------------------------------
Derivatives risk Certain derivative instruments can produce disproportionate gains or losses and are riskier
than direct investments. Also, in a down market derivatives could become harder to value or sell
at a fair price.
- ------------------------------- --------------------------------------------------------------------------------------------
Liquidity and valuation risks In a down or unstable market, the fund's investments could become
harder to value accurately or to sell at a fair price.
- ------------------------------- --------------------------------------------------------------------------------------------
Turnover risk In general, the greater the volume of buying and selling by a fund (and the higher its
"turnover rate"), the greater the impact that transaction costs will have on the fund's
performance. The fund's turnover rate may exceed 100%, which is considered relatively high.
- ------------------------------- --------------------------------------------------------------------------------------------
63
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
Shareholders are being asked to approve an Agreement and Plan of Reorganization,
a copy of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 7, 2001, but may occur on any later date before June 30,
2002. V.A. Bond Fund will transfer all of its assets to Active Bond
Fund and Active Bond Fund will assume all of V.A. Bond Fund's
liabilities. This will result in the addition of V.A. Bond Fund's
assets to Active Bond Fund's portfolio. The net asset value of both
funds will be computed as of 5:00 p.m., Eastern time, on the
reorganization date.
o Active Bond Fund will issue to V.A. Bond Fund shares in an amount
equal to the aggregate net asset value of V.A. Bond Fund's shares.
As part of the liquidation of V.A. Bond Fund, these shares will be
distributed immediately to shareholders of record of V.A. Bond Fund
in proportion to their holdings on the reorganization date. As a
result, shareholders of V.A. Bond Fund will end up as shareholders
of Active Bond Fund.
o After the reorganization is over, the existence of V.A. Bond Fund
will be terminated.
Reasons for the Proposed Reorganization.
The Board of Trustees of V.A. Bond Fund believes that the proposed
reorganization will be advantageous to the shareholders of V.A. Bond Fund for
several reasons. The Board of Trustees considered the following matters, among
others, in approving the proposal.
First, V.A. Bond Fund is no longer being offered to new variable insurance
contract holders, making it increasingly difficult for the fund to attract
assets.
Second, shareholders may be better served by a fund offering more
diversification. Active Bond Fund has a larger asset size than V.A. Bond Fund
and invests in the same types of securities. Combining the funds' assets into a
single investment portfolio may broaden diversification.
Third, Active Bond Fund shares have performed better than V.A. Bond Fund over
the life of both funds. While past performance cannot predict future results,
the Trustees believe that Active Bond Fund is better positioned than V.A. Bond
Fund to generate strong returns.
Fourth, a combined fund may offer economies of scale that can lead to better
control over expenses than is possible for V.A. Bond Fund alone. Both funds
incur substantial costs for accounting, legal, transfer agency services,
insurance, and custodial and administrative services.
The Trustees believe that Active Fund shareholders will also benefit from
improved diversification as a result of the reorganization. Although Active Bond
Fund is a larger fund than V.A. Bond Fund, the Trustees believe that the
addition of V.A. Bond Fund's assets may add to the diversification of Active
Bond Fund's overall portfolio and therefore provide an economic benefit to
Active Bond Fund and its shareholders.
The Boards of Trustees of both funds also considered that the adviser will also
benefit from the reorganization. For example, the adviser might realize time
savings from a consolidated portfolio management effort and from the need to
prepare fewer reports and regulatory filings as well as prospectus disclosure
for one fund instead of two. The Trustees believe, however, that these savings
will not amount to a significant economic benefit to the adviser.
Comparative Fees and Expense Ratios. As discussed above in the Summary, the
advisory fee rate paid by V.A. Bond Fund is lower than as the rate paid by
Active Bond Fund. Active Bond Fund's management fee rate of
64
0.62% and its pro forma management fee rate of 0.61% are higher than those of
V.A. Bond Fund's management fee rate of 0.50%.
V.A. Bond Fund's gross total annual operating expenses of 0.75% are lower than
those of Active Bond Fund, which are 0.77%. After the reduction of each fund's
other expenses as a result of the adviser's voluntary agreement to limit the
funds' other expenses, V.A. Bond Fund's total annual operating expenses (0.75%)
are higher than those of Active Bond Fund (0.72%). After the reorganization,
Active Bond Fund's pro forma total annual operating expenses (0.73%) are less
than those of V.A. Bond Fund's gross total annual operating expenses (0.75%) and
net total annual operating expenses (0.75%).
V.A. Bond Fund has not increased its asset size. The Trustees do not believe,
given V.A. Bond Fund's current size and historical growth rate, that V.A. Bond
Fund will grow to an asset size that would allow V.A. Bond Fund to realize the
benefits of economies of scale, including better control over expenses. The
Trustees also do not believe that V.A. Bond Fund will reach an asset size which
will allow V.A. Bond Fund to significantly broaden the diversification of its
investment portfolio.
Comparative Performance. The trustees also took into consideration the relative
performance of V.A. Bond Fund and Active Bond Fund.
65
PROPOSAL 8
APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION BETWEEN
V.A. MONEY MARKET FUND AND VST MONEY MARKET FUND
A proposal to approve an Agreement and Plan of Reorganization between V.A. Money
Market Fund and VST Money Market Fund. Under this Agreement, V.A. Money Market
Fund would transfer all of its assets to VST Money Market Fund in exchange for
shares of VST Money Market Fund. These shares would be distributed
proportionately to the shareholders of V.A. Money Market Fund. VST Money Market
Fund would also assume V.A. Money Market Fund's liabilities. V.A. Money Market
Fund's Board of Trustees recommends that shareholders vote FOR this proposal.
SUMMARY
Comparison of V.A. Money Market Fund to VST Money Market Fund
- -------------------------------------------------------------------------------------------------------------------
V.A. Money Market VST Money Market
- -------------------------------------------------------------------------------------------------------------------
Business: A diversified series of John Hancock A diversified series of John Hancock
Declaration Trust. The trust is an Variable Series Trust I. The trust is an
open-end investment company organized open-end investment company organized as a
as a Massachusetts business trust. Massachusetts business trust.
- -------------------------------------------------------------------------------------------------------------------
Net assets as of June 30, $143.5 million. $459.4 million.
2001:
- -------------------------------------------------------------------------------------------------------------------
Investment adviser and Investment Adviser: Investment Adviser:
portfolio managers: John Hancock Advisers, Inc. John Hancock Life Insurance Company
Portfolio Managers: Subadviser:
Team of Money Market research analysts Wellington Management Company, LLP
and portfolio managers. -Managing, with predecessors, since 1928
-Managing fund since May 2001
Portfolio Managers:
Management by investment team overseen by:
John Keogh
-Senior Vice President and Partner of
subadviser
-Joined subadviser in 1983
- -------------------------------------------------------------------------------------------------------------------
66
- ----------------------------------------------------------------------------------------------------------------
V.A. Money Market Fund VST Money Market Fund
- ----------------------------------------------------------------------------------------------------------------
Investment objective: The fund seeks the maximum current income The fund is a money market fund that
that is consistent with maintaing seeks to preserve capital and liquidity
liquidity and preserving capital. The while also seeking to achieve a
fund intends to maintain a stable $1 share competitive yield. The fund intends to
price. This objective can be changed maintain a stable net asset value of
without shareholder approval. $1.00 per share. This objective can be
changed without shareholder approval.
---------------------- -------------------------------------------- -------------------------------------------
Primary investments: The fund invests only in The fund invests in U.S. dollar
dollar-denominated securities rated within denominated money market instruments
the two highest short-term credit rated in one of the two highest
categories and their unrated equivalents. short-term credit rating categories,
These securities may be issued by: primarily including:
o U.S. and foreign companies o commercial paper and other
o U.S. and foreign banks short-term obligations of U.S. and
o U.S. and foreign governments foreign issuers (including asset-backed
o U.S. agencies, states and securities);
municipalities o certificates of deposit, bank
o International organizations such notes and other obligations of U.S. and
as the World Bank and the foreign banks and other lending
International Monetary Fund. institutions;
o debt securities issued by
foreign governments and agencies;
o U.S. Treasury, agency and state
and local government obligations; and
o repurchase agreements.
---------------------- ----------------------------------------------------------------------------------------
Average maturity: The fund maintains an average dollar-weighted maturity of 90 days or less, and does not
invest in securities with maturities of more than 13 months.
---------------------- ----------------------------------------------------------------------------------------
Foreign securities: The fund may invest in foreign securities which are U.S. dollar-denominated.
---------------------- ----------------------------------------------------------------------------------------
Repurchase The fund may invest in repurchase agreements.
agreements:
---------------------- ----------------------------------------------------------------------------------------
Diversification: The fund is diversified and, with respect to 75% of total assets, cannot invest more
than 5% of total assets in securities of a single issuer.
---------------------- ----------------------------------------------------------------------------------------
67
The Funds' Expenses
Both funds pay various expenses. The first two expense tables appearing below
show the expenses for the twelve-month period ended June 30, 2001, adjusted to
reflect any changes. Future expenses may be greater or less. The examples
contained in each expense table show what you would pay if you invested $10,000
over the various time periods indicated. Each example assumes that you
reinvested all dividends and that the average annual return was 5%. (The
examples do not reflect the fees or expenses associated with variable annuity
and variable life insurance contracts for which the funds serve as an investment
vehicle.) The examples are for comparison purposes only and are not a
representation of either fund's actual expenses or returns, either past or
future.
V.A. Money Market Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.50%
Other expenses 0.07%
Total fund operating expenses 0.57%
Expense reimbursement (1) 0.00%
Actual operating expenses 0.57%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $58 $182 $317 $711
(1) V.A. Money Market fund's adviser has agreed to limit expenses, excluding
management fees, to 0.25% until 5/1/02.
68
VST Money Market Fund
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.25%
Other expenses 0.03%
Total fund operating expenses 0.28%
Expense reimbursement (1) 0.00%
Actual operating expenses 0.28%
Example
Year 1 Year 3 Year 5 Year 10
At end of period $29 $90 $157 $356
(1) VST Money Market Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
Pro Forma Expense Table
The following expense table shows the pro forma expenses of VST Money Market
Fund assuming that a reorganization with V.A. Money Market Fund occurred on June
30, 2000. The expenses shown in the table are based on fees and expenses
incurred during the twelve months ended June 30, 2001, adjusted to reflect any
changes. VST Money Market Fund's actual expenses after the reorganization may be
greater or less than those shown. The example contained in the pro forma expense
table shows what you would pay on a $10,000 investment if the reorganization had
occurred on June 30, 2000. The example assumes that you reinvested all dividends
and that the average annual return was 5%. (The example does not reflect the
fees or expenses associated with variable annuity and variable life insurance
contracts for which the fund serves as an investment vehicle.) The pro forma
example is for comparison purposes only and is not a representation of VST Money
Market Fund's actual expenses or returns, either past or future.
69
VST Money Market Fund (PRO FORMA)
(Assuming reorganization with V.A. Money Market Fund)
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 0.00%
Maximum sales charge imposed on
Reinvested dividends none
Maximum deferred sales charge none
Redemption fee none
Exchange fee none
Annual fund operating expenses
(as a % of average net assets)
Management fee 0.25%
Other expenses 0.03%
Total fund operating expenses 0.28%
Expense reimbursement (1) 0.00%
Actual operating expenses 0.28%
Pro Forma Example
Year 1 Year 3 Year 5 Year 10
At end of period $29 $90 $157 $356
(1) VST Money Market Fund's adviser has agreed to limit the fund's expenses,
excluding management fees, to 0.10%.
The Reorganization
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 14, 2001, but may occur on any later date before June
30, 2002. V.A. Money Market Fund will transfer all of its assets to
VST Money Market Fund. VST Money Market Fund will assume V.A. Money
Market Fund's liabilities. The net asset value of both funds will be
computed as of 5:00 p.m., Eastern time, on the reorganization date.
o VST Money Market Fund will issue to V.A. Money Market Fund shares in
an amount equal to the aggregate net asset value of V.A. Money
Market Fund's shares. These shares will be distributed immediately
to V.A. Money Market Fund's shareholders in proportion to their
holdings on the reorganization date. As a result, shareholders of
V.A. Money Market Fund will end up as shareholders of VST Money
Market Fund.
o After the reorganization is over, V.A. Money Market Fund will be
terminated.
o The reorganization will be tax-free and will not take place unless
both funds receive a satisfactory opinion concerning the tax
consequences of the reorganization from Hale and Dorr LLP, counsel
to V.A. Money Market Fund.
70
The following diagram shows how the reorganization would be carried out.
V. A. Money Market V. A. Money Market Fund VST Money Market
Fund transfers assets assets and liabilities Fund receives assets
and liabilities to VST --------------->--------------- and assumes liabilities
Money Market of V.A. Money Market
Fund Fund
Shareholders ---------------<--------------- Issues Shares
V.A. Money Market Fund receives VST Money Market Fund shares and
and distributes them to its shareholders.
Other Consequences of the Reorganization. Each fund pays monthly advisory fees
equal to the following annual percentage of its average daily net assets: V.A.
Money Market Fund--0.50% and VST Money Market Fund 0.25%. VST Money Market
Fund's management fee rate of 0.25% and its pro forma management fee rate of
0.25% are lower than V.A. Money Market Fund's management fee rate of 0.50%. V.A.
Money Market Fund's gross total annual operating expenses of 0.57% are
substantially higher that those of VST Money Market Fund which are 0.28%. Even
after the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. Money Market Fund's
total annual operating expenses (0.57%) are higher than those of VST Money
Market Fund (0.28%). After the reorganization, VST Money Market Fund's pro forma
total annual operating expenses (0.28%) are less than those of V.A. Money Market
Fund's gross total annual operating expenses (0.57%) and net total annual
operating expenses (0.57%).
Investment advisory fees as a percentage of average daily net assets.
V.A. Money Market 0.50% VST Money Market 0.25%
71
INVESTMENT RISKS
The funds are exposed to various risks that could cause shareholders to lose
money on their investments in the funds. The following table shows that the
risks affecting each fund are similar and compares the risks affecting each
fund.
- --------------------------------------------------------------------------------------------------------------------------
V.A. Money Market Fund VST Money Market Fund
- --------------------------------------------------------------------------------------------------------------------------
Short term interest rate risk The value of fund shares will be most affected by short-term interest
rates. If interest rates rise sharply, the fund could underperform its peers or lose money.
- ------------------------------- --------------------------------------------------------------------------------------------
Credit risk The fund could lose money if the credit rating of any security in its portfolio is
downgraded or if the issuer of the security defaults on its obligations.
- ------------------------------- --------------------------------------------------------------------------------------------
Absence of government An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance
guarantee Corporation or any other government agency. Although the fund seeks to preserve the value
of your investment at $1 per share, it is possible to lose money by investing in the fund.
- ------------------------------- --------------------------------------------------------------------------------------------
Foreign securities risk Foreign investments involve additional risks, including potentially
inaccurate financial information and social or political instability.
- ------------------------------- --------------------------------------------------------------------------------------------
PROPOSAL TO APPROVE THE AGREEMENT
AND PLAN OF REORGANIZATION
Description of Reorganization
Shareholders are being asked to approve an Agreement and Plan of Reorganization,
a form of which is attached as Exhibit A. The Agreement provides for a
reorganization on the following terms:
o The reorganization is scheduled to occur at 5:00 p.m., Eastern time,
on December 14, 2001, but may occur on any later date before June
30, 2002. V.A. Money Market Fund will transfer all of its assets to
VST Money Market Fund and VST Money Market Fund will assume all of
V.A. Money Market Fund's liabilities. This will result in the
addition of V.A. Money Market Fund's assets to VST Money Market
Fund's portfolio. The net asset value of both funds will be computed
as of 5:00 p.m., Eastern time, on the reorganization date.
o VST Money Market Fund will issue to V.A. Money Market Fund shares in
an amount equal to the aggregate net asset value of V.A. Money
Market Fund's shares. As part of the liquidation of V.A. Money
Market Fund, these shares will be distributed immediately to
shareholders of record of V.A. Money Market Fund in proportion to
their holdings on the reorganization date. As a result, shareholders
of V.A. Money Market Fund will end up as shareholders of VST Money
Market Fund.
o After the reorganization is over, the existence of V.A. Money Market
Fund will be terminated.
72
Reasons for the Proposed Reorganization
The Board of Trustees of V.A. Money Market Fund believes that the proposed
reorganization will be advantageous to the shareholders of V.A. Money Market
Fund for several reasons. The Board of Trustees considered the following
matters, among others, in approving the proposal.
First, V.A. Money Market Fund is no longer being offered to new variable
insurance contract holders, making it increasingly difficult for the fund to
attract assets.
Second, shareholders may be better served by a fund offering more
diversification. VST Money Market Fund has a larger asset size than V.A. Money
Market Fund. Combining the funds' assets into a single investment portfolio may
broaden diversification.
Third, VST Money Market Fund shares have performed similarly to V.A. Money
Market Fund over the life of both funds. While past performance cannot predict
future results, the Trustees believe that VST Money Market Fund is better
positioned than V.A. Money Market Fund to generate strong returns.
Fourth, a combined fund may offer economies of scale that can lead to better
control over expenses than is possible for V.A. Money Market Fund alone. Both
funds incur substantial costs for accounting, legal, transfer agency services,
insurance, and custodial and administrative services.
Fifth, VST Money Market Fund Fund's total expenses are lower than V.A. Money
Market Fund's total expenses. As a result of the reorganization, shareholders of
V.A. Money Market Fund may experience a reduction in the total amount of fees,
as a percentage of average net assets, that they indirectly pay each month.
The Trustees believe that VST Money Market Fund shareholders will also benefit
from improved diversification as a result of the reorganization. Although VST
Money Market Fund is a larger fund than V.A. Money Market Fund, the Trustees
believe the addition of V.A. Money Market Fund's assets may add to the
diversification of VST Money Market Fund's overall portfolio and therefore
provide an economic benefit to VST Money Market Fund and its shareholders.
The Boards of Trustees of both funds also considered that the adviser will also
benefit from the reorganization. For example, the adviser might realize time
savings from the need to prepare fewer reports and regulatory filings. The
Trustees believe, however, that these savings will not amount to a significant
economic benefit to the adviser.
Comparative Fees and Expense Ratios. As discussed above in the Summary, the
advisory fee rate paid by V.A. Money Market Fund is higher than the rate paid by
VST Money Market Fund. VST Money Market Fund's management fee rate of 0.25% and
its pro forma management fee rate of 0.25% are lower than V.A. Money Market
Fund's management fee rate of 0.50%.
V.A. Money Market Fund's gross total annual operating expenses of 0.57% are
substantially higher that those of VST Money Market Fund which are 0.28%. Even
after the reduction of each fund's other expenses as a result of the adviser's
voluntary agreement to limit the funds' other expenses, V.A. Money Market Fund's
total annual operating expenses (0.57%) are higher than those of VST Money
Market Fund (0.28%). After the reorganization, VST Money Market Fund's pro forma
total annual operating expenses (0.28%) are less than those of V.A. Money Market
Fund's gross total annual operating expenses (0.57%) and net total annual
operating expenses (0.57%).
V.A. Money Market Fund has not increased its asset size. The Trustees do not
believe, given V.A. Money Market Fund's current size and historical growth rate,
that V.A. Money Market Fund will grow to an asset size that would allow V.A.
Money Market Fund to realize the benefits of economies of scale, including
better control over expenses. The Trustees also do not believe that V.A. Money
Market Fund will reach an asset size which will allow V.A. Money Market Fund to
significantly broaden the diversification of its investment portfolio.
Comparative Performance. The trustees also took into consideration the relative
performance of V.A. Money Market Fund and VST Money Market Fund.
73
FURTHER INFORMATION ON EACH REORGANIZATION
Tax Status of each Reorganization
Each reorganization will be tax-free for federal income tax purposes and will
not take place unless both funds in each respective reorganization receive a
satisfactory opinion from Hale and Dorr LLP, counsel to the Acquired Funds,
substantially to the effect that:
o The reorganization described above will be a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986
(the "Code"), and each fund will be "a party to a reorganization"
within the meaning of Section 368 of the Code;
o No gain or loss will be recognized by each Acquired Fund upon (1)
the transfer of all of its assets to the respective Acquiring Fund
as described above or (2) the distribution by each Acquired Fund of
Acquiring Fund shares to Acquired Fund shareholders;
o No gain or loss will be recognized by each Acquiring Fund upon the
receipt of each respective Acquired Fund's assets solely in exchange
for the issuance of Acquiring Fund shares and the assumption of all
of Acquired Fund liabilities by each respective Acquiring Fund;
o The basis of the assets of each Acquired Fund acquired by each
respective Acquiring Fund will be the same as the basis of those
assets in the hands of each respective Acquired Fund immediately
before the transfer;
o The tax holding period of the assets of each Acquired Fund in the
hands of each respective Acquiring Fund will include the Acquired
Fund's tax holding period for those assets;
o The shareholders of each Acquired Fund will not recognize gain or
loss upon the exchange of all their shares of the Acquired Funds
solely for Acquiring Fund shares as part of the reorganization;
o The basis of Acquiring Fund shares received by Acquired Fund
shareholders in the reorganization will be the same as the basis of
the shares of each Acquired Fund surrendered in exchange; and
o The tax holding period of the Acquiring Fund shares that Acquired
Fund shareholders receive will include the tax holding period of the
shares of the Acquired Fund surrendered in the exchange, provided
that the shares of the Acquired Fund were held as capital assets on
the reorganization date.
Additional Terms of Each Agreement and Plan of Reorganization
Conditions to Closing each Reorganization. The obligation of each Acquired Fund
to consummate the reorganization is subject to the satisfaction of certain
conditions, including the performance by the respective Acquiring Fund of all
its obligations under the Agreement and the receipt of all consents, orders and
permits necessary to consummate the reorganization. Proposals 4 and 5 are
conditioned on the receipt of an exemptive order from the Securities and
Exchange Commission because the insurance companies own directly 5% or more of
the Acquiring Funds (see Agreement, paragraph 6).
74
The obligation of each Acquiring Fund to consummate the reorganization is
subject to the satisfaction of certain conditions, including each respective
Acquired Fund's performance of all of its obligations under the Agreement, the
receipt of certain documents and financial statements from each respective
Acquired Fund and the receipt of all consents, orders and permits necessary to
consummate the reorganization (see Agreement, paragraph 7).
The obligations of each respective Acquired and Acquiring Funds are subject to
approval of the Agreement by the necessary vote of the outstanding shares of the
Acquired Fund, in accordance with the provisions of Acquired Funds' declaration
of trust and by-laws. The funds' obligations are also subject to the receipt of
a favorable opinion of Hale and Dorr LLP as to the federal income tax
consequences of the reorganization. (see Agreement, paragraph 8).
Termination of Agreement. The Board of Trustees of each respective Acquired Fund
or Acquiring Fund may terminate the Agreement (even if the shareholders of an
Acquired Fund have already approved it) at any time before the reorganization
date, if that board believes that proceeding with the reorganization would no
longer be advisable.
Expenses of the Reorganization. John Hancock Advisers, Inc. will pay each
Acquired Fund's merger costs, and each Acquiring Fund will pay its costs
incurred in connection with entering into and carrying out the provisions of the
Agreement, whether or not the reorganization occurs. With respect to each
proposal, the expenses for each fund are estimated to be approximately $27,750
for V.A. Core Equity Fund and $17,250 for Growth & Income Fund; $18,750 for V.A.
Large Cap Growth Fund and $14,250 for Growth & Income Fund; $21,000 for V.A. 500
Index Fund and $15,000 for Equity Index Fund; $16,500 for V.A. International
Fund and $13,500 for International Equity Fund; $16,500 for V.A. Mid Cap Growth
Fund and $13,500 for Fundamental Growth Fund; $19,500 for V.A. Small Cap Growth
Fund and $14,500 for VST Small Cap Growth Fund; $33,750 for V.A. Bond Fund and
$19,250 for Active Bond Fund; and $33,750 for V.A. Money Market Fund and $19,250
for VST Money Market Fund.
CAPITALIZATION
The following table sets forth the capitalization of each fund as of June 30,
2001, and the pro forma combined capitalization of both funds as if each
reorganization had occurred on that date. If the reorganization is consummated,
the actual exchange ratios on the reorganization date may vary from the exchange
ratios indicated. This is due to changes in the market value of the portfolio
securities of both funds between June 30, 2001 and the reorganization date,
changes in the amount of undistributed net investment income and net realized
capital gains of both funds during that period resulting from income and
distributions, and changes in the accrued liabilities of both funds during the
same period.
It is impossible to predict how many shares of each Acquiring Fund will actually
be received and distributed by each corresponding Acquired Fund on the
reorganization date. The table should not be relied upon to determine the amount
of Acquiring Fund shares that will actually be received and distributed.
If the reorganization of your fund(s) had taken place on June 30, 2001:
- -------------------------------------------------------------------------------------------------------------------------------
V.A. Core Equity Growth & Income Pro Forma(1) Pro Forma(2)
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets $41.14M $2,799.99M $2,841.13M $2,847.41M
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $16.66 $12.87 $12.87 $12.87
- -------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding 2.47M 217.63M 220.73M 221.24M
- -------------------------------------------------------------------------------------------------------------------------------
(1) Assuming the reorganization of V.A. Large Cap Growth Fund into Growth &
Income Fund does not occur. If the reorganization of your fund only had taken
place on June 30, 2001, approximately 1.2945 Growth & Income Fund shares would
have been issued for each share of V.A. Core Equity Fund.
(2) Assuming the reorganization of V.A. Large Cap Growth Fund into Growth &
Income Fund occurs. If both reorganizations had taken place on June 30, 2001,
approximately 1.2945 Growth & Income Fund shares would have been issued for each
share of V.A. Core Equity Fund.
75
- -------------------------------------------------------------------------------------------------------------------------------
V.A. Large Cap Growth & Income Pro Forma (1) Pro Forma(2)
Growth
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets $6.28M $2,799.99M $2,806.27M $2,847.41M
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $7.69 $12.87 $12.87 $12.87
- -------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding .82M 217.63M 218.13M 221.24M
- -------------------------------------------------------------------------------------------------------------------------------
(1) Assuming the reorganization of V.A. Core Equity Fund into Growth & Income
Fund does not occur. If the reorganization of your fund only had taken place on
June 30, 2001, approximately .5975 Growth & Income Fund shares would have been
issued for each share of V.A. Large Cap Growth Fund.
(2) Assuming the reorganization of V.A. Core Equity Fund into Growth & Income
Fund occurs. If both reorganizations had taken place on June 30, 2001,
approximately .5975 Growth & Income Fund shares would have been issued for each
share of V.A. Large Cap Growth Fund.
- --------------------------------------------------------------------------------------------------------
V.A. 500 Index Equity Index Pro Forma
- --------------------------------------------------------------------------------------------------------
Net Assets $18.42M $539.15M $557.57M
- --------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $15.01 $16.36 $16.36
- --------------------------------------------------------------------------------------------------------
Shares Outstanding 1.23M 32.95M 34.08M
- --------------------------------------------------------------------------------------------------------
The table reflects pro forma exchange ratios of approximately .9175 Equity Index
Fund shares being issued for each share of V.A. 500 Index Fund
- --------------------------------------------------------------------------------------------------------
V.A. International International Equity Pro Forma
- --------------------------------------------------------------------------------------------------------
Net Assets $5.00M $21.09M $26.09M
- --------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $8.89 $8.37 $8.37
- --------------------------------------------------------------------------------------------------------
Shares Outstanding 0.56M 2.52M 3.12M
- --------------------------------------------------------------------------------------------------------
The table reflects pro forma exchange ratios of approximately 1.0621
International Equity Fund shares being issued for each share of V.A.
International Fund.
- --------------------------------------------------------------------------------------------------------
V.A. Mid Cap Fundamental Pro Forma
Growth Growth
- --------------------------------------------------------------------------------------------------------
Net Assets $6.32M $40.34M $46.66M
- --------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $11.56 $9.86 $9.86
- --------------------------------------------------------------------------------------------------------
Shares Outstanding 0.55M 4.1M 4.73M
- --------------------------------------------------------------------------------------------------------
The table reflects pro forma exchange ratios of approximately 1.1724 Fundamental
Growth Fund shares being issued for each share of V.A. Mid Cap Growth Fund.
- --------------------------------------------------------------------------------------------------------
V.A. Small Cap VST Small Cap Pro Forma
Growth Growth
- --------------------------------------------------------------------------------------------------------
Net Assets $13.31M $202.05M $215.37M
- --------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $13.24 $12.40 $12.40
- --------------------------------------------------------------------------------------------------------
Shares Outstanding 1.01M 16.29M 17.36M
- --------------------------------------------------------------------------------------------------------
The table reflects pro forma exchange ratios of approximately 1.0677 VST Small
Cap Growth Fund shares being issued for each share of V.A. Small Cap Growth
Fund.
- --------------------------------------------------------------------------------------------------------
V.A. Bond Active Bond Pro Forma
- --------------------------------------------------------------------------------------------------------
Net Assets $67.69M $816.30 $883.99
- --------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $10.28 $9.49 $9.49
- --------------------------------------------------------------------------------------------------------
Shares Outstanding 6.58M 86.04 93.14
- --------------------------------------------------------------------------------------------------------
The table reflects pro forma exchange ratios of approximately 1.0832 Active Bond
Fund shares being issued for each share of V.A. Bond Fund.
76
- --------------------------------------------------------------------------------------------------------
V.A. Money Market VST Money Market Pro Forma
- --------------------------------------------------------------------------------------------------------
Net Assets $143.50M $459.40M $602.86M
- --------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------
Shares Outstanding 143.50M 459.40M 602.86M
- --------------------------------------------------------------------------------------------------------
The table reflects pro forma exchange ratios of approximately 1.0000 VST Money
Market Fund shares being issued for each share of V.A. Money Market Fund.
ADDITIONAL INFORMATION ABOUT THE FUNDS' BUSINESSES
The following table shows where in each fund's prospectus you can find
additional information about the business of each fund.
- -------------------------------------------------------------------------------------------------------------------
Type of Information Headings in Prospectus for each Acquired Fund
and each Acquiring Fund
- -------------------------------------------------------------------------------------------------------------------
Investment objective and policies Goal and Strategy
- -------------------------------------------------------------------------------------------------------------------
Portfolio Management Portfolio Management/Subadviser
- -------------------------------------------------------------------------------------------------------------------
Expenses Financial Highlights
- -------------------------------------------------------------------------------------------------------------------
Custodian Business Structure
- -------------------------------------------------------------------------------------------------------------------
Dividends, distributions and taxes Dividends and Taxes
- -------------------------------------------------------------------------------------------------------------------
BOARDS' EVALUATION AND RECOMMENDATION
With respect to each reorganization, for the reasons described above, the Board
of Trustees of each Acquired Fund, including the Trustees who are not
"interested persons" of either fund or the adviser ("independent trustees"),
approved the reorganization. In particular, the Trustees determined that the
reorganization was in the best interests of each Acquired Fund and that the
interests of each Acquired Fund's shareholders would not be diluted as a result
of the reorganization. Similarly, the Board of Trustees of each Acquiring Fund,
including the independent trustees, approved the reorganization. They also
determined that the reorganization was in the best interests of the each
Acquiring Fund and that the interests of the Acquiring Funds' shareholders would
not be diluted as a result of the reorganization.
- --------------------------------------------------------------------------------
The trustees of each Acquired Fund recommend that the
shareholders vote for each proposal to
approve the agreement and plan of reorganization.
- --------------------------------------------------------------------------------
VOTING RIGHTS AND REQUIRED VOTE
Each Acquired Fund share is entitled to one vote. Approval of the above proposal
requires the affirmative vote of a majority of the shares of each Acquired Fund
outstanding and entitled to vote. For this purpose, a majority of the
outstanding shares of an Acquired Fund means the vote of the lesser of
(1) 67% or more of the shares present at the meeting, if the holders of more
than 50% of the shares of the fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the fund.
77
Shares of each Acquired Fund represented in person or by proxy, including shares
that abstain or do not vote with respect to the proposal, will be counted for
purposes of determining whether there is a quorum at the meeting. Accordingly,
an abstention from voting has the same effect as a vote against the proposal.
If the required approval of shareholders is not obtained, an Acquired Fund will
continue to engage in business as a separate mutual fund and the Board of
Trustees will consider what further action may be appropriate. This action
could include, among other things, terminating a fund's expense limitation or
closing the fund.
INFORMATION CONCERNING THE MEETING
Voting at the Meeting
Contract owners use the voting instruction card as a ballot to give the
insurance company voting instructions for those shares attributable to the
variable contract as of the record date. When the contract owner completes the
voting instruction card and sends it to the insurance company, the insurance
company votes its proxy in accordance with the contract owner's instructions. If
the contract owner completes and signs the voting instruction card, the shares
attributable to the variable contract will be voted as instructed. If the
contract owner merely signs and returns the card, the life insurance company
will vote those shares in favor of the proposal. If the contract owner does not
return the card, the life insurance company will vote those shares in the same
proportion as shares for which instructions were received from other contract
owners.
Shares of each Acquired Fund which are not attributable to variable contracts
will be represented and voted by one of the insurance companies in the same
proportion as the voting instructions received from contract owners. These
shares include shares purchased with contributions made as seed capital to the
fund by the adviser.
Solicitation of Proxies
In addition to the mailing of these proxy materials, proxies may be solicited by
telephone, by fax or in person by the trustees, officers and employees of the
Acquired Funds and by personnel of the Acquired Funds' investment adviser, John
Hancock Advisers, Inc. and its transfer agent, John Hancock Annuity Servicing
Office. The Annuity Servicing Office, has agreed to provide proxy solicitation
services to each Acquired Fund.
Revoking Proxies
Each Acquired Fund shareholder signing and returning a proxy has the power to
revoke it at any time before it is exercised:
o By filing a written notice of revocation with the Acquired Funds'
transfer agent, John Hancock Annuity Servicing Office, 529 Main
Street, Charlestown, Massachusetts 02129, or
o By returning a duly executed proxy with a later date before the time
of the meeting, or
o If a shareholder has executed a proxy but is present at the meeting
and wishes to vote in person, by notifying the secretary of the
respective Acquired Fund (without complying with any formalities) at
any time before it is voted.
Being present at the meeting alone does not revoke a previously executed and
returned proxy.
Contract owners may revoke their voting instructions at any time before the
proxy is voted by the life insurance company by following the procedure outlined
above for revoking proxies.
Outstanding Shares and Quorum
As of September 20, 2001 (record date), the number of shares of beneficial
interest of each Acquired Fund outstanding were as follows:
78
- --------------------------------------------------------------------------------
FUND SHARES OUTSTANDING
- --------------------------------------------------------------------------------
V.A. Core Equity
- --------------------------------------------------------------------------------
V.A. Large Cap Growth
- --------------------------------------------------------------------------------
V.A. 500 Index
- --------------------------------------------------------------------------------
V.A. International
- --------------------------------------------------------------------------------
V.A. Mid Cap Growth
- --------------------------------------------------------------------------------
V.A. Small Cap Growth
- --------------------------------------------------------------------------------
V.A. Bond
- --------------------------------------------------------------------------------
V.A. Money Market
- --------------------------------------------------------------------------------
Only shareholders of record on September 20, 2001 (the "record date") are
entitled to notice of and to vote at the meeting. A majority of the outstanding
shares of each Acquired Fund that are entitled to vote will be considered a
quorum for the transaction of business.
Other Business
The Acquired Funds' Board of Trustees knows of no business to be presented for
consideration at the meeting other than the proposal. If other business is
properly brought before the meeting, proxies will be voted according to the best
judgment of the persons named as proxies.
Adjournments
If a quorum is not present in person or by proxy at the time any session of the
meeting is called to order, the persons named as proxies may vote those proxies
that have been received to adjourn the meeting to a later date. If a quorum is
present but there are not sufficient votes in favor of the proposal, the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies concerning the proposal. Any adjournment will
require the affirmative vote of a majority of an Acquired Fund's shares at the
session of the meeting to be adjourned. If an adjournment of the meeting is
proposed because there are not sufficient votes in favor of the proposal, the
persons named as proxies will vote those proxies favoring the proposal in favor
of adjournment, and will vote those proxies against the reorganization against
adjournment.
79
OWNERSHIP OF SHARES OF THE FUNDS
As of September 20, 2001, the following companies owned of record or on behalf
of certain separate accounts, more than 5% of certain funds' outstanding shares,
as noted on the table below: John Hancock Life Insurance Company ("JHLICO"), 200
Clarendon Street, Boston, Massachusetts 02117; and John Hancock Variable Life
Insurance Company ("JHVLICO"), 197 Clarendon Street, Boston, Massachusetts,
02117.
- ----------------------------------------------------------------------------------------------------------------------
Name Number of Shares Percentage of Fund
- ----------------------------------------------------------------------------------------------------------------------
V.A. Core Equity Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
Growth & Income Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
V.A. Large Cap Growth Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
Growth & Income Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
V.A. 500 Index Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
Equity Index Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
V.A. International Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
International Equity Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
80
- ----------------------------------------------------------------------------------------------------------------------
Name Number of Shares Percentage of Fund
- ----------------------------------------------------------------------------------------------------------------------
V.A. Mid Cap Growth Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
Fundamental Growth Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
V.A. Small Cap Growth Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLIO %
- ----------------------------------------------------------------------------------------------------------------------
VST Small Cap Growth Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
V.A. Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
Active Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
V.A. Money Market Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
VST Money Market Fund
- ----------------------------------------------------------------------------------------------------------------------
JHLICO %
- ----------------------------------------------------------------------------------------------------------------------
JHVLICO %
- ----------------------------------------------------------------------------------------------------------------------
However, these companies will vote their Fund shares only in accordance with
voting instructions received from the contract or certificate owners. For this
reason, the companies do not exercise control over the funds by virtue of their
record ownership of funds shares.
EXPERTS
The financial statements and the financial highlights of each fund as of
December 31, 2000 and for the periods then ended and the unaudited financial
statements and financial highlights of each fund as of June 30, 2001 are
incorporated by reference into this proxy statement and prospectus. The
financial statements and financial highlights as of December 31, 2000 have been
independently audited by Ernst & Young LLP as stated in their report appearing
in the statement of additional information. These financial statements and
financial highlights have been included in reliance on their report given on
their authority as experts in accounting and auditing.
81
AVAILABLE INFORMATION
Each fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 and files reports,
proxy statements and other information with the SEC. These reports, proxy
statements and other information filed by the funds can be inspected and copied
(at prescribed rates) at the public reference facilities of the SEC at 450 Fifth
Street, N.W., Washington, D.C., and at the following regional offices: Chicago
(500 West Madison Street, Suite 1400, Chicago, Illinois); and New York (7 World
Trade Center, Suite 1300, New York, New York). For access to the Washington D.C.
Reference Room, call (202) 942-8090. Copies of this material can also be
obtained by mail from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549-0102 (duplicating fee required). In
addition, copies of these documents may be viewed on-screen or downloaded from
the SEC's Internet site at (http://www.sec.gov), SEC file number 811-07437.
82
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this ___
day of September, 2001, by and between ____________________ (the "Acquiring
Fund") of John Hancock Variable Series Trust I, a Massachusetts business trust
(the "Trust II"), with its principal place of business at John Hancock Place,
P.O. Box 111, Boston, Massachusetts 02117, and _________________________ (the
"Acquired Fund"), a series of John Hancock Declaration Trust, a Massachusetts
business trust (the "Trust") with its principal place of business at 101
Huntington Avenue, Boston, Massachusetts 02199. The Acquiring Fund and the
Acquired Fund are sometimes referred to collectively herein as the "Funds" and
individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of "reorganization,"
as such term is used in Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization will consist of the transfer of all of
the assets of the Acquired Fund to the Acquiring Fund in exchange solely for the
issuance of shares of beneficial interest of the Acquiring Fund (the "Acquiring
Fund Shares") to the Acquired Fund and the assumption by the Acquiring Fund of
all of the liabilities of the Acquired Fund, followed by the distribution by the
Acquired Fund, on or promptly after the Closing Date hereinafter referred to, of
the Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation and termination of the Acquired Fund as provided herein, all upon
the terms and conditions set forth in this Agreement.
In consideration of the premises of the covenants and agreements hereinafter set
forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF ACQUIRING FUND SHARES; LIQUIDATION OF THE
ACQUIRED FUND
1.1 The Acquired Fund will transfer all of its assets (consisting, without
limitation, of portfolio securities and instruments, dividends and
interest receivables, cash and other assets), as set forth in the
statement of assets and liabilities referred to in Paragraph 7.2 hereof
(the "Statement of Assets and Liabilities"), to the Acquiring Fund free
and clear of all liens and encumbrances, except as otherwise provided
herein, in exchange for (i) the assumption by the Acquiring Fund of the
known and unknown liabilities of the Acquired Fund, including the
liabilities set forth in the Statement of Assets and Liabilities (the
"Acquired Fund Liabilities"), which shall be assigned and transferred to
the Acquiring Fund by the Acquired Fund and assumed by the Acquiring Fund,
and (ii) delivery by the Acquiring Fund to the Acquired Fund, for
distribution pro rata by the Acquired Fund to its shareholders in
proportion to their respective ownership of shares of beneficial interest
of the Acquired Fund, as of the close of business on [either December 7,
2001 or December 14, 2001] (the "Closing Date"), of a number of the
Acquiring Fund Shares having an aggregate net asset value equal to the
value of the assets, less such liabilities (herein referred to as the "net
value of the assets") assumed, assigned and delivered, all determined as
provided in Paragraph 2.1 hereof and as of a date and time as specified
therein. Such transactions shall take place at the closing provided for in
Paragraph 3.1 hereof (the "Closing"). All computations with respect to the
Acquiring Fund shall be provided by State Street Bank and Trust Company
(the "Acquiring Fund's Custodian"), as custodian and pricing agent for the
Acquiring Fund and, and with respect to the Acquired Fund by [either State
Street Bank and Trust Company or Investors Bank & Trust Company] (the
"Acquired Fund's Custodian).
1.2 The Acquired Fund has provided the Acquiring Fund with a list of the
current securities holdings of the Acquired Fund as of the date of
execution of this Agreement. The Acquired Fund reserves the right to sell
any of these securities (except to the extent sales may be limited by
representations made in connection with issuance of the tax opinion
provided for in paragraph 8.6 hereof) but will not, without the prior
approval of the Acquiring Fund, acquire any additional securities other
than securities of the type in which the Acquiring Fund is permitted to
invest.
1.3 The Acquiring Fund and the Acquired Fund shall each bear its own expenses
in connection with the transactions contemplated by this Agreement.
83
1.4 On or as soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro
rata to shareholders of record (the "Acquired Fund shareholders"),
determined as of the close of regular trading on the New York Stock
Exchange on the Closing Date, the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund, to open accounts on the share records of the Acquiring
Fund in the names of the Acquired Fund shareholders and representing the
respective pro rata number of Acquiring Fund Shares due such shareholders.
The Acquiring Fund shall not issue certificates representing Acquiring
Fund Shares in connection with such exchange.
1.5 The Acquired Fund shareholders holding certificates representing their
ownership of shares of beneficial interest of the Acquired Fund shall
surrender such certificates or deliver an affidavit with respect to lost
certificates in such form and accompanied by such surety bonds as the
Acquired Fund may require (collectively, an "Affidavit"), to John Hancock
Signature Services, Inc. prior to the Closing Date. Any Acquired Fund
share certificate which remains outstanding on the Closing Date shall be
deemed to be canceled, shall no longer evidence ownership of shares of
beneficial interest of the Acquired Fund and shall evidence ownership of
Acquiring Fund Shares. Unless and until any such certificate shall be so
surrendered or an Affidavit relating thereto shall be delivered, dividends
and other distributions payable by the Acquiring Fund subsequent to the
Liquidation Date with respect to Acquiring Fund Shares shall be paid to
the holder of such certificate(s), but such shareholders may not redeem or
transfer Acquiring Fund Shares received in the Reorganization. The
Acquiring Fund will not issue share certificates in the Reorganization.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than the registered holder of the Acquired Fund Shares on the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7 The existence of the Acquired Fund shall be terminated as promptly as
practicable following the Liquidation Date.
1.8 Any reporting responsibility of the Trust, including, but not limited to,
the responsibility for filing of regulatory reports, tax returns, or other
documents with the Securities and Exchange Commission (the "Commission"),
any state securities commissions, and any federal, state or local tax
authorities or any other relevant regulatory authority, is and shall
remain the responsibility of the Trust.
2. VALUATION
2.1 The net asset values of the Acquiring Fund Shares and the net values of
the assets and liabilities of the Acquired Fund to be transferred shall,
in each case, be determined as of the close of business (4:00 p.m. Boston
time) on the Closing Date. The net asset values of the Acquiring Fund
Shares shall be computed by the Acquiring Fund's Custodian in the manner
set forth in the Acquiring Fund's Declaration of Trust as amended and
restated (the "Declaration"), or By-Laws and the Acquiring Fund's
then-current prospectus and statement of additional information and shall
be computed in each case to not fewer than four decimal places. The net
values of the assets of the Acquired Fund to be transferred shall be
computed by the Acquired Fund's Custodian by calculating the value of the
assets transferred by the Acquired Fund and by subtracting therefrom the
amount of the liabilities assigned and transferred to and assumed by the
Acquiring Fund on the Closing Date, said assets and liabilities to be
valued in the manner set forth in the Acquired Fund's then current
prospectus and statement of additional information and shall be computed
in each case to not fewer than four decimal places.
2.2 The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Fund's assets shall be
determined by dividing the value of the Acquired Fund's assets less the
liabilities assumed by the Acquiring Fund, by the Acquiring Fund's net
asset value per share, all as determined in accordance with Paragraph 2.1
hereof.
2.3 All computations of value shall be made by each Custodian in accordance
with its regular practice as pricing agent for its respective Fund.
84
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be [either December 7, 2001 or December 14, 2001]
or such other date on or before June 30, 2002 as the parties may agree.
The Closing shall be held as of 5:00 p.m. at the offices of the Trust, 101
Huntington Avenue, Boston, Massachusetts 02199, or at such other time
and/or place as the parties may agree.
3.2 Portfolio securities that are not held in book-entry form in the name of
the Acquired Fund's Custodian as record holder for the Acquired Fund shall
be presented by the Acquired Fund to the Acquiring Fund's Custodian for
examination no later than five business days preceding the Closing Date.
Portfolio securities which are not held in book-entry form shall be
delivered by the Acquired Fund to the Acquiring Fund's Custodian for the
account of the Acquiring Fund on the Closing Date, duly endorsed in proper
form for transfer, in such condition as to constitute good delivery
thereof in accordance with the custom of brokers, and shall be accompanied
by all necessary federal and state stock transfer stamps or a check for
the appropriate purchase price thereof. Portfolio securities held of
record by the Acquired Fund's Custodian in book-entry form on behalf of
the Acquired Fund shall be delivered to the Acquiring Fund by the
Acquiring Fund's Custodian by recording the transfer of beneficial
ownership thereof on its records. The cash delivered shall be in the form
of currency or by the Acquiring Fund's Custodian crediting the Acquiring
Fund's account maintained with the Acquiring Fund's Custodian with
immediately available funds.
3.3 In the event that on the Closing Date (a) the New York Stock Exchange
shall be closed to trading or trading thereon shall be restricted or (b)
trading or the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired Fund is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored;
provided that if trading shall not be fully resumed and reporting restored
on or before June 30, 2002, this Agreement may be terminated by the
Acquiring Fund or by the Acquired Fund upon the giving of written notice
to the other party.
3.4 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding
and nonresident alien withholding status of the Acquired Fund shareholders
and the number of outstanding shares of beneficial interest of the
Acquired Fund owned by each such shareholder, all as of the close of
business on the Closing Date, certified by its Treasurer, Secretary or
other authorized officer (the "Shareholder List"). The Acquiring Fund
shall issue and deliver to the Acquired Fund a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares
have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, stock certificates, receipts or other
documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Trust on behalf of the Acquired Fund represents, warrants and
covenants to the Acquiring Fund as follows:
(a) The Trust is a business trust, duly organized, validly existing and
in good standing under the laws of The Commonwealth of Massachusetts
and has the power to own all of its properties and assets and,
subject to approval by the shareholders of the Acquired Fund, to
carry out the transactions contemplated by this Agreement. Neither
the Trust nor the Acquired Fund is required to qualify to do
business in any jurisdiction in which it is not so qualified or
where failure to qualify would subject it to any material liability
or disability. The Trust has all necessary federal, state and local
authorizations to own all of its properties and assets and to carry
on its business as now being conducted;
(b) The Trust is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), is in full force and effect. The Acquired
Fund is a diversified series of the Trust;
85
(c) The Trust and the Acquired Fund are not, and the execution, delivery
and performance of their obligations under this Agreement will not
result, in violation of any provision of the Trust's Declaration of
Trust, as amended and restated (the "Trust's Declaration") or
By-Laws or of any agreement, indenture, instrument, contract, lease
or other undertaking to which the Trust or the Acquired Fund is a
party or by which it is bound;
(d) Except as otherwise disclosed in writing and accepted by the
Acquiring Fund, no material litigation or administrative proceeding
or investigation of or before any court or governmental body is
currently pending or threatened against the Trust or the Acquired
Fund or any of the Acquired Fund's properties or assets. The Trust
knows of no facts which might form the basis for the institution of
such proceedings, and neither the Trust nor the Acquired Fund is a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and
adversely affects the Acquired Fund's business or its ability to
consummate the transactions herein contemplated;
(e) The Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase of
securities entered into in the ordinary course of business and
consistent with its obligations under this Agreement) which will not
be terminated without liability to the Acquired Fund at or prior to
the Closing Date;
(f) The audited statement of assets and liabilities, including the
schedule of investments, of the Acquired Fund as of December 31,
2000 and the related statement of operations (copies of which have
been furnished to the Acquiring Fund) and the unaudited statements
as of June 30, 2001, present fairly in all material respects the
financial condition of the Acquired Fund as of December 31, 2000 and
June 30, 2001 and the results of its operations for the period then
ended in accordance with generally accepted accounting principles
consistently applied, and there were no known actual or contingent
liabilities of the Acquired Fund as of the respective dates thereof
not disclosed therein;
(g) Since June 30, 2001, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities, or
business other than changes occurring in the ordinary course of
business, or any incurring by the Acquired Fund of indebtedness
maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund;
(h) At the date hereof and by the Closing Date, all federal, state and
other tax returns and reports, including information returns and
payee statements, of the Acquired Fund required by law to have been
filed or furnished by such dates shall have been filed or furnished,
and all federal, state and other taxes, interest and penalties shall
have been paid so far as due, or provision shall have been made for
the payment thereof, and to the best of the Acquired Fund's
knowledge no such return is currently under audit and no assessment
has been asserted with respect to such returns or reports;
(i) Each of the Acquired Fund and its predecessors has qualified as a
regulated investment company for each taxable year of its operation
and the Acquired Fund will qualify as such as of the Closing Date
with respect to its taxable year ending on the Closing Date;
(j) The authorized capital of the Acquired Fund consists of an unlimited
number of shares of beneficial interest, no par value. All issued
and outstanding shares of beneficial interest of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable by the Trust. All of the
issued and outstanding shares of beneficial interest of the Acquired
Fund will, at the time of Closing, be held by the persons and in the
amounts set forth in the Shareholder List submitted to the Acquiring
Fund pursuant to Paragraph 3.4 hereof. The Acquired Fund does not
have outstanding any options, warrants or other rights to subscribe
for or purchase any of its shares of beneficial interest, nor is
there outstanding any security convertible into any of its shares of
beneficial interest;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to the assets to be transferred to the Acquiring Fund pursuant
to Paragraph 1.1 hereof, and full right, power and authority to
sell, assign, transfer and deliver such assets hereunder, and upon
delivery and payment for such assets, the Acquiring Fund will
acquire good and marketable title thereto subject to no restrictions
on the full transfer thereof, including such restrictions as might
arise under the Securities Act of 1933, as amended (the "1933 Act");
86
(l) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Trust on
behalf of the Acquired Fund, and this Agreement constitutes a valid
and binding obligation of the Trust and the Acquired Fund
enforceable in accordance with its terms, subject to the approval of
the Acquired Fund's shareholders;
(m) The information to be furnished by the Acquired Fund to the
Acquiring Fund for use in applications for orders, registration
statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby
shall be accurate and complete and shall comply in all material
respects with federal securities and other laws and regulations
thereunder applicable thereto;
(n) The proxy statement of the Acquired Fund (the "Proxy Statement") to
be included in the Registration Statement referred to in Paragraph
5.7 hereof (other than written information furnished by the
Acquiring Fund for inclusion therein, as covered by the Acquiring
Fund's warranty in Paragraph 4.2(m) hereof), on the effective date
of the Registration Statement, on the date of the meeting of the
Acquired Fund shareholders and on the Closing Date, shall not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not misleading;
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquired Fund of the transactions contemplated by this Agreement;
(p) All of the issued and outstanding shares of beneficial interest of
the Acquired Fund have been offered for sale and sold in conformity
with all applicable federal and state securities laws;
(q) The prospectus of the Acquired Fund, dated May 1, 2001 (the
"Acquired Fund Prospectus"), previously furnished to the Acquiring
Fund, does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
4.2 The Trust II on behalf of the Acquiring Fund represents, warrants and
covenants to the Acquired Fund as follows:
(a) The Trust II is a business trust duly organized, validly existing
and in good standing under the laws of The Commonwealth of
Massachusetts and has the power to own all of its properties and
assets and to carry out the Agreement. Neither the Trust II nor the
Acquiring Fund is required to qualify to do business in any
jurisdiction in which it is not so qualified or where failure to
qualify would subject it to any material liability or disability.
The Trust II has all necessary federal, state and local
authorizations to own all of its properties and assets and to carry
on its business as now being conducted;
(b) The Trust II is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect.
The Acquiring Fund is [either a diversified series or a
non-diversified series] of the Trust II;
(c) The prospectus (the "Acquiring Fund Prospectus") and statement of
additional information of the Acquiring Fund, each dated May 1,
2001, and any amendments or supplements thereto on or prior to the
Closing Date, and the Registration Statement on Form N-14 to be
filed in connection with this Agreement (the "Registration
Statement") (other than written information furnished by the
Acquired Fund for inclusion therein, as covered by the Acquired
Fund's warranty in Paragraph 4.1(m) hereof) will conform in all
material respects to the applicable requirements of the 1933 Act and
the 1940 Act and the rules and regulations of the Commission
thereunder, the Acquiring Fund Prospectus does not include any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading and the Registration Statement will not
include any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading;
87
(d) At the Closing Date, the Trust II on behalf of the Acquiring Fund
will have good and marketable title to the assets of the Acquiring
Fund;
(e) The Trust II and the Acquiring Fund are not, and the execution,
delivery and performance of their obligations under this Agreement
will not result, in violation of any provisions of the Trust II's
Declaration, or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Trust II or the
Acquiring Fund is a party or by which the Trust II or the Acquiring
Fund is bound;
(f) Except as otherwise disclosed in writing and accepted by the
Acquired Fund, no material litigation or administrative proceeding
or investigation of or before any court or governmental body is
currently pending or threatened against the Trust II or the
Acquiring Fund or any of the Acquiring Fund's properties or assets.
The Trust II knows of no facts which might form the basis for the
institution of such proceedings, and neither the Trust II nor the
Acquiring Fund is a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects the Acquiring Fund's business or
its ability to consummate the transactions herein contemplated;
(g) The audited statement of assets and liabilities, including the
schedule of investments, of the Acquiring Fund as of December 31,
2000 and the related statement of operations and the unaudited
statements as of June 30, 2001 (copies of which have been furnished
to the Acquired Fund) present fairly in all material respects the
financial condition of the Acquiring Fund as of December 31, 2000
and June 30, 2001 and the results of its operations for the period
then ended in accordance with generally accepted accounting
principles consistently applied, and there were no known actual or
contingent liabilities of the Acquiring Fund as of the respective
dates thereof not disclosed therein;
(h) Since June 30, 2001, there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of
business, or any incurring by the Trust II on behalf of the
Acquiring Fund of indebtedness maturing more than one year from the
date such indebtedness was incurred, except as disclosed to and
accepted by the Acquired Fund;
(i) Each of the Acquiring Fund and its predecessors has qualified as a
regulated investment company for each taxable year of its operation
and the Acquiring Fund will qualify as such as of the Closing Date;
(j) The authorized capital of the Trust II consists of an unlimited
number of shares of beneficial interest, no par value per share. All
issued and outstanding shares of beneficial interest of the
Acquiring Fund are, and at the Closing Date will be, duly and
validly issued and outstanding, fully paid and nonassessable by the
Trust II. The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of its
shares of beneficial interest, nor is there outstanding any security
convertible into any of its shares of beneficial interest;
(k) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of the Trust II
on behalf of the Acquiring Fund, and this Agreement constitutes a
valid and binding obligation of the Acquiring Fund enforceable in
accordance with its terms;
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement, when so issued and
delivered, will be duly and validly issued shares of beneficial
interest of the Acquiring Fund and will be fully paid and
nonassessable by the Trust II;
(m) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements, proxy materials
and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and
shall comply in all material respects with federal securities and
other laws and regulations applicable thereto; and
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by the Agreement,
except for the registration of the Acquiring Fund Shares under the
1933 Act and the 1940 Act.
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5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 Except as expressly contemplated herein to the contrary, the Trust on
behalf of the Acquired Fund and the Trust II on behalf of Acquiring Fund,
will operate their respective businesses in the ordinary course between
the date hereof and the Closing Date, it being understood that such
ordinary course of business will include customary dividends and
distributions and any other distributions necessary or desirable to avoid
federal income or excise taxes.
5.2 The Trust will call a meeting of the Acquired Fund shareholders to
consider and act upon this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of
this Agreement.
5.4 The Trust on behalf of the Acquired Fund will provide such information
within its possession or reasonably obtainable as the Trust II on behalf
of the Acquiring Fund requests concerning the beneficial ownership of the
Acquired Fund's shares of beneficial interest.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund each shall take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate the transactions contemplated by this Agreement.
5.6 The Trust on behalf of the Acquired Fund shall furnish to the Trust II on
behalf of the Acquiring Fund on the Closing Date the Statement of Assets
and Liabilities of the Acquired Fund as of the Closing Date, which
statement shall be prepared in accordance with generally accepted
accounting principles consistently applied and shall be certified by the
Acquired Fund's Treasurer or Assistant Treasurer. As promptly as
practicable but in any case within 60 days after the Closing Date, the
Acquired Fund shall furnish to the Acquiring Fund, in such form as is
reasonably satisfactory to the Trust II, a statement of the earnings and
profits of the Acquired Fund for federal income tax purposes and of any
capital loss carryovers and other items that will be carried over to the
Acquiring Fund as a result of Section 381 of the Code, and which statement
will be certified by the President of the Acquired Fund.
5.7 The Trust II on behalf of the Acquiring Fund will prepare and file with
the Commission the Registration Statement in compliance with the 1933 Act
and the 1940 Act in connection with the issuance of the Acquiring Fund
Shares as contemplated herein.
5.8 The Trust on behalf of the Acquired Fund will prepare a Proxy Statement,
to be included in the Registration Statement in compliance with the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
the 1940 Act and the rules and regulations thereunder (collectively, the
"Acts") in connection with the special meeting of shareholders of the
Acquired Fund to consider approval of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST ON BEHALF OF THE ACQUIRED
FUND
The obligations of the Trust on behalf of the Acquired Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by the Trust II on behalf of the Acquiring Fund of all the
obligations to be performed by it hereunder on or before the Closing Date, and,
in addition thereto, the following further conditions:
6.1 All representations and warranties of the Trust II on behalf of the
Acquiring Fund contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of the
Closing Date with the same force and effect as if made on and as of the
Closing Date; and
6.2 The Trust II on behalf of the Acquiring Fund shall have delivered to the
Acquired Fund a certificate executed in its name by the Trust II's
President or Vice President and its Treasurer or Assistant Treasurer, in
form and
89
substance satisfactory to the Acquired Fund and dated as of the Closing
Date, to the effect that the representations and warranties of the Trust
II on behalf of the Acquiring Fund made in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected by
the transactions contemplated by this Agreement, and as to such other
matters as the Trust on behalf of the Acquired Fund shall reasonably
request.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST II ON BEHALF OF THE
ACQUIRING FUND
The obligations of the Trust II on behalf of the Acquiring Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by the Acquired Fund of all the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquired Fund contained in this
Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date;
7.2 The Trust on behalf of the Acquired Fund shall have delivered to the Trust
II on behalf of the Acquiring Fund the Statement of Assets and Liabilities
of the Acquired Fund, together with a list of its portfolio securities
showing the federal income tax bases and holding periods of such
securities, as of the Closing Date, certified by the Treasurer or
Assistant Treasurer of the Trust;
7.3 The Trust on behalf of the Acquired Fund shall have delivered to the Trust
II on behalf of the Acquiring Fund on the Closing Date a certificate
executed in the name of the Acquired Fund by a President or Vice President
and a Treasurer or Assistant Treasurer of the Trust, in form and substance
satisfactory to the Trust II on behalf of the Acquiring Fund and dated as
of the Closing Date, to the effect that the representations and warranties
of the Acquired Fund in this Agreement are true and correct at and as of
the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as the Trust
II on behalf of the Acquiring Fund shall reasonably request; and
7.4 At or prior to the Closing Date, the Acquired Fund's investment adviser,
or an affiliate thereof, shall have made all payments, or applied all
credits, to the Acquired Fund required by any applicable contractual
expense limitation.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE TRUST II
The obligations hereunder of the Trust II on behalf of the Acquiring Fund and
the Trust on behalf of the Acquired Fund are each subject to the further
conditions that on or before the Closing Date:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of
beneficial interest of the Acquired Fund in accordance with the provisions
of the Trust's Declaration and By-Laws, and certified copies of the
resolutions evidencing such approval by the Acquired Fund's shareholders
shall have been delivered by the Acquired Fund to the Trust II on behalf
of the Acquiring Fund;
8.2 On the Closing Date no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain changes or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits
of federal, state and local regulatory authorities (including those of the
Commission and their "no-action" positions) deemed necessary by the Trust
or the Trust II to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a
risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may
waive any such conditions for itself;
90
8.4 The Registration Statement shall have become effective under the 1933 Act
and the 1940 Act and no stop orders suspending the effectiveness thereof
shall have been issued and, to the best knowledge of the parties hereto,
no investigation or proceeding for that purpose shall have been instituted
or be pending, threatened or contemplated under the 1933 Act or the 1940
Act;
8.5 The Acquired Fund shall have distributed to its shareholders, in a
distribution or distributions qualifying for the deduction for dividends
paid under Section 561 of the Code, all of its investment company taxable
income (as defined in Section 852(b)(2) of the Code determined without
regard to Section 852(b)(2)(D) of the Code) for its taxable year ending on
the Closing Date, all of the excess of (i) its interest income excludable
from gross income under Section 103(a) of the Code over (ii) its
deductions disallowed under Sections 265 and 171(a)(2) of the Code for its
taxable year ending on the Closing Date, and all of its net capital gain
(as such term is used in Sections 852(b)(3)(A) and (C) of the Code), after
reduction by any available capital loss carry forward, for its taxable
year ending on the Closing Date; and
8.6 The parties shall have received an opinion of Hale and Dorr LLP,
satisfactory to the Trust on behalf of the Acquired Fund and the Trust II
on behalf of the Acquiring Fund, substantially to the effect that for
federal income tax purposes:
(a) The acquisition by the Acquiring Fund of all of the assets of the
Acquired Fund solely in exchange for the issuance of Acquiring Fund
Shares to the Acquired Fund and the assumption of all of the
Acquired Fund Liabilities by the Acquiring Fund, followed by the
distribution by the Acquired Fund, in liquidation of the Acquired
Fund, of Acquiring Fund Shares to the shareholders of the Acquired
Fund in exchange for their shares of beneficial interest of the
Acquired Fund and the termination of the Acquired Fund, will
constitute a "reorganization" within the meaning of Section 368(a)
of the Code, and the Acquired Fund and the Acquiring Fund will each
be "a party to a reorganization" within the meaning of Section
368(b) of the Code;
(b) No gain or loss will be recognized by the Acquired Fund upon (i) the
transfer of all of its assets to the Acquiring Fund solely in
exchange for the issuance of Acquiring Fund Shares to the Acquired
Fund and the assumption of all of the Acquired Fund Liabilities by
the Acquiring Fund; and (ii) the distribution by the Acquired Fund
of such Acquiring Fund Shares to the shareholders of the Acquired
Fund;
(c) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for
the issuance of the Acquiring Fund Shares to the Acquired Fund and
the assumption of all of the Acquired Fund Liabilities by the
Acquiring Fund;
(d) The basis of the assets of the Acquired Fund acquired by the
Acquiring Fund will be, in each instance, the same as the basis of
those assets in the hands of the Acquired Fund immediately prior to
the transfer;
(e) The tax holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will, in each instance, include the
Acquired Fund's tax holding period for those assets;
(f) The shareholders of the Acquired Fund will not recognize gain or
loss upon the exchange of all of their shares of beneficial interest
of the Acquired Fund solely for Acquiring Fund Shares as part of the
transaction;
(g) The basis of the Acquiring Fund Shares received by the Acquired Fund
shareholders in the transaction will be the same as the basis of the
shares of beneficial interest of the Acquired Fund surrendered in
exchange therefor; and
(h) The tax holding period of the Acquiring Fund Shares received by the
Acquired Fund shareholders will include, for each shareholder, the
tax holding period for the shares of the Acquired Fund surrendered
in exchange therefor, provided that the Acquired Fund shares were
held as capital assets on the date of the exchange.
The Trust II and the Trust agree to make and provide representations with
respect to the Acquiring Fund and the Acquired Fund, respectively, which are
reasonably necessary to enable Hale and Dorr LLP to deliver an opinion
substantially as set forth in this Paragraph 8.6. Notwithstanding anything
herein to the contrary, neither the Trust nor the Trust II may waive the
conditions set forth in this Paragraph 8.6.
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9. BROKERAGE FEES AND EXPENSES
9.1 The Trust II on behalf of the Acquiring Fund, and the Trust on behalf of
the Acquired Fund each represent and warrant to the other that there are
no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
9.2 The Acquiring Fund and the Acquired Fund shall each be liable solely for
its own expenses incurred in connection with entering into and carrying
out the provisions of this Agreement whether or not the transactions
contemplated hereby are consummated.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust II on behalf of the Acquiring Fund, and the Trust on behalf of
the Acquired Fund agree that neither party has made any representation,
warranty or covenant not set forth herein or referred to in Paragraph 4
hereof and that this Agreement constitutes the entire agreement between
the parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Trust II,
on behalf of the Acquiring Fund, and the Trust on behalf of the Acquired
Fund. In addition, either party may at its option terminate this Agreement
at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at
or prior to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and
which reasonably appears will not or cannot be met;
(c) by resolution of the Trust II's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the
Acquiring Fund's shareholders; or
(d) by resolution of the Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the
Acquired Fund's shareholders.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Trust II, the Acquiring Fund, the Trust, or the
Acquired Fund, or the Trustees or officers of the Trust II or the Trust,
but each party shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon by the authorized officers of the Trust and the Trust II.
However, following the meeting of shareholders of the Acquired Fund held
pursuant to Paragraph 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions regarding the method for determining the
number of Acquiring Fund Shares to be received by the Acquired Fund shareholders
under this Agreement to the detriment of such shareholders without their further
approval; provided that nothing contained in this Article 12 shall be construed
to prohibit the parties from amending this Agreement to change the Closing Date.
92
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquiring Fund at John Hancock
Place, P.O. Box 111, Boston, Massachusetts 02117, Attention: Arnold Bergman,
Esq. or to the Acquired Fund at 101 Huntington Avenue, Boston, Massachusetts
02199, Attention: Avery P. Maher, Esq., and, in either case, with copies to Hale
and Dorr LLP, 60 State Street, Boston, Massachusetts 02109, Attention: Pamela J.
Wilson, Esq.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any
party without the prior written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and
their respective successors and assigns, any rights or remedies under or
by reason of this Agreement.
14.5 All persons dealing with the Trust or the Trust II must look solely to the
property of the Trust or the Trust II, respectively, for the enforcement
of any claims against the Trust or the Trust II as the Trustees, officers,
agents and shareholders of the Trust or the Trust II assume no personal
liability for obligations entered into on behalf of the Trust or the Trust
II, respectively. None of the other series of the Trust or the Trust II
shall be responsible for any obligations assumed by on or behalf of the
Acquired Fund or the Acquiring Fund, respectively, under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and has caused its corporate seal to be affixed hereto.
-----------------------------
OF JOHN HANCOCK VARIABLE SERIES TRUST I
By:
-----------------------------------------
JOHN HANCOCK DECLARATION TRUST on behalf of
--------------------------------
By:
------------------------------------------
Maureen R. Ford
President and Chief Executive Officer
93
Appendix A
Basic information about the funds
Proposal 1
V.A. Core Equity Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks above-average total return (capital appreciation plus
income). To pursue this goal, the fund normally invests at least 65% of assets
in a diversified portfolio of equities which are primarily large-capitalization
stocks. The portfolio's risk profile is similar to that of the Standard & Poor's
500 Index.
The managers select from a menu of stocks of approximately 550 companies that
evolves over time. Approximately 70% to 80% of these companies also are included
in the Standard & Poor's 500 Index. The subadviser's investment research team is
organized by industry and tracks these companies to develop earnings estimates
and five-year projections for growth. A series of proprietary computer models
use this in-house research to rank the stocks according to their combination of:
o value, meaning they appear to be underpriced
o improving fundamentals, meaning they show potential for strong growth
This process, together with a risk/ return analysis against the Standard &
Poor's 500 Index, results in a portfolio of approximately 100 to 130 of the
stocks from the top 60% of the menu. The fund generally sells stocks that fall
into the bottom 20% of the menu.
In normal market conditions, the fund is almost entirely invested in stocks. The
fund may invest in dollar-denominated foreign securities and make limited use of
certain derivatives (investments whose value is based on indexes or securities).
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
SUBADVISER
Independence Investment LLC
- ---------------------------
Team responsible for day-to-day
investment management
A subsidiary of John Hancock
Financial Services, Inc.
Founded in 1982
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
30.68% 28.42% 13.89% -7.11%
2001 total return as of June 30: 6.45%
Best quarter: Q4 '98, 23.16% Worst quarter: Q3 '98, -13.01%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -7.11% -9.10%
Life of fund - began 8/29/96 17.11% 19.18%
Index: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
A-2
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on smallor
medium-capitalization stocks.
The fund's management strategy has a significant influence on fund performance.
If the investment research team's earnings estimates or projections turn out to
be inaccurate, or if the proprietary computer models do not perform as expected,
the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
inadequate or inaccurate financial information and social or political
instability.
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquired Fund's financial performance since its inception on August 29, 1996.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00 6/01(9)
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $11.11 $14.11 $17.74 $19.70 $17.52
Net investment income (2) 0.06 0.16 0.10 0.09 0.08 0.04
Net realized and unrealized gain (loss) on investments 1.12 3.23 3.90 2.36 (1.48) (0.86)
Total from investment operations 1.18 3.39 4.00 2.45 (1.40) (0.82)
Less distributions:
From net investment income (0.06) (0.14) (0.10) (0.09) (0.09) (0.04)
In excess of net investment income -- -- -- --(3) -- --
From net realized gain on investments sold (0.01) (0.25) (0.27) (0.40) (0.31) --
In excess of net realized gain on investments sold -- -- -- -- (0.38) --
Total distributions (0.07) (0.39) (0.37) (0.49) (0.78) (0.04)
Net asset value, end of period $11.11 $14.11 $17.74 $19.70 $17.52 $16.66
Total investment return (4) (%) 11.78(5,6) 30.68(6) 28.42 13.89 (7.11) (4.68%)(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,149 8,719 26,691 44,991 40,673 41,136
Ratio of expenses to average net assets (%) 0.95(7) 0.95 0.95 0.83 0.85 0.87(7)
Ratio of adjusted expenses to average net assets(8) (%) 4.23(7) 1.59 -- -- -- --
Ratio of net investment income to average net assets (%) 1.60(7) 1.24 0.65 0.47 0.45 0.49(7)
Portfolio turnover rate (%) 24 53 55 77 97 43
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
(9) Semiannual period from January 1, 2001 through June 30, 2001. Unaudited.
A-3
Growth & Income Fund
GOAL AND STRATEGY
This is a non-diversified large and mid-cap stock fund that seeks income and
long-term capital appreciation.
The Fund invests primarily in a diversified mix of common stocks of large and
mid-sized U.S. companies.
The Fund employs two subadvisers, each of which employs its own investment
approach and independently manages its portion of the Fund. On or about Novem-
ber 1, 2000, the assets of the Fund were allocated between the two subadvisers
with Putnam receiving $1 billion (approximately 26% of the Fund's assets as of
October 31, 2000) and Independence the remainder. All subsequent investments in
the Fund will be allocated equally between the two subadvisers, while redemp-
tions will be allocated on an asset-weighted basis. These allocation methodolo-
gies may change in the future.
Independence Investment LLC ("Independence") selects stocks using a combination
of proprietary equity research and quantitative tools. Stocks are purchased
that are undervalued relative to the stock's history and have improving earn-
ings growth prospects.
Independence seeks to maintain risk and sector characteristics similar to the
market benchmark for its portion of the Fund. Independence normally invests in
80 to 160 stocks, with at least 65% (usually higher) of its assets in large cap
companies.
Putnam Investment Management, LLC ("Putnam") selects stocks using a combination
of:
. a systematic screening approach to rank stocks based on: fundamental cata-
lyst (such as earnings surprise and momentum); valuation (such as price-to-
sales ratio); and financial strength (such as superior cash flow); and
. proprietary fundamental equity research to identify companies with strong
and innovative management teams, opportunities for above average growth
within their industry and strong competitive positioning relative to peers
and suppliers.
Putnam seeks broad diversification by security and sector and uses risk manage-
ment tools and qualitative judgement to determine sector and stock-specific
weightings. Putnam normally invests in 65 to 110 stocks, with at least 65%
(usually higher) of its assets in large and mid cap companies.
The Fund is "non-diversified", which means that it can take larger positions in
individual issuers.
Each portion of the Fund normally has 10% or less (usually lower) of its assets
in cash and cash equivalents. Each portion of the Fund may invest in initial
public offerings (IPOs). Each portion of the Fund may purchase other types of
securities that are not primary investment vehicles, for example: U.S. dollar
denominated foreign securities, and certain derivatives (investments whose
value is based on indices or other securities). As an example of how deriva-
tives may be used, Putnam may invest in stock index futures to manage cash
flow.
In abnormal market conditions, each portion of the Fund may take temporary
defensive measures--such as holding unusually large amounts of cash and cash
equivalents--that are inconsistent with the Fund's primary investment strategy.
In taking those measures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund and its predecessor since March, 1986
Managed approximately $25 billion in assets at end of 2000
FUND MANAGERS
Management by investment team overseen by:
Paul F. McManus
- -----------------
Senior Vice President of subadviser
Joined team in 1996
Joined subadviser in 1982
SUBADVISER
Putnam Investment Management, LLC
One Post Office Square
Boston, Massachusetts 02109
Managing since 1937
Managing Fund since November, 2000
Managed approximately $370 Billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
C. Beth Cotner, CFA
- -------------------
Managing Director and Chief Investment Officer of subadviser
Joined subadviser in 1995
Began career in 1976
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may also help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
[GRAPH]
1991 26.00%
1992 8.90%
1993 13.33%
1994 -0.56%
1995 34.21%
1996 20.10%
1997 29.79%
1998 30.25%
1999 16.23%
2000 -13.10%
Best quarter: up 24.07%, fourth quarter 1998 Worst quarter: down 12.05%, third
quarter 1998
Average annual total return -- for periods ending 12/31/2000*
Fund Index
1 year -13.10% -9.11%
5 years 15.44% 18.35%
10 years 15.58% 17.46%
Life of fund 14.17% 15.26%
Index:S & P 500 Index
*Began operations on March 29, 1986.
A-4
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large/mid cap" approach carries the risk that in certain markets
large/mid cap stocks will underperform small cap stocks.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds.
The less diversified a fund's holdings are, the more likely it is that a spe-
cific security's poor performance will hurt the fund significantly.
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquiring Fund's financial performance fo rthe time periods indicated.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
Period ended: 12/96 12/97 12/98 12/99 12/00 6/01
(Unuadited)
Net asset value,
beginning of period $ 13.94 $ 14.65 $ 16.61 $ 19.49 $ 20.01 $ 14.18
Income from investment
operations:
Net investment income
(loss) 0.34 0.27 0.23 0.20 0.17 0.02
Net realized and
unrealized gain (loss)
on investments* 2.43 4.07 4.75 2.88 (2.77) (1.31)
Total from investment
operations 2.77 4.34 4.98 3.08 (2.60) (1.29)
Less distributions:
Distributions from net
investment income and
capital paid in (0.34) (0.27) (0.23) (0.20) (0.40) (0.02)
Distributions from net
realized gain on
investments sold (1.72) (2.11) (1.87) (2.36) (2.69) --
Distributions in excess
of income/gain and from
capital paid in -- -- -- -- (0.14) --
Total distributions (2.06) (2.38) (2.10) (2.56) (3.23) (0.02)
Net asset value, end of
period $ 14.65 $ 16.61 $ 19.49 $ 20.01 $ 14.18 12.87
Total investment return 20.10% 29.79% 30.25% 16.23% (13.10)% (9.13)%
Ratios and supplemental
data
Net assets, end of
period (000s
omitted)($) $2,047,927 $2,785,964 $3,670,785 $4,218,841 $3,324,988 $2,799,990
Ratio of expenses to
average net assets (%) 0.27% 0.28% 0.27% 0.28% 0.40% 0.77%
Ratio of net investment
income (loss) to
average net assets (%) 2.24% 1.61% 1.24% 0.98% 0.84% 0.35%
Turnover rate (%) 81.02% 74.56% 48.45% 70.16% 112.94% 43.75%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** The performance of the portfolios shown on this page does not reflect
and charges of the applicable separate accounts and variable products, all of
which vary to a considerable extent and are described in your product's
prospectus.
A-5
Proposal 2
V.A. Large Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 65% of assets in stocks of
large-capitalization companies (companies in the capitalization range of the
Russell Top 200 Growth Index, which was $0.88 billion to $415.8 billion as of
March 31, 2001).
In choosing individual stocks, the managers use fundamental financial analysis
to identify companies with:
o strong cash flows
o secure market franchises
o sales growth that outpaces their industries
The fund generally invests in a diversified portfolio of U.S. companies. The
fund has tended to emphasize, or overweight, certain sectors such as health
care, technology or consumer goods. These weightings may change in the future.
The management team uses various means to assess the depth and stability of
companies' senior management, including interviews and company visits. The fund
favors companies for which the managers project an above-average growth rate.
The fund may invest in preferred stocks and other types of equities, and may
invest up to 15% of assets in foreign securities. The fund may also make limited
use of certain derivatives (investments whose value is based on indexes,
securities or currencies).
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
PORTFOLIO MANAGERS
William L. Braman
- -----------------------------------
Executive vice president and chief
investment officer of adviser
Joined fund team in 2000
Joined adviser in 2000
Chief investment officer
at Baring Asset Management
(London 1998-2000)
Head of U.S. equity team at
Baring Asset Management
(Boston 1989-1998)
Began business career in 1977
Robert J. Uek, CFA
- -----------------------------------
Vice president of adviser
Joined fund team in 2000
Joined adviser in 1997
Corporate finance manager
at Ernst & Young (1994-1997)
Began business career in 1990
Paul J. Berlinguet
- -----------------------------------
Vice president of adviser
Joined fund team in 2001
Joined adviser in 2001
U.S. equity investment manager
at Baring America Asset
Management (1989-2001)
Began business career in 1986
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indexes for reference). This information may help provide an indication of the
fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
14.27% 24.60% 20.71% -31.30%
2001 total return as of June 30: 9.70%
Best quarter: Q3 '97, 22.53% Worst quarter: Q1 '97, -15.55%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index 1 Index 2
1 year -31.30% -9.10% -24.53%
Life of fund - began 8/29/96 2.41% 19.18% 19.57%
Index 1: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
Index 2: Russell Top 200 Growth Index, an unmanaged index containing
growth-oriented stocks from the Russell Top 200 Index.
In the future, the adviser will compare the fund's performance only to the
Russell Top 200 Growth Index since it more closely represents the fund's
investment strategy.
A-6
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on smallor medium-
capitalization stocks. Similarly, growth stocks could underperform value stocks.
To the extent the fund invests in a given industry, its performance will be hurt
if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquired Fund's financial performance since its inception on May 1, 1998.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00 6/01(9)
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $9.39 $10.73 $13.37 $15.77 $10.27
Net investment loss(2) (0.01) (0.04) --(3) (0.04) (0.08) (0.02)
Net realized and unrealized gain (loss) on investments (0.60) 1.38 2.64 2.80 (4.85) (2.56)
Total from investment operations (0.61) 1.34 2.64 2.76 (4.93) (2.58)
Less distributions:
Distributions from net realized gain on investments sold -- -- -- (0.36) (0.57) --
Net asset value, end of period $9.39 $10.73 $13.37 $15.77 $10.27 $7.69
Total investment return(4) (%) (6.10)(5,6) 14.27(6) 24.60(6) 20.71(6) (31.30) (25.12)(5,6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 994 3,733 10,372 21,872 12,304 6,280
Ratio of expenses to average net assets (%) 1.00(7) 1.00 1.00 1.00 0.96 1.00(7)
Ratio of adjusted expenses to average net assets(8) (%) 4.76(7) 2.37 1.33 1.02 -- 1.26(7)
Ratio of net investment loss to average net assets (%) (0.23)(7) (0.39) (0.00) (0.25) (0.59) (0.53)(7)
Portfolio turnover rate (%) 68 136 176 172 170 38
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
(9) Semiannual period from January 1, 2001 through June 30, 2001. Unaudited.
A-7
Growth & Income Fund
GOAL AND STRATEGY
This is a non-diversified large and mid-cap stock fund that seeks income and
long-term capital appreciation.
The Fund invests primarily in a diversified mix of common stocks of large and
mid-sized U.S. companies.
The Fund employs two subadvisers, each of which employs its own investment
approach and independently manages its portion of the Fund. On or about Novem-
ber 1, 2000, the assets of the Fund were allocated between the two subadvisers
with Putnam receiving $1 billion (approximately 26% of the Fund's assets as of
October 31, 2000) and Independence the remainder. All subsequent investments in
the Fund will be allocated equally between the two subadvisers, while redemp-
tions will be allocated on an asset-weighted basis. These allocation methodolo-
gies may change in the future.
Independence Investment LLC ("Independence") selects stocks using a combination
of proprietary equity research and quantitative tools. Stocks are purchased
that are undervalued relative to the stock's history and have improving earn-
ings growth prospects.
Independence seeks to maintain risk and sector characteristics similar to the
market benchmark for its portion of the Fund. Independence normally invests in
80 to 160 stocks, with at least 65% (usually higher) of its assets in large cap
companies.
Putnam Investment Management, LLC ("Putnam") selects stocks using a combination
of:
. a systematic screening approach to rank stocks based on: fundamental cata-
lyst (such as earnings surprise and momentum); valuation (such as price-to-
sales ratio); and financial strength (such as superior cash flow); and
. proprietary fundamental equity research to identify companies with strong
and innovative management teams, opportunities for above average growth
within their industry and strong competitive positioning relative to peers
and suppliers.
Putnam seeks broad diversification by security and sector and uses risk manage-
ment tools and qualitative judgement to determine sector and stock-specific
weightings. Putnam normally invests in 65 to 110 stocks, with at least 65%
(usually higher) of its assets in large and mid cap companies.
The Fund is "non-diversified", which means that it can take larger positions in
individual issuers.
Each portion of the Fund normally has 10% or less (usually lower) of its assets
in cash and cash equivalents. Each portion of the Fund may invest in initial
public offerings (IPOs). Each portion of the Fund may purchase other types of
securities that are not primary investment vehicles, for example: U.S. dollar
denominated foreign securities, and certain derivatives (investments whose
value is based on indices or other securities). As an example of how deriva-
tives may be used, Putnam may invest in stock index futures to manage cash
flow.
In abnormal market conditions, each portion of the Fund may take temporary
defensive measures--such as holding unusually large amounts of cash and cash
equivalents--that are inconsistent with the Fund's primary investment strategy.
In taking those measures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund and its predecessor since March, 1986
Managed approximately $25 billion in assets at end of 2000
FUND MANAGERS
Management by investment team overseen by:
Paul F. McManus
- -----------------
Senior Vice President of subadviser
Joined team in 1996
Joined subadviser in 1982
SUBADVISER
Putnam Investment Management, LLC
One Post Office Square
Boston, Massachusetts 02109
Managing since 1937
Managing Fund since November, 2000
Managed approximately $370 Billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
C. Beth Cotner, CFA
- -------------------
Managing Director and Chief Investment Officer of subadviser
Joined subadviser in 1995
Began career in 1976
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may also help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
[GRAPH]
1991 26.00%
1992 8.90%
1993 13.33%
1994 -0.56%
1995 34.21%
1996 20.10%
1997 29.79%
1998 30.25%
1999 16.23%
2000 -13.10%
Best quarter: up 24.07%, fourth quarter 1998 Worst quarter: down 12.05%, third
quarter 1998
Average annual total return -- for periods ending 12/31/2000*
Fund Index
1 year -13.10% -9.11%
5 years 15.44% 18.35%
10 years 15.58% 17.46%
Life of fund 14.17% 15.26%
Index:S & P 500 Index
*Began operations on March 29, 1986.
A-8
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large/mid cap" approach carries the risk that in certain markets
large/mid cap stocks will underperform small cap stocks.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds.
The less diversified a fund's holdings are, the more likely it is that a spe-
cific security's poor performance will hurt the fund significantly.
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquiring Fund's financial performance fo rthe time periods indicated.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
Period ended: 12/96 12/97 12/98 12/99 12/00 6/01
(Unuadited)
Net asset value,
beginning of period $ 13.94 $ 14.65 $ 16.61 $ 19.49 $ 20.01 $ 14.18
Income from investment
operations:
Net investment income
(loss) 0.34 0.27 0.23 0.20 0.17 0.02
Net realized and
unrealized gain (loss)
on investments* 2.43 4.07 4.75 2.88 (2.77) (1.31)
Total from investment
operations 2.77 4.34 4.98 3.08 (2.60) (1.29)
Less distributions:
Distributions from net
investment income and
capital paid in (0.34) (0.27) (0.23) (0.20) (0.40) (0.02)
Distributions from net
realized gain on
investments sold (1.72) (2.11) (1.87) (2.36) (2.69) --
Distributions in excess
of income, capital
paid in & gains -- -- -- -- (0.14) --
Total distributions (2.06) (2.38) (2.10) (2.56) (3.23) (0.02)
Net asset value, end of
period $ 14.65 $ 16.61 $ 19.49 $ 20.01 $ 14.18 12.87
Total investment return 20.10% 29.79% 30.25% 16.23% (13.10)% (9.13)%
Ratios and supplemental
data
Net assets, end of
period (000s
omitted)($) $2,047,927 $2,785,964 $3,670,785 $4,218,841 $3,324,988 $2,799,990
Ratio of expenses to
average net assets (%) 0.27% 0.28% 0.27% 0.28% 0.40% 0.77%
Ratio of net investment
income (loss) to
average net assets (%) 2.24% 1.61% 1.24% 0.98% 0.84% 0.35%
Turnover rate (%) 81.02% 74.56% 48.45% 70.16% 112.94% 43.75%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** The performance of the portfolios shown on this page does not reflect
and charges of the applicable separate accounts and variable products, all of
which vary to a considerable extent and are described in your product's
prospectus.
A-9
V.A. 500 Index Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks to provide investment results that correspond to the
total return performance of the Standard & Poor's 500 Stock Price Index. To
pursue this goal, the fund normally invests at least 80% of assets in common
stocks of S&P 500(R) companies, in approximately the same proportions as they
are represented in the index.
This fund is passively managed, meaning that the manager does not use any broad
economic or fundamental financial analysis to select investments. The manager
monitors the portfolio daily and rebalances periodically to maintain the
proportions of the index. The fund also invests in futures contracts, exchange
traded funds and options based on S&P 500 stocks.
Under normal circumstances, the fund is fully invested -- directly or through
futures and options contracts -- in all 500 stocks represented in the index. It
may, however, invest in fewer stocks or in stocks of non-S&P 500 companies. The
fund normally maintains less than 1% of assets in cash or cash equivalents.
================================================================================
PORTFOLIO MANAGER
James D. Schantz, CFA
- --------------------------------------
Vice president of adviser
Joined fund team in 2000
Joined adviser in 1998
Executive vice president and
director of quantitative research
at Hagler, Mastrovita & Hewitt
(1994-1998)
Began business career in 1970
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
29.51% 28.44% 20.81% -9.28%
2001 total return as of June 30: 5.75%
Best quarter: Q4 '98, 21.39% Worst quarter: Q3 '98, -10.01%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -9.28% -9.10%
Life of fund - began 8/29/96 17.75% 19.18%
Index: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
A-10
MAIN RISKS
[Clip Art] The value of your investment will fluctuate with the index. The fund
does not attempt to temper volatility or avoid losses associated with a decline
in the index.
The large-capitalization stocks that make up the index could fall out of favor
with the market, causing the fund to underperform funds that focus on smallor
medium-capitalization stocks.
Certain investment practices may cause the fund to track the index less closely:
o Transaction expenses can reduce fund performance.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o The performance of S&P futures, exchange traded funds or options could
correlate less strongly with the index than investments in the underlying
securities.
o The relative proportions of stocks in the fund's portfolio could drift
over time, which could increase tracking error.
Other factors may affect performance, such as the liquidity of S&P 500 stocks
and the timing of the fund's cash flows. You could lose money by investing in
the fund.
Note: "Standard & Poor's(R)" and "S&P 500(R)" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by the adviser. Standard & Poor's
does not sell or promote the fund or advise whether you should invest in the
fund. A description of this license is provided in the statement of additional
information.
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquired Fund's financial performance since its inception on May 1, 1998.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00 6/01(8)
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $10.44 $12.62 $15.23 $18.09 $16.21
Net investment income (2) 0.17 0.30 0.20 0.17 0.14 0.07
Net realized and unrealized gain (loss) on investments 0.98 2.72 3.37 2.98 (1.81) (1.19)
Total from investment operations 1.15 3.02 3.57 3.15 (1.67) (1.12)
Less distributions:
Dividends from net investment income (0.16) (0.30) (0.20) (0.17) (0.15) (0.08)
Distributions from net realized gain on investments sold (0.55) (0.54) (0.76) (0.11) (0.06) --
Distributions in excess of net realized gain on investments sold -- -- -- (0.01) -- --
Total distributions (0.71) (0.84) (0.96) (0.29) (0.21) (0.08)
Net asset value, end of period $10.44 $12.62 $15.23 $18.09 $16.21 $15.01
Total investment return(3,4) (%) 11.49(5) 29.51 28.44 20.81 (9.28) (6.88)(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,049 20,008 26,457 37,953 25,094 18,419
Ratio of expenses to average net assets (%) 0.60(6) 0.36 0.35 0.35 0.35 0.35(6)
Ratio of adjusted expenses to average net assets(7) (%) 1.31(6) 0.83 0.92 0.75 0.93 1.22(6)
Ratio of net investment income to average net assets (%) 4.57(6) 2.45 1.44 1.06 0.86 0.98(6)
Portfolio turnover rate (%) 0 9 47 5 7 3
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
(8) Semiannual period from January 1, 2001 through June 30, 2001. Unaudited.
A-11
Equity Index Fund
GOAL AND STRATEGY
This is a stock fund that seeks to track the performance of the S&P 500 Index,
which emphasizes the stocks of large U.S. companies.
The manager employs a passive management strategy by normally investing in all
stocks included in the Index. The manager normally invests in each stock in
roughly the same proportion as represented in the Index.
The manager seeks to replicate as closely as possible the aggregate risk char-
acteristics and sector diversification of the Index.
The Fund normally invests in all 500 stocks in the Index, but has no predeter-
mined number of stocks that it must hold. S&P may change the composition of the
Index from time to time. The manager will reflect those changes as soon as
practical.
The Fund is normally fully invested. The manager may invest in stock index
futures to maintain market exposure and manage cash flow.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: Standard & Poor's Depositary Receipts (SPDRs), U.S. dol-
lar denominated foreign securities, cash equivalents, and certain derivatives
(investments whose value is based on indices or other securities). As an exam-
ple of how derivatives may be used, the Fund may invest in stock index futures
to manage cash flow.
Note: "S&P 500 Index" means the Standard & Poor's 500 Composite Stock Price
Index. "Standard & Poor's", "S&P" and "S&P 500" are trademarks of McGraw Hill,
Inc. and have been licensed for use by the Trust.
- --------------------------------------------------------------------------------
SUBADVISER
SSgA Funds Management, Inc.
(formerly State Street Global Advisors, a division of State Street Bank and
Trust Company)
Two International Place
Boston, Massachusetts 02110
Managing, with predecessor, since 1978
Managing Fund since May, 1997
Predecessor managed approximately $725 billion in assets at the end of 2000
FUND MANAGERS
John A. Tucker
- -----------------
Principal of subadviser
Joined subadviser in 1988
James B. May
- -----------------
Principal of subadviser
Joined subadviser in 1989
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may also help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
[GRAPH]
1997 32.79%
1998 28.45%
1999 21.08%
2000 -9.15%
Best quarter: up 21.27%, fourth quarter 1998 Worst quarter: down 9.99%, third
quarter 1998
Average annual total return -- for periods ending 12/31/2000*
Fund Index
1 year -9.15% -9.11%
Life of fund 17.74% 18.06%
Index:S&P 500 Index
*Began operations on May 1, 1996.
A-12
MAIN RISKS
Primary
Index Management Risk: Certain factors such as the following may cause the
Fund to track the Index less closely:
. The securities selected by the manager may not be fully representative of
the Index.
. Transaction expenses of the Fund may result in the Fund's performance being
different than that of the Index.
. The size and timing of the Fund's cash flows may result in the Fund's per-
formance being different than that of the Index.
Also, index funds like this one will have more difficulty in taking defensive
positions in abnormal market conditions.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results.
The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large cap" approach carries the risk that in certain markets large cap
stocks will underperform mid cap and small cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquiring Fund's financial performance since its inception on May 1, 1996.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
Period ended: 12/96** 12/97 12/98 12/99 12/00 6/01
(Unaudited)
Net asset value, beginning
of period $ 10.00 $ 11.10 $ 14.21 $ 17.70 $ 20.46 $ 17.64
Income from investment
operations:
Net investment income
(loss) 0.15 0.24 0.25 0.27 0.22 0.09
Net realized and unrealized
gain (loss) on
investments* 1.26 3.41 3.76 3.41 (2.09) (1.27)
Total from investment
operations 1.41 3.65 4.01 3.68 (1.87) (1.18)
Less distributions:
Distributions from net
investment income and
capital paid in (0.21) (0.29) (0.24) (0.26) (0.23) (0.10)
Distributions from net
realized gain on
investments sold (0.10) (0.25) (0.28) (0.66) (0.72) --
Distributions in excess of
income/gain and from capital
paid in -- -- -- -- -- --
Total distributions (0.31) (0.54) (0.52) (0.92) (0.95) (0.10)
Net asset value, end of
period $ 11.10 $ 14.21 $ 17.70 $ 20.46 $ 17.64 $ 16.36
Total investment return***+ 14.23%(a) 32.79% 28.45% 21.08% (9.15)% (6.74)%
Ratios and supplemental data
Net assets, end of period
(000s omitted)($) $14,650 $101,390 $232,578 $451,296 $525,659 $ 539,147
Ratio of expenses to average
net assets (%)**** 0.00%(b) 0.00% 0.00% 0.00% 0.19% 0.19%
Ratio of net investment
income (loss) to average
net assets (%) 2.47%(b) 1.97% 1.59% 1.42% 1.12% 1.15%
Turnover rate (%) 15.72%(a) 64.56% 43.31% 55.24% 34.11% 11.28%
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing
of purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Fund began operations on May 1, 1996.
*** Includes the effect of a voluntary capital contribution from John Han-
cock of $0.06 per share for the period ended 1996 and $0.04 per share
for year ended 1997. The Total Investment Return without the capital
contribution would have been 13.59% for the year ended 1996 and 32.47%
for the year ended 1997.
**** Expense ratio is net of expense reimbursement. Had such reimbursement
not been made the expense ratio would have been 1.61%, 0.65%, 0.34% and
0.22% for the years ended December 31, 1996, 1997, 1998 and 1999,
respectively.
+ The performance of the portfolios shown on this page does not reflect expenses
and charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product's
prospectus.
(a) Not annualized
(b) Annualized
A-13
Proposal 4
V.A. International Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of assets in stocks of foreign companies. The
fund may invest up to 30% of assets in emerging markets as classified by Morgan
Stanley Capital International (MSCI). The fund does not maintain a fixed
allocation of assets, either with respect to securities type or geography.
In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual foreign companies. In
analyzing specific companies for possible investment, the managers ordinarily
look for several of the following characteristics that will enable the companies
to compete successfully in their respective markets:
o above-average per share earnings growth
o high return on invested capital
o a healthy balance sheet
o sound financial and accounting policies and overall financial strength
o strong competitive advantages
o effective research, product development and marketing.
The managers consider whether to sell a particular security when any of those
factors materially changes. The managers allocate the fund's assets among
securities of countries that are expected to provide the best opportunities for
meeting the fund's investment objective. To manage risk, the fund does not
invest more than 5% of assets in any one security.
The fund may use certain derivatives (investments whose value is based on
indexes, securities or currencies).
In abnormal conditions, the fund may temporarily invest more than 20% of assets
in investment-grade short-term securities. In these and other cases, the fund
might not achieve its goal.
================================================================================
SUBADVISER
Nicholas-Applegate
Capital Management
- ----------------------------------
U.S.-based team responsible for
day-to-day investment manage-
ment since December 2000
Founded in 1984
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
-0.54% 16.76% 31.55% -25.17%
2001 total return as of June 30: -0.22%
Best quarter: Q4 `99, 25.38% Worst quarter: Q3 `98, -17.11%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -25.17% -16.34%
Life of fund - began 8/29/96 6.02% 5.25%
Index: MSCI All Country World Ex-U.S. Free Index, an unmanaged index of freely
traded stocks of foreign companies.
A-14
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
Foreign investments are more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social instability
and political actions ranging from tax code changes to governmental collapse.
These risks are more significant in emerging markets.
The fund's management strategy has a significant influence on fund performance.
If the fund invests in countries or regions that experience economic downturns,
performance could suffer. In addition, if certain investments or industries do
not perform as expected, or if the managers' security selection strategies do
not perform as expected, the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o In a down market, emerging market securities, other higher-risk securities
and derivatives could become harder to value or to sell at a fair price.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquired Fund's financial performance since its inception on May 1, 1998.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00 6/01(8)
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $11.23 $10.50 $12.18 $15.45 $11.01
Net investment income (2) 0.07 0.05 0.07 0.07 0.03 0.04
Net realized and unrealized gain (loss) on investments 1.20 (0.13) 1.69 3.75 (3.93) (2.16)
Total from investment operations 1.27 (0.08) 1.76 3.82 (3.90) (2.12)
Less distributions:
Dividends from net investment income (0.04) (0.01) (0.07) (0.08) (0.17) --
Dividends in excess of net investment income -- -- (0.01) (0.02) -- --
Distributions from net realized gain on investments sold -- (0.64) -- (0.45) (0.37) --
Total distributions (0.04) (0.65) (0.08) (0.55) (0.54) --
Net asset value, end of period $11.23 $10.50 $12.18 $15.45 $11.01 $8.89
Total investment return(3,4) (%) 12.75(5) (0.54) 16.75 31.55 (25.17) (19.26)(5)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 2,267 3,792 7,201 9,375 7,330 4,999
Ratio of expenses to average net assets (%) 1.15(6) 1.15 1.15 1.15 1.15 1.15(6)
Ratio of adjusted expenses to average net assets(7) (%) 3.13(6) 2.04 3.13 2.51 3.24 3.40(6)
Ratio of net investment income to average net assets (%) 2.03(6) 0.43 0.59 0.52 0.19 0.84(6)
Portfolio turnover rate (%) 14 273 89 116 177 176
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
(8) Semiannual period from January 1, 2001 through June 30, 2001. Unaudited.
A-15
International Equity Fund
GOAL AND STRATEGY
This is an international stock fund that seeks long-term capital appreciation.
The Fund primarily invests in a diversified mix of common stocks of large
established and medium-sized foreign companies located primarily in developed
countries outside of the U.S.
The manager selects stocks using proprietary equity research that identifies
companies having:
. strong market positions within their industry,
. management with a history of excellence focusing on core businesses,
. above average return on capital within their industry, and
. demonstrated ability to create long-term shareholder value.
The manager determines the allocation among regions and countries using a com-
bination of qualitative and quantitative inputs, including:
. quantitative models to rank the relative attractiveness of each
country/region based on valuation, credit risk and momentum, and
. qualitative assessment of regional portfolio managers to adjust model
results.
The Fund's sector exposures are largely the result of stock selection, although
the Fund maintains broad sector representation. The Fund is managed using risk
control techniques that maintain overall regional diversification. Although the
Fund may employ foreign currency hedging techniques, the Fund normally main-
tains the currency exposure of the underlying equity investments.
The Fund invests in at least 3 different countries other than the U.S., but
normally invests in 10 to 35 countries, with at least 65% of its assets in
securities of non-U.S. entities.
The Fund will invest no more than 10% of its assets in emerging market stocks.
The Fund normally invests in 120 to 200 stocks and normally has 10% or less
(usually lower) of its assets in cash and cash equivalents. The Fund may invest
in initial public offerings (IPOs).
The Fund also may purchase other types of securities that are not primary
investment vehicles, for example: American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs), European Depositary Receipts (EDRs), iShares SM and
other Exchange Traded Funds (ETFs), and certain derivatives (investments whose
value is based on indices or other securities). As an example of how deriva-
tives may be used, the Fund may invest in stock index futures to manage cash
flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Goldman Sachs Asset Management,
A unit of the Investment Management Division of Goldman, Sachs & Co.
32 Old Slip
New York, New York 10005
Managing since 1988
Managing Fund since August, 1999
Managed approximately $282 billion
in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
Shogo Maeda
- -----------------
Managing Director of subadviser
Joined subadviser in 1994
Senior Portfolio Manager at Nomura Investment Management, Inc. (1987-1994)
Susan Noble
- -----------------
Managing Director of subadviser
Joined subadviser in 1997
Portfolio Management Director at Fleming Investment Management (1986-1997)
Andrew Orchard
- -----------------
Executive Director of subadviser
Joined subadviser in 1999
Portfolio Manager at Morgan Grenfell
Asset Management (1994-1999)
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
[GRAPH]
2000 -14.37%
Best quarter: up 22.28%, fourth quarter 1999 Worst quarter: down 8.76%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -14.37% -13.96%
Life of fund 3.01% 1.31%
Index:MSCI EAFE Index
*Began operations on August 31, 1999.
A-16
MAIN RISKS
Primary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk. However, to the extent the Fund invests in emerging market coun-
tries, it will have a significantly higher degree of foreign risk than if it
invested exclusively in developed or newly-industrialized countries.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements.
Markets tend to move in cycles, with periods of rising prices and periods of
falling prices. Stocks tend to go up and down in value more than bonds. If the
Fund's investments are concentrated in certain sectors, the Fund's performance
could be worse than the overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large/mid cap" approach carries the risk that in certain markets
large/mid cap stocks will underperform small cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquiring Fund's financial performance since its inception on August 31, 1999.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
Period ended: 12/99** 12/00 6/01
(Unaudited)
Net asset value, beginning of period $ 10.00 $ 11.95 $ 9.85
Income from investment operations
Net investment income (loss) 0.01 0.06 0.05
Net realized and unrealized gain (loss) on investments* 2.12 (1.78) (1.48)
Total from investment operations 2.13 (1.72) (1.43)
Less distributions:
Distributions from net investment income and capital paid
in (0.01) (0.04) (0.05)
Distributions from net realized gain on investment (0.17) (0.30) --
Distributions in excess of income/gains and from
capital paid in -- (0.04) --
Total distributions (0.18) (0.38) (0.05)
Net asset value, end of period $ 11.95 $ 9.85 $ 8.37
Total investment return**** 21.49%(a) (14.37)% (14.56)%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $12,430 $15,716 $ 21,086
Ratio of expenses to average net assets (%)*** 1.10%(b) 1.10% 1.09%
Ratio of net investment income (loss) to average net assets
(%) 0.21%(b) 0.53% 1.15%
Turnover rate (%) 26.76%(a) 75.41% 22.65%
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing of
purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Fund began operations August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.71% and 1.76% for the years
ended December 31, 1999 and 2000, respectively.
**** The performance of the portfolios shown on this page does not reflect expenses
and charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product's
prospectus.
(a) Not annualized
(b) Annualized
A-17
Proposal 5
V.A. Mid Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 80% of assets in stocks of medium-
capitalization companies (companies in the capitalization range of the Russell
Midcap Growth Index, which was $0.02 billion to $19.37 billion as of March 31,
2001).
The manager conducts fundamental financial analysis to identify companies with
above-average earnings growth.
In choosing individual securities, the manager looks for companies with growth
stemming from a combination of gains in market share and increasing operating
efficiency. Before investing, the manager identifies a specific catalyst for
growth, such as a new product, business reorganization or merger.
The management team generally maintains personal contact with the senior
management of the companies the fund invests in.
The manager considers broad economic trends, demographic factors, technological
changes, consolidation trends and legislative initiatives.
The fund may not invest more than 5% of assets in any one security.
The fund may invest up to 10% of assets in foreign securities. The fund may also
make limited use of certain derivatives (investments whose value is based on
indexes or currencies).
In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash or cash equivalents. In these and other cases, the fund might not achieve
its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
PORTFOLIO MANAGERS
Team responsible for day-to-day investment management.
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indexes for reference). This information may help provide an indication of the
fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1998 1999 2000
10.35% 56.18% -11.73%
2001 total return as of June 30: 10.10%
Best quarter: Q4 '99, 41.78% Worst quarter: Q3 '98, -19.74%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index 1 Index 2
1 year -11.73% -9.10% -11.75%
Life of fund - began 1/7/98 15.12% 12.58% 17.28%
Index 1: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
Index 2: Russell Midcap Growth Index, an unmanaged index containing those stocks
from the Russell Midcap Index with a greater-than-average growth orientation.
A-18
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Medium-capitalization stocks tend to be more volatile than stocks of larger
companies, and as a group could fall out of favor with the market, causing the
fund to underperform investments that focus either on smallor
large-capitalization stocks. Similarly, growth stocks could underperform value
stocks. To the extent the fund invests in a given industry, its performance will
be hurt if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquired Fund's financial performance since its inception on January 7, 1998.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
- -------------------------------------------------------------------------------------------------------------
Period ended: 12/98(1) 12/99 12/00 6/01(9)
- -------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $11.03 $17.21 $15.09
Net investment income (loss)(2) 0.01 (0.03) (0.08) (0.05)
Net realized and unrealized gain (loss) on investments 1.03 6.23 (1.94) (3.48)
Total from investment operations 1.04 6.20 (2.02) (3.53)
Less distributions:
Dividends from net investment income (0.01) -- -- --
Distributions from net realized gain on investments sold -- (0.02) (0.10) --
Tax return of capital --(3) -- -- --
Total distributions (0.01) (0.02) (0.10) --
Net asset value, end of period $11.03 $17.21 $15.09 $11.56
Total investment return(4,5) (%) 10.35(6) 56.18 (11.73) (23.39)(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,779 6,363 11,482 6,315
Ratio of expenses to average net assets (%) 1.00(7) 1.00 1.00 1.00(7)
Ratio of adjusted expenses to average net assets(8) (%) 4.23(7) 2.36 1.10 1.19(7)
Ratio of net investment income (loss) to average net assets (%) 0.06(7) (0.23) (0.42) 0.74(7)
Portfolio turnover rate (%) 103 136 155 71
(1) Began operations on January 7, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
(9) Semiannual period from January 1, 2001 through June 30, 2001. Unaudited.
A-19
Fundamental Growth Fund
GOAL AND STRATEGY
This is a stock fund with a growth emphasis that seeks long-term capital appre-
ciation.
The Fund invests primarily in the common stocks of large-sized and mid-sized
U.S. companies that are believed to offer above-average potential for growth in
revenues and earnings.
The manager selects stocks using proprietary fundamental equity research and a
systematic screening approach. The manager screens the universe for stocks that
meet minimum size and earnings growth criteria. The manager employs a proprie-
tary quantitative model to rank stocks based on:
. fundamental catalyst (such as earnings surprise and momentum);
. valuation (such as price-to sales ratio); and
. financial strength (such as superior cash flow).
The manager uses fundamental equity research with a global equity research team
to identify companies with characteristics such as:
. strong and innovative management teams;
. opportunities for above average growth within its industry;
. strong competitive positioning relative to peers and suppliers;
. sufficient financial strength to grow the business; and
. reasonable valuations relative to earnings expectations.
The manager uses risk management tools and qualitative judgement to determine
the Fund's sector and stock-specific weightings. The Fund is broadly diversi-
fied by sector. The Fund normally invests in 90 to 150 stocks, with at least
65% (usually higher) of its assets in large and mid cap companies. The Fund
normally has 10% or less (usually lower) of its assets in cash and cash equiva-
lents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
As an example of how derivatives may be used, the Fund may invest in stock
index futures to manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Putnam Investment Management, LLC
One Post Office Square
Boston, Massachusetts 02119
Managing since 1937
Managing Fund since August, 2000
Managed approximately $370 billion
in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
Eric M. Wetlaufer, CFA
- -----------------
Managing Director and Chief Investment Officer of subadviser
Joined subadviser in 1997
Managing Director and Portfolio Manager at Cadence Capital Management (1991 --
1997)
Began career in 1985
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the vari-
able contracts. Such fees and charges would cause the investment returns under
the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
[GRAPH]
2000 -3.03%
Best quarter: up 54.57%, third quarter 1999 Worst quarter: down 20.91%, second
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -3.03% -11.75%
Life of fund 35.44% 16.11%
Index:Russell Mid Cap(TM) Growth Index
* Began operations on August 31, 1999.
A-20
MAIN RISKS
Primary
Small /Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized com-
panies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "large/mid cap"
approach carries the risk that large/mid cap stocks will underperform small
cap stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquiring Fund's financial performance since its inception on August 31, 1999.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
Period ended: 12/99** 12/00 6/01
(Unaudited)
Net asset value, beginning of period $10.00 $ 14.42 $ 12.52
Income from investment operations:
Net investment income (loss) (0.02) (0.02) (0.02)
Net realized and unrealized gain (loss) on investments* 5.34 (0.44) (2.64)
Total from investment operations 5.32 (0.46) (2.66)
Less distributions:
Distributions from net investment income and capital paid
in -- (0.03) --
Distributions from net realized gain on investments sold (0.90) (0.76) --
Distributions in excess of income/gains and from
capital paid in -- (0.65) --
Total distributions (0.90) (1.44) --
Net asset value, end of period $14.42 $ 12.52 $ 9.86
Total investment return**** 54.57%(a) (3.03)% (21.20)%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $9,175 $46,114 $40,342
Ratio of expenses to average net assets (%)*** 0.95%(b) 0.96% 0.99%
Ratio of net investment income (loss) to average
net assets (%) (0.55)%(b) (0.38)% (0.47)%
Turnover rate (%) 61.66%(a) 250.46% 51.34%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.09% and 1.00% for the years
ended December 31, 1999 and 2000, respectively.
**** The performance of the portfolios shown on this page does not reflect expenses
and charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product's
prospectus.
(a) Not annualized
(b) Annualized
A-21
Proposal 6
V.A. Small Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 80% of assets in stocks of
small-capitalization companies (companies in the capitalization range of the
Russell 2000 Growth Index, which was $10 million to $4.20 billion as of March
31, 2001).
The managers look for companies in the emerging growth phase of development that
are not yet widely recognized. The fund also may invest in established companies
that, because of new management, products or opportunities, offer the
possibility of accelerating earnings.
To manage risk, the fund typically invests in 150 to 220 companies across many
industries, and does not invest more than 5% of assets in any one security.
In choosing individual securities, the managers use fundamental financial
analysis to identify rapidly growing companies. The managers favor companies
that dominate their market niches or are poised to become market leaders. They
look for strong senior management teams and coherent business strategies. They
generally maintain personal contact with the senior management of the companies
the fund invests in.
The fund may invest in preferred stocks and other types of equities, and may
invest up to 10% of assets in foreign securities. The fund may also make limited
use of certain derivatives (investments whose value is based on indexes or
currencies).
In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash and cash equivalents. In these and other cases, the fund might not achieve
its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
PORTFOLIO MANAGERS
Bernice S. Behar, CFA
- ---------------------------------
Senior vice president of adviser
Joined fund team in 1996
Joined adviser in 1991
Began business career in 1986
Anurag Pandit, CFA
- ---------------------------------
Vice president of adviser
Joined fund team in 1996
Joined adviser in 1996
Equity analyst at Loomis Sayles
(1992-1996)
Began business career in 1984
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indexes for reference). This information may help provide an indication of the
fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
11.06% 15.94% 68.52% -22.33%
2001 total return as of June 30: 17.58%
Best quarter: Q4 `99, 44.55% Worst quarter: Q3 `98, -21.42%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index 1 Index 2
1 year -22.33% -3.02% -22.43%
Life of fund - began 8/29/96 11.02% 10.29% 6.88%
Index 1: Russell 2000 Index, an unmanaged index of 2,000 U.S.
small-capitalization stocks.
Index 2: Russell 2000 Growth Index, an unmanaged index containing those stocks
from the Russell 2000 Index with a greater-than-average growth orientation.
A-22
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Small-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on mediumor
large-capitalization stocks. Similarly, growth stocks could underperform value
stocks. To the extent the fund invests in a given industry, its performance will
be hurt if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
Stocks of smaller companies are more volatile than stocks of larger companies.
Many smaller companies have short track records, narrow product lines or niche
markets, making them highly vulnerable to isolated business setbacks.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price; this risk could also affect
small-capitalization stocks, especially those with low trading volumes.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquired Fund's financial performance since its inception on August 29, 1996.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00 6/01(9)
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $9.32 $10.35 $12.00 $19.76 $14.40
Net investment income (loss)(2) 0.02 (0.02) (0.06) (0.10) (0.13) (0.04)
Net realized and unrealized gain (loss) on investments (0.68) 1.05 1.71 8.29 (4.33) (1.12)
Total from investment operations (0.66) 1.03 1.65 8.19 (4.46) (1.16)
Less distributions:
Dividends from net investment income (0.02) --(3) -- -- -- --
Distributions from net realized gain on investments sold -- -- -- (0.43) (0.90) --
Total distributions (0.02) -- -- (0.43) (0.90) --
Net asset value, end of period $9.32 $10.35 $12.00 $19.76 $14.40 $13.24
Total investment return(4,5) (%) (6.62)(6) 11.06 15.94 68.52 (22.33) (8.06)(6)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 975 3,841 8,232 20,867 19,772 13,313
Ratio of expenses to average net assets (%) 1.00(7) 1.00 1.00 1.00 1.00 1.00(7)
Ratio of adjusted expenses to average net assets(8) (%) 5.19(7) 2.72 1.63 1.38 1.10 1.21(7)
Ratio of net investment income (loss) to average net assets (%) 0.62(7) (0.16) (0.59) (0.76) (0.68) (0.67)(7)
Portfolio turnover rate (%) 31 79 93 120 104 40
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
(9) Semiannual period from January 1, 2001 through June 30, 2001. Unaudited.
A-23
Small Cap Growth Fund
GOAL AND STRATEGY
This is a small cap stock fund with a growth emphasis that seeks long-term cap-
ital appreciation.
The Fund invests primarily in a diversified mix of the common stocks of small
U.S. companies that are believed to offerabove-average potential for growth in
revenues and earnings.
The manager selects stocks using proprietary equity research. Stocks are pur-
chased that are expected to have rapid earnings growth that is not yet widely
recognized by the investment community.
The manager looks for companies with:
. demonstrated annual 20% earnings growth over 3 years and/or similar future
growth expectations;
. dominant market niche or poised to become market leaders; and
. high quality senior management with coherent business strategies.
The Fund is highly diversified by sector and number of individual stocks. The
Fund's sector weightings are broadly diversified and managed relative to those
of the Russell 2000(R) Growth Index. The Fund normally invests in 140 to 220
stocks, with at least 65% (usually higher) of its assets in small cap compa-
nies. The Fund normally has 10% or less (usually lower) of its assets in cash
and cash equivalents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Owned by John Hancock
Managing since 1968
Managing Fund since May, 1996
Managed approximately $32 billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
Bernice S. Behar, CFA
- -----------------
Senior Vice President of subadviser
Joined subadviser in 1991
Began career in 1986
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
[GRAPH]
1997 14.26%
1998 14.49%
1999 70.38%
2000 -21.43%
Best quarter: up 45.57%, fourth quarter 1999 Worst quarter: down 22.48%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -21.43% -22.43%
Life of fund 12.63% 4.72%
Index: Russell 2000(R) Growth Index
*Began operations on May 1, 1996.
A-24
MAIN RISKS
Primary
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results.
The Fund could underperform its peers or lose money if the manager's invest-
ment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "small cap" approach
carries the risk that in certain markets small cap stocks will underperform
mid cap and large cap stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquiring Fund's financial performance since its inception on May 1, 1996.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
Period ended: 12/96** 12/97 12/98 12/99 12/00 6/01
(Unaudited)
Net asset value, beginning
of period $ 10.00 $ 9.93 $ 11.34 $ 12.99 $ 19.12 $ 13.47
Income from investment
operations:
Net investment income
(loss) 0.01 (0.02) (0.05) (0.21) (0.02) (0.04)
Net realized and
unrealized gain (loss) on
investments* (0.06) 1.44 1.70 9.06 (4.16) (1.03)
Total from investment
operations (0.05) 1.42 1.65 8.85 (4.18) (1.07)
Less distributions:
Distributions from net
investment income and (0.02) -- -- -- -- --
Distributions from net
realized gain on
investments sold -- -- -- (2.72) (0.12) --
Distributions in excess of
income/gains and from capital
paid in -- 0.01 -- -- (1.35) --
Total distributions (0.02) (0.01) -- (2.72) (1.47) --
Net asset value, end of
period $ 9.93 $ 11.34 $ 12.99 $ 19.12 $ 13.47 $ 12.40
Total investment return**** (0.50)%(a)14.26% 14.49% 70.38% (21.43)% (7.94)%
Ratios and supplemental
data
Net assets, end of period
(000s omitted)($) $20,633 $48,761 $74,849 $179,570 $234,542 $202,053
Ratio of expenses to
average net assets (%)*** 1.00%(b) 1.00% 1.00% 0.89% 0.82% 0.84%
Ratio of net investment
income (loss) to average
net assets (%) 0.12%(b) (0.28)% (0.65)% (0.70) (0.50)% (0.44)%
Turnover rate (%) 50.93%(a) 86.23% 101.16% 113.11% 97.73% 45.16%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuations in market
values of the fund.
** Fund began operations on May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made, the expense ratio would have been 1.55%, 1.12% and 1.05% for
the years ended December 31, 1996, 1997, and 1998, respectively.
**** The performance of the portfolios shown on this page does not reflect expenses
and charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product's
prospectus.
(a) Not annualized
(b) Annualized
A-25
Proposal 7
V.A. Bond Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks to generate a high level of current income consistent
with prudent investment risk. In pursuing this goal, the fund normally invests
at least 65% of assets in a diversified portfolio of debt securities. These
include corporate bonds and debentures as well as U.S. government and agency
securities. Most of these securities are investment grade, although the fund may
invest up to 25% of assets in junk bonds rated as low as CC/Ca and their unrated
equivalents. There is no limit on the fund's average maturity.
In managing the fund's portfolio, the managers concentrate on sector allocation,
industry allocation and securities selection: deciding which types of bonds and
industries to emphasize at a given time, and then which individual bonds to buy.
When making sector and industry allocations, the managers try to anticipate
shifts in the business cycle, using top-down analysis to determine which sectors
and industries may benefit over the next 12 months.
In choosing individual securities, the managers use bottom-up research to find
securities that appear comparatively undervalued. The managers look at bonds of
all different quality levels and maturities from many different issuers,
potentially including foreign governments and corporations.
The fund intends to keep its exposure to interest rate movements generally in
line with those of its peers. The fund may invest in mortgage-related securities
and certain other derivatives (investments whose value is based on indexes,
securities or currencies).
Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
================================================================================
PORTFOLIO MANAGERS
James K. Ho, CFA
- ------------------------------------
Executive vice president of adviser
Joined fund team in 1996
Joined adviser in 1985
Began business career in 1977
Benjamin A. Matthews
- ------------------------------------
Vice president of adviser
Joined fund team in 1998
Joined adviser in 1995
Began business career in 1970
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
9.31% 9.41% -0.51% 11.89%
2001 total return as of June 30: -0.04%
Best quarter: Q3 `98, 4.76% Worst quarter: Q1 `97, -0.96%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year 11.89% 9.39%
Life of fund - began 8/29/96 7.88% 7.28%
Index: Lehman Brothers Credit Bond Index, an unmanaged index of corporate bonds
and Yankee bonds.
A-26
MAIN RISKS
[Clip Art] The major factors in this fund's performance are interest rates and
credit risk. When interest rates rise, bond prices generally fall. Generally, an
increase in the fund's average maturity will make it more sensitive to interest
rate risk.
The fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. In general, lower-rated bonds have higher credit risks. If
certain sectors or investments do not perform as the fund expects, it could
underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Junk bonds and foreign securities may make the fund more sensitive to
market or economic shifts in the U.S. and abroad.
o If interest rate movements cause the fund's mortgage-related and callable
securities to be paid off substantially earlier or later than expected,
the fund's share price or yield could be hurt.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
Any U.S. government guarantees on portfolio securities do not apply to these
securities' market value or current yield, or to fund shares.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquired Fund's financial performance since its inception on August 29, 1996.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00 6/01(9)
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $10.19 $10.36 $10.51 $9.81 $10.29
Net investment income (2) 0.23 0.68 0.63 0.64 0.64 0.28
Net realized and unrealized gain (loss) on investments 0.21 0.24 0.32 (0.70) 0.50 0.01
Total from investment operations 0.44 0.92 0.95 (0.06) 1.12 0.29
Less distributions:
Dividends from net investment income (0.23) (0.68) (0.63) (0.64) (0.64) 0.30
Distributions from net realized gain on investments sold (0.02) (0.07) (0.17) -- -- --
Total distributions (0.25) (0.75) (0.80) (0.64) (0.64) (0.30)
Net asset value, end of period $10.19 $10.36 $10.51 $9.81 $10.29 $10.28
Total investment return(3) (%) 4.42(4,5) 9.30(5) 9.41(5) (0.51)(5) 11.89(5) 2.78(4)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,056 3,682 10,669 12,531 25,173 67,692
Ratio of expenses to average net assets (%) 0.75(6) 0.75 0.75 0.75 0.75 0.68(6)
Ratio of adjusted expenses to average net assets(7) (%) 4.15(6) 2.53 1.34 1.01 0.92 --
Ratio of net investment income to average net assets (%) 6.69(6) 6.57 5.93 6.39 6.47 5.50(6,8)
Portfolio turnover rate (%) 45 193 367 307 298 195
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
(8) Had the Fund not amortized premiums on debt securities, the annualized
ration of net investment income to average net assets would have been
5.77%.
(9) Semiannual period from January 1, 2001 through June 30, 2001. Unaudited.
A-27
Active Bond Fund
GOAL AND STRATEGY
This is an intermediate term bond fund of medium credit quality that seeks
income and capital appreciation.
The Fund primarily invests in a diversified mix of debt securities including:
. U.S. Treasury and agency securities;
. foreign government and agency securities (if dollar-denominated);
. corporate bonds, both U.S. and foreign (if dollar-denominated); and
. mortgage-backed and asset-backed securities.
The manager normally invests:
. mostly in investment grade debt securities; and
. no more than 25% of the Fund's assets in high yield bonds.
The manager seeks to identify specific bond sectors, industries and specific
bonds that are attractively priced. The manager tries to anticipate shifts in
the business cycle, using economic and industry analysis to determine which
sectors and industries might benefit over the next 12 months. The manager uses
proprietary research to identify securities that are undervalued.
The manager evaluates bonds of all quality levels and maturities from many dif-
ferent issuers. The Fund normally has an average credit rating of "A" or high-
er.
The Fund normally has 10% or less of its assets in cash and cash equivalents.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: emerging market debt securities, and certain derivatives
(investments whose value is based on indices or other securities). The manager
actively uses derivatives, such as futures, to adjust the Fund's average matu-
rity and seeks to keep the Fund's interest rate sensitivity in line with the
overall market.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Owned by John Hancock
Managing since 1968
Managing Fund since May, 1995
Managed approximately $32 billion in assets at the end of 2000
FUND MANAGER
James K. Ho, CFA
- -----------------
Executive Vice President of subadviser
Managed fund since 1995
Associated with subadviser since 1985
Began career in 1977
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
[GRAPH]
1991 16.70%
1992 7.70%
1993 10.80%
1994 -2.57%
1995 19.55%
1996 4.10%
1997 10.11%
1998 8.23%
1999 -0.94%
2000 10.45%
Best quarter: up 7.14%, second quarter 1989 Worst quarter: down 2.51%, first
quarter 1994
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 10.45% 11.63%
5 years 6.30% 6.46%
10 years 8.20% 7.96%
Life of fund 8.04% 8.16%
Index: Lehman Brothers Aggregate Bond Index
*Began operations on March 29, 1986.
A-28
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has more interest rate risk than a short-term bond fund, but
less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the fund may be downgraded. In either case, the value of the bond held by the
Fund would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
High Yield Bond Risk: Junk bonds, defined as bond securities rated below BBB-
/Baa3, may be subject to more volatile or erratic price movements due to
investor sentiment. In a down market, these high yield securities become harder
to value or to sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks. All
foreign securities have some degree of foreign risk. However, to the extent the
Fund invests in emerging market countries, it will have a significantly higher
degree of foreign risk than if it invested exclusively in developed or newly-
industrialized countries.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquiring Fund's financial performance for the time period indicated.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
Period ended: 12/96 12/97 12/98 12/99 12/00 6/01
(Unaudited)
Net asset value, beginning
of period $ 10.13 $ 9.77 $ 9.95 $9.92 $ 9.12 $ 9.44
Income from investment
operations:
Net investment income
(loss) 0.69 0.71 0.69 0.67 0.64 0.29
Net realized and
unrealized gain (loss) on
investments* (0.31) 0.24 0.11 (0.76) 0.28 0.06
Total from investment
operations 0.38 0.95 0.80 (0.09) 0.92 0.35
Less distributions:
Distributions from net
investment income and
capital paid in (0.69) (0.71) (0.69) (0.71) (0.60) (0.30)
Distributions from net
realized gain on
investments sold (0.05) (0.06) (0.14) -- -- --
Total distributions (0.74) (0.77) (0.83) (0.71) (0.60) (0.30)
Net asset value, end of
period $ 9.77 $ 9.95 $ 9.92 $ 9.12 $ 9.44 $ 9.49
Total investment return** 4.10% 10.11% 8.23% (0.94)% 10.45% 3.63%
Ratios and supplemental
data
Net assets, end of period
(000s omitted)($) $726,111 $803,770 $907,121 $850,286 $842,299 $816,297
Ratio of expenses to
average net assets (%) 0.29% 0.31% 0.29% 0.28% 0.41%*** 0.71%
Ratio of net investment
income (loss) to average
net assets (%) 7.07% 7.18% 6.84% 6.97% 6.98% 6.13%
Turnover rate (%) 119.12% 138.29% 228.74% 182.90% 164.34% 130.85%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** The performance of the portfolios shown on this page does not reflect expenses
and charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product's
prospectus.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 0.44% for year ended
December 31, 2000.
A-29
Proposal 8
V.A. Money Market Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks the maximum current income that is consistent with
maintaining liquidity and preserving capital. The fund intends to maintain a
stable $1 share price.
The fund invests only in dollar-denominated securities rated within the two
highest short-term credit categories and their unrated equivalents. These
securities may be issued by:
o U.S. and foreign companies
o U.S. and foreign banks
o U.S. and foreign governments
o U.S. agencies, states and municipalities
o International organizations such as the World Bank and the International
Monetary Fund
The fund may also invest in repurchase agreements based on these securities.
The fund maintains an average dollar-weighted maturity of 90 days or less, and
does not invest in securities with remaining maturities of more than 13 months.
In managing the portfolio, the management team searches aggressively for the
best values on securities that meet the fund's credit and maturity requirements.
The team tends to favor corporate securities and looks for relative yield
advantages between, for example, a company's secured and unsecured short-term
debt obligations.
================================================================================
PORTFOLIO MANAGERS
Team of money market research analysts and portfolio managers
YIELD INFORMATION
For the fund's 7-day effective yield, call 1-800-824-0335
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time. This information may help
provide an indication of the fund's risks. All figures assume dividend
reinvestment but do not include variable contract charges (see attached variable
product prospectus). Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
4.90% 4.90% 4.60% 5.90%
2001 total return as of June 30: 1.02%
Best quarter: Q1 `98, 1.25% Worst quarter: Q1 `99, 1.06%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund
1 year 5.90%
Life of fund - began 8/29/96 5.00%
A-30
MAIN RISKS
[Clip Art] The value of your investment will be most affected by short-term
interest rates. If interest rates rise sharply, the fund could underperform its
peers or lose money.
An issuer of securities held by the fund could default or have its credit rating
downgraded.
Foreign investments carry additional risks, including inadequate or inaccurate
financial information and social or political instability.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1 per share, it is possible to lose
money by investing in the fund.
================================================================================
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquired Fund's financial performance since its inception on August 29, 1996.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00 6/01(8)
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income (2) 0.02 0.05 0.05 0.05 0.06 0.02
Less distributions:
Dividends from net investment income (0.02) (0.05) (0.05) (0.05) (0.06) (0.02)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total investment return(3) (%) 1.61(4,5) 4.88(5) 4.87 4.58 5.90 2.33(4)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 207 8,377 16,519 32,952 73,917 143,495
Ratio of expenses to average net assets (%) 0.75(6) 0.75 0.74 0.66 0.60 0.57
Ratio of adjusted expenses to average net assets(7) (%) 27.48(6) 1.27 -- -- -- --
Ratio of net investment income to average net assets (%) 4.68(6) 4.86 4.70 4.55 5.86 4.52(6)
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
(8) Semiannual period from January 1, 2001 through June 30, 2001. Unaudited.
A-31
Money Market Fund
GOAL AND STRATEGY
This is a money market fund that seeks to preserve capital and liquidity while
also seeking to achieve a competitive yield. The Fund intends to maintain a
stable net asset value of $1.00 per share.
The Fund invests in U.S. dollar denominated money market instruments rated in
one of the two highest short-term credit rating categories, primarily includ-
ing:
. commercial paper and other short-term obligations of U.S. and foreign issuers
(including asset-backed securities);
. certificates of deposit, bank notes and other obligations of U.S. and foreign
banks and other lending institutions;
. debt securities issued by foreign governments and agencies;
. U.S. Treasury, agency and state and local government obligations; and,
. repurchase agreements.
The manager's investment approach combines top-down analysis with fundamental
bottom-up security selection. The manager considers factors such as the antici-
pated level of interest rates and the maturity of individual securities to
determine the Fund's overall weighted average maturity. The manager seeks secu-
rities;
. with an acceptable maturity;
. issued by issuers on a sound financial footing;
. that are marketable and liquid; and
. that offer competitive yields.
The Fund only invests in individual securities with a maximum remaining matu-
rity of 397 days (13 months). The overall weighted average maturity of the
Fund's investments is 90 days or less. The Fund may invest:
. up to 5% of assets in securities rated in the second-highest short-term cate-
gory (or unrated equivalents); and
. up to 1% of assets or $1 million (whichever is greater) in securities of a
single issuer rated in the second-highest short-term category (or unrated
equivalents).
- --------------------------------------------------------------------------------
SUBADVISER
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Managing, with predecessors, since 1928
Managing Fund since May, 2001
Managed approximately $274 billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
John Keogh
- -----------------
Senior Vice President and Partner of subadviser
Joined subadviser in 1983
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time. This information may also help provide
an indication of the fund's risks and potential rewards. All figures assume
dividend reinvestment. Past performance does not indicate future results. The
performance figures below do not reflect the deduction of fees and charges
payable under the variable contracts. Such fees and charges would cause the
investment returns under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
[GRAPH]
1991 6.00%
1992 3.60%
1993 3.41%
1994 4.03%
1995 5.78%
1996 5.32%
1997 5.38%
1998 5.40%
1999 5.05%
2000 6.29%
Best quarter: up 2.38%, second quarter 1989 Worst quarter: up 0.74%, second
quarter 1993
Average annual total return -- for periods ending 12/31/2000(/1/)
Fund
1 year 6.29%
5 years 5.50%
10 years 4.99%
Life of fund 5.84%
(1)Began operations on March 29, 1986.
A-32
MAIN RISKS
Primary
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, yields on the Fund's investments
will generally rise and prices on the Fund's investments will generally fall.
When interest rates fall, the reverse will generally occur. The longer the
average remaining maturity of instruments held by the Fund, the more sensitive
the Fund is to interest rate risk. This Fund has less interest rate risk than
an intermediate-term or long-term bond fund.
Credit Risk: An issuer of an instrument held by the Fund may default on its
obligation to pay interest and repay principal. Also, the credit rating of an
instrument held by the Fund may be downgraded. In either case, the value of the
instrument held by the Fund would fall. All money market instruments have some
credit risk, but in general lower-rated instruments have higher credit risk.
Principal Risk: An investment in the Fund is not a bank deposit and is not
guaranteed as to principal and interest. Although the Fund seeks to maintain a
stable net asset value of $1.00 per share, investors may lose money by invest-
ing in the Fund.
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks. All
foreign securities have some degree of foreign risk. However, to the extent the
Fund invests in emerging market countries, it will have a significantly higher
degree of foreign risk than if it invested exclusively in developed or newly-
industrialized countries.
Secondary
None
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial highlights table below is intended to help you understand the
Acquiring Fund's financial performance for the time periods indicated.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that a shareholder would have
earned (lost) on an investment in the Fund (assuming reinvestment of all divid-
ends and distributions). Except for the information as of June 30, 2001 (which
is unaudited) the information in the below table has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are in-
cluded in the Trust's Annual Report to Shareholders for the year ended December
31, 2000 (which is available upon request via the phone number or address on the
cover page of this Proxy Statement/Prospectus).
Period ended: 12/96# 12/97# 12/98# 12/99# 12/00# 6/01##
(Unaudited)
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income
(loss) 0.05 0.05 0.05 0.04 0.06 0.02
Total from investment
operations 0.05 0.05 0.05 0.04 0.06 0.02
Less distributions:
Distributions from net
investment income and
capital paid in (0.05) (0.05) (0.05) (0.04) (0.06) (0.02)
Total distributions $ (0.05) $ (0.05) $ (0.05) (0.04) (0.06) (0.02)
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total investment return* 5.32% 5.38% 5.40% 5.05% 6.29%** 2.51%
Ratios and supplemental
data
Net assets, end of period
(000s omitted)($) $213,235 $229,443 $395,195 $451,235 $496,853 $459,369
Ratio of expenses to
average net assets (%) 0.30% 0.33% 0.31% 0.31% 0.29% 0.29%
Ratio of net investment
income (loss) to average
net assets (%) 5.20% 5.32% 5.29% 4.95% 6.05% 5.03%
* The performance of the Funds shown on this page does not reflect expenses
and charges of the applicable separate accounts and variable products, all of
which vary to a considerable extent and are described in your product's
prospectus.
** The Total Investment Return includes the effect of the capital contribution
of $0.001 per share. The Total Investment Return without the capital
contribution would have been 6.18%
# Per share amounts have been restated to reflect a 10-for-1 stock split
effective May 1, 2001.
## The Fund entered into a new sub-advisory agreement with Wellington
Company, LLP during the period shown.
A-33
Appendix B
Management's discussion of fund performance:
December 31, 2001
B-1
PROPOSAL 1
John Hancock V.A. Core Equity Fund
By Paul McManus for the Portfolio Management Team
The year 2000 was marked by unprecedented volatility, as the markets
fell sharply in the spring, rallied over the summer and plunged again
during the final four months of the year. The Federal Reserve Board,
which had already hiked interest rates three times in 1999, added three
more increases in the first half of 2000, including a 0.50% increase in
May. With share prices in technology, telecommunications and
biotechnology stocks reflecting unrealistically optimistic expectations,
the Fed's actions were enough to puncture the speculative bubble and
bring the popular market averages lower. The tech-heavy NASDAQ Composite
Index was particularly vulnerable, shedding a whopping 39.29% in 2000.
At the time of the Fed's final increase on May 16, there was scant
evidence of decelerating growth in corporate earnings or the overall
economy. Accordingly, the markets rallied during the summer, buoyed by
investors' belief that interest rates were stabilizing and their hope
that higher rates would cool the economy without doing significant
damage to earnings.
That hope was shattered in the fall. Prominent companies in a broad
variety of sectors issued warnings that fourth-quarter profits would be
substantially lower than previously expected. At the same time, data on
industrial production, retail sales, employment and consumer confidence
all gave evidence of a slowing economy. As a result, sellers took
control and the markets plummeted. Defensive sectors like health care,
consumer nondurables and financial services managed to buck the trend,
as did energy, but growth stocks in most sectors had an extremely
difficult year in 2000.
PERFORMANCE SUMMARY
The Fund continued to implement its strategy of buying undervalued
stocks of companies with improving fundamentals. In sectors such as
technology, however, it was more a question of identifying the companies
that appeared to suffer the least deterioration in fundamentals. The
Fund had a losing year but finished ahead of the S&P 500 Index,
primarily due to favorable stock selection. For the 12 months ended
December 31, 2000, John Hancock V.A. Core Equity Fund had a return of
- -7.11% at net asset value. In comparison, the S&P 500 returned -9.10%,
including reinvested dividends. However, the Fund trailed the 1.15%
return of the average variable annuity growth and income fund, according
to Lipper, Inc. Many funds in the Lipper average have a heavier emphasis
on value-oriented investments, which were the place to be, especially
during the second half of the period. Longer-term performance
information can be found on page six.
HEALTH CARE, FINANCIALS HELP RETURNS
On a relative basis, we were helped by our holdings in health care, a
sector we steadily increased throughout the year. Compared with
companies in other sectors, health-care firms, especially pharmaceutical
companies, had generally superior earnings growth prospects. One of the
best performers, Warner-Lambert, rose sharply as a result of being the
target of a bidding war between Pfizer and American Home Products
(Pfizer ultimately won). Merck, Pharmacia, Bristol-Myers Squibb and
Schering-Plough were other drug stocks that made meaningful
contributions to performance.
Financial stocks were another area of strength, helped by the growing
consensus that a weakening economy would bring lower interest rates.
Both stock selection and a marginal overweighting aided performance
relative to our benchmark. One of our top performers, Fannie Mae, also
benefited when Congress lost interest in an initiative that would have
removed the competitive advantages Fannie Mae enjoys because of its
status as a quasi-government organization. Another holding in the sector
meriting mention is Citigroup, which continued to post consistently good
earnings growth through its favorable mix of banking, brokerage and
insurance businesses.
TECHNOLOGY AND TELECOMMUNICATIONS HIT THE SKIDS
Leading the list of negative contributors were many names that made
positive contributions a year ago. Microsoft was hurt earlier in the
year by the Justice Department's antitrust lawsuit, then by slowing
demand for personal computers. We reduced the position to below market
weight in the first half of the period, but the stock still hurt
performance substantially. Lucent Technologies was a different story. We
liked the stock for the first half of the year, but it subsequently
became apparent to us that the company was slipping behind competitors
in some key technological areas. Consequently, we sold the entire
position in the fourth quarter. Long-distance provider WorldCom
reflected the intense competition for telephone services of all kinds,
as did Sprint and AT&T, two other lackluster performers. Despite the
carnage, we maintained roughly a market weighting in technology. The
Fund stresses diversification and attempts to keep its risk profile
similar to that of the S&P 500 Index.
B-2
LOOKING AHEAD
Amid considerable pessimism about stocks, the Fed surprised investors by
cutting interest rates on January 3, just after the period ended. It
appears that the primary challenge facing investors over the short term
will be balancing the positive effects of lower rates with the negative
ramifications of slower earnings growth. Through its actions, the Fed
has served notice that it intends to be aggressive about addressing the
current slowdown, so we would not be surprised to see a series of
interest-rate reductions. Furthermore, history has shown that the stock
market responds well to multiple rate cuts by the Fed. We will consider
these and many other factors as we continue our search for undervalued
stocks of companies with improving fundamentals.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (7.11%) 98.43%
Average Annual Total Returns(1) (7.11%) 17.11%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
since inception would have been 16.69%. The expense limitation did not
impact the one-year performance.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is General Electric 4.6%, the
second is Citigroup 4.4%, the third Pfizer 3.6%, the fourth
Merck 3.2% and the fifth ExxonMobil 3.0%. A note below the
table reads "As a percentage of net assets on December 31,
2000."]
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Core Equity Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Core Equity
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
two lines. The first line represents the Standard & Poor's
500 Index and is equal to $22,043 as of December 31, 2000.
The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Core Equity
Fund on August 29, 1996 and is equal to $19,844 as of
December 31, 2000.
B-3
Inception: March 29, 1986
GROWTH & INCOME FUND
INDEPENDENCE INVESTMENT ASSOCIATES, INC. Paul F. McManus
PUTNAM INVESTMENTS C. Beth Cotner
Effective November 1, the Fund was modified to a multi-managed investment
approach
The Growth & Income Fund is a multi-manager fund with two sub-advisers each
independently managing their own portion of the Fund. The two managers employ
a distinct and complementary investment strategy. This unique multi-manager
approach seeks to produce more consistent investment returns over market
cycles and to reduce the risk of any one manager or strategy being out of
favor in certain market environments.
IIA selects stocks using a combination of fundamental equity research and
quantitative tools and focuses on large cap stocks that are undervalued
relative to the stock's history and have improving earnings growth prospects.
Putnam selects stocks using a systematic screening approach and fundamental
equity research and focuses on large and mid cap stocks with opportunities for
above average growth.
As of December 31, 2000, IIA managed approximately 77% and Putnam managed
approximately 23% of the Fund's assets. For the year, the Fund performed -
13.10% below the benchmark's performance of -9.11%.
Independence Investment Associates, Inc.
The Fund outperformed the benchmark in the fourth quarter. Stock prices
declined in the period as fears over an accelerating economic slowdown were
discounted in the market. Increasing numbers of technology companies began to
preannounce earnings shortfalls. The Fund was modestly underweight technology
stocks, and this benefited portfolio performance, although specific stock
selection skill was slightly negative. Health care was over weighted,
particularly in large drug companies. Both stock selection and the active
overweight benefited performance for the quarter. Holdings in Bristol Meyers,
Merck and Pharmacia Upjohn helped the portfolio. Electric utilities were
another positive are as investors were becoming even more defensive as the
economy was slowing. Perceived as safer technology stocks, information
services companies like First Data Corp and EDS did relatively well and helped
portfolio performance.
With the market being defensive, food and beverage stocks did well. We had an
underweight there as valuations did not justify the purchases of some of the
stocks. This relative underweight negatively impacted performance in the
quarter. In the media area, fears of the slowing economy affected the
broadcasters as advertising budgets became suspect. Also, the delay of Time
Warner--AOL adversely affected performance of those stocks.
Looking forward, we continue to maintain a broad sector neutral strategy
while emphasizing individual stock selection. Based upon the relative
valuation of stocks we will continue to select the best stocks within
industries based upon their valuation and outlook for sustainable earnings
growth.
Putnam Investments
The Fund benefited from overweighting the robust energy, conglomerate,
utilities, and financial sectors, along with strong stock selection. In
particular, exceptional stock performance by one of our holdings (Tyco) made
conglomerates the greatest contributor to performance. The next-largest
contribution came from energy, where oil services stocks boosted returns; in
financial services, insurance (American International Group) and investment
banking/brokerage (Goldman Sachs) aided performance.
The single largest detractor from performance came from technology, where the
benefit of being underweight in a very weak sector was more than offset by
poor stock performance in software (Openwave Systems, Veritas Software),
communications equipment (Redback Networks, Juniper Networks), and business
applications software (Agile Software, I2 Technologies). Fund performance was
also hindered by health care (underweighting pharmaceuticals and weak stock
selection in biotechnology); overweighting communications services (the worst-
performing sector), along with weak stock performance from that sector in the
cellular industry (Sprint PCS, Nextel); underweighting consumer staples (along
with not owning non-alcoholic beverage companies and owning weak TV
broadcasting companies); and finally, underweighting consumer cyclicals.
In the volatile environment of the new year, we anticipate additional
earnings disappointments, especially in stocks leveraged to the consumer. We
believe that the current environment will continue to place pressure on
rapidly expanding, high-quality growth companies. We have concentrated the
Fund on companies with a proven record of expanding profits even in unsettled
economic times. Higher energy prices should benefit oil and gas producers and
energy services companies. Going forward, we will be overweight energy (oil
services) and financial services (banking/brokerage services and insurance)
stocks while underweighting technology (communications equipment and software)
and consumer staples (media and TV broadcasting.)
B-4
Inception: March 29, 1986
GROWTH & INCOME FUND
INDEPENDENCE INVESTMENT ASSOCIATES, INC. Paul F. McManus
PUTNAM INVESTMENTS C. Beth Cotner
[GRAPH]
Growth & Income S&P 500. Growth & Income S&P 500.
Fund Index Fund Index
12/31/90 $10,000 $10,000 01/31/96 $21,300 $22,266
01/31/91 10,449 10,442 02/29/96 21,576 22,479
02/28/91 11,145 11,190 03/31/96 21,852 22,695
03/31/91 11,406 11,456 04/30/96 22,098 23,029
04/30/91 11,401 11,488 05/31/96 22,609 23,623
05/31/91 11,844 11,980 06/30/96 22,733 23,720
06/31/91 11,266 11,432 07/31/96 21,659 22,664
07/31/91 11,655 11,967 08/31/96 22,175 23,145
08/31/91 11,905 12,249 09/30/96 23,205 24,445
09/30/91 11,760 12,048 10/31/96 23,772 25,115
10/31/91 11,933 12,209 11/30/96 25,354 27,021
11/30/91 11,518 11,716 12/31/96 24,918 26,492
12/31/91 12,596 13,055 01/31/97 26,201 28,137
01/31/92 12,375 12,812 02/28/97 26,344 28,365
02/29/92 12,522 12,976 03/31/97 25,318 27,185
03/31/92 12,311 12,722 04/30/97 26,545 28,808
04/30/92 12,702 13,092 05/31/97 27,985 30,577
05/31/92 12,827 13,163 06/30/97 29,088 31,940
06/30/92 12,732 12,972 07/31/97 31,688 34,476
07/31/92 12,734 13,495 08/31/97 30,083 32,559
08/31/92 12,911 13,222 09/30/97 31,832 34,344
09/30/92 13,056 13,374 10/31/97 30,635 33,197
10/31/92 13,033 13,422 11/30/97 31,787 34,734
11/30/92 13,541 13,875 12/31/97 32,341 35,331
12/31/92 13,717 14,056 01/31/98 32,690 35,723
01/31/93 13,858 14,159 02/28/98 35,358 38,299
02/28/93 14,052 14,350 03/31/98 37,336 40,260
03/31/93 14,487 14,659 04/30/98 37,439 40,666
04/30/93 14,101 14,299 05/31/98 37,030 39,967
05/31/93 14,467 14,686 06/30/98 38,602 41,590
06/30/93 14,609 14,734 07/31/98 38,151 41,149
07/31/93 14,530 14,665 08/31/98 32,294 35,199
08/31/93 15,115 15,223 09/30/98 33,951 37,455
09/30/93 15,142 15,111 10/31/98 36,978 40,500
10/31/93 15,400 15,418 11/30/98 39,191 42,954
11/30/93 15,263 15,273 12/31/98 42,123 45,428
12/31/93 15,545 15,460 01/31/99 43,536 47,327
01/31/94 16,007 15,978 02/28/99 42,184 45,855
02/28/94 15,541 15,547 03/31/99 43,433 47,690
03/31/94 14,939 14,871 04/30/99 45,263 49,535
04/30/94 15,199 15,064 05/31/99 43,943 48,366
05/31/94 15,257 15,310 06/30/99 46,973 51,051
06/30/94 14,980 14,931 07/31/99 45,365 49,458
07/31/94 15,385 15,426 08/31/99 44,829 49,210
08/31/94 15,957 16,053 09/30/99 43,592 47,862
09/30/94 15,486 15,667 10/31/99 46,142 50,892
10/31/94 15,733 16,025 11/30/99 46,676 51,925
11/30/94 15,211 15,437 12/31/99 47,579 54,983
12/31/94 15,459 15,663 01/31/00 47,808 52,223
01/31/95 15,777 16,070 02/29/00 48,957 51,236
02/28/95 16,400 16,693 03/31/00 45,974 56,247
03/31/95 16,763 17,187 04/30/00 44,819 54,554
04/30/95 17,252 17,688 05/31/00 49,836 53,436
05/31/95 17,826 18,386 06/30/00 48,617 54,750
06/30/95 18,232 18,818 07/31/00 47,976 53,896
07/31/95 18,814 19,445 08/31/00 48,744 57,243
08/31/95 18,936 19,498 09/30/00 48,151 54,221
09/30/95 19,757 20,314 10/31/00 51,130 53,993
10/31/95 19,628 20,243 11/30/00 48,040 49,738
11/30/95 20,456 21,134 12/31/00 34,913 49,982
12/31/95 20,748 21,525
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
General Electric Co. 3.3% 5.9%
Pfizer, Inc. 3.0% 0.9%
Cisco Systems, Inc. 2.4% 4.6%
Citigroup, Inc. 2.3% 4.1%
Merck & Co., Inc. 2.2% 1.6%
Microsoft Corp. 2.1% 7.1%
Exxon Mobil Corp. 2.1% 1.4%
Wal-Mart Stores, Inc. 1.9% 1.5%
Intel Corp. N/A 3.1%
Tyco International, Ltd. 1.9% 1.5%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Growth & Income S&P 500 MorningStar
Fund Index Peer Group+
-------- ----------- -----------
1 Year -13.10% -9.11% -7.52%
3 Years 9.57 12.26 11.71
5 Years 15.44 18.35 17.02
10 Years 15.58 16.56 16.58
Top Ten Sectors (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
Technology 28.1% Energy 5.6%
Health Care 17.9% Consumer Cyclical 4.9%
Financial 15.4% Utility 4.5%
Capital Equipment 13.6% Consumer Staple 1.7%
Retail 5.6% Basic Material 1.6%
* Total returns are for the period ended December 31, 2000. Returns
represent past performance, assume reinvestment of all distributions and
are not indicative of future performance. "Results may have been achieved
during market conditions or pursuing performance opportunities that may
not continue to occur in the future." Investment returns and principal
value of fund shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. The performance of the Fund
on this page is reported net of Trust level charges (i.e. investment
management fees and operating expenses). It does not reflect expense and
charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product
prospectus.
. "Standard & Poor's 500" is a trademark of the McGraw-Hill companies, Inc.
and has been licensed for use by John Hancock Life Insurance Company. The
product is not sponsored, endorsed, fold or promoted by Standard & Poor's
and Standard & Poor's makes no representation regarding the advisability
of investing in the product.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the MorningStar variable universe having a
Large Blend investment category.
B-5
PROPOSAL 2
John Hancock V.A. Large Cap Growth Fund
By William L. Braman and Robert Uek for the Portfolio Management Team
The bears were out in full force during the past 12 months, particularly
in the technology arena. Volatility began early on and continued in
prolonged bouts as the period progressed. Speculation about the
economy's direction and the sustainability of corporate profits
dominated investors' concerns. By year's end, all the major stock
indexes were down considerably, as was John Hancock V.A. Large Cap
Growth Fund.
FUND PERFORMANCE
For the 12 months ended December 31, 2000, the Fund produced a total
return of -31.30% at net asset value. By comparison, the Fund's
benchmark index, the Russell Top 200 Growth Index, returned -24.53%,
the tech-heavy NASDAQ Composite Index returned -39.29% and the broader
market, as measured by the Standard & Poor's 500 Index, returned
- -9.10%. In the same period, the average variable annuity growth fund
returned -9.22%, according to Lipper, Inc. Historical performance
information can be found on page 12. The Fund's performance lagged its
peers primarily because of our heavy stake in technology, particularly
the more aggressive companies, which we maintained throughout much of
the year. As the earnings of many technology companies decelerated,
their stock prices came back down to earth.
TECHNOLOGY STRUGGLES
For a long time, we have been espousing the dynamic long-term growth
prospects of many technology stocks and, indeed, the sector itself. We
firmly believe technology companies will continue to drive not only the
United States' economy but the world's as well, thereby providing
investors with considerable long-term growth potential. The strength of
the technology stock sector in recent years is certainly a testament to
this belief. However, with each interest rate increase by the Federal
Reserve Board this past spring -- and then with each new economic report
suggesting a slowdown -- investors began to question the ability of
companies, particularly technology firms, to continue meeting the very
high earnings expectations of the past few years. Consequently, it grew
increasingly difficult for many investors to justify the high stock
prices in exchange for the potential payback. When a company posted
disappointing earnings -- as many did -- the stock price was pummeled.
As the stock prices in the tech and biotech sec tors dropped, fears
arose about the possible price declines of other richly valued stocks.
Investors harvested whatever profits they could and ran for cover in the
United States Treasury market.
TECH HOLDINGS REDUCED
Throughout the period, a large amount of the Fund's net assets remained
in the technology sector, with the weighting peaking in September at
around 60% of net assets. By period's end, however, the stake was
reduced to 43%. While the sector's downturn had a hand in bringing that
figure down, we also eliminated many holdings from the Fund. Our reasons
had more to do with the possibility of further stock price volatility
than with any concerns we had about the business fundamentals or
long-term growth prospects of many of the companies we sold.
In trimming the Fund's weighting, we targeted many names relating to
personal computer hardware. Issues we sold included IBM, Microsoft,
Gateway, Dell and Hewlett Packard. We also eliminated positions in
commodity semiconductors and semiconductor equipment by selling Intel,
Texas Instruments, Applied Materials and Micron. Other high-priced
stocks that demonstrated an increased risk of price declines were sold
as well. In the biotechnology sector, we moved out of Immunex and Amgen.
We held on to, and even purchased, some stocks in the computer
networking and communications sub sectors as stock prices became
increasingly attractive. We bought such issues as Juniper Networks,
CIENA, JDS Uniphase and Nortel Networks.
HEALTH CARE, FINANCE INCREASED
As the period progressed, we added to the Fund's weighting in
health-care and financial stocks. In health care, it was the
pharmaceuticals we sought. This past year, investors prized the earnings
predictability of large drug companies. These steady growers are also
defensive in nature, as they are relatively insulated from economic
changes. We increased the size of our stakes in Pfizer, Pharmacia and
Johnson & Johnson and initiated a new position in Merck. As technology
stock prices dropped, drug stocks soared.
B-6
Our financial focus has been fairly broad-based, though we emphasized
insurance names slightly. In addition to the relatively attractive stock
prices, the business cycle and pricing environment among property
casualty and insurance companies has been improving. We also thought it
prudent for the Fund to have exposure to the mortgage-lending and
consumer-lending sub sectors. The stocks that caught our attention
include AFLAC, American General, Wells Fargo, Fannie Mae, MBNA,
Citigroup and State Street Corp.
OUTLOOK
Shortly after the close of the period, the Fed cut the fed funds rate by
one-half a percent. As encouraged as we are by the Fed's recent actions,
we are mindful that plenty of volatility may well lie ahead. In our
opinion, investors will need quite a bit more convincing before
returning to growth stocks. First-quarter earnings reports will be
somewhat of a guidepost. The good news is that tech stock prices are now
more attractive than they have been in years. While the stock prices of
many companies have been taken down by 60% to 70%, many are still
growing their earnings by anywhere from 30% to 50%. With that in mind,
we are now inclined to selectively increase the Fund's technology
exposure and position for what we believe will be an eventual rebound.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (31.30%) 10.87%
Average Annual Total Returns(1) (31.30%) 2.41%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
since inception would have been 1.72%. The expense limitation did not
impact the one-year performance.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is Pfizer 5.3%, the second is
General Electric 4.7%, the third Cisco Systems 4.1%, the
fourth Oracle Systems 3.6% and the fifth Tyco International
3.6%. A note below the table reads "As a percentage of net
assets on December 31, 2000."]
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Large Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Russell Top 200 Growth Index -- an
unmanaged index which measures the performance of the Russell Top 200
companies with higher price-to-book ratios and higher forecasted growth
values. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Large Cap
Growth Fund, representing the growth of a hypothetical
$10,000 investment over the life of the fund. Within the
chart are two lines. The first line represents the Russell
Top 200 Growth Index and is equal to $22,269 as of December
31, 2000. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A.
Large Cap Growth Fund on August 29, 1996 and is equal to
$11,087 as of December 31, 2000.
B-7
Inception: March 29, 1986
GROWTH & INCOME FUND
INDEPENDENCE INVESTMENT ASSOCIATES, INC. Paul F. McManus
PUTNAM INVESTMENTS C. Beth Cotner
Effective November 1, the Fund was modified to a multi-managed investment
approach
The Growth & Income Fund is a multi-manager fund with two sub-advisers each
independently managing their own portion of the Fund. The two managers employ
a distinct and complementary investment strategy. This unique multi-manager
approach seeks to produce more consistent investment returns over market
cycles and to reduce the risk of any one manager or strategy being out of
favor in certain market environments.
IIA selects stocks using a combination of fundamental equity research and
quantitative tools and focuses on large cap stocks that are undervalued
relative to the stock's history and have improving earnings growth prospects.
Putnam selects stocks using a systematic screening approach and fundamental
equity research and focuses on large and mid cap stocks with opportunities for
above average growth.
As of December 31, 2000, IIA managed approximately 77% and Putnam managed
approximately 23% of the Fund's assets. For the year, the Fund performed -
13.10% below the benchmark's performance of -9.11%.
Independence Investment Associates, Inc.
The Fund outperformed the benchmark in the fourth quarter. Stock prices
declined in the period as fears over an accelerating economic slowdown were
discounted in the market. Increasing numbers of technology companies began to
preannounce earnings shortfalls. The Fund was modestly underweight technology
stocks, and this benefited portfolio performance, although specific stock
selection skill was slightly negative. Health care was over weighted,
particularly in large drug companies. Both stock selection and the active
overweight benefited performance for the quarter. Holdings in Bristol Meyers,
Merck and Pharmacia Upjohn helped the portfolio. Electric utilities were
another positive are as investors were becoming even more defensive as the
economy was slowing. Perceived as safer technology stocks, information
services companies like First Data Corp and EDS did relatively well and helped
portfolio performance.
With the market being defensive, food and beverage stocks did well. We had an
underweight there as valuations did not justify the purchases of some of the
stocks. This relative underweight negatively impacted performance in the
quarter. In the media area, fears of the slowing economy affected the
broadcasters as advertising budgets became suspect. Also, the delay of Time
Warner--AOL adversely affected performance of those stocks.
Looking forward, we continue to maintain a broad sector neutral strategy
while emphasizing individual stock selection. Based upon the relative
valuation of stocks we will continue to select the best stocks within
industries based upon their valuation and outlook for sustainable earnings
growth.
Putnam Investments
The Fund benefited from overweighting the robust energy, conglomerate,
utilities, and financial sectors, along with strong stock selection. In
particular, exceptional stock performance by one of our holdings (Tyco) made
conglomerates the greatest contributor to performance. The next-largest
contribution came from energy, where oil services stocks boosted returns; in
financial services, insurance (American International Group) and investment
banking/brokerage (Goldman Sachs) aided performance.
The single largest detractor from performance came from technology, where the
benefit of being underweight in a very weak sector was more than offset by
poor stock performance in software (Openwave Systems, Veritas Software),
communications equipment (Redback Networks, Juniper Networks), and business
applications software (Agile Software, I2 Technologies). Fund performance was
also hindered by health care (underweighting pharmaceuticals and weak stock
selection in biotechnology); overweighting communications services (the worst-
performing sector), along with weak stock performance from that sector in the
cellular industry (Sprint PCS, Nextel); underweighting consumer staples (along
with not owning non-alcoholic beverage companies and owning weak TV
broadcasting companies); and finally, underweighting consumer cyclicals.
In the volatile environment of the new year, we anticipate additional
earnings disappointments, especially in stocks leveraged to the consumer. We
believe that the current environment will continue to place pressure on
rapidly expanding, high-quality growth companies. We have concentrated the
Fund on companies with a proven record of expanding profits even in unsettled
economic times. Higher energy prices should benefit oil and gas producers and
energy services companies. Going forward, we will be overweight energy (oil
services) and financial services (banking/brokerage services and insurance)
stocks while underweighting technology (communications equipment and software)
and consumer staples (media and TV broadcasting.)
B-8
Inception: March 29, 1986
GROWTH & INCOME FUND
INDEPENDENCE INVESTMENT ASSOCIATES, INC. Paul F. McManus
PUTNAM INVESTMENTS C. Beth Cotner
[GRAPH]
Growth & Income S&P 500. Growth & Income S&P 500.
Fund Index Fund Index
12/31/90 $10,000 $10,000 01/31/96 $21,300 $22,266
01/31/91 10,449 10,442 02/29/96 21,576 22,479
02/28/91 11,145 11,190 03/31/96 21,852 22,695
03/31/91 11,406 11,456 04/30/96 22,098 23,029
04/30/91 11,401 11,488 05/31/96 22,609 23,623
05/31/91 11,844 11,980 06/30/96 22,733 23,720
06/31/91 11,266 11,432 07/31/96 21,659 22,664
07/31/91 11,655 11,967 08/31/96 22,175 23,145
08/31/91 11,905 12,249 09/30/96 23,205 24,445
09/30/91 11,760 12,048 10/31/96 23,772 25,115
10/31/91 11,933 12,209 11/30/96 25,354 27,021
11/30/91 11,518 11,716 12/31/96 24,918 26,492
12/31/91 12,596 13,055 01/31/97 26,201 28,137
01/31/92 12,375 12,812 02/28/97 26,344 28,365
02/29/92 12,522 12,976 03/31/97 25,318 27,185
03/31/92 12,311 12,722 04/30/97 26,545 28,808
04/30/92 12,702 13,092 05/31/97 27,985 30,577
05/31/92 12,827 13,163 06/30/97 29,088 31,940
06/30/92 12,732 12,972 07/31/97 31,688 34,476
07/31/92 12,734 13,495 08/31/97 30,083 32,559
08/31/92 12,911 13,222 09/30/97 31,832 34,344
09/30/92 13,056 13,374 10/31/97 30,635 33,197
10/31/92 13,033 13,422 11/30/97 31,787 34,734
11/30/92 13,541 13,875 12/31/97 32,341 35,331
12/31/92 13,717 14,056 01/31/98 32,690 35,723
01/31/93 13,858 14,159 02/28/98 35,358 38,299
02/28/93 14,052 14,350 03/31/98 37,336 40,260
03/31/93 14,487 14,659 04/30/98 37,439 40,666
04/30/93 14,101 14,299 05/31/98 37,030 39,967
05/31/93 14,467 14,686 06/30/98 38,602 41,590
06/30/93 14,609 14,734 07/31/98 38,151 41,149
07/31/93 14,530 14,665 08/31/98 32,294 35,199
08/31/93 15,115 15,223 09/30/98 33,951 37,455
09/30/93 15,142 15,111 10/31/98 36,978 40,500
10/31/93 15,400 15,418 11/30/98 39,191 42,954
11/30/93 15,263 15,273 12/31/98 42,123 45,428
12/31/93 15,545 15,460 01/31/99 43,536 47,327
01/31/94 16,007 15,978 02/28/99 42,184 45,855
02/28/94 15,541 15,547 03/31/99 43,433 47,690
03/31/94 14,939 14,871 04/30/99 45,263 49,535
04/30/94 15,199 15,064 05/31/99 43,943 48,366
05/31/94 15,257 15,310 06/30/99 46,973 51,051
06/30/94 14,980 14,931 07/31/99 45,365 49,458
07/31/94 15,385 15,426 08/31/99 44,829 49,210
08/31/94 15,957 16,053 09/30/99 43,592 47,862
09/30/94 15,486 15,667 10/31/99 46,142 50,892
10/31/94 15,733 16,025 11/30/99 46,676 51,925
11/30/94 15,211 15,437 12/31/99 47,579 54,983
12/31/94 15,459 15,663 01/31/00 47,808 52,223
01/31/95 15,777 16,070 02/29/00 48,957 51,236
02/28/95 16,400 16,693 03/31/00 45,974 56,247
03/31/95 16,763 17,187 04/30/00 44,819 54,554
04/30/95 17,252 17,688 05/31/00 49,836 53,436
05/31/95 17,826 18,386 06/30/00 48,617 54,750
06/30/95 18,232 18,818 07/31/00 47,976 53,896
07/31/95 18,814 19,445 08/31/00 48,744 57,243
08/31/95 18,936 19,498 09/30/00 48,151 54,221
09/30/95 19,757 20,314 10/31/00 51,130 53,993
10/31/95 19,628 20,243 11/30/00 48,040 49,738
11/30/95 20,456 21,134 12/31/00 34,913 49,982
12/31/95 20,748 21,525
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
General Electric Co. 3.3% 5.9%
Pfizer, Inc. 3.0% 0.9%
Cisco Systems, Inc. 2.4% 4.6%
Citigroup, Inc. 2.3% 4.1%
Merck & Co., Inc. 2.2% 1.6%
Microsoft Corp. 2.1% 7.1%
Exxon Mobil Corp. 2.1% 1.4%
Wal-Mart Stores, Inc. 1.9% 1.5%
Intel Corp. N/A 3.1%
Tyco International, Ltd. 1.9% 1.5%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Growth & Income S&P 500 MorningStar
Fund Index Peer Group+
-------- ----------- -----------
1 Year -13.10% -9.11% -7.52%
3 Years 9.57 12.26 11.71
5 Years 15.44 18.35 17.02
10 Years 15.58 16.56 16.58
Top Ten Sectors (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
Technology 28.1% Energy 5.6%
Health Care 17.9% Consumer Cyclical 4.9%
Financial 15.4% Utility 4.5%
Capital Equipment 13.6% Consumer Staple 1.7%
Retail 5.6% Basic Material 1.6%
* Total returns are for the period ended December 31, 2000. Returns
represent past performance, assume reinvestment of all distributions and
are not indicative of future performance. "Results may have been achieved
during market conditions or pursuing performance opportunities that may
not continue to occur in the future." Investment returns and principal
value of fund shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. The performance of the Fund
on this page is reported net of Trust level charges (i.e. investment
management fees and operating expenses). It does not reflect expense and
charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product
prospectus.
. "Standard & Poor's 500" is a trademark of the McGraw-Hill companies, Inc.
and has been licensed for use by John Hancock Life Insurance Company. The
product is not sponsored, endorsed, fold or promoted by Standard & Poor's
and Standard & Poor's makes no representation regarding the advisability
of investing in the product.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the MorningStar variable universe having a
Large Blend investment category.
B-9
PROPOSAL 3
John Hancock V.A. 500 Index Fund
By Roger Hamilton, CFA, Portfolio Manager
During 2000, the Standard & Poor's 500 Index posted one of its largest
losses in more than a decade, declining 9.10% for the year. But the
Index's losses seem worse than they really were. While technology and
telecommunications stocks -- two of the most influential groups within
the Index -- suffered painful declines during the year, more than 249
out of 444 stocks that were in the Index at the start of 2000 actually
posted gains for the year. Among the year's bright spots were groups
like drugs, electric utilities, energy, insurance, food and thrifts.
Possibly the most notable trend in 2000 was the shift away from
high-growth tech and telecommunications companies into more defensive,
value-oriented stocks. After bidding up their prices in 1998, 1999 and
the first quarter of 2000, investors suddenly and dramatically soured on
both tech and telecom as they became increasingly concerned that the
business fundamentals of most of these companies didn't justify their
sky-high valuations. That's not to say that tech and telecom stocks were
the year's only disappointments. Retailers, automotive companies and
basic-material producers also posted losses as concerns about a slowing
economy weighed heavily on these groups.
FUND PERFORMANCE
John Hancock V.A. 500 Index Fund had a total return of -9.28% at net
asset value. By comparison, the average variable annuity S&P 500 Index
objective fund had a total return of -9.32%, according to Lipper, Inc.
Historical performance information can be found on page nine.
In managing the Fund, our goal is to have our holdings closely track
those of the S&P 500 Index, while minimizing the costs associated with
buying and selling shares of stocks. Although there are frequent changes
in the composition of the Index, we re-balance the Fund's holdings less
frequently to minimize transaction costs. When we get additional money
into the Fund that cannot immediately be deployed into Index components,
we buy S&P 500 Index futures, which allow us to participate in the
Index's performance without incurring the higher transaction costs of
buying stocks.
Incidentally, 2000 was one of those years when there were many changes
in the composition of the Index. As a result of a variety of factors,
including mergers and acquisitions, financial failures or others, more
than 56 new companies were added to the Index during the year.
LEADERS AND LAGGARDS
Undoubtedly, the biggest story of 2000 was the reversal of fortune of
tech and telecommunications stocks. After posting eye-popping gains in
1999 and the first quarter of 2000, the tech stock mania stalled. From
Internet-related companies to software makers to hardware manufacturers,
investors increasingly sold tech stocks as evidence mounted that the
slowing economy was eating away at profits. Losses suffered by Internet
access providers Yahoo! and AOL took a big toll on the Index's
performance on a capitalization weighted basis, losing more than 85% and
54%, respectively, for the year. Lucent Technologies posted a loss of
nearly 81%. Shares of the beleaguered e-tailer Amazon.com slid almost
80% as investors worried that holiday sales would weaken. WorldCom and
AT&T both suffered losses in excess of 65% in the wake of falling
long-distance prices. Dell Computer and Intel lost 65% and 27%,
respectively, due to slower-than-expected demand for personal computers.
Microsoft tumbled more than 62% on worries about the antitrust suit
against the company, coupled with weaker demand for its software.
But outside the tech and telecommunications sectors, nowhere was the S&P
500 Index's health more evident than in the financial and drug sectors.
Finance company Washington Mutual and insurance giant American
International Group posted gains of 105% and 36% in response to
expectations that falling interest rates in 2001 would boost their
financial results. Likewise, Fannie Mae got a lift from the prospect of
falling rates, and posted a gain of more than 38%. Citigroup, up 22%,
was also boosted by the prospect of lower interest rates. Within the
drug sector, Pfizer and Merck each rose about 40% on investors' growing
desire for defensive stocks and on expectations that the demand for
established drugs will remain steady. Higher oil prices lifted energy
stocks, particularly Enron, which rose more than 87% during the year.
Rounding out the Index's top 10 biggest contributors for 2000 were two
consumer products companies nearly left for dead in 1999. Philip Morris
surged more than 91% and PepsiCo gained roughly 40%.
B-10
OUTLOOK
The first half of 2001 could continue to be a difficult period for the
stock market. Given the slowing economy, we could see more disappointing
earnings results. But after the Fed's surprise move to cut rates just
days after the year ended, and with the prospect of more rate cuts in
the offing, we are hopeful that it could provide the impetus for better
stock-market performance in the second half of the year. No matter what
the direction of the market, our goal will be to closely track the
performance of the S&P 500 Index, and our performance will be dictated
by the Index. The past year has served as a useful reminder that S&P 500
Index funds are susceptible to market downturns, and, as a result, the
Fund's share price will rise and fall in response to gains or losses
posted by the underlying stocks in the Index.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (9.28%) 103.25%
Average Annual Total Returns(1) (9.28%) 17.75%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) and the management fee to 0.l0% of the Fund's
daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year period and since inception
would have been (9.86%) and 17.20%, respectively.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is General Electric 4.1%, the
second is ExxonMobil 2.5%, the third Pfizer 2.4%, the fourth
Cisco Systems 2.2% and the fifth Citigroup 2.1%. A note below
the table reads "As a percentage of net assets on December
31, 2000."]
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. 500 Index Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. 500 Index Fund,
representing the growth of a hypothetical $10,000 investment
over the life of the fund. Within the chart are two lines.
The first line represents the Standard & Poor's 500 Index and
is equal to $22,043 as of December 31, 2000. The second line
represents the value of the hypothetical $10,000 investment
made in the John Hancock V.A. 500 Index Fund on August 29,
1996 and is equal to $20,326 as of December 31, 2000.
B-11
Inception: May 1, 1996
EQUITY INDEX FUND
STATE STREET GLOBAL ADVISORS Management Team
The year 2000 provided the first negative return of the S&P 500 since 1990.
This is only the second calendar year since 1980 to finish in the red. For the
year, the S&P 500 was down 9.09%. Technology stocks grabbed most of the
headlines during the year. The Nasdaq Composite Index fell more than 50% from
its high on March 10, and finished the year down approximately 40%.
The news was not all bad, as Financials, Health Care and Utilities all posted
strong returns. In fact, the S&P 500 ex-Technology posted a gain for 2000. The
smaller stocks in the Index performed much better than the giants in 2000. The
top quartile of names lost about 15% in 2000, while the other 4 quartiles all
posted gains ranging from 9.6% to 17.3%*. Value stocks outperformed their
growth counterparts by over 28% during the year.
The Equity Index Fund return was -9.15% for the year. The Index return was -
9.09% for the year. Fees cost the Fund -0.17% during the year. Removing these
from the calculation shows the Fund slightly outperformed its goal for the
year.
The Equity Index Fund attempts to track the performance of The S&P 500 Index
by fully replicating the index. The Fund attempts to match the index holdings
and weights for each security in order to provide returns close to the index
return.
[GRAPH]
Equity Index S&P 500.
Fund Index
5/1/96 $10,000 $10,000
5/31/96 10,210 10,258
6/28/96 10,231 10,300
7/31/96 9,825 9,842
8/30/96 9,971 10,050
9/30/96 10,509 10,615
10/31/96 10,787 10,906
11/29/96 11,561 11,734
12/31/96 11,423 11,504
1/31/97 12,133 12,218
2/28/97 12,221 12,317
3/31/97 11,736 11,805
4/30/97 12,409 12,510
5/30/97 13,119 13,278
6/30/97 13,727 13,870
7/31/97 14,821 14,971
8/29/97 13,993 14,139
9/30/97 14,756 14,913
10/31/97 14,267 14,415
11/28/97 14,887 15,083
12/31/97 15,169 15,342
1/1/98 15,336 15,513
2/27/98 16,441 16,631
3/31/98 17,280 17,482
4/30/98 17,455 17,659
5/29/98 17,151 17,355
6/30/98 17,850 18,060
7/31/98 17,664 17,868
8/31/98 15,096 15,285
9/30/98 16,067 16,264
10/30/98 17,369 17,587
11/30/98 18,419 18,653
12/31/98 19,484 19,727
1/29/99 20,296 20,551
2/26/99 19,669 19,912
3/31/99 20,464 20,709
4/30/99 21,252 21,510
5/28/99 20,743 21,003
6/30/99 21,904 22,168
7/31/99 21,220 21,477
8/31/99 21,115 21,369
9/30/99 20,541 20,784
10/31/99 21,833 22,099
11/30/99 22,274 22,548
12/31/99 23,592 23,876
1/31/00 22,400 22,677
2/29/00 21,978 22,249
3/31/00 24,120 24,425
4/30/00 23,394 23,690
5/31/00 22,910 23,204
6/30/00 23,475 23,775
7/31/00 23,108 23,404
8/31/00 24,546 24,857
9/30/00 23,245 23,545
10/31/00 23,146 23,446
11/30/00 21,326 21,598
12/31/00 21,433 21,704
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
General Electric Co. 2.5% 3.6%
Exxon Mobil Corp. 2.4% 2.0%
Pfizer, Inc. 2.2% 0.9%
Cisco Systems, Inc. 2.0% 2.5%
Citigroup, Inc. 2.0% 1.3%
Wal-Mart Stores, Inc. 2.0% 2.2%
Microsoft Corp. 1.8% 4.3%
American International Group, Inc. 1.7% 1.2%
Merck & Co., Inc. N/A 1.1%
Intel Corp. 1.4% 2.0%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Equity Index S&P 500. MorningStar
Fund(1) Index Peer Group+
------------- ----------- -----------
1 Year -9.15% -9.11% -7.52%
3 Years 12.21 12.26 11.71
Since Inception (5/1/96) 17.74 18.06 N/A
Top Ten Sectors (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
Technology 23.7% Consumer Staple 6.5%
Financial 16.9% Retail 6.3%
Health Care 13.5% Utility 6.2%
Capital Equipment 10.2% Consumer Cyclical 5.5%
Energy 6.8% Basic Material 2.4%
(1) Returns reflect waiver of advisory fee, reimbursement of all non-advisory
fund expenses, and extra-ordinary capital contributions of $84,000 in 1996
and $250,000 in 1997.
* Total returns are for the period ended December 31, 2000. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. "Results may have been achieved during
market conditions or pursuing performance opportunities that may not
continue to occur in the future." Investment returns and principal value of
fund shares will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. The performance of the fund does not
reflect expense and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product prospectus.
. "Standard & Poor's 500" is a trademark of The McGraw-Hill Companies, Inc.
and has been licensed for use by John Hancock Life Insurance Company. The
product is not sponsored, endorsed, sold or promoted by Standard & Poor's
and Standard & Poor's makes no representation regarding the advisability of
investing in the product.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all the variable annuity and
life sub-accounts within the Morningstar variable universe having a Large
Blend investment category.
* Source: Prudential Securities.
B-12
PROPOSAL 4
John Hancock V.A. International Fund
On December 14, 2000, Nicholas-Applegate Capital Management assumed
management responsibility for the Fund under a new subadvisory agreement
that shareholders will be asked to formally approve in an upcoming proxy
solicitation. Founded in 1984, Nicholas-Applegate is a recognized leader
in U.S. equity, global and international equity management and currently
manages more that $35 billion for institutional and individual
investors.
The discussion below provides a summary of the Fund's performance for
the year, followed by commentary from the new managers on their
investment style and strategies going forward.
The year 2000 was a difficult one for foreign stock markets as a group,
led by a significant downturn in Japan, where economic problems
prevailed, its currency fell and its main market index -- the Nikkei --
suffered from a reshuffling that upped the technology weighting. The
year began on the same high that closed out 1999, as the "TMT" sectors
- -- technology, media and telecommunications -- were soaring. But the
tide turned in March, when TMT stocks worldwide began a dramatic plunge
as fears grew that many of these stocks were far too expensive in the
face of a potential slowdown in the global economy and earnings growth.
In a major reversal of fortunes, the more cyclical, attractively valued
old-economy stocks began to make a comeback.
A number of factors continued to keep overseas markets volatile -- and
their results contained -- through the year's end. These included rising
oil prices, rising interest rates -- first in the United States and then
in Europe and elsewhere -- a slowdown in the U.S. economy later in the
year and the growing downturn in the U.S. stock market. What's more,
declines in many of emerging Asia's currencies and the continuing drop
in the value of the euro hurt U.S.-based investors. Overall, overseas
markets, as measured by the Fund's benchmark, the MSCI All Country World
Free Ex-U.S. Index, lost ground, returning -16.34% for the year ended
December 31, 2000.
FUND PERFORMANCE
For the year ended December 31, 2000, John Hancock V.A. International
Fund posted a total return of -25.17% at net asset value, compared with
the -14.72% return of the average variable annuity international fund,
according to Lipper, Inc. Historical performance information can be
found on page 27.
The Fund's relative underperformance came mainly from its timing in the
volatile TMT sectors. Although overweight versus the MSCI index, the
Fund had a lighter weighting than its peers when the tech group
skyrocketed early in the year. After boosting the TMT stake, the Fund
was hit by having an overweighted position -- particularly in Japan and
Europe -- as the stocks came back down to earth in the tumultuous months
of March and April. Some of the Fund's biggest detractors came from the
tech and telecom sectors, including Japanese companies Sony, Hikari
Tsushin and NTT DoCoMo Communications. The Fund was also hurt by its
large stake in European telecom giant Vodafone, which was pounded after
its announced plan to acquire Mannesman, although Mannesman's stock rose
on the news and was one of the Fund's best performers. Nortel Networks
and British Telecom were two telecom companies that plunged following
profit warnings.
NEW MANAGEMENT: STRATEGIES AND CHANGES
By Randall Kahn, CFA, and Loretta Morris, for the Portfolio Management Team
On December 14, 2000, Nicholas-Applegate Capital Management assumed
management of the Fund. The cornerstone of our investment philosophy
rests on identifying investment opportunities that have three core
attributes. We look for companies that are poised to benefit from
positive change -- such as innovation, new leadership or
higher-than-expected earnings; that are in a position to sustain this
positive change over time; and that are beginning to be recognized by
the market through rising stock prices. When all three criteria are met,
we seek to invest in a timely fashion to maximize gains.
We are first and foremost bottom-up stock pickers, focusing on selecting
individual stocks with superior earnings potential. But we also have a
strict process in place to regularly assess political, economic,
monetary and technology factors in each country. This active approach to
country allocation guides our decisions on whether to overweight or
underweight specific countries in the portfolio.
B-13
Upon assuming management of the Fund on December 14, 2000, we began to
gradually transition the portfolio to be consistent with our investment
approach. We moved to pare the number of holdings in order to maintain
larger positions in fewer names and to make the Fund less country and
sector neutral. We also further reduced the Fund's exposure to the
volatile technology sector. Our bottom-up process guided us to begin
cutting the Fund's stake in Japan -- particularly in the construction
and banking sectors -- as we foresee little growth in that country in
the coming months. The shift out of Japan will continue in the new year.
In its place, we have identified more attractive opportunities in the
United Kingdom and have begun to shift some assets there. Due to
year-end liquidity issues, these moves are being made with deliberate
slowness.
A LOOK AHEAD
Many of the uncertainties haunting the world's markets in 2000 may
linger in 2001. Technology stocks may remain under pressure in the
coming quarters, as valuations for many technology leaders remain high.
In addition, although global central banks seem to be done hiking
interest rates, the lagged effects of their tightenings will continue to
slow world activity well into 2001, according to International Strategy
and Investment. Going forward, we are focusing on companies that are
posting strong earnings, and we will take a more defensive stance by
investing in the food, pharmaceutical, utilities, financials and
energy/oil service sectors.
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (25.17%) 28.90%
Average Annual Total Returns(1) (25.17%) 6.02%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been (27.26%) and
4.40%, respectively.
[Pie chart at bottom left-hand column with heading "Portfolio
Diversification." The chart is divided into seven sections
(from top to left): Pacific Rim ex-Japan 8%, Short-Term
Investments & Other 28%, Latin America 1%, U.K. & Ireland
11%, Continental Europe 26%, Canada 5% and Japan 21%. A note
below the chart reads "As a percentage of net assets on
December 31, 2000."]
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. International Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Morgan Stanley Capital International
(MSCI) All Country World Free Ex-U.S. Index, which measures the
performance of a broad range of developed and emerging stock markets.
The index represents securities that are freely traded on a variety of
equity exchanges around the world. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. International
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
two lines. The first line represents the MSCI All Country
World Free Ex-U.S. Index and is equal to $13,601 as of
December 31, 2000. The second line represents the value of
the hypothetical $10,000 investment made in the John Hancock
V.A. International Fund on August 29, 1996 and is equal to
$12,889 as of December 31, 2000.
B-14
Inception: August 31, 1999
INTERNATIONAL EQUITY FUND
GOLDMAN SACHS ASSET MANAGEMENT Maeda/Noble/Orchard
During the one-year reporting period the International Equity Fund generated a
total cumulative return of -14.37% at net asset value versus the -13.96% total
cumulative return of the Fund's benchmark, the MSCI EAFE Index. As these
returns indicate, it has been an extremely challenging period in the financial
markets. During the period we strategically moved to reduce the size of our
sector positions (overweight or underweight) in response to high market
volatility and intra-market rotation. We have focused instead on our key
strength, bottom-up stock selection.
Very few equity markets posted positive returns during the year. From a
country standpoint the Fund's strongest absolute returns came from Sweden and
Switzerland, while our stocks originating from Japan and The Netherlands
generated weak performance. On a sector basis, our Consumer Staples and
Utilities stocks enhanced returns, while our Telecom Services, Information
Technology and Industrial stocks produced poor results. In terms of individual
stocks, Epcos (0.0% of the total Fund at 12/31/00), Reuters Group (0.6%) and
Unilever (1.6%) were examples of stocks that enhanced performance. Conversely,
Advantest (0.2%), Rohm Co. (0.6%), TDK Corp. (0.0%) and United Pan-Europe
Communications (0.3%) all produced disappointing results.
[GRAPH]
International MSCI EAFE
Equity Fund Index
8/31/99 $10,000 $10,000
9/30/99 9,936 10,103
10/31/99 10,308 10,484
11/30/99 11,104 10,851
12/31/99 12,149 11,826
1/31/00 11,524 11,077
2/29/00 12,106 11,377
3/31/00 12,440 11,820
4/30/00 11,838 11,201
5/31/00 11,567 10,930
6/30/00 11,852 11,359
7/31/00 11,411 10,886
8/31/00 11,366 10,983
9/30/00 10,814 10,450
10/31/00 10,580 10,205
11/30/00 10,129 9,825
12/31/00 10,403 10,177
Top Ten Holdings (as of December 31, 2000)
- --------------------------------------------------------------------------
% of six months ago
investments % of investments
Vodafone AirTouch plc 2.5% 1.4%
GlaxoSmithKline plc 2.1% N/A
Nokia Oyj 2.0% 2.5%
Nestle SA 1.9% 0.6%
Royal Dutch Petroleum Co. 1.7% N/A
ING Groep NV 1.7% 0.8%
BP Amoco plc 1.6% 1.1%
Unilever plc 1.5% 0.4%
Telefonaktiebolaget LM Ericsson AB N/A N/A
Roche Holding AG 1.4% 0.9%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
International MSCI EAFE MorningStar
Equity Fund Index Peer Group+
------------- ------------ -----------
1 Year -14.37% -13.95% -15.51%
Since inception (8/31/99) 3.01 1.32 N/A
Top Ten Countries (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
United Kingdom 20.0% Sweden 4.7%
France 10.1% Italy 2.7%
Netherlands 7.3% Finland 2.6%
Switzerland 6.6% Australia 2.4%
Germany 6.0% Spain 2.3%
* Total returns are for the period ended December 31, 2000, returns represent
past performance, assume reinvestment of all distributions, and are not
indicative of future performance. "Results may have been achieved during
market conditions or pursuing performance opportunities, including investment
in initial public offerings, that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
The performance of the fund on this page is reported net of Trust level
charges (i.e. investment management fees and operating expenses). It does not
reflect expense and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product prospectus. There are special risks associated with
international investing, including currency fluctuations, political and
economic instability, foreign taxation and different accounting standards,
as outlined in the current prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the Morningstar variable universe having a
Foreign Stock with Large Cap investment category.
B-15
PROPOSAL 5
John Hancock V.A. Mid Cap Growth Fund
By Barbara C. Friedman, CFA, Portfolio Management Team Leader
Mid-cap growth stocks held up well in the volatile first half of 2000,
but eventually faltered amid a sharp slowdown in economic growth. Early
in the year, mid-cap stocks, with their strong earnings and more
reasonable valuations, remained in favor. In March, however, investors
abandoned technology stocks, concerned that they had reached
unsustainably high prices in light of rising interest rates and a
potential deceleration in the economy. Growth stocks of all sizes
suffered, while safer haven sectors like finance, health care, energy
and utilities took off. By the fourth quarter, there was evidence of
much slower economic growth. Weaker consumer and corporate spending hurt
sales in many sectors. Stock prices fell, with the Russell Midcap Growth
Index returning -11.75% for 2000.
STRATEGY AND PERFORMANCE REVIEW
In this difficult environment, John Hancock V.A. Mid Cap Growth Fund
maintained its long-term focus on mid-size companies with strong
earnings growth prospects and market capitalizations in the range of the
Russell Midcap Growth Index. The Fund's above-average stake in both
technology and telecommunications stocks, along with weak performance
among radio stocks, resulted in a -11.73% return at net asset value for
the year ended December 31, 2000. By comparison, the average variable
annuity mid-cap fund, which includes funds that invest in both mid-cap
growth and value stocks, returned 5.21%, according to Lipper, Inc.
Historical performance information appears on page 15.
TELECOM AND RADIO DISAPPOINTMENTS
The Fund maintained a high stake in competitive local exchange carriers
(CLECs) such as Global Crossing, McLeodUSA, XO Communi cations (formerly
NEXTLINK) and Allegiance Telecom. Concerns that some CLECs would be
unable to obtain funding to build out their systems hurt the entire
sector, sending stock prices down 50% or more for the year. We held on
to CLECs that were fully funded through 2001 and, in many cases, beyond.
In addition, most of our companies ended the year in better shape
fundamentally than a year earlier, having added new customers and access
lines faster than anticipated. Radio stocks also declined significantly
last year, as investors anticipated a huge slowdown in advertising
spending in 2001. We sold smaller, specialized names like Radio One last
summer. But during the fall, we added shares of leading broadcasters
like Clear Channel Com munications and His panic Broadcasting, believing
that inves tors had overreacted to what should be a less precipitous
drop in ad spending.
TECHNOLOGY BRIGHT SPOTS
We lightened up on technology over the summer, but kept a market
weighting because we expect technology spending to continue to outpace
the growth rate of the overall economy. We focused on stocks in the
fast-growing areas of data storage and fiber optics. Companies like
Brocade Communications Systems, which provides switches for storage
systems, benefited as the Internet explosion increased data storage
demands. Many top performers for the year were fiber-optics-related
businesses, including Corning, a leading fiber supplier, which we sold
mid-year; E-Tek Dynamics, an equipment manufacturer, which was bought
out; and Applied Micro Circuits, which sells integrated circuits.
Comverse Technology also did quite well as demand grew for the
profitable, value-added services (like voice mail) that it provides to
telephone companies. Unfortunately, we had our share of technology
disappointments, including Lexmark International, which makes printers.
As PC demand failed to pick up this fall, the stock got hammered,
causing us to sell.
STRENGTH IN FINANCE AND HEALTH CARE
We used the proceeds from our technology sales to add to our finance and
health-care investments. Finance stocks climbed largely in anticipation
of declining interest rates. Concord EFS, a company that specializes in
electronic transaction processing for credit cards, also soared as
demand for its services increased. USA Education (formerly Sallie Mae),
which makes student loans, benefited from a favorable competitive
environment and a recent acquisition. Other strong performers included
Ambac Financial Group, a municipal bond insurer that is expanding
internationally, and Golden West Financial, a California savings and
loan with a sizable mortgage business. In the health-care area, Waters
Corp. and Applera Corp.--Applied Biosystems Group posted strong gains as
demand increased for the analytical equipment they supply to biotech
companies. We added health-care service names like Community Health
Systems, a well-managed chain of rural hospitals that took off after
going public this summer. Allergan, a drug company that specializes in
eye diseases, also boosted performance as investors looked for
safer-haven investments.
B-16
OUTLOOK FOR 2001
As we start 2001, we believe the environment will be one of uncertainty,
continued volatility and more modest gains. We expect more companies to
announce earnings disappointments related to the rapid deceleration in
economic growth. But economic growth, though low, should remain
positive, as business in many sectors remains strong. Inflation should
also remain under control. The fact that the Federal Reserve acted
quickly after year end to cut interest rates bodes well for the economy
- -- and for the market. Going forward, we expect a variety of sectors to
participate in any market upturn, although there will also be more
distinct winners and losers within each sector. For this reason, we have
distributed the Fund's assets across a wider array of sectors with a
focus on the strongest mid-cap stocks in each sector -- names that
should be among the first to rebound in an economic recovery.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (1/7/98)
---------- ----------
Cumulative Total Returns (11.73%) 52.13%
Average Annual Total Returns(1) (11.73%) 15.12%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been (11.83%) and
13.55%, respectively.
[Table at bottom left hand column entitled "Top Five Stock
Holdings." The first listing is Waters Corp. 2.3%, the second
is Millennium Pharmaceuticals 1.9%, the third Aeroflex 1.8%,
the fourth AFLAC, Inc. 1.8% and the fifth McLeodUSA 1.8%. A
note below the table reads "As a percentage of net assets on
December 31, 2000."]
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Mid Cap Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in both the Standard & Poor's 500 Index and the
Russell Midcap Growth Index. The Standard & Poor's 500 Index is an
unmanaged index that includes 500 widely traded common stocks and is a
commonly used measure of stock market performance. The Russell Midcap
Growth Index is an unmanaged index that contains those securities from
the Russell Midcap Index with a greater-than-average growth orientation.
It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Mid Cap Growth
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
three lines. The first line represents the Russell Midcap
Growth Index and is equal to $15,737 as of December 31, 2000.
The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Mid Cap
Growth Fund on January 7, 1998 and is equal to $15,213 as of
December 31, 2000. The third line represents the Standard &
Poor's 500 Index and is equal to $14,148 as of December 31,
2000.
B-17
Inception: August 31, 1999
FUNDAMENTAL GROWTH FUND (FORMERLY FUNDAMENTAL MID CAP GROWTH FUND)
PUTNAM INVESTMENTS Eric M. Wetlaufer
Effective August 1, 2000 Putnam Investments assumed management of the Fund.
The Fund returned -20.91% for the fourth quarter, outpacing the Russell Mid
Cap Growth Index return of -23.25%. Outperformance in this hostile environment
for growth investing was largely due to adept stock selection, particularly in
the battered technology sector. Selection in health care contributed early in
the period but detracted in the fourth quarter largely due to weakness in
biotechnology. Energy, utilities, and financial holdings benefited performance
throughout the period. Communications services holdings hurt results.
The U.S. equity market remains extremely volatile as we begin the new year.
We anticipate additional earnings disappointments, especially in stocks
leveraged to the consumer. In the light of signs that the economy is slowing
significantly, we expect several interest-rate cuts over the first half of
2001.
High energy prices will continue to act as a tax on the economy, reducing
consumers' disposable income and adding pressure to corporate profit margins.
A forecasted colder-than-average winter will exacerbate the effect of higher
oil and natural gas prices on local economies and on consumer spending.
We expect growing unemployment and business failures--especially in the dot-
com universe. As a result, consumer confidence will continue to erode,
creating a difficult environment for retailers.
We have concentrated the Fund on growth companies with a proven track record
of expanding profits even in unsettled economic times. Higher energy prices
should benefit oil and gas producers and energy services companies. Within the
financial sector we will emphasize the regional banks and credit-cards issuers
that should benefit from Fed rate cuts. While underweighting technology as a
whole--particularly semiconductors and components--we will overweight software
and communications and equipment. Within the underweight sector of consumer
staples, we will emphasize broadcasting and restaurants, while underweighting
foods.
[GRAPH]
Fundamental Russell Mid Cap
Growth Fund Growth Index
8/31/99 $10,000 $10,000
9/30/99 10,000 9,915
10/31/99 10,836 10,681
11/30/99 12,529 11,788
12/31/99 15,457 13,829
1/31/00 15,972 13,826
2/29/00 22,030 16,732
3/31/00 18,801 16,749
4/30/00 16,532 15,122
5/31/00 14,461 14,020
6/30/00 18,224 15,507
7/31/00 17,402 14,526
8/31/00 18,979 16,716
9/30/00 18,950 15,899
10/31/00 17,465 14,811
11/30/00 13,822 11,593
12/31/00 14,989 12,204
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
Allergan, Inc. 2.6% N/A
Brocade Communications Systems, Inc. 2.4% 0.2%
Palm, Inc. 2.2% N/A
Applera Corporation - 2.2% N/A
Applied Biosystems Group
Medimmune, Inc. 1.9% 0.4%
Rational Software Corp. 1.9% 0.2%
PerkinElmer, Inc. 1.8% N/A
Immunex Corp. 1.8% N/A
Transocean Sedco Forex, Inc. N/A N/A
Symbol Technologies, Inc. 1.7% N/A
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Fundamental Russell Mid Cap MorningStar
Growth Fund Growth Index Peer Group+
--------------- --------------- -----------
1 Year -3.03% -11.75 -7.87
Since Inception (8/31/99) 35.44 16.11 N/A
Top Ten Sectors (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
Technology 37.5% Retail 4.5%
Health Care 25.3% Utility 3.3%
Energy 9.9% Consumer Cyclical 2.8%
Financial 7.5% Consumer Staple 1.9%
Capital Equipment 6.0% Transportation 1.4%
* Total returns are for the period ended December 31, 2000. Returns
represent past performance, assume reinvestment of all distributions and
are not indicative of future performance. "Results may have been achieved
during market conditions or pursuing performance opportunities, including
investment in initial public offerings, that may not continue to occur in
the future." Investment returns and principal value of fund shares will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Small-company investing entails special risks as
outlined in the prospectus. The performance of the fund on this page is
reported net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary to
a considerable extent and are described in your product prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the MorningStar variable universe having a
Mid Cap Growth investment category.
B-18
PROPOSAL 6
John Hancock V.A. Small Cap Growth Fund
By Bernice S. Behar, CFA, Portfolio Management Team Leader, and
Anurag Pandit, CFA, Portfolio Manager
After a very strong 1999, small-cap growth stocks sank under the weight
of falling technology and telecommunications stocks in 2000. Rising
interest rates and growing earnings concerns in the face of a slowing
economy caused investors to flee these high-priced sectors that had held
their undivided attention until mid March. This reversal sent the
tech-heavy NASDAQ Composite Index down 39.29% for the year, as investors
became more focused on less expensive and more defensive segments of the
market like health care, financial and energy stocks. Value stocks
replaced growth stocks as the place to be. The result was a huge gap in
performance between two of the major indexes that track small-cap
stocks, with the Russell 2000 Value Index gaining 22.83% and the Russell
2000 Growth Index losing 22.43% for the year ended December 31, 2000.
FUND PERFORMANCE
John Hancock V.A. Small Cap Growth Fund performed in line with its
benchmark Russell 2000 Growth Index, posting a total return of -22.33%
at net asset value for the year ended December 31, 2000. That compared
with the 0.24% return of the average variable annuity small-cap fund,
according to Lipper, Inc. Our relative underperformance stems from the
fact that this Lipper group includes funds that were able to invest in
more value-oriented stocks. Furthermore, while we were underweight in
technology versus our benchmark index, we remained overweighted versus
the peer group. We also suspect that some of our peers held on to more
of the stocks that recently graduated from small-cap to mid-cap status
on their strong performance, since mid-cap companies produced some of
the best relative earnings growth. In contrast, we typically sell
companies once they grow too big for our small-cap focus.
INDIVIDUAL TECH STANDOUTS
Despite the tech and telecom group's difficult run this year, good
individual stock picking provided us with some standouts, including
Internet software company Interwoven and telecommunications equipment
companies Virata and Powerwave. While these helped us to outperform the
index in the technology category, the group's results were still
negative and held us back, especially in the Internet area. Some big
detractors were Mediaplex and Broadbase Software, both of which help
companies develop their Web sites and target their advertising; they
were hurt as the Internet advertising model started to come into
question. At appropriate times we sold some of these stocks.
GOING DEFENSIVE: HEALTH CARE, FINANCIALS, ENERGY
As questions arose over the year about the strength of user demand
across all technology and telecom subsectors, we pared our stakes and
put the proceeds into more defensive areas where we felt the relative
earnings growth potential appeared more certain for the foreseeable
future. These included health care, financials and energy.
A large piece of our health-care stake was in biotechnology companies,
where a string of good news -- from the completion of the Human Genome
Project, to a flood of new products, increased spending and a favorable
capital markets environment -- bodes well for the group. Although
biotech stocks have a tendency to be volatile, many of our biotech
companies served us well on balance for the year, including CV
Therapeutics, COR Therapeutics, NPS Pharmaceuticals and Alkermes. In
fact, by the end of the year, we took some profits in our biotech stake
not only to lock in gains, but also to position the Fund more
defensively and reduce our risk level.
In addition to biotech, we built our weighting across a number of
health-care industries, including medical device companies such as
Wilson Greatbatch Technologies and distributors such as AmeriSource
Health and Bindley Western Industries, which received a takeover
proposal from one of the largest health-care distributors. We also upped
our stake in rural hospital companies LifePoint Hospitals and Province
Healthcare. Their results have improved, and their stock prices too,
through a combination of aggressive management of the hospitals they run
and positive pricing trends.
We brought our weighting in financial stocks up to our benchmark's level
by buying several regional banks with strong growth rates, such as Texas
banks Southwest Bancorp and Sterling Bancshares. We also added several
specialty property and casualty companies like HCC Insurance and title
insurance company Fidelity National, all of which we believe will
benefit from a lower interest-rate environment.
B-19
With rising oil prices and a pickup in exploration, we added to energy
companies like Lone Star Technologies, Pride International and Newfield
Exploration. Companies serving the natural gas industry, like Universal
Compression, did especially well.
A LOOK AHEAD
In the short term, we expect small-cap stocks to remain volatile while
the economy continues to slow and companies adjust their earnings
downward. We're more optimistic about later in the year, however, as
small-cap growth stock valuation levels are more attractive now and
companies will have a better chance of beating lowered expectations.
This is especially true in the wake of the Fed's surprise cut in
short-term interest rates just days after the year ended to prevent the
economy from stalling. Even with a slowing economy, we remain confident
in our ability to find good small companies with accelerating and
sustainable earnings growth, dominant positions and strong management.
We believe we will be rewarded for holding such companies over the long
term.
See the prospectus for a discussion of the risks of investing in
small-cap stocks.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (22.33%) 57.38%
Average Annual Total Returns(1) (22.33%) 11.02%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been (22.43)% and
10.03%, respectively.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is Newfield Exploration 1.5%,
the second is Corporate Executive Board 1.5%, the third
Bindley Western Industries 1.4%, the fourth AmeriSource
Health Corp. 1.4% and the fifth LifePoint Hospitals 1.3%. A
note below the table reads "As a percentage of net assets on
December 31, 2000."]
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Small Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Russell 2000 Index and the Russell
2000 Growth Index. The Russell 2000 Index is an unmanaged small-cap
index that is comprised of 2,000 U.S. stocks. The Russell 2000 Growth
Index is an unmanaged index that contains Russell 2000 Index stocks with
a greater-than-average growth orientation. It is not possible to invest
in an index.
Line chart with the heading John Hancock V.A. Small Cap
Growth Fund, representing the growth of a hypothetical
$10,000 investment over the life of the fund. Within the
chart are three lines. The first line represents the Russell
2000 Index and is equal to $16,219 as of December 31, 2000.
The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Small Cap
Growth Fund on August 29, 1996 and is equal to $15,738 as of
December 31, 2000. The third line represents the Russell 2000
Growth Index and is equal to $14,370 as of December 31, 2000.
B-20
Inception: May 1, 1996
SMALL CAP GROWTH FUND
JOHN HANCOCK ADVISERS, INC. Bernice Behar
The fourth quarter brought yet another challenging environment for equity
investors. A steady stream of pessimistic news fueled the volatility. Many
companies, across a broad spectrum of industries, reported lower than expected
earnings or reduced future growth rates. This led investors to more value-
oriented sectors such as utilities, energy, financial services and certain
health care groups. The trend caused a wide divergence between growth and
value--a trend most pronounced in the small caps. The Fund was hurt by this
market environment and underperformed the benchmark declining (21.43)% versus
(20.2%) for the Russell 2000 Growth Index.
Our healthcare holdings produced mixed results. After many months of
impressive performance, biotechnology stocks stalled in October. Our sizeable
allocation hurt performance as they underperformed through quarter end.
Fortunately, we purchased many biotechnology names in early 2000 at prices
well below current levels. Recently, their Fundamental outlook has weakened.
As a result, we expect to lock-in current profits. We also owned several
strong performing health care services companies. These stocks benefited from
increased government reimbursement due to the Balanced Budget Refinement Act.
The more reasonable reimbursement levels improved profit margins and revenue
growth. In addition, patient volumes have increased as HMOs eased restrictions
on admissions. We remain positive on the longer-term position for these stocks
and expect maintain a focus to this group.
Technology stocks were among the weakest performers in the benchmark
declining over 36%. Lofty valuations coupled with a barrage of bad news caused
the dramatic sell-off. We were underweight which helped relative performance
versus our benchmark. Despite our reduced exposure, the sector's dismal
results adversely impacted absolute performance. We expect negative news to
continue through early 2001 extending the period of volatility. Accordingly,
we will continue to underweight this sector.
[GRAPH]
Russell 2000 Small Cap
Growth Index Growth Fund
5/1/96 $10,000 $10,000
5/31/96 10,513 10,599
6/28/96 9,830 10,294
7/31/96 8,629 9,480
8/30/96 9,268 10,298
9/30/96 9,745 11,151
10/31/96 9,325 10,170
11/29/96 9,585 9,976
12/31/96 9,771 9,950
1/31/97 10,016 10,302
2/28/97 9,411 9,638
3/31/97 8,746 8,962
4/30/97 8,645 8,763
5/30/97 9,944 9,781
6/30/97 10,281 10,514
7/31/97 10,808 11,205
8/29/97 11,132 11,571
9/30/97 12,020 12,817
10/31/97 11,298 11,834
11/28/97 11,029 11,387
12/31/97 11,036 11,370
1/1/98 10,889 11,170
2/27/98 11,850 12,062
3/31/98 12,348 12,788
4/30/98 12,423 12,730
5/29/98 11,521 11,856
6/30/98 11,639 12,366
7/31/98 10,667 11,537
8/31/98 8,205 8,966
9/30/98 9,037 9,701
10/30/98 9,509 10,230
11/30/98 10,247 11,424
12/31/98 11,174 13,017
1/29/99 11,677 13,456
2/26/99 10,609 12,384
3/31/99 10,986 13,341
4/30/99 11,956 13,873
5/28/99 11,975 13,626
6/30/99 12,606 14,903
7/31/99 12,217 15,022
8/31/99 11,760 14,920
9/30/99 11,987 15,236
10/31/99 12,294 16,337
11/30/99 13,593 18,479
12/31/99 15,988 22,179
1/31/00 15,840 21,633
2/29/00 19,526 27,928
3/31/00 17,474 25,551
4/30/00 15,709 21,939
5/31/00 14,333 19,338
6/30/00 16,184 23,398
7/31/00 14,797 21,153
8/31/00 16,354 23,673
9/30/00 15,541 22,478
10/31/00 14,279 20,010
11/30/00 11,686 16,004
12/31/00 12,401 17,425
Top Ten Holdings (as of December 31, 2000)
- -----------------------------------------------------------------------------
% of six months ago
investments % of investments
Bindley Western Industries, Inc. 1.4% N/A
Corporate Executive Board Co. 1.3% 0.6%
LifePoint Hospitals, Inc. 1.3% N/A
Province Healthcare Co. 1.3% N/A
AmeriSource Health Corp. 1.3% N/A
NewField Exploration Co. 1.2% 0.5%
Fidelity National Financial, Inc. 1.2% N/A
Universal Compression Holdings 1.2% N/A
Affiliated Managers Group, Inc. N/A 0.4%
NPS Pharmaceuticals, Inc. 1.2% N/A
Average Annual Total Returns*
- -----------------------------------------------------------------------------
Small Cap Russell 2000 MorningStar
Growth Fund Growth Index Peer Group+
----------- ------------ -----------
1 Year -21.43% -22.43% -9.18%
3 Years 15.30 3.96 15.10
Since Inception (5/1/96) 12.63 4.72 N/A
Top Ten Sectors (as of December 31, 2000)
- -----------------------------------------------------------------------------
% of % of
investments investments
Technology 26.5% Energy 7.3%
Health Care 23.0% Capital Equipment 5.2%
Financial 11.7% Transportation 1.8%
Retail 7.7% Utility 0.9%
Consumer Cyclical 7.6% Basic Material 0.8%
* Total returns are for the period ended December 31, 2000. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. "Results may have been achieved during
market conditions or pursuing performance opportunities, including investment
in initial public offerings, that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Small company investing entails special risks as outlined in the prospectus.
The performance of the fund on this page is reported net of Trust level
charges (i.e. investment management fees and operating expenses). It does not
reflect expense and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are described in
your product prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for the sub-accounts of all
variable annuity and life products within the Morningstar variable universe
having a Small Growth investment category.
B-21
PROPOSAL 7
John Hancock V.A. Bond Fund
By James K. Ho, CFA, Portfolio Management Team Leader, and
Benjamin A. Matthews, Portfolio Manager
The broad fixed-income market had a better time of it this year than
last, although corporate bonds experienced a fair amount of volatility
and uncertainty. John Hancock V.A. Bond Fund's heavy weighting in U.S.
government and agency issues was the primary driver of Fund performance,
as this fixed-income segment produced the best results. Selectivity and
in-depth research proved essential in the corporate area as well,
particularly given the turbulence caused by the slowing economy.
Overall, it was flexibility in asset allocation that enabled the Fund to
post solid gains.
FUND PERFORMANCE
For the year ended December 31, 2000, John Hancock V.A. Bond Fund
produced a total return of 11.89% at net asset value. This compares
favorably with the 9.79% return of the average variable annuity
corporate debt A-rated fund, according to Lipper, Inc. For historical
performance information, please turn to page 39.
DEFENSIVE APPROACH DEFINES PORTFOLIO COMPOSITION
Early in the year, we began to build in some more defensive
characteristics into the Fund's portfolio and further enhanced that
approach as the period progressed. Calendar 2000 was the year in which
the Treasury market was king. The run on Treasury securities,
particularly longer-term issues, began in February and continued
unabated through period's end. The U.S. government's budget surplus
prompted the Treasury to propose a buyback of millions of dollars worth
of bonds in coming years, jumpstarting a dramatic rally in its long-term
bonds. The Federal Reserve Board continued to raise interest rates
through mid-May, further strengthening the rally as investors looked
past the rate hikes to their intended effect -- a slowdown in the
economy. Stock market volatility simply stoked the fire as investors
rushed to the relatively safe haven of U.S. government securities.
Our strategy in the Treasury arena was at first to cluster assets at
both the long-end and short-end of the Treasury yield curve, reflecting
our belief that the yield curve would flatten. (The yield curve is a
plotting of yields across the maturity spectrum.) By early summer, with
the curve having flattened, we not only increased the Fund's exposure to
Treasury securities but moved some assets into intermediate-term issues
so that by period's end we had a laddered approach in place. We also
bolstered the Fund's weighting in mortgage-backed and agency securities.
All performed extremely well.
UPGRADED CREDIT QUALITY
Credit quality concerns played a big role in investor sentiment this
past year. As the economy showed concrete signs of not only slowing, but
perhaps slowing too much, investors became increasingly skittish about
the creditworthiness of corporate issuers. This fear, combined with the
strength of the Treasury market, caused credit yield spreads to widen
dramatically. As you may know, credit spreads represent the difference
in yield between bonds of different credit quality. The more credit
sensitive an issue was, the greater the downward pressure. Over the
period, we focused our attention on higher-quality issues within both
the investment-grade and high-yield arenas. One such holding is General
Electric Capital Corp. For the most part, we held smaller positions in
the longer-maturity securities represented in the Fund, though at times
we swapped into the shorter-term debt of corporate issuers that we
already owned.
DECREASED HIGH-YIELD EXPOSURE
The high-yield sector suffered the most. Any corporate issuer that had
even a hint of difficulty in meeting earnings projections witnessed the
floor dropping out from under its bond prices. Defaults increased
substantially. We trimmed the portfolio's exposure to high-yield debt by
selling among other bonds those issued by telecommunication companies.
These included Global Crossing, NEXTLINK Communications and Focal
Communications.
TROUBLED NAMES SOLD EARLY
Thorough research and daily monitoring of securities proved vital to
performance as the economy weakened. We were able to move out of several
troubled names before the brunt of negative sentiment and price declines
were realized. Holdings we sold included Dillard's Inc., Conseco, FINOVA
Capital Group and two beaten down California utility companies --
Pacific Gas & Electric and Southern California Edison.
B-22
UTILITIES, DEFENSE, HEALTHCARE, ENERGY EMPHASIZED
We focused more on industries that tend to be relatively stable and
insulated from an economic slowdown. These include utility, defense,
healthcare, and energy-related issues, such as Verizon, Keyspan,
CalEnergy, NRG, Lockheed Martin, Raytheon, Tenet Healthcare, Hospital
Corporation of America, Amerada Hess and Apache. We also maintained
sizable positions in high-demand media names such as Continental
Cablevision.
OUTLOOK
Shortly after the close of 2000, the Fed cut short-term interest rates
by one-half a percentage point. Bond prices rose and corporate spreads
narrowed. While nothing is guaranteed, the outlook for corporate bonds
appears much improved. Investors seem to be now anticipating the
possibility of economic strengthening and greater corporate
profitability down the road. Though we are encouraged, we will watch the
economy closely to determine whether or not too much weakness has
already set in. We shall move ahead with cautious optimism and consider
opportunities to add selectively to high-yield and cyclical issues. Our
duration, or interest rate sensitivity, remains relatively neutral,
though we have begun to shorten it slightly, believing that yields in
the government sector don't have much room to fall further.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns 11.89% 38.98%
Average Annual Total Returns(1) 11.89% 7.88%
YIELD
For the period ended December 31, 2000
SEC 30-DAY
YIELD
----------
John Hancock V.A. Bond Fund(1) 5.84%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been 11.72% and
6.95%, respectively, and the yield would have been 5.63%.
[Table at bottom left-hand column entitled "Top Five
Sectors." The first listing is U.S. Government 37%, the
second is U.S. Agencies 24%, the third Mortgage Banking 6%,
the fourth Utilities 6% and the fifth Finance 4%. A note below
the table reads "As a percentage of net assets on December
31, 2000."]
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Bond Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Lehman Brothers Corporate Bond Index --
an unmanaged index that mirrors the investment objectives and
characteristics of the Fund. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Bond Fund,
representing the growth of a hypothetical $10,000 investment
over the life of the fund. Within the chart are two lines.
The first line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Bond Fund on
August 29, 1996 and is equal to $13,897 as of December 31,
2000. The second line represents the Lehman Brothers
Corporate Bond Index and is equal to $13,466 as of December
31, 2000.
B-23
Inception: March 29, 1986
ACTIVE BOND FUND (FORMERLY SOVEREIGN BOND FUND)
JOHN HANCOCK ADVISERS, INC. James Ho
During the quarter the Fund gained 3.84%, underperforming the Lehman
Aggregate Index at 4.21%. YTD the Fund performed well on an absolute basis,
returning 10.45%, though underperforming the index return of 11.63%.
Underperformance can be attributed to the Fund's bias towards spread product,
as most spread sectors underperformed Treasuries for both periods. Treasuries
had their best year of performance since 1995. Our underweight position in
this sector relative to the benchmark, for both the quarter and year,
detracted from performance results. The Fund's overweight position in
corporate bonds relative to the index detracted from performance results for
both the quarter and 2000.
With the unexpected and aggressive rate cut on January 3rd, the Fed
effectively put a floor under the economy and the risk of recession is greatly
reduced. Given an expected upturn in the economy later in 2001 in response to
this stimulus action, we think interest rates may be close to bottom. We plan
to use periods of market strength to reduce interest rate sensitivity by
shortening duration. With a backdrop of a stronger economy expected, we plan
to reduce our defensive stance. We'll likely reduce our Treasury holdings and
asset backed securities and increase investments in the high-yield sector,
which currently offers very attractive values and yields. We'll also look for
attractive values among lower-rated investment grade issues. Additionally,
we're likely to move away from defensive industry sectors-- such as energy,
health care and utilities-in favor of more economically sensitive sectors such
as autos, home building and financials. Our neutral weighting in mortgage
securities is likely to remain constant, and we will emphasize prepayment-
resistant securities with coupons of between 6% and 7%. Emerging markets may
present opportunities, especially if the U.S. economy rebounds.
[GRAPH]
Active Bond Active Bond Active Bond Active Bond
Fund Benchmark Fund Benchmark
12/31/90 $10,000 $10,000 01/31/96 $16,299 $16,061
01/31/91 10,081 10,112 02/29/96 15,986 15,721
02/28/91 10,204 10,199 03/31/96 15,888 15,589
03/31/91 10,298 10,269 04/30/96 15,808 15,481
04/30/91 10,448 10,387 05/31/96 15,804 15,455
05/31/91 10,526 10,436 06/30/96 15,964 15,662
06/30/91 10,534 10,425 07/31/96 16,015 15,698
07/31/91 10,648 10,556 08/31/96 16,027 15,660
08/31/91 10,889 10,799 09/30/96 16,317 15,939
09/30/91 11,110 11,025 10/31/96 16,664 16,311
10/31/91 11,219 11,123 11/30/96 16,925 16,611
11/30/91 11,313 11,234 12/31/96 16,868 16,426
12/31/91 11,666 11,613 01/31/97 16,931 16,446
01/31/92 11,553 11,441 02/28/97 17,011 16,481
02/29/92 11,583 11,501 03/31/97 16,831 16,284
03/31/92 11,554 11,438 04/30/97 17,061 16,522
04/30/92 11,628 11,507 05/31/97 17,253 16,676
05/31/92 11,822 11,730 06/30/97 17,479 16,876
06/30/92 11,976 11,902 07/31/97 18,003 17,392
07/31/92 12,265 12,207 08/31/97 17,826 17,198
08/31/92 12,398 12,316 09/30/97 18,115 17,468
09/30/92 12,565 12,483 10/31/97 18,271 17,747
10/31/92 12,412 12,292 11/30/97 18,372 17,841
11/30/92 12,374 12,281 12/31/97 18,573 18,028
12/31/92 12,559 12,492 01/31/98 18,828 18,283
01/31/93 12,783 12,765 02/28/98 18,812 18,246
02/28/93 13,049 13,030 03/31/98 18,919 18,303
03/31/93 13,121 13,075 04/30/98 19,011 18,394
04/30/93 13,203 13,175 05/31/98 19,180 18,591
05/31/93 13,196 13,169 06/30/98 19,364 18,781
06/30/93 13,467 13,468 07/31/98 19,400 18,796
07/31/93 13,581 13,554 08/31/98 19,591 19,162
08/31/93 13,868 13,865 09/30/98 20,040 19,710
09/30/93 13,936 13,914 10/31/98 19,852 19,570
10/31/93 13,951 13,971 11/30/98 20,043 19,688
11/30/93 13,846 13,813 12/31/98 20,102 19,735
12/31/93 13,911 13,874 01/31/99 20,287 19,875
01/31/94 14,114 14,082 02/28/99 19,871 19,402
02/28/94 13,855 13,775 03/31/99 20,013 19,499
03/31/94 13,561 13,438 04/30/99 20,076 19,548
04/30/94 13,440 13,326 05/31/99 19,859 19,346
05/31/94 13,417 13,302 06/30/99 19,809 19,286
06/30/94 13,404 13,271 07/31/99 19,769 19,232
07/31/94 13,621 13,537 08/31/99 19,730 19,217
08/31/94 13,654 13,542 09/30/99 19,906 19,390
09/30/94 13,495 13,338 10/31/99 19,946 19,462
10/31/94 13,473 13,323 11/30/99 20,016 19,460
11/30/94 13,448 13,299 12/31/99 19,913 19,366
12/31/94 13,554 13,387 01/31/00 19,830 19,302
01/31/95 13,812 13,644 02/29/00 20,053 19,536
02/28/95 14,143 13,960 03/31/00 20,256 19,794
03/31/95 14,253 14,054 04/30/00 20,178 19,736
04/30/95 14,459 14,249 05/31/00 20,160 19,727
05/31/95 15,081 14,846 06/30/00 20,583 20,137
06/30/95 15,211 14,965 07/31/00 20,748 20,320
07/31/95 15,145 14,907 08/31/00 21,062 20,615
08/31/95 15,320 15,098 09/30/00 21,181 20,745
09/30/95 15,474 15,252 10/31/00 21,293 20,882
10/31/95 15,726 15,476 11/30/00 21,576 21,224
11/30/95 15,960 15,731 12/31/00 21,994 21,619
12/31/95 16,203 15,962
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
Government National Mortgage Assoc. 25.9% 22.1%
U.S. Treasury 11.4% 18.4%
Federal National Mortgage Assoc. 8.8% 10.4%
GMAC Commercial Mortgage Securities, Inc. 1.4% 1.4%
Peco Energy Transition Trust 1.3% 0.3%
Hydro-Quebec 1.1% 1.1%
Amresco Residential Securities 1.0% 1.0%
Morgan Stanley Capital 1.0% N/A
UCFC Home Equity Loan 1.0% 1.5%
Cleveland Electric Illuminating Co. 0.8% 0.8%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Active Bond Active Bond MorningStar
Fund Benchmark(1) Peer Group+
-------- --------------- -----------
1 Year 10.45% 11.63% 8.21%
3 Years 5.80 6.24 4.86
5 Years 6.30 6.25 5.69
10 Years 8.20 7.62 7.80
Fund Composition (as of December 31, 2000)
- ---------------------------------------------------------------------------
Credit Quality Duration
- -------------- --------
Short Term 5.30% less than 1 Year 5.30%
AAA 44.80% 1-3 Years 0.30%
AA 8.0% 3-5 Years 0.00%
A 13.80% 5-10 Years 86.60%
BBB 15.40% greater than 10 Years 7.80%
BB 8.80%
B 3.50%
Below B 0.00%
NR/NA 0.40%
(1) The Active Bond Benchmark represents the Lehman Brothers Government/
Corporate Bond Index from April 1986 to September 1999 and Lehman
Brothers Aggregate Bond Index from October 1999 to present.
* Total returns are for the period ended December 31, 2000, returns
represent past performance, assume reinvestment of all distributions,
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary
to a considerable extent and are described in your product
prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the MorningStar variable universe having an
Intermediate Term Bond investment category.
B-24
PROPOSAL 8
John Hancock V.A. Money Market Fund
By Dawn Baillie for the Portfolio Management Team
It was a good year for money-market fund investors, who saw their yields
rise and their returns beat those of most stock-fund investors. In the
first half of the year, money-market yields rose along with interest
rates. This occurred after all signs pointed to a very robust U.S.
economy in January, with soaring consumer confidence and a booming stock
market sparking concerns of an uptick in inflation. As a result, the
Federal Reserve switched to its inflation-fighting mode again, raising
the federal funds rate that banks charge each other for overnight loans
by one-quarter percentage point in February and again in March in an
effort to cool the economy and block inflation. When that didn't deter
the economy, or the stock market, the Fed took the unusual step of
raising rates by one-half a percentage point in May. Shortly after, the
economy began to show signs of slowing, while inflation remained
relatively benign. This trend continued through the year's end, so the
Fed stayed on the sidelines and the federal funds rate ended the year at
6.50%, up from 5.50% a year earlier. After rising in the first half of
the year, money-market yields remained fairly level, since the federal
funds rate is a key pricing benchmark for money-market securities.
In the second half of the year, the effects of the slowing economy began
to show up in earnest in the form of earnings disappointments -- which
sent the stock market reeling -- and slowdowns in manufacturing, housing
and consumer spending. So by the end of the year, the Fed actually
returned to its neutral stance and investors even began to anticipate
rate cuts in 2001.
7-day effective yield
On December 31, 2000, John Hancock V.A. Money Market Fund had a 7-day
effective yield of 6.17%. By comparison, the average taxable
money-market fund had a 7-day effective yield of 5.91%, according to
Lipper, Inc.
STAYING SHORT
For the first nine months of 2000, we kept the Fund's maturity slightly
shorter than average, believing that rates were on the rise, as the Fed
remained intent on slowing the economy and preventing inflation through
a series of rate hikes. This conservative stance meant that our money
was not tied up for as long, so we were able to move more quickly into
higher-yielding securities as rates rose.
Our thinking changed by the end of September, as we began to see a
marked and consistent slowdown in housing, manufacturing and the
consumer and producer price indexes. Believing that a slowing economy
would keep the Fed on hold, or even cause it to reverse course and lower
rates, we extended our maturity in October to be on the average. We
stayed that way through year end, mostly to take advantage of the
year-end bargains and higher yields that we can generally find as
traders clear out their inventory of money-market securities.
A LOOK AHEAD
With the economy slowing down so rapidly, we had anticipated that the
Fed would begin lowering rates at its next meeting in late January. In
fact, just three days after the Fund's year ended, the Fed took the
surprise step of lowering rates by one-half a percentage point in an
aggressive effort to avoid a serious economic downturn. In doing so, the
Fed cited weaker sales, production, consumer confidence and financial
markets, while core inflation remained tame. Even before this move, we
had confidence that the Fed would continue to nimbly manage the
economy's growth and prevent a recession, and this recent action further
bolsters that view. With the prospects for additional rate cuts real, we
plan to extend our maturity to slightly longer than average in an effort
to lock in higher rates. As always, we will continue to focus not only
on providing the Fund with a competitive yield, but also on preserving
stability of principal.
The Fund is neither insured nor guaranteed by the U.S. government.
Although the Fund seeks to maintain a net asset value of $1.00 per
share, it is possible to lose money by investing in the Fund.
B-25
Inception: March 29, 1986
MONEY MARKET FUND
JOHN HANCOCK LIFE INSURANCE CO. Peter Mitsopoulos
The Federal Reserve's monetary tightening actions starting in 1999 continued
as we entered 2000, but by mid-year the Fed abandoned further rate increases
as the economy showed signs of weakness. The Fed Funds target rate stood at
6.50% and the Fed remained on hold through December 31. Just a few days after
the New Year, however, the Fed enacted a 50 basis point reduction in the rate
to 6.0%. During the first half of the year we shortened the fund's weighted
average maturity (WAM) in order to capture higher yields under the tightening
policy. The WAM of the Fund was approximately 45 days at year-end 1999 and had
reached a low of 21 days in late April. We made efforts to push the level into
the 30 day to 40 day range for the later part of the year given growing
expectations for an end to fed tightening and ended the year with a WAM of 31
days.
The Fund performed generally in-line with expectations during the year. We
had become more cautious in our acquisition of adjustable rate securities
because of two factors: They were becoming more expensive and some of the more
active issuers were developing credit concerns. The Fund ended with only a 16%
position versus 22% at year-end 1999. The market continues to make it
difficult to pick up any appreciable yield differential by going out beyond
one or two months. However, when we see value out on the curve, we will
acquire securities in an effort to lock in yield and increase the Fund's
weighted average maturity.
The Fund is invested primarily in commercial paper (78%), adjustable rate
notes (16%) with other money market securities making up the balance.
[GRAPH]
Money
Market
Fund
12/31/90 $10,000
1/31/91 10,063
2/28/91 10,115
3/31/91 10,165
4/30/91 10,222
5/31/91 10,271
6/30/91 10,315
7/31/91 10,369
8/31/91 10,417
9/30/91 10,465
10/31/91 10,511
11/30/91 10,549
12/31/91 10,596
1/31/92 10,633
2/29/92 10,664
3/31/92 10,700
4/30/92 10,735
5/31/92 10,767
6/30/92 10,804
7/31/92 10,838
8/31/92 10,870
9/30/92 10,901
10/31/92 10,920
11/30/92 10,950
12/31/92 10,981
1/31/93 11,009
2/28/93 11,035
3/31/93 11,065
4/30/93 11,093
5/31/93 11,118
6/30/93 11,147
7/31/93 11,175
8/31/93 11,204
9/30/93 11,232
10/31/93 11,258
11/30/93 11,287
12/31/93 11,316
1/31/94 11,346
2/28/94 11,372
3/31/94 11,403
4/30/94 11,432
5/31/94 11,467
6/30/94 11,505
7/31/94 11,542
8/31/94 11,588
9/30/94 11,632
10/31/94 11,673
11/30/94 11,719
12/31/94 11,773
1/31/95 11,829
2/28/95 11,880
3/31/95 11,939
4/30/95 11,992
5/31/95 12,054
6/30/95 12,110
7/31/95 12,168
8/31/95 12,225
9/30/95 12,279
10/31/95 12,338
11/30/95 12,394
12/31/95 12,453
1/31/96 12,511
2/29/96 12,562
3/31/96 12,613
4/30/96 12,668
5/31/96 12,723
6/30/96 12,773
7/31/96 12,833
8/31/96 12,888
9/30/96 12,945
10/31/96 13,002
11/30/96 13,051
12/31/96 13,116
1/31/97 13,174
2/28/97 13,226
3/31/97 13,284
4/30/97 13,341
5/31/97 13,400
6/30/97 13,461
7/31/97 13,522
8/31/97 13,579
9/30/97 13,643
10/31/97 13,706
11/30/97 13,762
12/31/97 13,830
1/31/98 13,894
2/28/98 13,949
3/31/98 14,012
4/30/98 14,074
5/31/98 14,138
6/30/98 14,200
7/31/98 14,264
8/31/98 14,329
9/30/98 14,392
10/31/98 14,456
11/30/98 14,517
12/31/98 14,579
1/31/99 14,640
2/28/99 14,693
3/31/99 14,752
4/30/99 14,807
5/31/99 14,866
6/30/99 14,923
7/31/99 14,984
8/31/99 15,047
9/30/99 15,109
10/31/99 15,176
11/30/99 15,242
12/31/99 15,315
1/31/00 15,388
2/29/00 15,457
3/31/00 15,531
4/30/00 15,604
5/31/00 15,684
6/30/00 15,766
7/31/00 15,851
8/31/00 15,937
9/30/00 16,020
10/31/00 16,105
11/30/00 16,190
12/31/00 16,278
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
Monte Rosa Capital Corp. 4.2% 1.0%
Falcon Asset Securitization Corp. 3.7% 2.1%
Sigma Finance, Inc. 3.6% 4.2%
Centric Capital Corp. 3.6% 3.2%
Sheffield Receivables Corp. 3.3% 4.1%
Merrill Lynch & Co., Inc. 3.3% 0.5%
DOVER Corp. YRS 3+4 3.2% N/A
Lehman Brothers Holdings 2.9% N/A
Enterprise Funding Corp. 2.7% N/A
K2 USA LLC 2.6% 2.9%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Money Market
Fund/1/
------------
1 Year 6.29%
3 Years 5.58%
5 Years 5.50%
10 Years 4.99%
- ---------------------------------------------------------------------------
Top Ten Sectors (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
Financial 83.9% Consumer Staple 2.3%
Capital Equipment 5.7% Technologyyclical 1.3%
Consumer Cyclical 3.5% Basic Material 0.4%
Utility 2.9%
- ---------------------------------------------------------------------------
The Money Market Fund is neither insured nor guaranteed by the U.S.
Government and there is no guarantee the fund will be able to maintain a
stable net asset value of $10.00/share.
* Total returns are for the period ended December 31, 2000. Returns
represent past performance, assume reinvestment of all distributions and are
not indicative of future performance. "Results may have been achieved during
market conditions or pursuing performance opportunities that may not
continue to occur in the future." The performance of the Fund on this page
is reported net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
/1/ Returns reflect extra-ordinary capital contribution of $284,471 in October
2000
B-26
SUPPLEMENT DATED MAY 7, 2001
TO
PROSPECTUSES DATED MAY 1, 2001
This Supplement is intended to be distributed with prospectuses dated May
1, 2001 for certain variable life insurance policies issued by John Hancock Life
Insurance Company or John Hancock Variable Life Insurance Company ("Product
Prospectuses") and with the prospectus dated May 1, 2001 for the John Hancock
Variable Series Trust I ("John Hancock Variable Series Trust Prospectus") that
accompanies the Product Prospectuses. The variable life insurance policies
involved bear the title "MAJESTIC VARIABLE ESTATE PROTECTION," "MAJESTIC
VARIABLE ESTATE PROTECTION 98," "MAJESTIC VARIABLE UNIVERSAL LIFE," "MAJESTIC
VARIABLE UNIVERSAL LIFE 98," "MEDALLION EXECUTIVE VARIABLE LIFE," "MEDALLION
EXECUTIVE VARIABLE LIFE II," "MEDALLION EXECUTIVE VARIABLE LIFE III," "MEDALLION
VARIABLE UNIVERSAL LIFE PLUS," "MEDALLION VARIABLE UNIVERSAL LIFE EDGE,"
"VARIABLE ESTATE PROTECTION," "VARIABLE ESTATE PROTECTION II," or "VARIABLE
MASTER PLAN PLUS."
. As stated in the John Hancock Variable Series Trust Prospectus, the sub-
adviser of the Health Sciences fund is Putnam Investment Management, LLC. The
reference on the first page of the Product Prospectuses to "John Hancock
Advisers, Inc." as the manager for the Health Sciences variable investment
option is a typographical error and the name "Putnam Investment Management,
LLC" should be substituted in its place. You should read the John Hancock
Variable Series Trust Prospectus for further information about the Health
Sciences fund and Putnam Investment Management, LLC before selecting this
variable investment option.
. Morgan Stanley Dean Witter Investment Management Inc., the sub-adviser of the
Emerging Markets Equity fund and one of the sub-advisers of the Real Estate
Equity fund, has a new name. References in the Product Prospectuses and the
John Hancock Variable Series Trust Prospectus to "Morgan Stanley Dean Witter
Investment Management Inc." are therefor deleted and the new name, "Morgan
Stanley Investment Management Inc.," is inserted in their place.
As with all mutual funds, the Securities and Exchange Commission has not judged
whether the funds of the John Hancock Variable Series Trust I are good
investments or whether the information in this prospectus is adequate and
accurate. Anyone who tells you otherwise is committing a federal crime.
JOHN HANCOCK
VARIABLE SERIES TRUST I
PROSPECTUS
May 1, 2001
Equity Index Fund
Growth & Income Fund
Large Cap Value Fund
Large Cap Value CORE SM Fund
Large Cap Value CORE SM II Fund
Large Cap Growth Fund
Large Cap Aggressive Growth Fund
Large/Mid Cap Value Fund
Large/Mid Cap Value II Fund
Fundamental Growth Fund
Mid Cap Blend Fund
Mid Cap Growth Fund
Small/Mid Cap CORE SM Fund
Small/Mid Cap Growth Fund
Small Cap Equity Fund
Small Cap Value Fund
Small Cap Growth Fund
International Equity Index Fund
International Opportunities Fund
International Equity Fund
Emerging Markets Equity Fund
Real Estate Equity Fund
Health Sciences Fund
Managed Fund
Aggressive Balanced Fund
Global Balanced Fund
Short-Term Bond Fund
Bond Index Fund
Active Bond Fund
Active Bond II Fund
High Yield Bond Fund
Global Bond Fund
Money Market Fund
Managed by John Hancock Life Insurance Company
John Hancock Place
Boston, MA 02117
Contents
- --------------------------------------------------------------------------------
John Hancock Variable Series Trust I ("Trust")
A fund-by-fund summary of goals, strategies and risks.
Policies and instructions for opening, maintaining and closing an account in
any fund
Further information on the funds
Further information on the Trust
Additional subadviser information
Overview 1
Your Investment Choices 2
Equity Index Fund 6
Growth & Income Fund 8
Large Cap Value Fund 10
Large Cap Value CORE SM Fund 12
Large Cap Value CORE SM II Fund 14
Large Cap Growth Fund 16
Large Cap Aggressive Growth Fund 18
Large/Mid Cap Value Fund 20
Large/Mid Cap Value II Fund 22
Fundamental Growth Fund 24
Mid Cap Blend Fund 26
Mid Cap Growth Fund 28
Small/Mid Cap CORE SM Fund 30
Small/Mid Cap Growth Fund 32
Small Cap Equity Fund 34
Small Cap Value Fund 36
Small Cap Growth Fund 38
International Equity Index Fund 40
International Opportunities Fund 42
International Equity Fund 44
Emerging Markets Equity Fund 46
Real Estate Equity Fund 48
Health Sciences Fund 50
Managed Fund 52
Aggressive Balanced Fund 54
Global Balanced Fund 56
Short-Term Bond Fund 58
Bond Index Fund 60
Active Bond Fund 62
Active Bond II Fund 64
High Yield Bond Fund 66
Global Bond Fund 68
Money Market Fund 70
Your Account 72
Investments in shares of the funds 72
Share price 72
Valuation 72
Conflicts 72
Funds' Expenses 73
Dividends and Taxes 73
Dividends 73
Taxes 73
Trust Business Structure 74
Appendix A 75
For more information back cover
Overview
- --------------------------------------------------------------------------------
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on page 6. Each description provides
the following information:
Goal and Strategy The fund's particular investment goals and the principal
strategies it intends to use in pursuing those goals.
Subadviser/Manager The firm and individual(s) providing investment management
services to the fund.
Past Performance The fund's total return, measured year-by-year and over time.
Main Risks The significant risk factors associated with the fund. The risks are
categorized as "Primary" or "Secondary". The Primary Risks are considered major
factors in the fund's performance and are described first. The Secondary Risks
are not considered major factors in the fund's performance because the fund
would not normally commit a large portion of its assets to the investments
involved. However, the Secondary Risks are of such a nature that they could
significantly affect the fund's performance, even if the investments are held
in relatively small amounts.
Financial Highlights The fund's operating performance per share, measured year-
by-year.
THE FUNDS
The Trust offers investment choices, or funds, for the variable annuity and
variable life insurance contracts ("variable contracts") of:
. John Hancock Life Insurance Company ("John Hancock"),
. John Hancock Variable Life Insurance Company ("JHVLICO"), and
. certain other insurance companies that may or may not be affiliated with John
Hancock.
In some variable contract forms, the Trust may be referred to by some other
term (such as the "Fund" or "Series Fund") and the investment choices may also
be referred to by some other term (such as "Portfolios" or "Series").
RISKS OF FUNDS
These funds, like all mutual funds, are not bank deposits. They are not insured
or guaranteed by the FDIC or any other government agency. You could lose money
by investing in these funds. So, be sure to read all risk disclosure carefully
before investing.
MANAGEMENT
John Hancock is the investment adviser of each fund of the Trust. John Hancock
is a Massachusetts stock life insurance company. On February 1, 2000, John Han-
cock changed its form of organization and its name. Prior to that date, it was
John Hancock Mutual Life Insurance Company, a mutual life insurance company
that was chartered in 1862. At the end of 2000, John Hancock and its affiliates
managed approximately $125 billion in assets, of which it owned approximately
$79 billion. All of the funds of the Trust have subadvisers.
1
Your Investment Choices
- --------------------------------------------------------------------------------
The Trust offers a number of investment choices, or funds, to suit a variety of
objectives under variable contracts. There are 33 funds available under your
variable contract. Each fund has its own strategy and its own risk/reward
profile.The funds can be broadly categorized as equity funds, sector funds,
balanced funds, bond funds, and international/global funds. Within these broad
categories, the funds can be further categorized as follows:
EQUITY FUNDS
Equity funds can be categorized in two ways--by capitalization and by invest-
ment style.
Capitalization Equity funds can be categorized by market capital-
ization, which is defined as the market value of
all shares of a company's stock. The following def-
initions for large, mid and small cap are based
upon statistics at year-end 2000, but are adjusted
periodically with broad equity market movements as
represented by the Russell 3000(R) Index/1/ or
other widely- recognized source of market capital-
ization data. Adjustments are typically made on a
quarterly basis, but in extraordinary circumstances
may be made as frequently as monthly. In volatile
market environments, a fund's market cap exposure
may be allowed to shift temporarily outside of the
normal range in order to avoid unnecessary transac-
tion costs.
Large Cap Funds:
. Equity Index Fund These funds invest primarily in large, well-estab-
lished companies that typically are very actively
. Growth & Income traded and provide more stable investment returns
Fund over time. Large cap companies represent the 300
largest stocks in the Russell 3000(R) Index. Each
. Large Cap Value of those companies has a market capitalization
Fund greater than $7.8 billion as of the end of 2000.
Large cap funds are appropriate for investors who
. Large Cap Value want the least volatile investment returns within
CORE SM Fund the overall equity markets.
. Large Cap Value
CORE SM II Fund
. Large Cap Growth
Fund
. Large Cap Aggres-
sive Growth Fund
Large/Mid Cap Funds:
. Large/Mid Cap These funds invest primarily in large cap and mid
Value Fund cap companies. The capitalization of these funds
can shift over time from primarily large cap to
. Large/Mid Cap primarily mid cap or vice versa depending on where
Value II Fund the manager identifies investment opportunities.
These funds are generally more volatile than pure
. Fundamental large cap funds, but generally less volatile than
Growth Fund pure mid cap funds.
Mid Cap Funds:
. Mid Cap These funds invest primarily in medium-sized, less
Blend Fund established companies that are less actively traded
and provide more share price volatility over time
. Mid Cap than large cap stocks. Mid cap companies represent
Growth Fund the 250th to 1000th largest stocks in the Russell
3000(R) Index. Each of those companies has a market
capitalization between $1.4 billion and $10 billion
as of the end of 2000. Mid cap funds are appropri-
ate for investors who are willing to accept more
volatile investment returns within the overall
equity markets with the potential reward of higher
long-term returns.
Small/Mid Cap Funds:
These funds invest primarily in mid cap and small
. Small/Mid Cap cap companies. The capitalization of these funds
CORE SM Fund can shift over time from primarily mid cap to pri-
marily small cap or vice versa depending on where
. Small/Mid Cap the manager identifies investment opportunities.
Growth Fund These funds are generally more volatile than pure
mid cap funds, but generally less volatile than
pure small cap funds.
- -------
/1/The Russell 3000(R) Index is a broad market index and is representative of
the U.S. stock markets with a total capitalization of $12.8 trillion at the
end of 2000. The Russell 3000(R) Index is a service mark of Frank Russell
Company, which does not sponsor and is not in any way affiliated with the
Trust. Inclusion of a security in the index in no way implies an opinion on
the part of Frank Russell Company as to its attractiveness or appropriateness
as an investment.
2
Small Cap Funds:
. Small Cap These funds invest primarily in small newly estab-
Equity Fund lished companies that are less actively traded and
have a high level of share price volatility over
. Small Cap time. Small cap companies represent the 2000 small-
Value Fund est stocks in the Russell 3000(R) Index. Each of
these companies has a market capitalization of less
. Small Cap than $1.4 billion as of the end of 2000. Small cap
Growth Fund funds are appropriate for investors who are willing
to accept the most volatile investment returns
within the overall equity markets for the potential
reward of higher long-term returns.
Investment Style
Value Funds:
. Large Cap Value Value funds invest in companies that are attrac-
Fund tively priced, considering their asset and earnings
history. These stocks typically pay above average
. Large Cap Value dividends and have low stock prices relative to mea-
CORE SM Fund sures of earnings and book value. Value funds are
appropriate for investors who want some dividend
. Large Cap Value income and the potential for capital gains, but are
CORE SM II Fund less tolerant of share-price fluctuations.
. Large/Mid Cap
Value Fund
. Large/Mid Cap
Value II Fund
. Small Cap Value
Fund
Growth Funds:
. Large Cap Growth Growth funds invest in companies believed to have
Fund above-average prospects for capital growth due to
their strong earnings and revenue potential. Growth
. Large Cap Aggres- stocks typically have high stock prices relative to
sive Growth Fund measures of earnings and book value. Growth funds
are appropriate for investors who are willing to
. Fundamental Growth accept more share-price volatility for the potential
Fund reward of higher long-term returns.
. Mid Cap Growth
Fund
. Small Mid/Cap
Growth Fund
. Small Cap Growth
Fund
Blend Funds:
. Equity Index Fund Blend funds invest in both value and growth compa-
nies. Blend funds are appropriate for investors who
. Growth & Income seek both dividend and capital appreciation charac-
Fund teristics.
. Mid Cap Blend Fund
. Small/Mid Cap
CORE SM Fund
. Small Cap Equity
Fund
SECTOR FUNDS
Sector funds invest primarily in a single sector of the stock market and may be
affected by economic factors and other factors specific to that sector. Sector
funds are appropriate for investors who are willing to accept more volatile
investment returns relative to the overall equity market.
. Real Estate Equity
Fund
. Health Sciences
Fund
BALANCED FUNDS
Balanced funds invest in a combination of stocks and bonds and actively manage
the mix of stocks and bonds within a target range. Domestic balanced funds
invest in U.S. stocks and bonds. Global balanced funds invest in foreign and
U.S. stocks and bonds.
. Managed Fund
.Aggressive Balanced Fund
. Global Balanced
Fund
BOND FUNDS
Bond funds can be categorized in two ways--by average maturity and by credit
quality:
Average Maturity Bond maturity is a key measure of interest rate
risk. A bond's maturity measures the time remaining
until the bond matures, or until the repayment of
the bond's principal comes due. The longer a bond's
maturity, the more sensitive the bond's price is to
changes in interest rates.
3
Short:
. Money Market Fund These funds invest primarily in bonds with short
. Short Term Bond maturities, typically less than four years. These
Fund funds have less interest rate risk than intermedi-
ate-term bond funds.
Intermediate:
. Bond Index Fund These funds invest in bonds of all maturities and
. Active Bond Fund maintain an average maturity which is typically
between four and ten years. These funds have more
interest rate risk than short-term bond funds.
. Active Bond II
Fund
. High Yield Bond
Fund
. Global Bond Fund
Credit Quality Credit quality is a measure of the ability of a
bond issuer to meet its financial obligations and
repay principal and interest. High quality bonds
have less credit risk than lower quality bonds.
Investment grade bonds typically have "high" or
"medium" credit quality ratings (as defined below),
while high-yield bonds have "low" credit quality
ratings.
High:
. Money Market Fund These funds focus on the highest-rated, most
. Bond Index Fund creditworthy bonds or money market instruments and
typically maintain an average credit quality rating
of AAA/Aaa (A-1/P-1 for money market funds).
Medium:
. Short Term Bond These funds invest in bonds of all credit quality
Fund levels with a focus on investment grade bonds.
These funds typically maintain an average credit
. Active Bond Fund quality rating of AA/Aa, A or BBB/Baa.
. Active Bond II
Fund
. Global Bond Fund
Low:
. High Yield Bond These funds invest primarily in lower rated bonds--
Fund known as high yield or "junk" bonds. These funds
typically maintain a below investment-grade average
credit quality rating of BB/Ba or B.
INTERNATIONAL/GLOBAL EQUITY FUNDS
International funds invest primarily in securities markets outside the United
States. Global funds invest both in the United States and abroad. These funds
can be categorized by the types of markets they invest in.
Developed Markets:
. International These funds invest primarily in the larger, well-
Equity Index Fund established developed or industralized markets
around the world. These funds have a lower level of
. International foreign securities risk than emerging market funds.
Equity Fund
. International
Opportunities Fund
Emerging Markets:
. Emerging Markets These funds invest primarily in developing or
Equity Fund emerging markets and have a higher level of foreign
securities risk than funds that invest primarily in
developed markets. These funds have more return
volatility than the overall international/global
equity markets.
4
--------------
In the following pages, any fund investment strategy that is stated as a per-
centage of a fund's assets applies at all times, not just at the time the fund
buys or sells an investment security. However, when markets are unusually vola-
tile or when a fund experiences unusually large cash flows, a fund may be
allowed to temporarily deviate from its normal strategy to avoid unnecessary
transaction costs. The trustees of the Trust can change the investment goals
and strategy of any fund without shareholder (i.e., contractowner) approval.
The financial highlights tables on the following pages detail the historical
performance of each fund, including total return information showing the
increase or decrease of an investment in the fund each year (assuming reinvest-
ment of all dividends and distributions). The "total investment return" shown
for each fund does not reflect the expenses and charges of the applicable sepa-
rate accounts and variable contracts. Those expenses and charges vary consider-
ably from contract to contract and are described in the variable contract pro-
spectus to which this prospectus is attached. If the earliest period shown in
the financial highlights table is less than a full calendar year, the two "Ra-
tios" shown for that period have been annualized (i.e., projected as if the
fund had been in effect for a full year). However, the "total investment
return" and "turnover rate" for that period have not been annualized.
All of the funds (except bond funds and equity index funds) may participate in
initial public offerings (IPOs). Under certain market conditions, such partici-
pation could significantly improve a fund's total investment return. There is
no assurance that such market conditions will continue and provide the same
favorable impact on future investment returns.
If the total investment return for any fund for any given year appears unusu-
ally high, the return may be attributable to unusually favorable market condi-
tions which will probably not be sustainable. For instance, a high total
investment return may reflect participation in IPOs, "hot" industries (e.g.,
internet-related companies), private placements and/or leveraging investment
techniques during the period indicated. There is no assurance that any of those
methods, or any other investment technique, will continue to have the same
impact on the fund's total investment returns.
In this prospectus, the term "stock"' is used as a shorthand reference for
equity investments generally and the term "bond" is used as a shorthand refer-
ence for debt obligations generally.
5
Equity Index Fund
GOAL AND STRATEGY
This is a stock fund that seeks to track the performance of the S&P 500 Index,
which emphasizes the stocks of large U.S. companies.
The manager employs a passive management strategy by normally investing in all
stocks included in the Index. The manager normally invests in each stock in
roughly the same proportion as represented in the Index.
The manager seeks to replicate as closely as possible the aggregate risk char-
acteristics and sector diversification of the Index.
The Fund normally invests in all 500 stocks in the Index, but has no predeter-
mined number of stocks that it must hold. S&P may change the composition of the
Index from time to time. The manager will reflect those changes as soon as
practical.
The Fund is normally fully invested. The manager may invest in stock index
futures to maintain market exposure and manage cash flow.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: Standard & Poor's Depositary Receipts (SPDRs), U.S. dol-
lar denominated foreign securities, cash equivalents, and certain derivatives
(investments whose value is based on indices or other securities). As an exam-
ple of how derivatives may be used, the Fund may invest in stock index futures
to manage cash flow.
Note: "S&P 500 Index" means the Standard & Poor's 500 Composite Stock Price
Index. "Standard & Poor's", "S&P" and "S&P 500" are trademarks of McGraw Hill,
Inc. and have been licensed for use by the Trust.
- --------------------------------------------------------------------------------
SUBADVISER
SSgA Funds Management, Inc.
(formerly State Street Global Advisors, a division of State Street Bank and
Trust Company)
Two International Place
Boston, Massachusetts 02110
Managing, with predecessor, since 1978
Managing Fund since May, 1997
Predecessor managed approximately $725 billion in assets at the end of 2000
FUND MANAGERS
John A. Tucker
- -----------------
Principal of subadviser
Joined subadviser in 1988
James B. May
- -----------------
Principal of subadviser
Joined subadviser in 1989
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may also help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 21.27%, fourth quarter 1998 Worst quarter: down 9.99%, third
quarter 1998
Average annual total return -- for periods ending 12/31/2000*
Fund Index
1 year -9.15% -9.11%
Life of fund 17.74% 18.06%
Index:S&P 500 Index
*Began operations on May 1, 1996.
6
MAIN RISKS
Primary
Index Management Risk: Certain factors such as the following may cause the
Fund to track the Index less closely:
. The securities selected by the manager may not be fully representative of
the Index.
. Transaction expenses of the Fund may result in the Fund's performance being
different than that of the Index.
. The size and timing of the Fund's cash flows may result in the Fund's per-
formance being different than that of the Index.
Also, index funds like this one will have more difficulty in taking defensive
positions in abnormal market conditions.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results.
The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large cap" approach carries the risk that in certain markets large cap
stocks will underperform mid cap and small cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996** 1997 1998 1999 2000
Net asset value, beginning
of period $ 10.00 $ 11.10 $ 14.21 $ 17.70 $ 20.46
Income from investment
operations:
Net investment income
(loss) 0.15 0.24 0.25 0.27 0.22
Net realized and unrealized
gain (loss) on
investments* 1.26 3.41 3.76 3.41 (2.09)
Total from investment
operations 1.41 3.65 4.01 3.68 (1.87)
Less distributions:
Distributions from net
investment income and
capital paid in (0.21) (0.29) (0.24) (0.26) (0.23)
Distributions from net
realized gain on
investments sold (0.10) (0.25) (0.28) (0.66) (0.72)
Distributions in excess of
income, capital paid in &
gains -- -- -- -- --
Total distributions (0.31) (0.54) (0.52) (0.92) (0.95)
Net asset value, end of
period $ 11.10 $ 14.21 $ 17.70 $ 20.46 $ 17.64
Total investment return*** 14.23% 32.79% 28.45% 21.08% (9.15)%
Ratios and supplemental data
Net assets, end of period
(000s omitted)($) $14,650 $101,390 $232,578 $451,296 $525,659
Ratio of expenses to average
net assets (%)**** 0.00% 0.00% 0.00% 0.00% 0.19%
Ratio of net investment
income (loss) to average
net assets (%) 2.74% 1.97% 1.59% 1.42% 1.12%
Turnover rate (%) 15.72% 64.56% 43.31% 55.24% 34.11%
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing
of purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Fund began operations on May 1, 1996.
*** Includes the effect of a voluntary capital contribution from John Han-
cock of $0.06 per share for the period ended 1996 and $0.04 per share
for year ended 1997. The Total Investment Return without the capital
contribution would have been 13.59% for the year ended 1996 and 32.47%
for the year ended 1997.
**** Expense ratio is net of expense reimbursement. Had such reimbursement
not been made the expense ratio would have been 1.61%, 0.65%, 0.34% and
0.22% for the years ended December 31, 1996, 1997, 1998 and 1999,
respectively.
7
Growth & Income Fund
GOAL AND STRATEGY
This is a non-diversified large and mid-cap stock fund that seeks income and
long-term capital appreciation.
The Fund invests primarily in a diversified mix of common stocks of large and
mid-sized U.S. companies.
The Fund employs two subadvisers, each of which employs its own investment
approach and independently manages its portion of the Fund. On or about Novem-
ber 1, 2000, the assets of the Fund were allocated between the two subadvisers
with Putnam receiving $1 billion (approximately 26% of the Fund's assets as of
October 31, 2000) and Independence the remainder. All subsequent investments in
the Fund will be allocated equally between the two subadvisers, while redemp-
tions will be allocated on an asset-weighted basis. These allocation methodolo-
gies may change in the future.
Independence Investment LLC ("Independence") selects stocks using a combination
of proprietary equity research and quantitative tools. Stocks are purchased
that are undervalued relative to the stock's history and have improving earn-
ings growth prospects.
Independence seeks to maintain risk and sector characteristics similar to the
market benchmark for its portion of the Fund. Independence normally invests in
80 to 160 stocks, with at least 65% (usually higher) of its assets in large cap
companies.
Putnam Investment Management, LLC ("Putnam") selects stocks using a combination
of:
. a systematic screening approach to rank stocks based on: fundamental cata-
lyst (such as earnings surprise and momentum); valuation (such as price-to-
sales ratio); and financial strength (such as superior cash flow); and
. proprietary fundamental equity research to identify companies with strong
and innovative management teams, opportunities for above average growth
within their industry and strong competitive positioning relative to peers
and suppliers.
Putnam seeks broad diversification by security and sector and uses risk manage-
ment tools and qualitative judgement to determine sector and stock-specific
weightings. Putnam normally invests in 65 to 110 stocks, with at least 65%
(usually higher) of its assets in large and mid cap companies.
The Fund is "non-diversified", which means that it can take larger positions in
individual issuers.
Each portion of the Fund normally has 10% or less (usually lower) of its assets
in cash and cash equivalents. Each portion of the Fund may invest in initial
public offerings (IPOs). Each portion of the Fund may purchase other types of
securities that are not primary investment vehicles, for example: U.S. dollar
denominated foreign securities, and certain derivatives (investments whose
value is based on indices or other securities). As an example of how deriva-
tives may be used, Putnam may invest in stock index futures to manage cash
flow.
In abnormal market conditions, each portion of the Fund may take temporary
defensive measures--such as holding unusually large amounts of cash and cash
equivalents--that are inconsistent with the Fund's primary investment strategy.
In taking those measures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund and its predecessor since March, 1986
Managed approximately $25 billion in assets at end of 2000
FUND MANAGERS
Management by investment team overseen by:
Paul F. McManus
- -----------------
Senior Vice President of subadviser
Joined team in 1996
Joined subadviser in 1982
SUBADVISER
Putnam Investment Management, LLC
One Post Office Square
Boston, Massachusetts 02109
Managing since 1937
Managing Fund since November, 2000
Managed approximately $370 Billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
C. Beth Cotner, CFA
- -----------------
Managing Director and Chief Investment Officer of subadviser
Joined subadviser in 1995
Began career in 1976
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may also help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 24.07%, fourth quarter 1998 Worst quarter: down 12.05%, third
quarter 1998
Average annual total return -- for periods ending 12/31/2000*
Fund Index
1 year -13.10% -9.11%
5 years 15.44% 18.35%
10 years 15.58% 17.46%
Life of fund 14.17% 15.26%
Index:S & P 500 Index
*Began operations on March 29, 1986.
8
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large/mid cap" approach carries the risk that in certain markets
large/mid cap stocks will underperform small cap stocks.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds.
The less diversified a fund's holdings are, the more likely it is that a spe-
cific security's poor performance will hurt the fund significantly.
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December
31: 1996 1997 1998 1999 2000
Net asset value,
beginning of period $ 13.94 $ 14.65 $ 16.61 $ 19.49 $ 20.01
Income from investment
operations:
Net investment income
(loss) 0.34 0.27 0.23 0.20 0.17
Net realized and
unrealized gain (loss)
on investments* 2.43 4.07 4.75 2.88 (2.77)
Total from investment
operations 2.77 4.34 4.98 3.08 (2.60)
Less distributions:
Distributions from net
investment income and
capital paid in (0.34) (0.27) (0.23) (0.20) (0.40)
Distributions from net
realized gain on
investments sold (1.72) (2.11) (1.87) (2.36) (2.69)
Distributions in excess
of income, capital
paid in & gains -- -- -- -- (0.14)
Total distributions (2.06) (2.38) (2.10) (2.56) (3.23)
Net asset value, end of
period $ 14.65 $ 16.61 $ 19.49 $ 20.01 $ 14.18
Total investment return 20.10% 29.79% 30.25% 16.23% (13.10)%
Ratios and supplemental
data
Net assets, end of
period (000s
omitted)($) $2,047,927 $2,785,964 $3,670,785 $4,218,841 $3,324,988
Ratio of expenses to
average net assets (%) 0.27% 0.28% 0.27% 0.28% 0.40%
Ratio of net investment
income (loss) to
average net assets (%) 2.24% 1.61% 1.24% 0.98% 0.84%
Turnover rate (%) 81.02% 74.56% 48.45% 70.16% 112.94%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
9
Large Cap Value Fund
GOAL AND STRATEGY
This is a large cap stock fund with a value emphasis that seeks long-term capi-
tal appreciation and substantial dividend income.
The Fund invests primarily in a diversified mix of common stocks of large
established U.S. companies paying above-average dividends.
The manager employs a value approach in selecting stocks using proprietary
equity research. Stocks are purchased that are undervalued by various measures
such as the stock's current price relative to its earnings potential.
The manager looks for companies with:
. established operating history;
. above-average dividend yield relative to the S&P 500 Index;
. low price/earnings ratio relative to the S&P 500 Index;
. sound balance sheet and other positive financial characteristics; and
. low stock price relative to the company's underlying value.
The Fund's sector exposures are a result of stock selection as opposed to pre-
determined allocations. The Fund normally invests in 100 to 175 stocks, with at
least 65% (usually higher) of its assets in large cap companies. The Fund nor-
mally has 10% or less (usually lower) of its assets in cash and cash equiva-
lents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: foreign securities denominated in U.S. dollars or any
other currency, high and medium quality debt securities, and certain deriva-
tives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
Note: "S&P 500 Index" means the Standard & Poor's 500 Composite Stock Price
Index. "Standard & Poor's", "S&P" and "S&P 500" are trademarks of McGraw Hill,
Inc. and have been licensed for use by the Trust.
- --------------------------------------------------------------------------------
SUBADVISER
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Managing since 1937
Managing Fund since May, 1996
Managed approximately $167 billion in assets at the end of 2000
FUND MANAGERS
Management by Investment Advisory Committee
Brian C. Rogers, CFA, CIC
- -----------------
Committee Chairman
Director of subadviser
Joined subadviser in 1982
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may also help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 12.86%, fourth quarter 1999 Worst quarter: down 8.58%, third
quarter 1999
Average annual total return -- for periods ending 12/31/2000*
Fund Index
1 year 12.97% 7.01%
Life of fund 14.30% 16.74%
Index:Russell 1000(R) Value Index
*Began operations on May 1, 1996.
10
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "value" approach carries the risk that in certain markets "value"
stocks will underperform "growth" stocks. Also, the Fund's "large cap"
approach carries the risk that in certain markets large cap stocks will
underperform small cap and mid cap stocks.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996** 1997 1998 1999 2000
Net asset value, beginning of
period $ 10.00 $ 11.09 $ 13.57 $ 14.02 $ 13.49
Income from investment
operations:
Net investment income (loss) 0.16 0.29 0.28 0.27 0.27
Net realized and unrealized
gain (loss) on investments* 1.22 2.84 0.96 0.18 1.45
Total from investment
operations 1.38 3.13 1.24 0.45 1.72
Less distributions:
Distributions from net
investment income and
capital paid in (0.16) (0.29) (0.28) (0.27) (0.29)
Distributions from net
realized gain on investments
sold (0.13) (0.36) (0.51) (0.71) (0.53)
Distributions in excess of
income, capital paid in &
gains -- -- -- -- (0.01)
Total distributions (0.29) (0.65) (0.79) (0.98) (0.83)
Net asset value, end of period $ 11.09 $ 13.7 $ 14.02 $ 13.49 $ 14.38
Total investment return 13.90% 28.56% 9.26% 3.28% 12.97%
Ratios and supplemental data
Net assets, end of period
(000s omitted)($) $19,781 $73,269 $123,365 $155,849 $204,535
Ratio of expenses to average
net assets (%)*** 1.00% 1.0% 0.92% 0.85% 0.78%
Ratio of net investment income
(loss) to average net assets
(%) 2.74% 2.4% 2.08% 1.88% 2.04%
Turnover rate (%) 19.95% 19.2% 18.46% 32.62% 42.12%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.89% and 1.06% for the years
ended December 31, 1996 and 1997, respectively.
11
Large Cap Value CORE SM Fund
GOAL AND STRATEGY
This is a large cap stock fund with a value emphasis that seeks long-term capi-
tal appreciation and dividend income.
The Fund invests primarily in a diversified mix of common stocks of large
established U.S. companies that are believed to offer favorable prospects for
increasing dividends and growth in capital.
The manager selects stocks using a combination of quantitative techniques and
fundamental equity research. The manager employs an investment process known as
CORE, "Computer Optimized, Research-Enhanced," that employs a proprietary quan-
titative model. "CORE SM" is a service mark of Goldman, Sachs & Co. The manager
identifies stocks that have strong expected earnings growth and momentum and
better valuation and risk characteristics than the Russell 1000(R) Value Index.
Stocks are purchased that have:
. Low to modest valuation characteristics relative to general market measures,
such as price/earnings ratio, book value and other fundamental accounting
measures, and
. favorable prospects for capital appreciation and/or dividend paying ability.
The Fund is managed using risk control techniques to maintain risk, style, cap-
italization and sector characteristics similar to the Russell 1000(R) Value
Index. The Fund is broadly diversified by sector.
The Fund normally invests in 100 to 350 stocks, with at least 65% (usually
higher) of the Fund's assets in large cap companies. The Fund normally has 10%
or less (usually lower) of its assets in cash and cash equivalents. The Fund
may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, Standard &
Poor's Depositary Receipts (SPDRs) and other Exchange Traded Funds (ETFs), and
certain derivatives (investments whose value is based on indices or other secu-
rities). As an example of how derivatives may be used, the Fund may invest in
stock index futures to manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Goldman Sachs Asset Management,
A unit of the Investment Management
Division of Goldman, Sachs & Co.
32 Old Slip
New York, New York 10005
Managing since 1988
Managing Fund since August, 1999
Managed approximately $282 billion
in assets at the end of 2000
FUND MANAGERS
Robert C. Jones
- -----------------
Managing Director of subadviser
Joined subadviser in 1989
Melissa R. Brown
- -----------------
Managing Director of subadviser
Joined subadviser in 1998
Director of Quantitative Equity Research at Prudential Securities (1983-1998)
Victor H. Pinter
- -----------------
Vice President of subadviser
Joined subadviser in 1989
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
Best quarter: up 8.62%, third quarter 2000 Worst quarter: down 4.14%, first
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 5.12% 7.01%
Life of fund 6.58% 6.59%
Index:Russell 1000(R) Value Index
* Began operations on August 31, 1999.
12
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "value" approach carries the risk that in certain markets "value"
stocks will underperform "growth" stocks. Also, the Fund's "large cap"
approach carries the risk that in certain markets large cap stocks will
underperform small and mid cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1999** 2000
Net asset value, beginning of period $10.00 $ 10.16
Income from investment operations:
Net investment income (loss) 0.04 0.15
Net realized and unrealized gain (loss) on investments* 0.31 0.36
Total from investment operations 0.35 0.51
Less distributions:
Distributions from net investment income and capital paid in (0.04) (0.16)
Distributions from net realized gain on investments sold (0.14) (0.06)
Distributions in excess of income, capital paid in & gains (0.01) (0.03)
Total distributions (0.19) (0.25)
Net asset value, end of period $10.16 $ 10.42
Total investment return 3.58% 5.12%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $6,371 $18,164
Ratio of expenses to average net assets (%)*** 0.85% 0.85%
Ratio of net investment income (loss) to average net assets
(%) 1.13% 1.54%
Turnover rate (%) 30.90% 59.15%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.17% and 1.09% for the years
ended December 31, 1999 and 2000, respectively.
13
Large Cap Value CORE SM II Fund
(Formerly American Leaders Large Cap Value Fund)
GOAL AND STRATEGY
This is a large cap stock fund with a value emphasis that seeks long-term capi-
tal appreciation and dividend income.
The Fund invests primarily in a diversified mix of common stocks of large
established U.S. companies that are believed to offer favorable prospects for
increasing dividends and growth in capital.
The manager selects stocks using a combination of quantitative techniques and
fundamental equity research. The manager employs an investment process known as
CORE, "Computer Optimized, Research-Enhanced," that employs a proprietary quan-
titative model. "CORE SM" is a service mark of Goldman, Sachs & Co. The manager
identifies stocks that have strong expected earnings growth
and momentum and better valuation and risk characteristics than the Russell
1000(R) Value Index.
Stocks are purchased that have:
. Low to modest valuation characteristics relative to general market measures,
such as price/earnings ratio, book value and other fundamental accounting
measures, and
. favorable prospects for capital appreciation and/or dividend paying ability.
The Fund is managed using risk control techniques to maintain risk, style, cap-
italization and sector characteristics similar to the Russell 1000(R) Value
Index. The Fund is broadly diversified by sector.
The Fund normally invests in 100 to 350 stocks, with at least 65% (usually
higher) of the Fund's assets in large cap companies. The Fund normally has 10%
or less (usually lower) of its assets in cash and cash equivalents. The Fund
may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, Standard &
Poor's Depositary Receipts (SPDRs) and other Exchange Traded Funds (ETFs), and
certain derivatives (investments whose value is based on indices or other secu-
rities). As an example of how derivatives may be used, the Fund may invest in
stock index futures to manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Goldman Sachs Asset Management,
A unit of the Investment Management
Division of Goldman, Sachs & Co.
32 Old Slip
New York, New York 10005
Managing since 1988
Managing Fund since January, 2001
Managed approximately $282 billion
in assets at the end of 2000
FUND MANAGERS
Robert C. Jones
- -----------------
Managing Director of subadviser
Joined subadviser in 1989
Melissa R. Brown
- -----------------
Managing Director of subadviser
Joined subadviser in 1998
Director of Quantitative Equity Research at Prudential Securities (1983-1998)
Victor H. Pinter
- -----------------
Vice President of subadviser
Joined subadviser in 1989
PAST PERFORMANCE
Because this Fund did not have a full year of operations as of December 31,
2000, no year-by-year total returns or average annual total returns can be
shown for this Fund.
14
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific investment cate-
gory may lag the returns of the overall stock market. For example, the Fund's
"value" approach carries the risk that in certain markets "value" stocks will
underperform "growth" stocks. Also, the Fund's "large cap" approach carries
the risk that in certain markets large cap stocks will underperform small cap
and mid cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Large Cap Value CORESM II Fund (formerly American Leaders Large Cap
Value Fund) -- Period ended December 31: 2000**
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income (loss) 0.06
Net realized and unrealized gain (loss) on investments* 0.74
Total from investment operations 0.80
Less distributions:
Distributions from net investment income and capital paid in (0.06)
Distributions from net realized gain on investments sold (0.03)
Distributions in excess of income, capital paid in & gains --
Total distributions (0.09)
Net asset value, end of period $10.71
Total investment return 8.02%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $6,029
Ratio of expenses to average net assets (%) 0.85%
Ratio of net investment income (loss) to average net assets (%) 1.22%
Turnover rate (%) 17.16%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations June 30, 2000.
15
Large Cap Growth Fund
GOAL AND STRATEGY
This is a non-diversified large cap stock fund with a growth emphasis that
seeks capital appreciation.
The Fund invests primarily in a diversified mix of common stocks of large
established U.S. companies that are believed to offer above-average potential
for growth in revenues and earnings.
The manager selects stocks using a combination of proprietary equity research
and quantitative tools. Stocks are purchased that are undervalued relative to
the stock's history and have improving earnings growth prospects. The manager
seeks to maintain risk and sector characteristics similar to the Russell
1000(R) Growth Index.
The Fund is "non-diversified", which means it can take larger positions in
individual issuers. However, the Fund normally invests in 80 to 160 stocks,
with at least 65% (usually higher) of its assets in large cap companies. The
Fund normally has 10% or less (usually lower) of its assets in cash and cash
equivalents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund and its predecessor since March, 1986
Managed approximately $25 billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
Mark C. Lapman
- -----------------
Executive Vice President of subadviser
Joined team in 1996
Joined subadviser in 1982
Began career in 1979
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 27.79%, fourth quarter 1998 Worst quarter: down 11.16%, third
quarter 1998
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -17.89% -22.42%
5 years 17.08% 18.15%
10 years 16.24% 17.33%
Life of fund 14.89% 14.98%
Index:Russell 1000(R) Growth Index
* Began operations on March 29, 1986.
16
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds.
The less diversified a fund's holdings are, the more likely it is that a spe-
cific security's poor performance will hurt the fund significantly.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "large cap" approach
carries the risk that in certain markets large cap stocks will underperform
small cap and mid cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December
31: 1996 1997 1998 1999 2000
Net asset value,
beginning of period $ 17.37 $ 17.49 $ 20.82 $ 26.19 $ 27.33
Income from investment
operations:
Net investment income
(loss) 0.25 0.17 0.14 0.09 0.03
Net realized and
unrealized gain (loss)
on investments* 2.89 5.21 8.05 6.03 (4.89)
Total from investment
operations 3.14 5.38 8.19 6.12 (4.86)
Less distributions:
Distributions from net
investment income and
capital paid in (0.25) (0.17) (0.14) (0.09) (0.11)
Distributions from net
realized gain on
investments sold (2.77) (1.88) (2.68) (4.89) (2.69)
Distributions in excess
of income, capital
paid in & gains -- -- -- -- (0.78)
Total distributions (3.02) (2.05) (2.82) (4.98) (3.58)
Net asset value, end of
period $ 17.49 $ 20.82 $ 26.19 $ 27.33 $ 18.89
Total investment return 18.27% 30.89% 39.51% 24.07% (17.89)%
Ratios and supplemental
data
Net assets, end of
period (000s
omitted)($) $524,145 $754,398 $1,126,764 $1,382,473 $1,146,787
Ratio of expenses to
average net assets (%) 0.44% 0.44% 0.41% 0.39% 0.46%
Ratio of net investment
income (loss) to
average net assets (%) 1.35% 0.86% 0.59% 0.33% 0.10%
Turnover rate (%) 135.98% 83.82% 56.41% 37.42% 89.30%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
17
Large Cap Aggressive Growth Fund
GOAL AND STRATEGY
This is a non-diversified large cap stock fund with a growth emphasis that
seeks long-term capital appreciation.
The Fund invests primarily in the common stocks of large established U.S. com-
panies that are believed to offer above-average potential for long-term growth
in revenues and earnings.
The manager selects stocks using proprietary company-specific research that
focuses on firms:
. offering superior earnings growth that is not fully reflected in current mar-
ket valuations,
. having prospective earnings growth rates substantially above that of the S&P
500, and
. exhibiting strong management, superior industry positions and excellent bal-
ance sheets.
The Fund employs aggressive investment strategies and invests most of its
assets in a relatively small number of companies, with the 25 most highly
regarded stocks representing a majority of the Fund's assets. The manager
selects stocks without regard to any predefined sector selection criteria.
The manager actively trades and adjusts the Fund's holdings to capitalize on
market fluctuations. The manager typically:
. increases investment in favored securities and reduces the number of holdings
in declining markets, and
. decreases investment in favored securities and increases the number of hold-
ings in rising markets.
The Fund is "non-diversified", which means it can take larger positions in
individual issuers. The Fund normally invests in 35 to 75 stocks, with at least
65% (usually higher) of its assets in large cap companies. The Fund normally
has 10% or less (usually lower) of its assets in cash and cash equivalents. The
Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
Managing, with predecessors, since 1971
Managing Fund since August, 1999
Managed approximately $454 billion
in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
John H. Fogarty
- -----------------
Vice president of subadviser
Joined subadviser in 1988
Began career in 1988
Alfred Harrison
- -----------------
Vice chairman and Director of subadviser
Joined subadviser in 1978
Began career in 1962
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the vari-
able contracts. Such fees and charges would cause the invesment returns under
the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
Best quarter: up 20.81%, fourth quarter 1999 Worst quarter: down 15.21%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -18.77% -22.42%
Life of fund -1.79% -3.74%
Index:Russell 1000(R) Growth Index
* Began operations on August 31, 1999.
18
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds.
The less diversified a fund's holdings are, the more likely it is that a spe-
cific security's poor performance will hurt the fund significantly.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "large cap" approach
carries the risk that large cap stocks will underperform small cap and mid cap
stocks.
Concentration Risk: The Fund's investment in securities of a smaller number of
issuers could produce more volatile performance relative to funds that invest
in a larger number of issuers. The more concentrated a fund's holdings are,
the more likely it is a specific security's poor performance will hurt the
fund significantly.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1999** 2000
Net asset value, beginning of period $ 10.00 $ 11.94
Income from investment operations:
Net investment income (loss) (0.01) 0.03)
Net realized and unrealized gain (loss) on investments* 2.03 (2.21)
Total from investment operations 2.02 (2.24)
Less distributions:
Distributions from net investment income and capital paid
in -- (0.11)
Distributions from net realized gain on investments sold (0.08) (0.01)
Distributions in excess of income, capital paid in &
gains -- (0.06)
Total distributions (0.08) (0.18)
Net asset value, end of period $ 11.94 $ 9.52
Total investment return 20.18% (18.77)%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $15,074 $26,244
Ratio of expenses to average net assets (%)*** 1.08% 1.00%
Ratio of net investment income (loss) to average net
assets (%) (0.39)% (0.37)%
Turnover rate (%) 18.97% 75.97%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.17% and 1.05% for the years
ended December 31, 1999 and 2000, respectively.
19
Large/Mid Cap Value Fund
GOAL AND STRATEGY
This is a large/mid cap stock fund with a value emphasis that seeks long-term
capital appreciation.
The Fund invests primarily in a diversified mix of common stocks of large- and
mid-sized U.S. companies that are believed to offer favorable prospects for
increasing dividends and growth in capital.
The manager employs a value approach in selecting stocks, using proprietary
equity research to identify stocks having distinct value characteristics based
on industry- specific valuation criteria.
The manager screens the investable universe for:
. stocks in the Russell 1000(R) Value Index, or
. stocks with dividend yields greater than the Russell 1000(R) Index, or
. stocks with price/book ratios lower than the Russell 1000(R) Index.
The Fund's assets are allocated to industry-specific sub-portfolios that are
managed by each industry analyst. The manager oversees the Fund to maintain
capitalization and sector weights similar to the Russell 1000(R) Value Index.
The Fund normally invests in 90 to 130 stocks, with at least 65% (usually high-
er) of its assets in large and mid cap companies. The Fund normally has 10% or
less (usually lower) of its assets in cash and cash equivalents. The Fund may
invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
As an example of how derivatives may be used, the Fund may invest in stock
index futures to manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Managing, with predecessors, since 1928
Managing Fund since August, 1999
Managed approximately $274 billion
in assets at the end of 2000
FUND MANAGERS
Management by Global Research Team overseen by:
Doris Dwyer Chu
- -----------------
Vice President of subadviser
Joined subadviser in 1998
Partner and portfolio manager at Grantham,
Mayo, Van Otterloo & Co. (1985-1998)
Laurie A. Gabriel
- -----------------
Managing Partner of subadviser
Joined subadviser in 1976
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the vari-
able contracts. Such fees and charges would cause the investment returns under
the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
Best quarter: up 11.62%, first quarter 2000 Worst quarter: down 5.65%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 13.41% 7.01%
Life of fund 13.76% 6.59%
Index:Russell 1000(R) Value Index
* Began operations on August 31, 1999.
20
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Small /Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "value" approach carries the risk that in certain markets "value" stocks
will underperform "growth" stocks. Also, the Fund's "large/mid cap" approach
carries the risk that large/mid cap stocks will underperform small cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund with
a small asset base. Also, the Fund's investments in IPOs may be subject to more
erratic price movements than the overall equity market.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1999** 2000
Net asset value, beginning of period $10.00 $ 10.42
Income from investment operations:
Net investment income (loss) 0.03 0.09
Net realized and unrealized gain (loss) on investments* 0.45 1.30
Total from investment operations 0.48 1.39
Less distributions:
Distributions from net investment income and capital paid in (0.03) (0.10)
Distributions from net realized gain on investments sold (0.02) (0.08)
Distributions in excess of income, capital paid in & gains (0.01) (0.06)
Total distributions (0.06) (0.24)
Net asset value, end of period $10.42 $ 11.57
Total investment return 4.72% 13.41%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $6,101 $15,728
Ratio of expenses to average net assets (%)*** 1.05% 1.05%
Ratio of net investment income (loss) to average net assets
(%) 0.94% 0.97%
Turnover rate (%) 23.03% 86.97%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.42% and 1.36% for the years
ended December 31, 1999 and 2000, respectively.
21
Large/Mid Cap Value II Fund
(Formerly Mid Cap Value Fund)
GOAL AND STRATEGY
This is a large/mid cap stock fund with a value emphasis that seeks long-term
capital appreciation.
The Fund invests primarily in a diversified mix of common stocks of large- and
mid-sized U.S. companies that are believed to offer favorable prospects for
increasing dividends and growth in capital.
The manager employs a value approach in selecting stocks, using proprietary
equity research to identify stocks having distinct value characteristics based
on industry- specific valuation criteria.
The manager screens the investable universe for:
. stocks in the Russell 1000(R) Value Index, or
. stocks with dividend yields greater than the Russell 1000(R) Index, or
. stocks with price/book ratios lower than the Russell 1000(R) Index.
The Fund's assets are allocated to industry-specific sub-portfolios that are
managed by each industry analyst. The manager oversees the Fund to maintain
capitalization and sector weights similar to the Russell 1000(R) Value Index.
The Fund normally invests in 90 to 130 stocks, with at least 65% (usually high-
er) of its assets in large and mid cap companies. The Fund normally has 10% or
less (usually lower) of its assets in cash and cash equivalents. The Fund may
invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
As an example of how derivatives may be used, the Fund may invest in stock
index futures to manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Managing, with predecessors, since 1928
Managing Fund since January, 2001
Managed approximately $274 billion
in assets at the end of 2000
FUND MANAGERS
Management by Global Research Team overseen by:
Doris Dwyer Chu
- -----------------
Vice President of subadviser
Joined subadviser in 1998
Partner and portfolio manager at Grantham,
Mayo, Van Otterloo & Co. (1985-1998)
Laurie A. Gabriel
- -----------------
Managing Partner of subadviser
Joined subadviser in 1976
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 17.06%, third quarter 1997 Worst quarter: down 21.29%, third
quarter 1998
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 28.38% 19.18%
Life of fund 14.01% 14.72%
Index:Russell Mid Cap(TM) Value Index
* Began operations on May 1, 1996.
22
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Small /Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized com-
panies may be subject to more erratic price movements than investment in large
established companies.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "value" approach carries the risk that in certain markets "value"
stocks will underperform "growth" stocks. Also, the Fund's "large/mid cap"
approach carries the risk that in certain markets large cap and mid cap stocks
will underperform small cap stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high.
Although the Fund's turnover rate has been high in recent years, the current
manager anticipates that the Fund's turnover rate will normally be less than
100%.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Large/Mid Cap Value II Fund
(formerly Mid Cap Value
Fund)--Period ended December
31: 1996** 1997 1998 1999 2000
Net asset value, beginning of
period $ 10.00 $ 11.35 $ 13.87 $ 12.19 $ 12.78
Income from investment
operations:
Net investment income (loss) 0.04 0.05 0.11 0.08 0.06
Net realized and unrealized
gain (loss) on investments* 1.57 3.59 (1.68) 0.59 3.51
Total from investment
operations 1.61 3.64 (1.57) 0.67 3.57
Less distributions:
Distributions from net
investment income and capital
paid in (0.04) (0.05) (0.11) (0.08) (0.06)
Distributions from net
realized gain on investments
sold (0.22) (1.07) -- -- (0.41)
Distributions in excess of
income, capital paid in &
gains -- -- -- -- (1.23)
Total distributions (0.26) (1.12) (0.11) (0.08) (1.70)
Net asset value, end of period $ 11.35 $ 13.87 $ 12.19 $ 12.78 $ 14.65
Total investment return 16.18% 32.17% (11.33)% 5.52% 28.38%
Ratios and supplemental data
Net assets, end of period (000s
omitted)($) $10,926 $64,973 $94,820 $92,150 $129,233
Ratio of expenses to average
net assets (%)*** 1.05% 1.05% 0.96% 0.92% 0.87%
Ratio of net investment income
(loss) to average net assets
(%) 0.69% 0.53% 0.93% 0.64% 0.42%
Turnover rate (%) 62.99% 93.78% 173.33% 137.06% 235.80%
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing of
purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Fund began operations on May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 2.15% and 1.14% for the years
ended December 31, 1996, and 1997, respectively.
23
Fundamental Growth Fund
GOAL AND STRATEGY
This is a stock fund with a growth emphasis that seeks long-term capital appre-
ciation.
The Fund invests primarily in the common stocks of large-sized and mid-sized
U.S. companies that are believed to offer above-average potential for growth in
revenues and earnings.
The manager selects stocks using proprietary fundamental equity research and a
systematic screening approach. The manager screens the universe for stocks that
meet minimum size and earnings growth criteria. The manager employs a proprie-
tary quantitative model to rank stocks based on:
. fundamental catalyst (such as earnings surprise and momentum);
. valuation (such as price-to sales ratio); and
. financial strength (such as superior cash flow).
The manager uses fundamental equity research with a global equity research team
to identify companies with characteristics such as:
. strong and innovative management teams;
. opportunities for above average growth within its industry;
. strong competitive positioning relative to peers and suppliers;
. sufficient financial strength to grow the business; and
. reasonable valuations relative to earnings expectations.
The manager uses risk management tools and qualitative judgement to determine
the Fund's sector and stock-specific weightings. The Fund is broadly diversi-
fied by sector. The Fund normally invests in 90 to 150 stocks, with at least
65% (usually higher) of its assets in large and mid cap companies. The Fund
normally has 10% or less (usually lower) of its assets in cash and cash equiva-
lents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
As an example of how derivatives may be used, the Fund may invest in stock
index futures to manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Putnam Investment Management, LLC
One Post Office Square
Boston, Massachusetts 02119
Managing since 1937
Managing Fund since August, 2000
Managed approximately $370 billion
in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
Eric M. Wetlaufer, CFA
- -----------------
Managing Director and Chief Investment Officer of subadviser
Joined subadviser in 1997
Managing Director and Portfolio Manager at Cadence Capital Management (1991 --
1997)
Began career in 1985
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the vari-
able contracts. Such fees and charges would cause the investment returns under
the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
Best quarter: up 54.57%, third quarter 1999 Worst quarter: down 20.91%, second
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -3.03% -11.75%
Life of fund 35.44% 16.11%
Index:Russell Mid Cap(TM) Growth Index
* Began operations on August 31, 1999.
24
MAIN RISKS
Primary
Small /Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized com-
panies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "large/mid cap"
approach carries the risk that large/mid cap stocks will underperform small
cap stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1999** 2000
Net asset value, beginning of period $10.00 $ 14.42
Income from investment operations:
Net investment income (loss) (0.02) (0.02)
Net realized and unrealized gain (loss) on investments* 5.34 (0.44)
Total from investment operations 5.32 (0.46)
Less distributions:
Distributions from net investment income and capital paid
in -- (0.03)
Distributions from net realized gain on investments sold (0.90) (0.76)
Distributions in excess of income, capital paid in & gains -- (0.65)
Total distributions (0.90) (1.44)
Net asset value, end of period $14.42 $ 12.52
Total investment return 54.57% (3.03)%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $9,175 $46,114
Ratio of expenses to average net assets (%)*** 0.95% 0.96%
Ratio of net investment income (loss) to average net assets
(%) (0.55)% (0.38)%
Turnover rate (%) 61.66% 250.46%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.09% and 1.00% for the years
ended December 31, 1999 and 2000, respectively.
25
Mid Cap Blend Fund
GOAL AND STRATEGY
This is a mid cap stock fund that seeks long-term capital appreciation.
The Fund invests primarily in a diversified mix of common stocks of mid-sized
U.S. companies that are believed to offer:
. favorable prospects for increasing dividends and capital appreciation
(i.e., "value" companies), and
. above-average potential for growth in revenues and earnings (i.e. "growth"
companies).
The manager selects stocks using a combination of proprietary equity research
and quantitative tools. Stocks are purchased that are undervalued relative to
the stock's history and have improving earnings growth prospects. The manager
seeks to maintain risk and sector characteristics similar to the Russell Mid
Cap(TM) Index.
The Fund normally invests in 80 to 160 stocks, with at least 65% (usually high-
er) of its assets in mid cap companies. The Fund normally has 10% or less (usu-
ally lower) of its assets in cash and cash equivalents. The Fund may invest in
initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund since August, 1999
Managed approximately $25 billion
in assets at the end of 2000
FUND MANAGERS
Management by investment team
overseen by:
Coreen S. Kraysler, CFA
- -----------------
Senior Vice President of subadviser
Joined subadviser in 1986
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the vari-
able contracts. Such fees and charges would cause the investment returns under
the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
Best quarter: up 14.64%, second quarter 1999 Worst quarter: down 2.71%, third
quarter 1999
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 18.58% 8.25%
Life of fund 23.31% 16.40%
Index:Russell Mid Cap(TM) Index
* Began operations on August 31, 1999.
26
MAIN RISKS
Primary
Small /Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized com-
panies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "mid cap" approach carries the risk that in certain markets "mid cap"
stocks will underperform "large cap" and "small cap" stocks. Also, the Fund's
"blend" style carries the risk that in certain markets, "blend" styles will
underperform "growth" and "value" styles.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. The
Fund had a high turnover rate in 2000 because of higher than expected market
volatility. Normally, the Fund's turnover rate is expected to be less than
100%.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1999 2000
Net asset value, beginning of period $10.00 $ 10.70
Income from investment operations:
Net investment income (loss) 0.03 0.04
Net realized and unrealized gain (loss) on investments* 1.10 1.93
Total from investment operations 1.13 1.97
Less distributions:
Distributions from net investment income and capital paid in (0.03) (0.04)
Distributions from net realized gain on investments sold (0.40) (0.24)
Distributions in excess of income, capital paid in & gains -- (0.27)
Total distributions (0.43) (0.55)
Net asset value, end of period $10.70 $ 12.12
Total investment return 11.53% 18.58%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $5,810 $21,259
Ratio of expenses to average net assets (%)*** 0.85% 0.85%
Ratio of net investment income (loss) to average net assets
(%) 0.82% 0.44%
Turnover rate (%) 55.68% 138.64%
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing of
purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Fund began operations on August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.20% and 1.04% for the years
ended December 31, 1999 and 2000, respectively.
27
Mid Cap Growth Fund
GOAL AND STRATEGY
This is a non-diversified mid cap stock fund with a growth emphasis that seeks
long-term capital appreciation.
The Fund invests primarily in the common stocks of mid-sized U.S. companies
that are believed to offer above-average potential for growth in revenues and
earnings.
The manager selects stocks using proprietary equity research. Stocks are pur-
chased that are expected to have earnings growth potential that may not be rec-
ognized by the investment community. The manager selects stocks without regard
to any pre- defined sector selection criteria.
The manager looks for companies experiencing:
. above-average growth relative to their peers or the general economy; and
. positive change due to new product developments, improved regulatory environ-
ment or a new management team.
The Fund is "non-diversified", which means it can take larger positions in
individual issuers. The Fund normally invests in 35 to 85 stocks, with at least
65% of its assets in mid cap companies. The Fund normally has 15% or less of
its assets in cash and cash equivalents. The Fund's sector exposures are a
result of stock selection as opposed to predetermined allocations. The Fund may
invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: foreign securities denominated in U.S. dollars or any
other currency, and certain derivatives (investments whose value is based on
indices or other securities). As an example of the use of derivatives, the Fund
may use futures and forwards to implement currency management strategies and
manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Janus Capital Corporation
100 Fillmore Street
Denver, Colorado 80206
Managing since 1970
Managing Fund since May, 1996
Managed approximately $250 billion
in assets at the end of 2000
FUND MANAGER
James P. Goff
- -----------------
Executive Vice President of subadviser
Managed fund since 1996 (its inception)
Joined subadviser in 1988
Began career in 1985
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 59.33%, fourth quarter 1999 Worst quarter: down 29.24%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -35.86% -11.75%
Life of fund 19.90% 16.39%
Index:Russell Mid Cap(TM) Growth Index
*Began operations on May 1, 1996.
28
MAIN RISKS
Primary
Small /Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized com-
panies may be subject to more erratic price movements than investment in large
established companies.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds.
The less diversified a fund's holdings are, the more likely it is that a spe-
cific security's poor performance will hurt the fund significantly.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "mid cap" approach
carries the risk that in certain markets mid cap stocks will underperform
small cap and large cap stocks.
Concentration Risk: The Fund's investment in securities of a smaller number of
issuers could produce more volatile performance relative to funds that invest
in a larger number of issuers. The more concentrated a fund's holdings are,
the more likely it is a specific security's poor performance will hurt the
fund significantly.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could be- come harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share Interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996** 1997 1998 1999 2000
Net asset value, beginning
of period $ 10.00 $ 10.22 $ 11.93 $ 15.12 $ 29.22
Income from investment
operations:
Net investment income
(loss) 0.05 (0.02) (0.09) (0.19) (0.05)
Net realized and unrealized
gain (loss) on
investments* 0.22 1.73 4.75 17.70 (10.49)
Total from investment
operations 0.27 1.71 4.66 17.51 (10.54)
Less distributions:
Distributions from net
investment income and
capital paid in (0.05) -- (0.15) -- (1.06)
Distributions from net
realized gain on
investments sold -- -- (1.32) (3.41) (0.41)
Distributions in excess of
income, capital paid in &
gains -- -- -- -- (1.61)
Total distributions (0.05) -- (1.47) (3.41) (3.08)
Net asset value, end of
period $ 10.22 $ 11.93 $ 15.12 $ 29.22 $ 15.60
Total investment return 2.69% 16.66% 39.07% 118.31% (35.86)%
Ratios and supplemental data
Net assets, end of period
(000s omitted)($) $16,492 $40,235 $94,085 $452,937 $393,988
Ratio of expenses to average
net assets (%)*** 1.10% 1.10% 1.10% 0.93% 0.85%
Ratio of net investment
income (loss) to average
net assets (%) 0.92% (0.26% (0.64)% (0.68)% (0.43)%
Turnover rate (%) 71.25% 124.04% 137.01% 106.06% 140.94%
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing of
purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Fund began operations May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 2.34%, 1.42% and 1.13% for
the years ended December 31, 1996, 1997, and 1998, respectively.
29
Small/Mid Cap CORE SM Fund
GOAL AND STRATEGY
This is a small/mid cap stock fund that seeks long-term capital appreciation.
The Fund invests primarily in a diversified mix of the common stocks of small
and mid-sized U.S. companies that are believed to offer:
. favorable prospects for increasing dividends and capital appreciation (i.e.,
"value" companies); and
. above-average potential for growth in revenues and earnings (i.e. "growth"
companies).
The manager selects stocks using a combination of quantitative techniques and
equity research. The manager employs an investment process known as CORE, "Com-
puter Optimized, Research-Enhanced," that employs a proprietary quantitative
model. "CORE SM" is a service mark of Goldman, Sachs & Co. Stocks are purchased
that have strong expected earnings growth and momentum and better valuation and
risk characteristics than the Russell 2500(TM) Index.
The Fund is managed using risk control techniques to maintain risk, style, cap-
italization and sector characteristics similar to the Russell 2500(TM) Index.
The Fund is broadly diversified by sector.
The Fund normally invests in 400 to 700 stocks, with at least 65% (usually
higher) of the Fund's assets in small cap and mid cap companies. The Fund nor-
mally has 10% or less (usually lower) of its assets in cash and cash equiva-
lents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, Standard &
Poor's Depositary Receipts (SPDRs) and other Exchange Traded Funds (ETFs), and
certain derivatives (investments whose value is based on indices or other secu-
rities). As an example of how derivatives may be used, the Fund may invest in
stock index futures to manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Goldman Sachs Asset Management,
A unit of the Investment Management Division of Goldman Sachs and Co.
32 Old Slip
New York, New York 10005
Managing since 1988
Managing Fund since May, 1998
Managed approximately $282 billion in assets at the end of 2000
FUND MANAGERS
Robert C. Jones
- -----------------
Managing Director of subadviser
Joined subadviser in 1989
Melissa R. Brown
- -----------------
Managing Director of subadviser
Joined subadviser in 1998
Director of Quantitative Equity
Research at Prudential Securities (1983-1998)
Victor H. Pinter
- -----------------
Vice President of subadviser
Joined subadviser in 1990
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 17.85%, second quarter 1999 Worst quarter: down 20.01%, fourth
quarter 1998
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 4.63% 4.27%
Life of fund 4.94% 6.20%
Index: Russell 2500(TM) Index
* Began operations on May 1, 1998.
30
MAIN RISKS
Primary
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "small/mid cap" approach carries the risk that in certain markets
small/mid cap stocks will underperform large cap stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. The
Fund had unusually high turnover in 1999 and in 2000. This higher than
expected turnover is due to (i) the relatively small size of the Fund, which
magnifies the effect of contributions and redemptions, and (ii) the high vola-
tility of the market, which in 1999 resulted in the subadviser implementing
procedures to reduce the Fund's tracking risk. Normally, the Fund's turnover
rate will be less than 100%.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1998** 1999 2000
Net asset value, beginning of period $10.00 $ 9.02 $ 9.82
Income from investment operations:
Net investment income (loss) -- 0.02 0.05
Net realized and unrealized gain (loss) on
investments* (0.98) 1.77 0.39
Total from investment operations (0.98) 1.79 0.44
Less distributions:
Distributions from net investment income and
capital paid in -- (0.03) (0.07)
Distributions from net realized gain on
investments sold -- (0.96) (0.32)
Distributions in excess of income, capital paid in
& gains -- -- (0.05)
Total distributions -- (0.99) (0.44)
Net asset value, end of period $ 9.02 $ 9.82 $ 9.82
Total investment return (9.81)% 20.54 % 4.63%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $5,015 $8,248 $21,636
Ratio of expenses to average net assets (%)*** 1.05% 0.94% 0.90%
Ratio of net investment income (loss) to average
net assets (%) (0.01)% 0.30% 0.56%
Turnover rate (%) 60.51% 109.12% 94.78%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations May 1, 1998.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 4.55%, 2.24% and 1.23% for the
years ended December 31, 1998, 1999 and 2000, respectively.
31
Small/Mid Cap Growth Fund
GOAL AND STRATEGY
This is a small/mid cap stock fund with a growth emphasis that seeks long-term
capital appreciation.
The Fund invests primarily in the common stocks of small and mid-sized U.S.
companies that are believed to offer above-average potential for growth in rev-
enues and earnings.
The manager selects stocks using a combination of proprietary quantitative and
qualitative equity research. Quantitative screening seeks to identify a group
of high-quality companies with above-average growth characteristics relative to
industry peers. Equity research seeks to identify indi
vidual companies from that group with a higher potential for long term earnings
growth and capital appreciation.
The manager buys companies that seem attractive based on a combination of cri-
teria, among others:
. Superior historical earnings growth,
. Prospects for above-average growth,
. Attractive valuations,
. Strong market positions,
. Favorable new products, and
. Superior management.
The Fund is broadly diversified by sector. The Fund normally invests in 60 to
110
stocks, with at least 65% (usually higher) of its assets in small and mid cap
companies. The Fund normally has 10% or less (usually lower) of its assets in
cash and cash equivalents. The Fund may invest in initial public offerings
(IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Managing, with predecessors, since 1928
Managing Fund since May, 1999
Managed approximately $274 billion in assets at the end of 2000
FUND MANAGERS
Frank V. Wisneski
- -----------------
Senior Vice President of subadviser
Joined subadviser in 1968
(Retiring June, 2001)
Frank J. Boggan, CFA
- -----------------
Vice President of subadviser
Joined subadviser in 2001
Managing Director of Palladian Capital
Management (1998-2001)
Portfolio Manager at The Pioneer
Group (1991-1998)
John J. Harrington, CFA
- -----------------
Vice President of subadviser
Joined subadviser in 1995
Portfolio Manager at Munder Capital Management (1991-1994)
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 21.59%, fourth quarter 1998 Worst quarter: down 21.48%, third
quarter 1998
Average annual total returns -- for periods ending 12/31/2000*
Fund Index 1 Index 2**
1 year 9.25% -16.10% -16.10%
5 Years 10.34% 12.17% 17.50%
Life of fund 12.85% 14.14% 18.14%
Index 1: Russell 2500(TM) Growth Index
Index 2: A composite index combining the performance of the following indices
over the periods indicated: Russell Mid Cap(TM) Growth Index (from inception
through April 30, 1999) and Russell 2500(TM) Growth Index (after April 30,
1999)
*Began operations on May 1, 1994.
** John Hancock believes Index 2 is a more suitable index against which to
measure the fund's performance because it more closely matches the fund's
changes in investment strategy since inception.
32
MAIN RISKS
Primary
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "small/mid cap"
approach carries the risk that in certain markets small/mid cap stocks will
underperform large cap stocks.
Concentration Risk: The Fund's investment in securities of a smaller number of
issuers could produce more volatile performance relative to funds that invest
in a larger number of issuers. The more concentrated a fund's holdings are,
the more likely it is a specific security's poor performance will hurt the
fund significantly.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commis-
sions and other transaction costs will have on the fund's performance. Any
turnover rate in excess of 100% is considered relatively high. The Fund had a
high turnover
rate in 1999 and 2000 because of higher than expected market volatility and
some restructuring of the Fund. In future years, the Fund's turnover rate will
normally be less than 100%.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996 1997 1998 1999 2000
Net asset value,
beginning of period $ 13.18 $ 16.52 $ 15.39 $ 15.94 $ 14.03
Income from investment
operations:
Net investment income
(loss) 0.02 0.01 (0.02) (0.07) (0.02)
Net realized and
unrealized gain (loss)
on investments* 3.99 0.56 0.88 0.74 1.27
Total from investment
operations 4.01 0.57 0.86 0.67 1.25
Less distributions:
Distributions from net
investment income and
capital paid in (0.02) (0.01) -- (0.17) --
Distributions from net
realized gain on
investments sold (0.65) (1.69) (0.31) (2.41) (1.43)
Distributions in excess
of income, capital paid
in & gains -- -- -- -- (0.15)
Total distributions (0.67) (1.70) (0.31) (2.58) (1.58)
Net asset value, end of
period $ 16.52 $ 15.39 $ 15.94 $ 14.03 $ 13.70
Total investment return 30.33% 3.44% 5.61% 5.15% 9.25%
Ratios and supplemental
data
Net assets, end of period
(000s omitted)($) $194,108 $213,612 $193,332 $181,931 $190,010
Ratio of expenses to
average net assets (%) 0.84% 0.85% 0.89% 0.85% 0.85%
Ratio of net investment
income (loss) to average
net assets (%) 0.18% 0.09% (0.11)% (0.27)% (0.20)%
Turnover rate (%) 217.84% 331.19% 162.21% 172.58% 103.19%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
33
Small Cap Equity Fund
GOAL AND STRATEGY
This is a small cap stock fund that seeks long-term capital appreciation.
The Fund invests primarily in a diversified mix of the common stocks of small
U.S. companies that are believed to be undervalued relative to long-term earn-
ings growth potential.
The manager selects stocks using proprietary fundamental equity research.
Research focuses on identifying companies that are believed to be:
. undervalued (i.e., with current stock price below long-term value);
. asset rich with strong balance sheets and able to generate internal cash
flows to meet capital needs; and
. dynamic and growing with realistic payback periods for any price premium.
The manager employs a research intensive approach using extensive field
research and direct company contact to determine the fundamental value of a
company. A company's future prospects are determined from analyzing a company's
products, markets, management, suppliers, and competitors.
The Fund is managed using a multiple portfolio manager system in which the Fund
is managed by multiple portfolio managers and/or research analysts. The Fund is
normally broadly diversified since its exposures reflect the aggregate deci-
sions of the multiple portfolio managers and research analysts managing the
Fund.
The Fund's sector exposures are a result of stock selection as opposed to pre-
determined allocations. The Fund normally invests in 150 to 300 stocks, with at
least 65% (usually higher) of its assets in small cap companies. The Fund nor-
mally has 10% or less (usually lower) of its assets in cash and cash
equivalents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, California 90071
Managing since 1968
Managing Fund since November, 2000
Managed approximately $122 billion in assets at the end of 2000
FUND MANAGERS
Team managed by 5 Portfolio Managers
Average 17 years with Capital Guardian
Average 21 years industry experience
See Appendix A for more details
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 18.11%, second quarter 1997 Worst quarter: down 21.06%, third
quarter 1998
Average annual total returns -- for periods ending 12/31/2000*
Fund Index 1 Index 2**
1 year -8.89% -3.02% 10.32%
Life of fund 2.97% 8.69% 8.52%
Index 1: Russell 2000(R) Index
Index 2: A composite index combining the performance of the following indices
over the periods indicated: 50% Russell 2000(R) Index/50% Russell 2000(R) Value
Index (from inception through August, 1999); Russell 2000(R) Value Index (from
September, 1999 through October, 2000); and Russell 2000(R) Index (after Octo-
ber, 2000)
*Began operations on May 1, 1996.
** John Hancock believes Index 2 is a more suitable index against which to
measure the fund's performance because it more closely matches the fund's
changes in investment strategy since inception.
34
MAIN RISKS
Primary
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "small cap" approach carries the risk that in certain markets small cap
stocks will underperform mid cap and large cap stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high.
Although the Fund's turnover rate has been high in recent years, the current
manager anticipates that the Fund's turnover rate will normally be less than
100%.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996** 1997 1998 1999 2000
Net asset value, beginning of
period $ 10.00 $ 10.73 $ 12.40 $ 11.59 $ 10.92
Income from investment
operations:
Net investment income (loss) 0.07 0.08 0.07 0.09 0.14
Net realized and unrealized
gain (loss) on investments* 0.96 2.66 (0.81) (0.50) (1.13)
Total from investment
operations 1.03 2.74 (0.74) (0.41) (0.99)
Less distributions:
Distributions from net
investment income and
capital paid in (0.07) (0.08) (0.07) (0.07) (0.45)
Distributions from net
realized gain on investments
sold (0.23) (0.99) -- (0.01) (0.14)
Distributions in excess of
income, capital paid in &
gains -- -- -- (0.18) (0.20)
Total distributions (0.30) (1.07) (0.07) (0.26) (0.79)
Net asset value, end of period $ 10.73 $ 12.40 $ 11.59 $ 10.92 $ 9.14
Total investment return 10.33% 25.57% (5.96)% (3.43)% (8.89)%
Ratios and supplemental data
Net assets, end of period
(000s omitted)($) $10,541 $43,261 $64,095 $68,900 $70,031
Ratio of expenses to average
net assets (%)*** 1.05% 1.05% 1.05% 0.95% 0.92%
Ratio of net investment income
(loss) to average net assets
(%) 1.15% 0.68% 0.63% 0.78% 1.25%
Turnover rate (%) 66.31% 126.10% 100.83% 117.33% 189.57%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 2.06%, 1.30%, 1.08%, 0.96% and
0.95% for the years ended December 31, 1996, 1997, 1998, 1999 and 2000,
respectively.
35
Small Cap Value Fund
(Formerly Small/Mid Cap Value Fund)
GOAL AND STRATEGY
This is a small cap stock fund with a value emphasis that seeks long-term capi-
tal appreciation.
The Fund invests primarily in a diversified mix of common stocks of small U.S.
companies that are believed to be undervalued by various measures and offer
good prospects for capital appreciation.
The manager employs a value approach in selecting stocks using proprietary fun-
damental equity research. The manager generally looks for companies with:
. Low price/earnings, price/book or price/cash flow ratios relative to small
cap stocks, the company's peers, or its own historical norm.
. Low stock price relative to a company's underlying asset values.
. A sound balance sheet and other positive financial characteristics.
. Catalysts with the potential for value realization such as beneficial manage-
ment change, restructuring, or industry consolidation.
The Fund's sector exposures are a result of stock selection as opposed to pre-
determined allocations. The Fund normally invests in 75 to 135 stocks, with at
least 65% (usually higher) of its assets in small cap compa-
nies. The Fund normally has 10% or less of its assets in cash and cash equiva-
lents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Managing since 1937
Managing Fund since January, 2001
Managed approximately $167 billion
in assets at the end of 2000
FUND MANAGERS
Management by Investment
Advisory Committee
Preston G. Athey, CFA, CIC
- -----------------
Managing Director of subadviser
Joined subadviser in 1978
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 13.42%, third quarter 2000 Worst quarter: down 4.40%, third
quarter 1999
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 34.19% 20.79%
Life of fund 29.38% 15.91%
Index: Russell 2500(R) Value Index
* Began operations on August 31, 1999.
36
MAIN RISKS
Primary
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "value" approach carries the risk that in certain markets "value"
stocks will underperform "growth" stocks. Also, the Fund's "small cap"
approach carries the risk that in certain markets small cap stocks will
underperform mid cap and large cap stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high.
Although the Fund's turnover rate was high in 2000, the current manager antic-
ipates that the Fund's turnover rate will normally be less than 100%.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Small Cap Value Fund (formerly Small/Mid Cap Value Fund) --
Period ended December 31: 1999** 2000
Net asset value, beginning of period $10.00 $ 10.13
Income from investment operations:
Net investment income (loss) -- 0.01
Net realized and unrealized gain (loss) on investments* 0.49 3.37
Total from investment operations 0.49 3.38
Less distributions:
Distributions from net investment income and capital paid
in -- (0.01)
Distributions from net realized gain on investments sold (0.36) (1.80)
Distributions in excess of income, capital paid in & gains -- --
Total distributions (0.36) (1.81)
Net asset value, end of period $10.13 $ 11.70
Total investment return 5.08% 34.19%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $5,570 $29,436
Ratio of expenses to average net assets (%)*** 1.05% 1.05%
Ratio of net investment income (loss) to average net assets
(%) (0.12)% 0.13%
Turnover rate (%) 51.97% 220.80%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.61% and 1.29% for the years
ended December 31, 1999 and 2000, respectively.
37
Small Cap Growth Fund
GOAL AND STRATEGY
This is a small cap stock fund with a growth emphasis that seeks long-term cap-
ital appreciation.
The Fund invests primarily in a diversified mix of the common stocks of small
U.S. companies that are believed to offerabove-average potential for growth in
revenues and earnings.
The manager selects stocks using proprietary equity research. Stocks are pur-
chased that are expected to have rapid earnings growth that is not yet widely
recognized by the investment community.
The manager looks for companies with:
. demonstrated annual 20% earnings growth over 3 years and/or similar future
growth expectations;
. dominant market niche or poised to become market leaders; and
. high quality senior management with coherent business strategies.
The Fund is highly diversified by sector and number of individual stocks. The
Fund's sector weightings are broadly diversified and managed relative to those
of the Russell 2000(R) Growth Index. The Fund normally invests in 140 to 220
stocks, with at least 65% (usually higher) of its assets in small cap compa-
nies. The Fund normally has 10% or less (usually lower) of its assets in cash
and cash equivalents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Owned by John Hancock
Managing since 1968
Managing Fund since May, 1996
Managed approximately $32 billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
Bernice S. Behar, CFA
- -----------------
Senior Vice President of subadviser
Joined subadviser in 1991
Began career in 1986
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 45.57%, fourth quarter 1999 Worst quarter: down 22.48%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -21.43% -22.43%
Life of fund 12.63% 4.72%
Index: Russell 2000(R) Growth Index
*Began operations on May 1, 1996.
38
MAIN RISKS
Primary
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results.
The Fund could underperform its peers or lose money if the manager's invest-
ment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "small cap" approach
carries the risk that in certain markets small cap stocks will underperform
mid cap and large cap stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996** 1997 1998 1999 2000
Net asset value, beginning
of period $ 10.00 $ 9.93 $ 11.34 $ 12.99 $ 19.12
Income from investment
operations:
Net investment income
(loss) 0.01 (0.02) (0.05) (0.21) (0.02)
Net realized and
unrealized gain (loss) on
investments* (0.06) 1.44 1.70 9.06 (4.16)
Total from investment
operations (0.05) 1.42 1.65 8.85 (4.18)
Less distributions:
Distributions from net
investment income and
capital paid in (0.02) (0.01) -- -- (1.35)
Distributions from net
realized gain on
investments sold -- -- -- (2.72) (0.12)
Distributions in excess of
income, capital paid in &
gains -- -- -- -- --
Total distributions (0.02) (0.01) -- (2.72) (1.47)
Net asset value, end of
period $ 9.93 $ 11.34 $ 12.99 $ 19.12 $ 13.47
Total investment return (0.50)% 14.26% 14.49% 70.38% (21.43)%
Ratios and supplemental
data
Net assets, end of period
(000s omitted)($) $20,633 $48,761 $74,849 $179,570 $234,542
Ratio of expenses to
average net assets (%)*** 1.00% 1.00% 1.00% 0.89% 0.82%
Ratio of net investment
income (loss) to average
net assets (%) 0.12% (0.28)% (0.65)% (0.70) (0.50)%
Turnover rate (%) 50.93% 86.23% 101.16% 113.11% 97.73%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuations in market
values of the fund.
** Fund began operations on May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made, the expense ratio would have been 1.55%, 1.12% and 1.05% for
the years ended December 31, 1996, 1997, and 1998, respectively.
39
International Equity Index Fund
GOAL AND STRATEGY
This is an international stock fund that seeks to track the performance of
broad-based equity indices of foreign companies in developed and emerging mar-
kets.
The Fund is managed relative to a target mix of 90% in the MSCI EAFE GDP Index
and 10% in the MSCI EMF Index. The EAFE GDP Index, known as the Europe Austral-
asia and Far East Index, includes foreign companies in developed markets, with
country index weights based upon a country's Gross Domestic Product (GDP). The
EMF Index, known as the Emerging Markets Free Index, includes foreign companies
in emerging markets, with country index weights based upon a country's market
capitalization.
The manager employs a passive management strategy using quantitative techniques
to invest in a representative sample of stocks in the Index. The manager
selects stocks in an attempt to track, as closely as possible, the characteris-
tics of the Index, including country and sector weights. The Fund normally
invests in 400 to 1,200 stocks.
The Index composition changes from time to time. The manager will reflect those
changes as soon as practical.
The Fund is normally fully invested. The manager may invest in stock index
futures to maintain market exposure and manage cash flow. Although the Fund may
employ foreign currency hedging techniques, the Fund normally maintains the
currency exposure of the underlying equity investments.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: American Depositary Receipts (ADRs), Global Depositary
Receipts (GDRs), European Depositary Receipts (EDRs), iShares SM and other
Exchange Traded Funds (ETFs), cash equivalents, and certain derivatives (in-
vestments whose value is based on indices or other securities). As an example
of how derivatives may be used, the Fund may invest in stock index futures to
manage cash flow.
Note: "MSCI EAFE GDP Index" and "MSCI EMF Index" are the exclusive property of
Morgan Stanley & Co., Incorporated and are registered service marks of Morgan
Stanley Capital International.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1986
Managing Fund since May, 1998
Managed approximately $25 billion in assets at the end of 2000
FUND MANAGERS
Bradford S. Greenleaf, CFA
- -----------------
Senior Vice President of subadviser
Joined team in 2000
Joined subadviser in 1994
Vice President, Franklin Portfolio Associates, Inc. (1986-1994)
David P. Nolan, CFA
- -----------------
Senior Vice President of subadviser
Joined subadviser in 1996
Portfolio manager Boston
International Advisors, Inc. (1989-1996)
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 20.91%, fourth quarter 1998 Worst quarter: down 14.75%, third
quarter 1998
Average annual total returns -- for periods ending 12/31/2000*
Fund Index 1 Index 2**
1 year -17.42% -15.30% -16.93%
5 years 6.25% 10.16% 7.81%
10 years 8.21% 10.27% 8.75%
Life of fund 7.29% 9.11% 6.29%
Index 1: MSCI EAFE GDP Index
Index 2: A composite index combining the performance of the following indices
over the periods indicated: MSCI EAFE Index (from inception through April 30,
1998); MSCI EAFE GDP Index (from May 1, 1998 through June 30, 1999); and 90%
MSCI EAFE GDP Index/10% MSCI EMF Index (after June 30, 1999)
* Began operations on May 2, 1988.
** John Hancock believes Index 2 is a more suitable index against which to
measure the fund's performance because it more closely matches the fund's
changes in investment strategy since inception.
40
MAIN RISKS
Primary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk. However, to the extent the Fund invests in emerging market coun-
tries, it will have a significantly higher degree of foreign risk than if it
invested exclusively in developed or newly-industrialized countries.
Index Management Risk: Certain factors such as the following may cause the
Fund to track the Index less closely:
. The securities selected by the manager may not be fully representative of
the Index.
. Transaction expenses of the Fund may result in the Fund's performance being
different than that of the Index.
. The size and timing of the Fund's cash flows may result in the Fund's per-
formance being different than that of the Index.
Also, index funds like this one will have more difficulty in taking defensive
positions in abnormal market conditions.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices.
Stocks tend to go up and down in value more than bonds. If the Fund's invest-
ments are concentrated in certain sectors, the Fund's performance could be
worse than the overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures
and swaps) can produce disproportionate gains or losses. They are generally
considered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996 1997 1998 1999 2000
Net asset value,
beginning of period $ 15.61 $ 16.83 $ 15.20 $ 15.56 $ 19.64
Income from investment
operations:
Net investment income
(loss) 0.21 0.13 0.23 0.21 0.23
Net realized and
unrealized gain (loss)
on investments* 1.22 (0.97) 2.91 4.51 (3.64)
Total from investment
operations 1.43 (0.84) 3.14 4.72 (3.41)
Less distributions:
Distributions from net
investment income and
capital paid-in (0.21) (0.13) (0.23) (0.21) (0.25)
Distributions from net
realized gain on
investments sold -- (0.66) (2.55) (0.38) (0.59)
Distributions in excess
of income, capital paid
in & gains -- -- -- (0.05) --
Total distributions (0.21) (0.79) (2.78) (0.64) (0.84)
Net asset value, end of
period $ 16.83 $ 15.20 $ 15.56 $ 19.64 $ 15.39
Total investment return 9.19% (5.03)% 20.82% 30.87% (17.42)%
Ratios and supplemental
data
Net assets, end of period
(000s omitted) $155,753 $152,359 $173,137 $244,017 $195,012
Ratio of expenses to
average net assets (%)** 0.76% 0.79% 0.56% 0.31% 0.28%
Ratio of net investment
income (loss) to average
net assets (%) 1.30% 0.78% 1.45% 1.26% 1.40%
Turnover rate (%) 92.03% 83.13% 158.63% 19.01% 14.86%
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing of
purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 0.63%, 0.38% and 0.37% for
the years ended December 31, 1998, 1999 and 2000, respectively.
41
International Opportunities Fund
GOAL AND STRATEGY
This is an international stock fund that seeks long-term capital appreciation.
The Fund primarily invests in a diversified mix of common stocks of large
established and medium-sized foreign companies located outside the U.S., pri-
marily in developed countries and in emerging markets to a lesser extent.
The manager selects stocks using proprietary fundamental research that identi-
fies companies that:
. are capable of achieving sustainable above-average, long-term earnings
growth;
. are reasonably priced relative to present or anticipated earnings, cash flow,
or book value; and
. have attractive valuations relative to opportunities in large, mid or small
cap companies.
The Fund's country and regional exposures are primarily a result of stock
selection, although the Fund maintains broad diversification across countries
and regions.
The manager selects stocks that have growth characteristics such as:
. leading market position or technological leadership;
. attractive business niche;
. healthy balance sheets with relatively low debt;
. strong competitive advantage;
. strength of management; and
. earnings growth and cash flow sufficient to support growing dividends.
The Fund invests in at least 3 different countries other than the U.S., but
normally invests in 15 to 45 countries, with at least 65% of its assets in
securities of non-U.S. entities.
The Fund will invest no more than 20% of its assets in emerging market stocks.
The Fund normally invests in 150 to 250 stocks and normally has 10% or less
(usually lower) of its assets in cash and cash equivalents. The Fund may invest
in initial public offerings (IPOs).
Although the Fund may employ foreign currency hedging techniques, the Fund nor-
mally maintains the currency exposure of the underlying equity investments.
The Fund also may purchase other types of securities that are not primary
investment vehicles, for example: American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs), European Depositary Receipts (EDRs), iSharesSM and
other Exchange Traded Funds (ETFs), and certain derivatives (investments whose
value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
T. Rowe Price International, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Managing since 1979
Managing Fund since May, 1996
Managed approximately $33 billion in assets at the end of 2000
FUND MANAGERS
Management by Investment Advisory Group overseen by:
David J. L. Warren
- -----------------
Portfolio Manager of subadviser
Joined subadvisor in 1983
Began career in 1981
John R. Ford
- -----------------
Portfolio Manager of subadviser
Joined subadvisor in 1982
Began career in 1980
James B. M. Seddon
- -----------------
Portfolio Manager of subadvisor
Joined subadvisor in 1987
Began career in 1987
Mark Bickford-Smith
- -----------------
Portfolio Manager of subadvisor
Joined subadvisor in 1995
Began career in 1985
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 24.44%, fourth quarter 1999 Worst quarter: down 13.70%, third
quarter 1998
Average annual total returns(/1/) -- for periods ending 12/31/2000*
Fund Index
1 year -16.36% -15.09%
Life of fund 7.70% 5.81%
Index:MSCI All Country World Free Index, Excluding U.S.
*Began operations on May 1, 1996.
42
MAIN RISKS
Primary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk. However, to the extent the Fund invests in emerging market coun-
tries,
it will have a significantly higher degree of foreign risk than if it invested
exclusively in developed or newly-industrialized countries.
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large/mid cap" approach carries the risk that in certain markets
large/mid cap stocks will underperform small cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund with
a small asset base. Also, the Fund's investments in IPOs may be subject to more
erratic price movements than the overall equity market.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996** 1997 1998 1999 2000
Net asset value, beginning of
period $ 10.00 $ 10.60 $ 10.63 $ 12.21 $ 15.17
Income from investment
operations:
Net investment income (loss) 0.07 0.10 0.11 0.10 0.07
Net realized and unrealized
gain (loss) on investments* 0.60 0.11 1.57 3.95 (2.57)
Total from investment
operations 0.67 0.21 1.68 4.05 (2.50)
Less distributions:
Distributions from net
investment income and capital
paid in (0.07) (0.10) (0.10) (0.11) (0.15)
Distributions from net
realized gain on investments
sold -- (0.08) -- (0.94) (0.62)
Distributions in excess of
income, capital paid in &
gains -- -- -- (0.04) (0.05)
Total distributions (0.07) (0.18) (0.10) (1.09) (0.82)
Net asset value, end of period $ 10.60 $ 10.63 $ 12.21 $ 15.17 $ 11.85
Total investment return 6.72% 1.95% 15.92% 34.01% (16.36)%
Ratios and supplemental data
Net assets, end of period (000s
omitted) $17,898 $30,631 $64,250 $79,794 $120,034
Ratio of expenses to average
net assets (%)*** 1.25% 1.22% 1.16% 1.02% 0.93%
Ratio of net investment income
(loss) to average net assets
(%) 0.87% 0.65% 0.89% 0.77% 0.47%
Turnover rate (%) 5.46% 21.09% 18.67% 34.02% 37.92%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 2.76%, 1.57%, 1.46%, 1.15% and
1.09% for the years ended December 31, 1996, 1997, 1998, 1999 and 2000
respectively.
43
International Equity Fund
GOAL AND STRATEGY
This is an international stock fund that seeks long-term capital appreciation.
The Fund primarily invests in a diversified mix of common stocks of large
established and medium-sized foreign companies located primarily in developed
countries outside of the U.S.
The manager selects stocks using proprietary equity research that identifies
companies having:
. strong market positions within their industry,
. management with a history of excellence focusing on core businesses,
. above average return on capital within their industry, and
. demonstrated ability to create long-term shareholder value.
The manager determines the allocation among regions and countries using a com-
bination of qualitative and quantitative inputs, including:
. quantitative models to rank the relative attractiveness of each
country/region based on valuation, credit risk and momentum, and
. qualitative assessment of regional portfolio managers to adjust model
results.
The Fund's sector exposures are largely the result of stock selection, although
the Fund maintains broad sector representation. The Fund is managed using risk
control techniques that maintain overall regional diversification. Although the
Fund may employ foreign currency hedging techniques, the Fund normally main-
tains the currency exposure of the underlying equity investments.
The Fund invests in at least 3 different countries other than the U.S., but
normally invests in 10 to 35 countries, with at least 65% of its assets in
securities of non-U.S. entities.
The Fund will invest no more than 10% of its assets in emerging market stocks.
The Fund normally invests in 120 to 200 stocks and normally has 10% or less
(usually lower) of its assets in cash and cash equivalents. The Fund may invest
in initial public offerings (IPOs).
The Fund also may purchase other types of securities that are not primary
investment vehicles, for example: American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs), European Depositary Receipts (EDRs), iShares SM and
other Exchange Traded Funds (ETFs), and certain derivatives (investments whose
value is based on indices or other securities). As an example of how deriva-
tives may be used, the Fund may invest in stock index futures to manage cash
flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Goldman Sachs Asset Management,
A unit of the Investment Management Division of Goldman, Sachs & Co.
32 Old Slip
New York, New York 10005
Managing since 1988
Managing Fund since August, 1999
Managed approximately $282 billion
in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
Shogo Maeda
- -----------------
Managing Director of subadviser
Joined subadviser in 1994
Senior Portfolio Manager at Nomura Investment Management, Inc. (1987-1994)
Susan Noble
- -----------------
Managing Director of subadviser
Joined subadviser in 1997
Portfolio Management Director at Fleming Investment Management (1986-1997)
Andrew Orchard
- -----------------
Executive Director of subadviser
Joined subadviser in 1999
Portfolio Manager at Morgan Grenfell
Asset Management (1994-1999)
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
Best quarter: up 22.28%, fourth quarter 1999 Worst quarter: down 8.76%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -14.37% -13.96%
Life of fund 3.01% 1.31%
Index:MSCI EAFE Index
*Began operations on August 31, 1999.
44
MAIN RISKS
Primary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk. However, to the extent the Fund invests in emerging market coun-
tries, it will have a significantly higher degree of foreign risk than if it
invested exclusively in developed or newly-industrialized countries.
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements.
Markets tend to move in cycles, with periods of rising prices and periods of
falling prices. Stocks tend to go up and down in value more than bonds. If the
Fund's investments are concentrated in certain sectors, the Fund's performance
could be worse than the overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large/mid cap" approach carries the risk that in certain markets
large/mid cap stocks will underperform small cap stocks.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1999** 2000
Net asset value, beginning of period $ 10.00 $ 11.95
Income from investment operations
Net investment income (loss) 0.01 0.06
Net realized and unrealized gain (loss) on investments* 2.12 (1.78)
Total from investment operations 2.13 (1.72)
Less distributions:
Distributions from net investment income and capital paid
in (0.01) (0.04)
Distributions from net realized gain on investment (0.17) (0.30)
Distributions in excess of income, capital paid in & gains -- (0.04)
Total distributions (0.18) (0.38)
Net asset value, end of period $ 11.95 $ 9.85
Total investment return 21.49% (14.37)%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $12,430 $15,716
Ratio of expenses to average net assets (%)*** 1.10% 1.10%
Ratio of net investment income (loss) to average net assets
(%) 0.21% 0.53%
Turnover rate (%) 26.76% 75.41%
* The amount shown may not accord with the change in the aggregate gains
and losses in the fund securities for the period because of the timing of
purchases and withdrawals of shares in relation to the fluctuation in
market values of the fund.
** Fund began operations August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.71% and 1.76% for the years
ended December 31, 1999 and 2000, respectively.
45
Emerging Markets Equity Fund
GOAL AND STRATEGY
This is an emerging markets stock fund that seeks long-term capital apprecia-
tion.
The Fund invests primarily in the stocks of companies in countries having econ-
omies or markets generally considered by the World Bank or United Nations to be
emerging or developing.
The manager's investment approach combines top-down country allocation with
bottom-up stock selection. In making country allocation decisions, the manager
analyzes the global environment and selects countries with:
. Improving macroeconomic, political and social trends, and
. attractive valuation levels.
The manager selects stocks using fundamental proprietary research to identify
companies that have:
. strong earnings growth potential,
. reasonable valuations, and
. shareholder-focused management, dominant products, and well established dis-
tribution channels.
The Fund normally invests in at least 15 emerging market countries.
The Fund normally invests in 100 to 350 stocks in 15 to 30 countries. The Fund
normally has 10% or less of its assets in cash and cash equivalents. The Fund
may invest in initial public offerings (IPOs).
Although the Fund may employ foreign currency hedging techniques, the Fund
normally maintains the currency exposure of the underlying equity investments.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: American Depositary Receipts (ADRs), Global Depositary
Receipts (GDRs), European Depositary Receipts (EDRs), and certain derivatives
(investments whose value is based on indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Managing since 1975
Managing Fund since August, 1999
Managed approximately $170 billion in assets at the end of 2000
FUND MANAGERS
Robert L. Meyer, CFA
- -----------------
Managing Director of subadvisor
Joined subadviser in 1989
Narayan Ramachandran, CFA
- -----------------
Managing Director of subadviser
Joined subadviser in 1996
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 50.45%, fourth quarter 1999 Worst quarter: down 20.41%, third
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -40.11% -30.61%
Life of fund -9.21% -7.14%
Index:MSCI Emerging Markets Free Index
*Began operations on May 1, 1998.
46
MAIN RISKS
Primary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk. However, since the Fund invests primarily in emerging market coun-
tries, it will have a significantly higher degree of foreign risk than funds
that invest primarily in developed or newly- industrialized countries.
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "growth" approach carries the risk that in certain markets "growth"
stocks will underperform "value" stocks. Also, the Fund's "large/mid cap"
approach carries the risk that large/mid cap stocks will underperform small cap
stocks.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the funds perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. The
Fund's turnover rate could be greater than 100% due to the relatively high vol-
atility associated with investing in emerging markets.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund with
a small asset base. Also, the Fund's investments in IPOs may be subject to more
erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1998** 1999 2000
Net asset value, beginning of period $10.00 $ 7.09 $ 12.26
Income from investment operations:
Net investment income (loss) 0.03 0.03 (0.02)
Net realized and unrealized gain (loss) on
investments* (2.91) 5.67 (4.91)
Total from investment operations (2.88) 5.70 (4.93)
Less distributions:
Distributions from net investment income and
capital paid in (0.03) (0.01) (0.01)
Distributions from net realized gain on
investments sold -- (0.10) (0.62)
Distributions in excess of income, capital paid
in & gains -- (0.42) --
Total distributions (0.03) (0.53) (0.63)
Net asset value, end of period $ 7.09 $ 12.26 $ 6.70
Total investment return*** (28.87)% 81.37% (40.11)%
Ratios and supplemental data
Net assets, end of period (000s omitted) $7,310 $32,596 $31,010
Ratio of expenses to average net assets (%)**** 1.55% 1.39% 1.32%
Ratio of net investment income (loss) to average
net assets (%) 0.51% 0.19% (0.28)%
Turnover rate (%) 53.95% 196.32% 103.90%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on May 1, 1998.
*** Includes the effect of a voluntary capital contribution from John Hancock
of $32 per share for the year ended 1999. The Total Investment Return
without the capital contribution would have been 79.02% for the year ended
1999.
**** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 3.69%, 3.44% and 2.49% for the
years ended December 31, 1998, 1999 and 2000, respectively.
47
Real Estate Equity Fund
GOAL AND STRATEGY
This is a non-diversified real estate stock fund that seeks above-average
income and long-term capital appreciation.
The Fund invests primarily in:
. equity securities of real estate investment trusts (REITs) that own commer-
cial and multi-family residential real estate; and
. equity securities of real estate operating companies.
The Fund invests mostly in stocks of U.S. companies but also invests to a lim-
ited extent in foreign stocks.
The Fund employs two subadvisers, each of which employs its own investment
approach and independently manages its portion of the Fund. On or about June
30, 2000, the assets of the Fund were evenly divided between the subadvisers.
All subsequent investments in and redemptions from the Fund will be evenly
divided between the subadvisers. These allocation methodologies may change in
the future.
Independence Investment LLC ("Independence") selects real estate stocks using
a combination of proprietary, equity research and quantitative tools. Real
estate stocks are purchased that are undervalued relative to the stock's his-
tory and the market and have improving earnings growth prospects.
Independence seeks to maintain risk, style and sector characteristics similar
to the public equity real estate market. Independence will normally invest in
30 to 60 stocks in its portion of the Fund.
Morgan Stanley Dean Witter Investment Management Inc. ("MSDW") selects real
estate stocks using a combination of:
. top-down, market overview to identify undervalued property sectors and geo-
graphic regions; and
. proprietary, fundamental equity research to select companies that are attrac-
tively priced relative to the value of their underlying real estate assets.
MSDW seeks to maintain broad exposure to key property sectors (i.e., apart-
ments, retail and office/industrial). MSDW will normally invest in 30 to 50
stocks in its portion of the Fund.
The Fund is "non-diversified", which means that it can take larger positions in
individual issuers. Each portion of the Fund normally has at least 65% (usually
higher) of its assets invested in real estate equity securities and 10% or less
(usually lower) of its assets in cash and cash equivalents. Each portion of the
Fund may invest in initial public offerings (IPOs).
Each portion of the Fund also may purchase other types of securities that are
not primary investment vehicles, for example: foreign securities denominated in
U.S. dollars or any other currency, equity securities of non-real estate busi-
nesses whose real estate holdings are significant in relation to their market
capitalization, and certain derivatives (investments whose value is based on
indices and other securities).
In abnormal market conditions, each portion of the Fund may take temporary
defensive measures--such as holding unusually large amounts of cash and cash
equivalents--that are inconsistent with the Fund's primary investment strategy.
In taking those measures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund since May, 1988
Managed approximately $25 billion in assets at the end of 2000
Fund Managers
John F. DeSantis
- -----------------
Executive Vice President of subadviser
Managed fund since 1999
Joined subadviser in 1982
Thomas D. Spicer
- -----------------
Vice President of subadviser
Managed fund since 1999
Joined team in 1996
Joined subadviser in 1991
SUBADVISER
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Managing since 1975
Managing Fund since June, 2000
Managed approximately $170 billion in assets at the end of 2000
Fund Managers
Theodore R. Bigman
- -----------------
Managing Director, Global Real Estate, of subadviser
Joined subadviser in 1995
Douglas A. Funke
- -----------------
Principal of subadviser
Joined subadviser in 1995
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 25.82%, first quarter 1991 Worst quarter: down 17.37%, third
quarter 1990
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 31.29% 30.74%
5 years 10.89% 11.38%
10 years 13.41% 11.39%
Life of fund 9.41% 6.39%
Index: Wilshire Real Estate Securities Index
*Began operations on May 16, 1988.
48
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds.
Manager Risk: The managers and their respective strategies may fail to produce
the intended results. The Fund could underperform its peers or lose money if
the managers' investment strategies do not perform as expected.
Sector Fund Risk: The Fund's investments are concentrated in a single sector of
the stock market and the Fund's performance could be significantly affected by
developments in that particular sector. Because of this concentration, the
Fund's performance could be worse than the overall market by a wide margin or
for extended periods. Also, the Fund's performance could be more volatile rela-
tive to funds that invest broadly across different sectors of the stock market.
Real Estate Securities Risk: Real estate investment trusts (REITs) or other
real estate-related equity securities may be affected by changes in the value
of the underlying property owned by the trust. Mortgage REITs may be affected
by the quality of any credit extended. Other potential risks include the possi-
bility of a REIT failing to qualify for tax-free pass-through of income under
the Internal Revenue Code or failing to maintain exemption under the Investment
Company Act of 1940.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds. The
less diversified a fund's holdings are, the more likely it is that a specific
security's poor performance will hurt the fund significantly.
Concentration Risk: The Fund's investment in securities of a smaller number of
issuers could produce more volatile performance relative to funds that invest
in a larger number of issuers. The more concentrated a fund's holdings are, the
more likely it is a specific security's poor performance will hurt the fund
significantly.
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Interest Rate Risk: The Fund is subject to interest rate risk, which is the
possibility that changes in interest rates could hurt REIT performance. In gen-
eral, during periods of high interest rates, REITs may lose some of their
appeal for investors who may be able to obtain higher yields from other income-
producing investments, such as long-term bonds. Higher interest rates also mean
that financing for property purchases and improvements is more costly and dif-
ficult to obtain.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund with
a small asset base. Also, the Fund's investments in IPOs may be subject to more
erratic price movements than the overall equity market.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated):
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996 1997 1998 1999 2000
Net asset value,
beginning of period $ 11.70 $ 14.64 $ 15.91 $ 12.46 $ 11.47
Income from investment
operations:
Net investment income
(loss) 0.76 0.77 0.77 0.78 0.76
Net realized and
unrealized gain (loss)
on investments* 2.97 1.68 (3.38) (0.99) 2.73
Total from investment
operations 3.73 2.45 (2.61) (0.21) 3.49
Less distributions:
Distributions from net
investment income and
capital paid in (0.76) (0.77) (0.70) (0.78) (1.06)
Distributions from net
realized gain on
investments sold (0.03) (0.41) (0.14) -- (0.06)
Distributions in excess
of income, capital paid
in & gains -- -- -- -- (0.17)
Total distributions (0.79) (1.18) (0.84) (0.78) (1.29)
Net asset value, end of
period $ 14.64 $ 15.91 $ 12.46 $ 11.47 $ 13.67
Total investment return 33.07% 17.22% (16.71)% (1.69)% 31.29%
Ratios and supplemental
data
Net assets, end of period
(000s omitted)($) $151,105 $204,131 $152,789 $126,214 $158,811
Ratio of expenses to
average net assets (%) 0.69% 0.69% 0.69% 0.70% 0.76%
Ratio of net investment
income (loss) to average
net assets (%) 6.14% 5.12% 5.48% 6.38% 5.99%
Turnover rate (%) 18.37% 20.04% 22.69% 12.95% 58.81%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chase and withdrawals of shares in relation to the fluctuation in market val-
ues of the fund.
49
Health Sciences Fund
GOAL AND STRATEGY
This is a non-diversified speciality health sciences stock fund with a growth
emphasis that seeks long-term capital appreciation.
The Fund invests primarily in the common stocks of companies in the health sci-
ences industries, including pharmaceutical, health-care services, applied
research and development, biotechnology, and medical technology, equipment and
supplies industries. The Fund invests mostly in stocks of U.S. companies but
also invests to a limited extent in foreign stocks.
The manager selects health sciences and related stocks using proprietary funda-
mental equity research and a systematic screening approach. The manager screens
the universe for stocks that meet minimum size and earnings growth criteria.
The manager employs a proprietary quantitative model to rank stocks based on:
. fundamental catalyst (such as earnings surprise and momentum);
. valuation (such as price-to-sales); and
. financial strength (such as superior cash flow).
The manager uses fundamental equity research with a health sciences team and
global equity research team to identify companies with:
. strong and innovative management teams;
. opportunities for above-average growth within its industry;
. strong competitive positioning relative to peers and suppliers;
. sufficient financial strength to grow business; and
. reasonable valuations relative to earnings expectations.
The manager uses risk management tools and qualitative judgement to determine
the Fund's industry and stock specific weightings. The Fund normally invests in
75 to 120 stocks. The Fund normally has 10% or less (usually lower) of its
assets in cash and cash equivalents. The Fund may invest in initial public
offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: foreign securities denominated in U.S. dollars or any
other currency, certain derivatives (investments whose value is based on indi-
ces or other securities) and companies with the potential for growth as a
result of their particular products, technology, patents or other market advan-
tages in the health-sciences industries. As an example of how derivatives may
be used, the Fund may invest in stock index futures to manage cash flow.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Putnam Investment Management, LLC
One Post Office Square
Boston, Massachusetts 02109
Managing since 1937
Managing Fund since May, 2001
Managed approximately $370 billion in assets at the end of 2000
Fund Managers
Management by investment team overseen by:
Richard England, CFA
- -----------------
Senior Vice President of subadviser
Joined subadviser in 1992
PAST PERFORMANCE
This is a new Fund. It was not in operation as of December 31, 2000.
50
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds.
Manager Risk: The managers and their respective strategies may fail to produce
the intended results. The Fund could underperform its peers or lose money if
the managers' investment strategies do not perform as expected.
Sector Fund Risk: The Fund's investments are concentrated in a single sector
of the stock market and the Fund's performance could be significantly affected
by developments in that particular sector. Because of this concentration, the
Fund's performance could be worse than the overall market by a wide margin or
for extended periods. Also, the Fund's performance could be more volatile rel-
ative to funds that invest broadly across different sectors of the stock mar-
ket.
Health Sciences and Related Securities Risk: Health sciences and related
equity securities may be affected by changes in the regulatory and competitive
environment for health sciences industries and in state and federal government
policies relating to
the funding of health care services. Other risks include (i) the possibility
that regulatory approval may not be granted for new drugs or other products,
(ii) lawsuits against health care companies related to product or service lia-
bility issues, and (iii) technological advances that make existing health care
products and services obsolete.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds.
The less diversified a fund's holdings are, the more likely it is that a spe-
cific security's poor performance will hurt the fund significantly.
Concentration Risk: The Fund's investment in securities of a smaller number of
issuers could produce more volatile performance relative to funds that invest
in a larger number of issuers. The more concentrated a fund's holdings are,
the more likely it is a specific security's poor performance will hurt the
fund significantly.
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity markets.
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic,
political and social instability. Factors such as lack of liquidity, foreign
ownership limits and restrictions on removing currency also pose special
risks.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--This is a new Fund. It was not in operation as of
December 31, 2000.
51
Managed Fund
GOAL AND STRATEGY
This is a non-diversified balanced stock and bond fund that seeks income and
long-term capital appreciation.
The Fund invests primarily in a diversified mix of:
. common stocks of large and mid sized U.S. companies, and
. bonds with an overall intermediate term average maturity.
The Fund employs two subadvisers, each of which employs its own investment
approach and independently manages its portion of the Fund. On or about Novem-
ber 1, 2000, the assets of the Fund were allocated between the two subadvisers
with Capital Guardian receiving $500 million (approximately 16% of the Fund's
assets as of October 31, 2000) and Independence the remainder. All subsequent
investments in the Fund will be allocated equally between the two subadvisers,
while redemptions will be allocated on an asset-weighted basis. These alloca-
tion methodologies may change in the future.
Independence Investment LLC ("Independence") selects stocks and bonds using a
combination of proprietary research and quantitative tools. Stocks are pur-
chased that are undervalued relative to the stock's history and have improving
earnings growth prospects. Bonds are purchased that are attractively priced
based upon market fundamentals and technical factors. Independence seeks to
maintain risk and sector characteristics of the Fund similar to those of the
overall equity market.
Independence's portion of the Fund has a target mix of 60% equities and 40%
bonds, but Independence actively manages the mix within +/- 10 percentage
points of the target mix. Independence normally invests its equity portion in
80 to 160 stocks, with at least 65% (usually higher) in large cap companies.
Independence may invest up to 30% of its bond assets in high yield and foreign
bonds (denominated in foreign currencies).
Capital Guardian Trust Company ("Capital Guardian") selects stocks and bonds
using proprietary fundamental research that focuses on identifying securities
that are believed to be undervalued (i.e., with current prices below long-term
value).
Capital Guardian's portion of the Fund has a target mix of 70% equities and 30%
bonds, but Capital Guardian actively manages the mix within +/- 15 percentage
points of the target mix.
Capital Guardian uses a multiple portfolio manager system in which the stock
and bond portions of the Fund are each managed by multiple portfolio managers
and/or research analysts. Capital Guardian's strategy is normally broadly
diversified since its exposures reflect the aggregate decisions of the multiple
portfolio managers and research analysts.
Capital Guardian's equity sector exposures are a result of stock selection as
opposed to prede termined allocations. Capital Guardian normally invests its
equity portion in 75 to 150 stocks, with at least 65% (usually higher) in large
and mid cap companies. Capital Guardian may invest up to 30% of its bond assets
in high yield and foreign bonds (denominated in foreign currencies).
The Fund is "non-diversified," which means that it can take larger positions in
individual issuers.
Each portion of the Fund normally has 10% or less (usually lower) of its assets
in cash and cash equivalents. Each portion of the Fund may invest in initial
public offerings (IPOs). Each portion of the Fund may purchase other types of
securities that are not primary investment vehicles, for example: U.S. dollar
denominated foreign securities, and certain derivatives (investments whose
value is based on indices or other securities). Each portion of the Fund may
use derivatives, such as futures and forwards, to manage the Fund's average
maturity and to implement foreign currency strategies.
In abnormal market conditions, each portion of the Fund may take temporary
defensive measures--such as holding unusually large amounts of cash and cash
equivalents--that are inconsistent with the Fund's primary investment strategy.
In taking those measures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund and its predecessor since March, 1986
Managed approximately $25 billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
John C. Forelli (equity)
- -----------------
Senior Vice President of subadviser
Joined team in 1996
Joined subadviser in 1990
Jay C. Leu, CFA (fixed income)
- -----------------
Senior Vice President of subadviser
Joined team in 1998
Joined subadvisor in 1997
Portfolio Manager, Pacific Capital Asset Management (1995-1997)
SUBADVISER
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, California 90071
Managing since 1968
Managing Fund since November, 2000
Managed approximately $122 billion in assets at the end of 2000
FUND MANAGERS
Equity
Managed by team of 23 research analysts
Average of 10 years with Capital Guardian
Average of 14 years industry experience
Fixed Income
Team managed by 3 portfolio managers
Average of 15 years with Capital Guardian
Average of 18 years industry experience
See Appendix A for more details
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may also help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 14.77%, fourth quarter 1998 Worst quarter: down 7.22%, third
quarter 1998
Average annual total return -- for periods ending 12/31/2000*
Fund Index 1 Index 2 Index 3**
1 year 0.03% -9.11% 11.63% -0.99%
5 years 11.55% 18.35% 6.46% 12.96%
10 years 12.15% 17.46% 7.96% 13.02%
Life of fund 11.57% 15.26% 8.16% 12.09%
Index 1: S&P 500 Index
Index 2:Lehman Brothers Aggregate Bond Index
Index 3:A composite index combining the performance of the following indices
over the periods indicated: 50% S&P 500 Index/50% Lehman Brothers Aggregate
Bond Index (from inception through December, 1997) and 60% S&P 500
Index/40% Lehman Brothers Aggregate Bond Index (after December, 1997)
* Began operations on March 29, 1986.
**John Hancock believes Index 3 is a more suitable index against which to meas-
ure the fund's performance because it more closely matches the fund's changes
in investment strategy since inception.
52
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall
market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Market Allocation Risk: The allocation of the Fund's assets among major asset
classes (i.e., stocks, bonds, and short-term debt securities) may (1) reduce
the Fund's holdings in a class whose value then increases unexpectedly, or (2)
increase the Fund's holdings in a class just prior to its experiencing a loss
of value.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large/mid cap" approach carries the risk that in certain markets
large/mid cap stocks will underperform small cap stocks.
Non-Diversified Fund Risk: The Fund's larger position in individual issuers
could produce more volatile performance relative to more diversified funds. The
less diversified a fund's holdings are, the more likely it is that a specific
security's poor performance will hurt the fund significantly.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has more interest rate risk than a short-term bond fund, but
less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the Fund may be downgraded. In either case, the value of the bond held by the
Fund would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
High Yield Bond Risk: Junk bonds, defined as bond securities rated below BBB-
/Baa3, may be subject to more volatile or erratic price movements due to
investor sentiment. In a down market, these high yield securities become harder
to value or to sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing
currency also pose special risks. However, to the extent the Fund invests in
emerging market countries, it will have a significantly higher degree of
foreign risk than if it invested exclusively in developed or newly-
industrialized countries.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund with
a small asset base. Also, the Fund's investments in IPOs may be subject to more
erratic price movements than the overall equity market.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December
31: 1996 1997 1998 1999 2000
Net asset value,
beginning of period $13.73 $13.35 $14.35 $15.64 $ 15.45
Income from investment
operations:
Net investment income
(loss) 0.61 0.59 0.46 0.44 0.44
Net realized and
unrealized gain (loss)
on investments* 0.81 1.86 2.43 0.94 (0.45)
Total from investment
operations 1.42 2.45 2.89 1.38 (0.01)
Less distributions:
Distributions from net
investment income and
capital paid in (0.61) (0.67) (0.51) (0.43) (0.44)
Distributions from net
realized gain on
investments sold (1.19) (0.78) (1.09) (1.14) (1.18)
Distributions in excess
of income, capital
paid in & gains -- -- -- -- --
Total distributions (1.80) (1.45) (1.60) (1.57) (1.62)
Net asset value, end of
period $13.35 $14.35 $15.64 $15.45 $ 13.82
Total investment return 10.72% 18.72% 20.42% 9.10% 0.03%
Ratios and supplemental
data
Net assets, end of
period (000s
omitted)($) $2,386,660 $2,800,127 $3,301,910 $3,430,919 $2,995,794
Ratio of expenses to
average net assets (%) 0.36% 0.37% 0.36% 0.36% 0.46%
Ratio of net investment
income (loss) to
average net assets (%) 4.41% 4.18% 2.99% 2.75% 2.86%
Turnover rate (%) 113.61% 200.41% 160.57% 203.86% 199.27%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
53
Aggressive Balanced Fund
GOAL AND STRATEGY
This is a balanced stock and bond fund that seeks income and long-term capital
appreciation.
The Fund invests primarily in a diversified mix of:
. common stocks of large established U.S. companies, and
. bonds with an overall intermediate term average maturity.
The manager makes ongoing decisions about the mix among stocks and bonds. The
manager has a target mix of 75% in equities and 25% in bonds, but actively man-
ages the mix within +/-10 percentage points of the target mix.
The manager selects stocks and bonds using a combination of proprietary
research and quantitative tools. Stocks are purchased that are undervalued rel-
ative to the stock's history and have improving earnings growth prospects.
Bonds are purchased that are attractively priced based upon market fundamentals
and technical factors. The manager seeks to maintain risk and sector character-
istics similar to the overall equity market.
The Fund normally invests its equity portion in 80 to 160 stocks, with at least
65% (usually higher) of its equity assets in large cap companies. The Fund may
invest up to 30% of its bond assets in high yield and foreign bonds (denomi-
nated in foreign currencies). The Fund normally has 10% or less (usually lower)
of its assets in cash and cash equivalents. The Fund may invest in initial pub-
lic offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: U.S. dollar denominated foreign securities, and certain
derivatives (investments whose value is based on indices or other securities).
The manager actively uses derivatives, such as futures and forwards, to adjust
the Fund's average maturity and to implement currency strategies.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund since August, 1999
Managed approximately $25 billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
John C. Forelli
(equity)
- -----------------
Senior Vice President of subadviser
Joined team in 1996
Joined subadviser in 1990
Jay C. Leu, CFA
- -----------------
Senior Vice President of subadviser
Joined team in 1998
Joined subadvisor in 1997
Portfolio Manager, Pacific Capital Asset
Management (1995-1997)
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the vari-
able contracts. Such fees and charges would cause the investment returns under
the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
Best quarter: up 8.94%, fourth quarter 1999 Worst quarter: down 3.16%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index 1 Index 2 Index 3**
1 year -1.53% -9.11% 11.63% -4.07%
Life of fund 4.06% 1.17% 9.45% 3.44%
Index 1:S&P 500 Index
Index 2:Lehman Brothers Aggregate Bond Index
Index 3:75% S&P 500 Index/25% Lehman Brothers Aggregate Bond Index
* Began operations on August 31, 1999.
** John Hancock believes Index 3 is a more suitable index against which to
measure the fund's performance because it more closely matches the fund's
investment strategy.
54
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response
to overall stock or bond market movements. Markets tend to move in cycles,
with periods of rising prices and periods of falling prices. Stocks tend to go
up and down in value more than bonds. If the Fund's investments are concen-
trated in certain sectors, the Fund's performance could be worse than the
overall market.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Market Allocation Risk: The allocation of the Fund's assets among major asset
classes (i.e., stocks, bonds, and short-term debt securities) may (1) reduce
the Fund's holdings in a class whose value then increases unexpectedly, or (2)
increase the Fund's holdings in a class just prior to its experiencing a loss
of value.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large cap" approach carries the risk that in certain markets large cap
stocks will underperform mid cap and small cap stocks.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest
rates fall, the reverse will generally occur. The longer the average remaining
maturity of bonds held by the Fund, the more sensitive the Fund is to interest
rate risk. This Fund has more interest rate risk than a short-term bond fund,
but less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obliga-
tion to pay interest and repay principal. Also, the credit rating of a bond
held by the fund may be downgraded. In either case, the value of the bond held
by the Trust would fall. All bonds have some credit risk, but in general low-
er-rated bonds have higher credit risk.
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
High Yield Bond Risk: Junk bonds, defined as bond securities rated below BBB-
/Baa3, may be subject to more volatile or erratic price movements due to
investor sentiment. In a down market, these high yield securities become
harder to value or to sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if inter-
est rate movements cause the Fund's mortgage-related and callable securities
to be paid off substantially earlier than expected.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally con-
sidered more risky than direct investments. Also, in a down market, deriva-
tives could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund
with a small asset base. Also, the Fund's investments in IPOs may be subject
to more erratic price movements than the overall equity market.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1999** 2000
Net asset value, beginning of period $ 10.00 $ 10.62
Income from investment operations:
Net investment income (loss) 0.06 0.19
Net realized and unrealized gain (loss) on investments* 0.64 (0.35)
Total from investment operations 0.70 (0.16)
Less distributions:
Distributions from net investment income and capital paid
in (0.05) (0.19)
Distributions from net realized gain on investments sold (0.03) (0.02)
Distributions in excess of income, capital paid in & gains -- (0.01)
Total distributions (0.08) (0.22)
Net asset value, end of period $ 10.62 $ 10.24
Total investment return 7.09% (1.53)%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $11,883 $20,941
Ratio of expenses to average net assets (%)*** 0.78% 0.78%
Ratio of net investment income (loss) to average net assets
(%) 1.68% 1.87%
Turnover rate (%) 70.28% 164.89%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on August 31, 1999.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 0.96% and 0.89% for the years
ended December 31, 1999 and 2000, respectively.
55
Global Balanced Fund
GOAL AND STRATEGY
This is a non-diversified global balanced stock and bond fund that seeks income
and long-term capital appreciation. The Fund invests primarily in a mix of:
. U.S. and foreign common stocks of large and mid sized companies within devel-
oped markets; and
. U.S. and foreign bonds with an overall intermediate term average maturity.
The Fund has a target mix of 60% stocks and 40% bonds, but the manager actively
manages the mix within (+/-) 15 percentage points of the target mix.
The Fund invests in at least 3 different countries, but normally in 15 to 45
countries.
Capital Guardian uses a multiple portfolio manager system in which the stock
and bond portions of the Fund are each managed by multiple portfolio managers
and/or research analysts. Therefore, the Fund normally has broad country, cur-
rency, sector and individual security exposures, reflecting the aggregate
decisions of the multiple portfolio managers and research analysts managing the
Fund.
The managers make ongoing decisions regarding the Fund's country, currency,
sector and individual security exposures. Each manager selects stocks and bonds
using proprietary fundamental research that focuses on indentifying securities
that are believed to be undervalued (i.e., with current prices below long-term
value).
The Fund is "non-diversified", which means that it can take larger positions in
individual issuers. However, the Fund normally invests in 125 to 250 stocks
within the equity portion. The Fund may invest:
. no more than 10% of its equity assets in emerging market stocks; and
. no more than 15% of its bond assets in high yield and emerging market bonds.
The bond portion of the Fund normally has an average credit rating of "A" or
higher. The Fund normally has 10% or less (usually lower) of its assets in cash
and cash equivalents. The Fund may invest in initial public offerings (IPOs).
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: American Depositary Receipts (ADRs), Global Depositary
Receipts (GDRs), European Depositary Receipts (EDRs), high yield debt securi-
ties, and certain derivatives (investments whose value is based on indices or
other securities). The Fund may use derivatives, such as futures and forwards,
to manage the Fund's average maturity and to implement foreign currency strate-
gies. Currency management strategies are primarily used for hedging purposes
and to protect against anticipated changes in foreign currency exchange rates.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, California 90071
Managing since 1968
Managing Fund since November, 2000
Managed approximately $122 billion in assets at the end of 2000
FUND MANAGERS
Team managed by 14 Portfolio Managers
Average 17 years with Capital Guardian
Average 21 years industry experience
See Appendix A for more details
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 13.06%, fourth quarter 1998 Worst quarter: down 4.49%, fourth
quarter 1997
Average annual total returns -- for periods ending 12/31/2000*
Fund Index 1 Index 2 Index 3**
1 year -9.08% -12.92% 1.59% -9.14%
Life of fund 4.63% 11.93% 3.83% 5.69%
Index 1: MSCI World Index
Index 2: Salomon Brothers World Government Bond Index, Unhedged
Index 3: A composite index combining the performance of the following indices
over the periods indicated: 65% MSCI World Index (Ex US)/35% Salomon Brothers
Non-US Government Bond Index, Unhedged (from inception through April, 2000);
65% MSCI World Index/35% Salomon Brothers World Government Bond Index, Unhedged
(from May, 2000 through October, 2000); and 60% MSCI World Index/40% Salomon
Brothers World Government Bond Index, Unhedged (after October, 2000)
* Began operations on May 1, 1996.
** John Hancock believes Index 3 is a more suitable index against which to
measure the fund's performance because it more closely matches the fund's
changes in investment strategy since inception.
56
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Market Allocation Risk: The allocation of the Fund's assets between the major
asset classes (i.e., stocks and bonds) may (1) reduce the Fund's holdings in a
class whose value then increases unexpectedly, or (2) increase the Fund's hold-
ings in a class just prior to its experiencing a loss of value.
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk. However, to the extent the Fund invests in emerging market coun-
tries, it will have a significantly higher degree of foreign risk than if it
invested exclusively in developed or newly-industrialized countries.
Investment Category Risk: The returns of the Fund's specific equity investment
category may lag the returns of the overall stock market. For example, the
Fund's "large/mid cap" approach carries the risk that large/mid cap stocks will
underperform small cap stocks.
Non-Diversified Fund Risk: The Fund's larger position in foreign government
securities could produce more volatile performance relative to funds with
smaller positions. The less diversified a fund's holdings are, the more likely
it is that a specific security's poor performance will hurt the fund signifi-
cantly.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has more interest rate risk than a short-term bond fund, but
less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the fund may be downgraded. In either case, the value of the bond held by the
Trust would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
Small/Mid Cap Stock Risk: The Fund's investment in smaller or mid-sized compa-
nies may be subject to more erratic price movements than investment in large
established companies.
High Yield Bond Risk. Junk bonds, defined as bond securities rated below BBB-
/Baa3, may be subject to more volatile or erratic price movements due to
investor sentiment. In a down market, these high yield securities become harder
to value or to sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
Turnover Risk. In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high.
Although the Fund's turnover rate has been high in recent years, the current
manager anticipates that the Fund's turnover rate will normally be less than
100%.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
Initial Public Offering Risk: The Fund has the ability to invest in initial
public offerings (IPOs) and a significant portion of the Fund's return may at
times be attributable to its investment in IPOs. IPOs could have a substantial
impact on performance, either positive or negative, particularly on a fund with
a small asset base. Also, the Fund's investments in IPOs may be subject to more
erratic price movements than the overall equity market.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996** 1997 1998 1999 2000
Net asset value, beginning of
period $ 10.00 $ 10.39 $ 10.11 $ 11.12 $ 10.71
Income from investment
operations:
Net investment income (loss) 0.24 0.33 0.34 0.29 0.23
Net realized and unrealized
gain (loss) on investments* 0.41 (0.05) 1.44 0.25 (1.20)
Total from investment
operations 0.65 0.28 1.78 0.54 (0.97)
Less distributions:
Distributions from net
investment income and capital
paid in (0.24) (0.34) (0.35) (0.35) (0.36)
Distributions from net realized
gain on investments sold (0.02) (0.22) (0.42) (0.44) (0.01)
Distributions in excess of
income, capital paid in & gain -- -- -- (0.16) (0.10)
Total distributions (0.26) (0.56) (0.77) (0.95) (0.47)
Net asset value, end of period $ 10.39 $ 10.11 $ 11.12 $ 10.71 $ 9.27
Total investment return 6.73% 2.65% 17.99% 5.11% (9.08)%
Ratios and supplemental data
Net assets, end of period (000s
omitted)($) $24,098 $25,420 $30,416 $31,577 $28,527
Ratio of expenses to average net
assets (%)*** 1.10% 1.10% 1.10% 1.00% 0.98%
Ratio of net investment income
(loss) to average net assets
(%) 3.59% 3.18% 3.20% 2.73% 2.32%
Turnover rate (%) 22.21% 81.04% 103.55% 131.21% 171.38%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.44%, 1.56%, 1.82%, 1.31% and
1.27% for the years ended December 31, 1996, 1997, 1998, 1999 and 2000,
respectively.
57
Short-Term Bond Fund
GOAL AND STRATEGY
This is a short-term bond fund of medium credit quality that seeks high income.
The Fund primarily invests in a diversified mix of short-term debt securities
including:
. U.S. Treasury and Agency securities;
. U.S. corporate bonds;
. foreign corporate bonds (if dollar-denominated);
. foreign government and agency securities (if dollar denominated); and
. mortgage-and asset-backed securities.
The manager selects bonds using a combination of proprietary research and quan-
titative tools. Bonds are purchased that are attractively priced based upon
market fundamentals and technical factors.
The Fund normally has:
. an average maturity between one and three and a half years;
. no more than 15% of its assets in high yield bonds;
. an average credit quality rating of "A" or higher; and
. 10% or less of its assets in cash and cash equivalents.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: certain derivatives (investments whose value is based on
indexes or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
Owned by John Hancock
Managing since 1982
Managing Fund since May, 1994
Managed approximately $25 billion in assets at the end of 2000
FUND MANAGER
Jay C. Leu, CFA
- -----------------
Senior Vice President of subadviser
Joined team in 1998
Joined subadviser in 1997
Portfolio Manager, Pacific Capital Asset Management (1995-1997)
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 3.87%, second quarter 1995 Worst quarter: down 0.42%, first
quarter 1999
Average annual total returns -- for periods ending 12/31/2000*
Fund Index 1 Index 2**
1 year 7.98% 8.07% 7.93%
5 year 5.34% 5.99% 6.01%
Life of fund 5.74% 6.33% 6.54%
Index 1: Lehman Brothers 1-3 Year Government/Credit Bond Index
Index 2: A composite index combining the performance of the following indices
over the periods indicated: Merrill Lynch 1-5 Year U.S. Government Bond Index
(from inception through April, 1998) and 65% Lehman Brothers 1-3 Year Credit
Bond Index/35% Lehman Brothers 1-3 Year Government Bond Index (after April,
1998)
*Began operations on May 1, 1994.
** John Hancock believes Index 2 is a more suitable index against which to
measure the fund's performance because it more closely matches the fund's
changes in investment strategy since inception.
58
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has less interest rate risk than an intermediate-term or long-
term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the fund may be downgraded. In either case, the value of the bond held by the
Trust would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
Concentration Risk: The Fund's investment in securities of a smaller number of
issuers could produce more volatile performance relative to funds that invest
in a larger number of issuers. The more concentrated a fund's holdings are, the
more likely it is a specific security's poor performance will hurt the fund
significantly.
High Yield Bond Risk: Junk bonds, defined as bond securities rated below BBB-
/Baa3, may be subject to more volatile or erratic price movements due to
investor sentiment. In a down market, these high yield securities become harder
to value or to sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996 1997 1998 1999 2000
Net asset value, beginning of
period $ 10.23 $ 10.05 $ 10.08 $ 10.05 $ 9.72
Income from investment
operations:
Net investment income (loss) 0.54 0.59 0.61 0.61 0.61
Net realized and unrealized gain
(loss) on investments* (0.18) 0.03 (0.03) (0.33) 0.14
Total from investment operations 0.36 0.62 (0.58) 0.28 0.75
Less distributions:
Distributions from net
investment income and capital
paid in (0.54) (0.59) (0.61) (0.61) (0.61)
Distributions from net realized
gain on investments sold -- -- -- -- --
Distributions in excess of
income, capital paid in & gains -- -- -- -- --
Total distributions (0.54) (0.59) (0.61) (0.61) (0.61)
Net asset value, end of period $ 10.05 $ 10.08 $ 10.05 $ 9.72 $ 9.86
Total investment return 3.61% 6.41% 5.82% 2.96% 7.98%
Ratios and supplemental data
Net assets, end of period (000s
omitted) $58,676 $51,120 $77,194 $68,844 $80,109
Ratio of expenses to average net
assets (%)** 0.75% 0.57% 0.53% 0.43% 0.36%
Ratio of net investment income
(loss) to average net assets (%) 5.66% 5.67% 6.17% 6.25% 6.27%
Turnover rate (%) 20.68% 108.29% 184.50% 100.04% 45.27%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made, the expense ratio would have been 0.79% for the year ended Decem-
ber 31, 1996.
59
Bond Index Fund
GOAL AND STRATEGY
This is an intermediate term bond fund of high and medium credit quality that
seeks to track the performance of the Lehman Brothers Aggregate Bond Index,
which broadly represents the U.S. investment grade bond market.
The manager employs a passive management strategy using quantitative techniques
to select individual securities that provide a representative sample of the
securities in the Index.
The Index consists of dollar denominated, fixed rate, investment grade debt
securities with maturities generally greater than one year and outstanding par
values of at least $150 million including:
. U.S. Treasury and agency securities;
. mortgage-backed and asset-backed securities;
. corporate bonds, issued by both U.S. and foreign companies; and
. foreign government and agency securities.
The manager selects securities to match, as closely as practicable, the Index's
duration, cash flow, sector, credit quality, callability, and other key perfor-
mance characteristics.
The Index composition may change from time to time. The manager will reflect
those changes as soon as practicable. The Fund may hold some cash and cash
equivalents, but is normally fully invested.
- --------------------------------------------------------------------------------
SUBADVISER
Mellon Bond Associates, LLP
One Mellon Center
Pittsburgh, Pennsylvania 15258
Managing since 1986
Managing Fund since May, 1998
Managed approximately $58 billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
Gregory D. Curran, CFA
- -----------------
Senior Vice President of subadviser
Joined subadviser in 1995
Began career in 1986
Vice President of Salomon Brothers (1986-1995)
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 5.35%, Fourth quarter 1998 Worst quarter: down 1.27%, first
quarter 1999
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 11.81% 11.84%
Life of fund 5.98% 6.20%
Index: Lehman Brothers Government/Credit Bond Index
*Began operations on May 1, 1998.
60
MAIN RISKS
Primary
Index Management Risk: Certain factors such as the following may cause the
Fund to track the Index less closely:
. The securities selected by the manager may not be fully representative of the
Index.
. Transaction expenses of the Fund may result in the Fund's performance being
different than that of the Index.
. The size and timing of the Fund's cash flows may result in the Fund's perfor-
mance being different than that of the Index.
Also, index funds like this one will have more difficulty in taking defensive
positions in abnormal market conditions.
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has more interest rate risk than a short-term bond fund, but
less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the fund may be downgraded. In either case, the value of the bond held by the
Trust would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks. All
foreign securities have some degree of foreign risk. However, to the extent the
Fund invests in emerging market countries, it will have a significantly higher
degree of foreign risk than if it invested exclusively in developed or newly-
industrialized countries.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1998** 1999 2000
Net asset value, beginning of period $ 10.00 $ 10.19 $ 9.32
Income from investment operations:
Net investment income (loss) 0.42 0.63 0.62
Net realized and unrealized gain (loss) on
investments* 0.29 (0.89) 0.43
Total from investment operations 0.71 (0.26) 1.05
Less distributions:
Distributions from net investment income and
capital paid in (0.42) (0.61) (0.63)
Distributions from net realized gain on
investments sold (0.10) -- --
Distributions in excess of income, capital paid
in & gains -- -- --
Total distributions (0.52) (0.61) (0.63)
Net asset value, end of period $ 10.19 $ 9.32 $ 9.74
Total investment return 7.20% (2.57)% 11.81%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $28,001 $38,436 $64,768
Ratio of expenses to average net assets (%)*** 0.40% 0.29% 0.25%
Ratio of net investment income (loss) to average
net assets (%) 6.17% 6.56% 6.80%
Turnover rate (%) 21.09% 17.06% 33.14%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on May 1, 1998.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 0.71%, 0.35% and 0.27% for the
years ended December 31, 1998, 1999 and 2000, respectively.
61
Active Bond Fund
GOAL AND STRATEGY
This is an intermediate term bond fund of medium credit quality that seeks
income and capital appreciation.
The Fund primarily invests in a diversified mix of debt securities including:
. U.S. Treasury and agency securities;
. foreign government and agency securities (if dollar-denominated);
. corporate bonds, both U.S. and foreign (if dollar-denominated); and
. mortgage-backed and asset-backed securities.
The manager normally invests:
. mostly in investment grade debt securities; and
. no more than 25% of the Fund's assets in high yield bonds.
The manager seeks to identify specific bond sectors, industries and specific
bonds that are attractively priced. The manager tries to anticipate shifts in
the business cycle, using economic and industry analysis to determine which
sectors and industries might benefit over the next 12 months. The manager uses
proprietary research to identify securities that are undervalued.
The manager evaluates bonds of all quality levels and maturities from many dif-
ferent issuers. The Fund normally has an average credit rating of "A" or high-
er.
The Fund normally has 10% or less of its assets in cash and cash equivalents.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: emerging market debt securities, and certain derivatives
(investments whose value is based on indices or other securities). The manager
actively uses derivatives, such as futures, to adjust the Fund's average matu-
rity and seeks to keep the Fund's interest rate sensitivity in line with the
overall market.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Owned by John Hancock
Managing since 1968
Managing Fund since May, 1995
Managed approximately $32 billion in assets at the end of 2000
FUND MANAGER
James K. Ho, CFA
- -----------------
Executive Vice President of subadviser
Managed fund since 1995
Associated with subadviser since 1985
Began career in 1977
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 7.14%, second quarter 1989 Worst quarter: down 2.51%, first
quarter 1994
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year 10.45% 11.63%
5 years 6.30% 6.46%
10 years 8.20% 7.96%
Life of fund 8.04% 8.16%
Index: Lehman Brothers Aggregate Bond Index
*Began operations on March 29, 1986.
62
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has more interest rate risk than a short-term bond fund, but
less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the fund may be downgraded. In either case, the value of the bond held by the
Fund would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
High Yield Bond Risk: Junk bonds, defined as bond securities rated below BBB-
/Baa3, may be subject to more volatile or erratic price movements due to
investor sentiment. In a down market, these high yield securities become harder
to value or to sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks. All
foreign securities have some degree of foreign risk. However, to the extent the
Fund invests in emerging market countries, it will have a significantly higher
degree of foreign risk than if it invested exclusively in developed or newly-
industrialized countries.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996 1997 1998 1999 2000
Net asset value, beginning
of period $ 10.13 $ 9.77 $ 9.95 $9.92 $ 9.12
Income from investment
operations:
Net investment income
(loss) 0.69 0.71 0.69 0.67 0.64
Net realized and
unrealized gain (loss) on
investments* (0.31) 0.24 0.11 (0.76) 0.28
Total from investment
operations 0.38 0.95 0.80 (0.09) 0.92
Less distributions:
Distributions from net
investment income and
capital paid in (0.69) (0.71) (0.69) (0.71) (0.60)
Distributions from net
realized gain on
investments sold (0.05) (0.06) (0.14) -- --
Distributions in excess of
income, capital paid in &
gains -- -- -- -- --
Total distributions (0.74) (0.77) (0.83) (0.71) (0.60)
Net asset value, end of
period $ 9.77 $ 9.95 $ 9.92 $ 9.12 $ 9.44
Total investment return 4.10% 10.11% 8.23% (0.94)% 10.45%
Ratios and supplemental
data
Net assets, end of period
(000s omitted)($) $726,111 $803,770 $907,121 $850,286 $842,299
Ratio of expenses to
average net assets (%) 0.29% 0.31% 0.29% 0.28% 0.41%
Ratio of net investment
income (loss) to average
net assets (%) 7.07% 7.18% 6.84% 6.97% 6.98%
Turnover rate (%) 119.12% 138.29% 228.74% 182.90% 164.34%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
63
Active Bond II Fund
(Formerly Core Bond Fund)
GOAL AND STRATEGY
This is an intermediate term bond fund of medium credit quality that seeks
income and capital appreciation.
The Fund primarily invests in a diversified mix of debt securities including:
. U.S. Treasury and agency securities;
. foreign government and agency securities (if dollar-denominated);
. corporate bonds, both U.S. and foreign (if dollar-denominated); and
. mortgage-backed and asset-backed securities.
The manager normally invests:
. mostly in investment grade debt securities; and
. no more than 25% of the Fund's assets in high yield bonds.
The manager seeks to identify specific bond sectors, industries and specific
bonds that are attractively priced. The manager tries to anticipate shifts in
the business cycle, using economic and industry analysis to determine which
sectors and industries might benefit over the next 12 months. The manager uses
proprietary research to identify securities that are undervalued.
The manager evaluates bonds of all quality levels and maturities from many dif-
ferent issuers. The Fund normally has an average credit rating of "A" or high-
er.
The Fund normally has 10% or less of its assets in cash and cash equivalents.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: emerging market debt securities, and certain derivatives
(investments whose value is based on indices or other securities). The manager
actively uses derivatives, such as futures, to adjust the Fund's average matu-
rity and seeks to keep the Fund's interest rate sensitivity in line with the
overall market.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199
Owned by John Hancock
Managing since 1968
Managing Fund since January, 2001
Managed approximately $32 billion in assets at the end of 2000
FUND MANAGER
James K. Ho, CFA
- -----------------
Executive Vice President of subadviser
Associated with subadviser since 1985
Began career in 1977
PAST PERFORMANCE
Because this Fund did not have a full year of operations as of December 31,
2000, no year-by-year total returns or average annual total returns can be
shown for this Fund.
64
MAIN RISKS
Primary
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has more interest rate risk than a short-term bond fund, but
less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the fund may be downgraded. In either case, the value of the bond held by the
Trust would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
Concentration Risk: The Fund's investment in securities of a smaller number of
issuers could produce more volatile performance relative to funds that invest
in a larger number of issuers. The more concentrated a fund's holdings are, the
more likely it is a specific security's poor performance will hurt the fund
significantly.
High Yield Bond Risk: Junk bonds, defined as bond securities rated below BBB-
/Baa3, may be subject to more volatile or erratic price movements due to
investor sentiment. In a down market, these high yield securities become harder
to value or to sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high. Nor-
mally, the Fund's turnover rate will be greater than 100%.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks. All
foreign securities have some degree of foreign risk. However, to the extent the
Fund invests in emerging market countries, it will have a significantly higher
degree of foreign risk than if it invested exclusively in developed or newly-
industrialized countries.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Active Bond II Fund (Formerly Core Bond Fund)--Period ended Decmeber
31: 2000**
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income (loss) 0.32
Net realized and unrealized gain (loss) on investments* 0.37
Total from investment operations 0.69
Less distributions:
Distributions from net investment income and capital paid in (0.31)
Distributions from net realized gain on investments sold (0.05)
Distributions in excess of income, capital paid in & gains --
Total distributions (0.36)
Net asset value, end of period $10.33
Total investment return 7.00%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $5,428
Ratio of expenses to average net assets (%) 0.75%
Ratio of net investment income (loss) to average net assets (%) 16.09%
Turnover rate (%) 131.71%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations June 30, 2000.
65
High Yield Bond Fund
GOAL AND STRATEGY
This is a high yield bond fund that seeks high income and capital appreciation.
The Fund invests primarily in a diversified mix of high yield debt securities,
commonly referred to as "junk bonds" (rated BB+/Ba1 or lower and their unrated
equivalents), including:
. corporate bonds, both U.S. and foreign (if dollar-denominated);
. foreign government and agency securities (if dollar-denominated);
. preferred stocks; and
. convertible securities (convertible into common stocks or other equity inter-
ests).
The manager will invest no more than 15% of the Fund's assets in emerging mar-
ket countries (with below investment-grade sovereign debt). The Fund normally
has 10% or less of its assets in cash and cash equivalents.
The manager seeks to purchase bonds with stable or improving credit quality
before the market widely perceives the improvement. Purchase and sale decisions
are primarily based upon the investment merits of the particular security.
The manager selects bonds using proprietary research, including:
. quantitative analysis of historical financial data;
. qualitative analysis of a company's future prospects; and
. economic and industry analysis.
The Fund's average maturity depends on security selection decisions rather than
interest rate decisions.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: equity securities, high quality debt securities (short-
term and otherwise), foreign debt securities denominated in U.S. dollars or any
other currency, and certain derivatives (investments whose value is based on
indices or other securities).
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Managing, with predecessors, since 1928
Managing Fund since May, 1998
Managed approximately $274 billion in assets at the end of 2000
FUND MANAGER
Richard T. Crawford
- -----------------
Vice President of subadviser
Joined subadviser in 1994
Began career in 1991
Manager draws upon the other members of the High Yield team, including:
Earl E. McEvoy
- -----------------
Partner of subadviser
Joined subadviser in 1978
Began career in 1972
Catherine A. Smith
- -----------------
Partner of subadviser
Joined subadviser in 1985
Began career in 1983
PAST PERFORMANCE
The graph will show how the fund's total return varies from year to year, while
the table will show performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks and potential rewards. All figures assume dividend reinvestment.
Past performance does not indicate future results. The performance figures
below do not reflect the deduction of fees and charges payable under the
variable contracts. Such fees and charges would cause the investment returns
under the contracts to be less than that shown below.
Year-by-year total returns -- calendar year
Best quarter: up 4.55%, fourth quarter 1998 Worst quarter: down 8.80%, fourth
quarter 2000
Average annual total returns -- for periods ending 12/31/2000*
Fund Index
1 year -10.81% -5.86%
Life of fund -3.48% -2.05%
Index:Lehman Brothers High-yield Bond Index
*Began operations on May 1, 1998.
66
MAIN RISKS
Primary
High Yield Bond Risk: High yield or junk bonds, defined as bond securities
rated below BBB-/Baa3, may be subject to more volatile or erratic price move-
ments due to investor sentiment. In a down market, these high yield securities
may become harder to value or to sell at a fair price.
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has more interest rate risk than a short-term bond fund, but
less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the fund may be downgraded. In either case, the value of the bond held by the
Fund would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
Secondary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks. All
foreign securities have some degree of foreign risk. However, to the extent the
Fund invests in emerging market countries, it will have a significantly higher
degree of foreign risk than if it invested exclusively in developed or newly-
industrialized countries.
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1998** 1999 2000
Net asset value, beginning of period $ 10.00 $ 9.23 $ 8.99
Income from investment operations:
Net investment income (loss) 0.46 0.72 0.73
Net realized and unrealized gain (loss) on
investments* (0.76) (0.26) (1.65)
Total from investment operations (0.30) 0.46 (0.92)
Less distributions:
Distributions from net investment income and
capital paid in (0.46) (0.70) (0.74)
Distributions from net realized gain on
investments sold (0.01) -- --
Distributions in excess of income, capital paid
in & gains -- -- --
Total distributions (0.47) (0.70) (0.74)
Net asset value, end of period $ 9.23 $ 8.99 $ 7.33
Total investment return (2.98)% 5.13% (10.81)%
Ratios and supplemental data
Net assets, end of period (000s omitted)($) $14,789 $19,921 $25,978
Ratio of expenses to average net assets (%)*** 0.90% 0.80% 0.75%
Ratio of net investment income (loss) to average
net assets (%) 7.43% 7.94% 8.88%
Turnover rate (%) 17.67% 38.62% 21.94%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on May 1, 1998.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 2.03%, 1.04% and 0.87% for the
years ended December 31, 1998, 1999 and 2000, respectively.
67
Global Bond Fund
GOAL AND STRATEGY
This is an intermediate term, non-diversified global bond fund of medium credit
quality that seeks income and capital appreciation.
The Fund primarily invests in a broad mix of debt securities throughout the
world including:
. U.S. Treasury and agency securities;
. foreign government and agency securities;
. supranational securities (such as the World Bank);
. corporate bonds, both U.S. and foreign; and
. mortgage-backed and asset-backed securities.
The Fund has a target mix of 25% U.S. bonds and 75% non-U.S. bonds (denominated
in foreign currencies), but the manager actively manages the mix within (+/-)
15 percentage points of the target mix.
The Fund normally:
. invests in at least 3 countries, but normally in 10 to 35 countries;
. has an average credit quality rating of "A" or higher; and
. invests up to 15% in emerging market and high yield debt securities.
The Fund is managed using a multiple portfolio manager system in which the Fund
is managed by multiple portfolio managers and/or research analysts. Therefore,
the Fund normally has broad country, currency, sector and individual security
exposures, reflecting the aggregate decisions of the multiple portfolio manag-
ers and research analysts managing the Fund.
The managers make ongoing decisions regarding the Fund's average maturity and
the Fund's country, sector and foreign currency exposures. The manager uses
proprietary research and economic analysis to identify attractive markets and
currencies and undervalued sectors and securities.
The Fund is "non-diversified", which means that it can take larger positions in
individual issuers. The Fund normally has 10% or less (usually lower) of its
assets in cash and cash equivalents.
The Fund may purchase other types of securities that are not primary investment
vehicles, for example: certain derivatives (investments whose value is based on
indices or other securities). The Fund may use derivatives, such as futures and
forwards, to manage the Fund's average maturity relative to the benchmark and
to implement foreign currency strategies. Currency management strategies are
primarily used for hedging purposes and to protect against anticipated changes
in foreign currency exchange rates.
In abnormal market conditions, the Fund may take temporary defensive measures--
such as holding unusually large amounts of cash and cash equivalents--that are
inconsistent with the Fund's primary investment strategy. In taking those mea-
sures, the Fund may not achieve its investment goal.
- --------------------------------------------------------------------------------
SUBADVISER
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, California 90071
Managing since 1968
Managing Fund since November, 2000
Managed approximately $122 billion in assets at the end of 2000
FUND MANAGERS
Team managed by 4 Portfolio Managers
Average 11 years with Capital Guardian
Average 17 years industry experience
See Appendix A for more details
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time (along with a broad-based market index
for reference). This information may help provide an indication of the fund's
risks and potential rewards. All figures assume dividend reinvestment. Past
performance does not indicate future results. The performance figures below do
not reflect the deduction of fees and charges payable under the variable
contracts. Such fees and charges would cause the investment returns under the
contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 7.04%, forth quarter 2000 Worst quarter: down 1.75%, second
quarter 1999
Average annual total returns -- for periods ending 12/31/2000*
Fund Index 1 Index 2**
1 year 12.00% 1.59% 13.37%
Life of fund 7.34% 3.83% 8.46%
Index 1:Salomon Brothers World Government Bond Index, Unhedged
Index 2:A composite index combining the performance of the following indices
over the periods indicated: 75% Lehman Brothers Aggregate Bond Index / 25% JP
Morgan Non-US Government Bond Index, US Dollar Hedged (from inception through
April, 1999); JP Morgan Global Government Bond Index, US Dollar Hedged (from
May, 1999 through October, 2000); and Salomon Brothers World Government Bond
Index, Unhedged (after October, 2000)
* Began operations on May 1, 1996.
**John Hancock believes Index 2 is a more suitable index against which to meas-
ure the fund's performance because it more closely matches the fund's changes
in investment strategy since inception.
68
MAIN RISKS
Primary
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, economic, political
and social instability and foreign currency rate fluctuations. Factors such as
lack of liquidity, foreign ownership limits and restrictions on removing cur-
rency also pose special risks. All foreign securities have some degree of for-
eign risk. However, the Fund's investments in emerging market countries have a
significantly higher degree of foreign risk than investments in developed or
newly-industrialized countries.
Market Risk: The value of the securities in the Fund may go down in response to
overall stock or bond market movements. Markets tend to move in cycles, with
periods of rising prices and periods of falling prices. Stocks tend to go up
and down in value more than bonds. If the Fund's investments are concentrated
in certain sectors, the Fund's performance could be worse than the overall mar-
ket.
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, the Fund's bond yields will gen-
erally rise and the Fund's bond prices will generally fall. When interest rates
fall, the reverse will generally occur. The longer the average remaining matu-
rity of bonds held by the Fund, the more sensitive the Fund is to interest rate
risk. This Fund has more interest rate risk than a short-term bond fund, but
less interest rate risk than a long-term bond fund.
Credit Risk: An issuer of a bond held by the Fund may default on its obligation
to pay interest and repay principal. Also, the credit rating of a bond held by
the fund may be downgraded. In either case, the value of the bond held by the
Trust would fall. All bonds have some credit risk, but in general lower-rated
bonds have higher credit risk.
Non-Diversified Fund Risk: The Fund's larger position in foreign government
securities could produce more volatile performance relative to funds with
smaller positions. The less diversified a fund's holdings are, the more likely
it is that a specific security's poor performance will hurt the fund signifi-
cantly.
Concentration Risk. The Fund's investment in securities of a smaller number of
issuers could produce more volatile performance relative to funds that invest
in a larger number of issuers. The more concentrated a fund's holdings are, the
more likely it is a specific security's poor performance will hurt the fund
significantly.
Turnover Risk: In general, the greater the volume of buying and selling by a
fund (i.e., the higher its "turnover rate"), the greater the impact that bro-
kerage commissions and other transaction costs will have on the fund's perfor-
mance. Any turnover rate in excess of 100% is considered relatively high.
Although the Fund's turnover rate has been high in recent years, the current
manager anticipates that the Fund's turnover rate will normally be less than
100%.
Secondary
Derivatives Risk: Certain derivative instruments (such as options, futures and
swaps) can produce disproportionate gains or losses. They are generally consid-
ered more risky than direct investments. Also, in a down market, derivatives
could become harder to value or sell at a fair price.
Prepayment/Call Risk: The Fund's share price or yield could be hurt if interest
rate movements cause the Fund's mortgage-related and callable securities to be
paid off substantially earlier than expected.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996** 1997 1998 1999 2000
Net asset value, beginning of
period $ 10.00 $ 10.16 $ 10.24 $ 10.60 $ 9.82
Income from investment
operations:
Net investment income (loss) 0.38 0.59 0.54 0.48 0.48
Net realized and unrealized
gain (loss) on investments* 0.28 0.30 0.38 (0.70) 0.67
Total from investment
operations 0.66 0.89 0.92 (0.22) 1.15
Less distributions:
Distributions from net
investment income and capital
paid in (0.38) (0.66) (0.47) (0.56) (0.63)
Distributions from net realized
gain on investments sold (0.12) (0.15) (0.09) -- --
Distributions in excess of
income, capital paid in &
gains -- -- -- -- --
Total distributions $ (0.50) $ (0.81) $ (0.56) (0.56) (0.63)
Net asset value, end of period $ 10.16 $ 10.24 $ 10.60 $ 9.82 $ 10.34
Total investment return 6.71% 9.05% 9.15% (2.16)% 12.00%
Ratios and supplemental data
Net assets, end of period (000s
omitted)($) $12,907 $28,647 $66,791 $70,991 $68,473
Ratio of expenses to average net
assets (%)*** 1.00% 1.00% 0.95% 0.83% 0.81%
Ratio of net investment income
(loss) to average net assets
(%) 6.05% 5.80% 5.27% 4.70% 4.71%
Turnover rate (%) 171.39% 69.38% 186.70% 332.06% 209.39%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
** Fund began operations on May 1, 1996.
*** Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.57%, 1.32%, 1.02%, 0.84% and
0.91% for the years ended December 31, 1996, 1997, 1998, 1999 and 2000,
respectively.
69
Money Market Fund
GOAL AND STRATEGY
This is a money market fund that seeks to preserve capital and liquidity while
also seeking to achieve a competitive yield. The Fund intends to maintain a
stable net asset value of $1.00 per share.
The Fund invests in U.S. dollar denominated money market instruments rated in
one of the two highest short-term credit rating categories, primarily includ-
ing:
. commercial paper and other short-term obligations of U.S. and foreign issuers
(including asset-backed securities);
. certificates of deposit, bank notes and other obligations of U.S. and foreign
banks and other lending institutions;
. debt securities issued by foreign governments and agencies;
. U.S. Treasury, agency and state and local government obligations; and,
. repurchase agreements.
The manager's investment approach combines top-down analysis with fundamental
bottom-up security selection. The manager considers factors such as the antici-
pated level of interest rates and the maturity of individual securities to
determine the Fund's overall weighted average maturity. The manager seeks secu-
rities;
. with an acceptable maturity;
. issued by issuers on a sound financial footing;
. that are marketable and liquid; and
. that offer competitive yields.
The Fund only invests in individual securities with a maximum remaining matu-
rity of 397 days (13 months). The overall weighted average maturity of the
Fund's investments is 90 days or less. The Fund may invest:
. up to 5% of assets in securities rated in the second-highest short-term cate-
gory (or unrated equivalents); and
. up to 1% of assets or $1 million (whichever is greater) in securities of a
single issuer rated in the second-highest short-term category (or unrated
equivalents).
- --------------------------------------------------------------------------------
SUBADVISER
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Managing, with predecessors, since 1928
Managing Fund since May, 2001
Managed approximately $274 billion in assets at the end of 2000
FUND MANAGERS
Management by investment team overseen by:
John Keogh
- -----------------
Senior Vice President and Partner of subadviser
Joined subadviser in 1983
PAST PERFORMANCE
The graph shows how the fund's total return has varied from year to year, while
the table shows performance over time. This information may also help provide
an indication of the fund's risks and potential rewards. All figures assume
dividend reinvestment. Past performance does not indicate future results. The
performance figures below do not reflect the deduction of fees and charges
payable under the variable contracts. Such fees and charges would cause the
investment returns under the contracts to be less than that shown below.
Year-by-year total returns -- calendar years
Best quarter: up 2.38%, second quarter 1989 Worst quarter: up 0.74%, second
quarter 1993
Average annual total return -- for periods ending 12/31/2000(/1/)
Fund
1 year 6.29%
5 years 5.50%
10 years 4.99%
Life of fund 5.84%
(1)Began operations on March 29, 1986.
70
MAIN RISKS
Primary
Manager Risk: The manager and its strategy may fail to produce the intended
results. The Fund could underperform its peers or lose money if the manager's
investment strategy does not perform as expected.
Interest Rate Risk: When interest rates rise, yields on the Fund's investments
will generally rise and prices on the Fund's investments will generally fall.
When interest rates fall, the reverse will generally occur. The longer the
average remaining maturity of instruments held by the Fund, the more sensitive
the Fund is to interest rate risk. This Fund has less interest rate risk than
an intermediate-term or long-term bond fund.
Credit Risk: An issuer of an instrument held by the Fund may default on its
obligation to pay interest and repay principal. Also, the credit rating of an
instrument held by the Fund may be downgraded. In either case, the value of the
instrument held by the Fund would fall. All money market instruments have some
credit risk, but in general lower-rated instruments have higher credit risk.
Principal Risk: An investment in the Fund is not a bank deposit and is not
guaranteed as to principal and interest. Although the Fund seeks to maintain a
stable net asset value of $1.00 per share, investors may lose money by invest-
ing in the Fund.
Foreign Risk: The Fund's foreign securities will pose special risks, due to
limited government regulation, lack of public information, and economic, polit-
ical and social instability. Factors such as lack of liquidity, foreign owner-
ship limits and restrictions on removing currency also pose special risks. All
foreign securities have some degree of foreign risk. However, to the extent the
Fund invests in emerging market countries, it will have a significantly higher
degree of foreign risk than if it invested exclusively in developed or newly-
industrialized countries.
Secondary
None
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Selected data for each share interest outstanding
throughout the period indicated)
The following financial highlights have been audited by Ernst & Young LLP.
Period ended December 31: 1996 1997 1998 1999 2000
Net asset value, beginning
of period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income from investment
operations:
Net investment income
(loss) 0.52 0.53 0.53 0.45 0.60
Net realized and
unrealized gain (loss) on
investments* -- -- -- -- --
Total from investment
operations 0.52 0.53 0.53 0.45 0.60
Less distributions:
Distributions from net
investment income and
capital paid in (0.52) (0.53) (0.53) (0.45) (0.61)
Distributions from net
realized gain on
investments sold -- -- -- -- --
Distributions in excess of
income, capital paid in &
gains -- -- -- -- --
Total distributions $ (0.52) $ (0.53) $ (0.53) (0.45) (0.61)
Net asset value, end of
period $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Total investment return 5.32% 5.38% 5.40% 5.05% 6.29%
Ratios and supplemental
data
Net assets, end of period
(000s omitted)($) $213,235 $229,443 $395,195 $451,235 $496,853
Ratio of expenses to
average net assets (%) 0.30% 0.33% 0.31% 0.31% 0.29%
Ratio of net investment
income (loss) to average
net assets (%) 5.20% 5.32% 5.29% 4.95% 6.05%
* The amount shown may not accord with the change in the aggregate gains and
losses in the fund securities for the period because of the timing of pur-
chases and withdrawals of shares in relation to the fluctuation in market
values of the fund.
71
Your Account
Investments in shares of the funds
Each fund sells its shares directly to separate accounts of John Hancock,
JHVLICO and other insurance companies to fund variable contracts. Each fund
also buys back its shares on redemption by the separate accounts.
Under the variable contracts, a separate account buys or redeems a fund's
shares based on:
. instructions by you and other contractowners to invest or receive back monies
under a contract (such as making a premium payment or surrendering a con-
tract), and
. the operation of a contract (such as deduction of fees and charges).
The Trust, as law permits, may:
. refuse a buy order if the adviser believes it would disrupt management
. suspend a fund's offer of shares, or
. suspend a fund's redemption obligation or postpone a fund's payment of
redemption proceeds for more than seven days.
Share price
Each fund sells and buys back its shares at the net asset value per share
("NAV") next computed after receipt by a separate account of a contractowner's
instructions.
Each fund calculates its NAV:
. by dividing its net assets by the number of its outstanding shares,
. once daily as of the close of regular trading on the New York Stock Exchange
(generally at 4 p.m. New York time) on each day the Exchange is open.
Certain funds may hold securities primarily listed on foreign exchanges that
trade on weekends or other days when the Trust does not calculate NAV. Conse-
quently, NAV may change on days when contractowners will not be able to
instruct a separate account to buy or redeem fund shares.
Valuation
The Money Market Fund values its securities at amortized cost. Each of the
other funds values securities based on:
. market quotations,
. amortized cost,
. valuations of independent pricing services, or
. fair value determined in accordance with procedures approved by the Trust's
trustees.
A fund may value securities at fair value where, for example:
.market quotations are not readily available, or
. the value of securities has been materially affected after the closing of a
foreign market.
Conflicts
The Trust's trustees monitor for possible material irreconcilable conflicts
among separate accounts buying shares of the funds. The Trust's net asset value
could decrease, if the Trust had to sell investment securities to pay redemp-
tion proceeds to a separate account withdrawing because of a conflict.
72
Funds' Expenses
The advisory fee paid by each fund to the adviser in 2000 was:
Funds % of net assets
Equity Index Fund 0.13%
Growth & Income Fund 0.32%
Large Cap Value Fund 0.73%
Large Cap Value CORESM Fund 0.75%
Large Cap Value CORESM II
Fund* 0.80%
Large Cap Growth Fund 0.36%
Large Cap Aggressive Growth
Fund 0.90%
Large/Mid Cap Value Fund 0.95%
Large/Mid Cap Value II Fund** 0.80%
Fundamental Growth Fund 0.86%
Mid Cap Blend Fund 0.75%
Mid Cap Growth Fund 0.81%
Small/Mid Cap CORESM Fund 0.80%
Small/Mid Cap Growth Fund 0.75%
Small Cap Equity Fund 0.82%
Small Cap Value Fund*** 0.95%
Small Cap Growth Fund 0.75%
International Equity Index
Fund 0.17%
International Opportunities
Fund 0.83%
International Equity Fund 1.00%
Emerging Markets Equity Fund 1.22%
Real Estate Equity Fund 0.67%
Managed Fund 0.38%
Aggressive Balanced Fund 0.68%
Global Balanced Fund 0.88%
Short-term Bond Fund 0.30%
Bond Index Fund 0.15%
Active Bond Fund 0.31%
Active Bond II Fund**** 0.70%
High Yield Bond Fund 0.65%
Global Bond Fund 0.71%
Money Market Fund 0.25%
* Formerly American Leaders Large Cap Value
** Formerly Mid Cap Value
*** Formerly Small/Mid Cap Value
**** Formerly Core Bond
The Health Sciences Fund was not in operation in 2000. That Fund pays fees to
the adviser (as a percentage of net assets) equal to 0.55% of the first $250
million and 0.50% above $250 million.
The adviser pays subadvisory fees out of its own assets. No fund pays a fee to
its subadviser. The adviser has agreed to limit each fund's annual expenses
(excluding advisory fees and certain other expenses such as brokerage and tax-
es) to not more than 0.10 percent of the fund's average daily net assets.
Dividends and Taxes
Dividends
Each fund automatically reinvests its dividends and distributions in additional
shares of the fund at NAV.
Each fund declares and pays dividends monthly, except that the Small/Mid Cap
Growth Fund does so annually and the Money Market Fund does so daily.
Funds generally declare capital gains distributions annually.
Taxes
Each fund must meet investment diversification and other requirements under the
Internal Revenue Code, in order to:
. avoid federal income tax and excise tax, and
. assure the tax-deferred treatment of variable contracts under the Code.
You should read the prospectus for your variable contract for the federal
income tax consequences for contractowners, including the consequences of a
fund's failure to meet Code requirements.
73
Trust Business Structure
The diagram below shows the basic business structure of the Trust. The Trust's
trustees oversee the Trust's investment and business activities and hire vari-
ous service providers to carry out the Trust's operations.
Variable
Contractowners
John Hancock,
JHVLICO and IPL
Separate Accounts
The Trust
Trustees oversee the
Trust's investment and
business activities.
Investment Adviser Custodian
John Hancock Life State Street Bank and
Insurance Company Trust
Company
Manages the Trust's
investment and business Holds the Trust's assets,
activities. settles all Trust
trades and collects most
of the valuation
data required for calcu-
lating the Trust's
NAV.
Subadvisers
Alliance Capital Management Morgan Stanley Dean Witter In-
L.P. vestment Management Inc.
Capital Guardian Trust Company Putnam Investment Management, LLC
Goldman Sachs Asset Manage- SSgA Funds Management, Inc.
ment. T. Rowe Price Associates, Inc.
Independence Investment LLC T. Rowe Price International, Inc.
Janus Capital Corporation Wellington Management Company,
John Hancock Advisers, Inc. LLP
Mellon Bond Associates, LLP
Provide management to various funds.
74
APPENDIX A
Capital Guardian Trust Company uses a multiple portfolio manager system in
which each Fund it subadvises is divided into segments that are managed by
individual portfolio managers and/or research analysts. This multiple manager
approach seeks to deliver the best ideas of individual portfolio managers and
analysts within each Fund. Each portfolio manager and research analyst decides
how their respective segment will be invested within the limits provided by the
Fund's goal and strategy and investment policies. Capital Guardian's Investment
Committee determines the specific allocation to individual portfolio managers
and the research analyst team. Set forth below are details regarding the multi-
ple portfolio managers of Capital Guardian who are involved in the management
of the Funds indicated:
MANAGED FUND
U.S. Equity Investments:
The Research Team, consisting of the following 23 research analysts, has an
average of 10 years experience with Capital Guardian and 14 years of industry
experience.
Gene Barron Reed H. Lowenstein
Andrew F. Barth, D. James Martin
Research Portfolio Coordinator
Karen A. Miller
Terry Berkemeier
Jason M. Pilalas
Steven Connell
Lars Reierson
Caroline E. Ford
Suzanne Rheault
Zachary E. Guevara
Carlos Schonfeld
Todd S. James
Lawrence R. Solomon
Nancy Kamei
Eric H. Stern
James S. Kang
Steven R. Wanek
Karin L. Larson
Alan J. Wilson
Jin Lee
John A. Longhurst
U.S. Fixed Income Investments:
James S. Baker John W. Ressner
Vice President of subadviser Executive Vice President of subadviser
Joined subadviser in 1987 Joined subadviser in 1988
Began career in 1981 Began career in 1988
James R. Mulally
Senior Vice President of
subadviser
Joined subadviser in 1980
Began career in 1977
SMALL CAP EQUITY FUND
Michael R. Ericksen Karen A. Miller
Senior Vice President of Senior Vice President of subadviser
subadviser Joined subadviser in 1990
Joined subadviser in 1987 Began career in 1989
Began career in 1981
Lawrence R. Solomon
James S. Kang Senior Vice President of subadviser
Senior Vice President of Joined subadviser in 1985
subadviser Began career in 1984
Joined subadviser in 1988
Began career in 1987
Robert G. Kirby
Chairman Emeritus of subadviser
Joined subadviser in 1966
Began career in 1953
75
GLOBAL BALANCED FUND
Global Equity Investments:
Michael R. Ericksen Robert Ronus
Senior Vice President of President of subadviser
subadviser Joined subadviser in 1972
Joined subadviser in 1987 Began career in 1969
Began career in 1981
Lionel M. Sauvage
David I. Fisher Senior Vice President of
Chairman of subadviser subadviser
Joined subadviser in 1969 Joined subadviser in 1987
Began career in 1966 Began career in 1987
Richard N. Havas Nilly Sikorsky
Senior Vice President of President of subadviser
subadviser Joined subadviser in 1962
Joined subadviser in 1986 Began career in 1963
Began career in 1982
Rudolf M. Staehelin
Nancy I. Kyle Senior Vice President of
Senior Vice President of subadviser
subadviser Joined subadviser in 1981
Joined subadviser in 1991 Began career in 1978
Began career in 1974
Eugene P. Stein
Christopher A. Reed Executive Vice President of
Vice President of subadviser subadviser
Joined subadviser in 1994 Joined subadviser in 1973
Began career in 1994 Began career in 1972
Global Fixed Income Investments:
Mark A. Brett James R. Mulally
Senior Vice President of Senior Vice President of
subadviser subadviser
Joined subadviser in 1993 Joined subadviser in 1980
Began career in 1980 Began career in 1977
Laurentius Harrer John W. Ressner
Vice President of subadviser Executive Vice President of subadviser
Joined subadviser in 1993 Joined subadviser in 1988
Began career in 1988 Began career in 1988
GLOBAL BOND FUND
Mark A. Brett James R. Mulally
Senior Vice President of Senior Vice President of
subadviser subadviser
Joined subadviser in 1993 Joined subadviser in 1980
Began career in 1980
Began career in 1977
Laurentius Harrer John W. Ressner
Vice President Executive Vice President of
Joined subadviser in 1993 subadviser
Began career in 1988 Joined subadviser in 1988
Began career in 1988
76
For more information
This prospectus Two documents are To request a free
should be used available that offer copy of the current
only with a vari- further information annual/semiannual
able contract on John Hancock report or the SAI,
prospectus. Variable Series or to make share-
Trust I: holder inquiries,
please contact:
Annual/Semiannual
Report to shareholders
By mail:
Includes financial John Hancock Variable
statements, a dis- Series Trust I
cussion of the mar- John Hancock Place
ket conditions and Boston, MA 02117
investment strate-
gies that signifi- By phone: 1-800-732-
cantly affected per- 5543
formance, and the
auditors' report (in Or you may view or
the annual report obtain these docu-
only). ments from the SEC:
Statement of In person: at the
Additional SEC's Public Refer-
Information (SAI) ence Room in Wash-
ington, DC
The SAI contains By phone: 1-202-942-
more detailed infor- 8090
mation on all
aspects of the By mail: Office of
funds. Public Reference Secu-
rities and Exchange
Commission
John Hancock A current SAI has 450 5th Street,
Variable been filed with the N.W., Room 1300
Series Trust I Securities and Washington, DC
John Hancock Exchange Commission 20549-0102
Place and is incorporated (duplicating fee
Boston, Massachu- by reference into required)
setts 02117 (i.e., is legally a
part of) this pro- By e-
spectus. mail: publicinfo@SEC.gov
On the
Internet: www.sec.gov
SEC File Num-
ber: 811-4490
[LOGO OF JOHN HANCOCK]
Annual Report
December 31, 2000
Investment Vision
The Variable Series | Variable Series Trust
- --------------------------------------------------------------------------------
Insurance Products:
. Are NOT FDIC insured; NOT insured by the FDIC, NCUSIF, or any other federal
entity;
. Are NOT deposits or other obligations of any bank and are NOT guaranteed by
any bank; and
. Are subject to investment risk, including the possible loss of principal
investment.
- --------------------------------------------------------------------------------
[LOGO OF JOHN HANCOCK]
[LOGO OF INDEPENDENCE INVESTMENT ASSOCIATES, INC.]
[LOGO OF ALLIANCE CAPITAL]
[LOGO OF THE BOSTON COMPANY]
[LOGO OF CAPITAL GUARDIAN TRUST COMPANY]
[LOGO OF FEDERATED]
[LOGO OF GOLDMAN SACHS]
[LOGO OF JANUS]
[LOGO OF MELLON BOND]
[LOGO OF MORGAN STANLEY DEAN WITTER]
[LOGO OF NEUBERGER BERMAN]
[LOGO OF PUNAM INVESTMENTS]
[LOGO OF STATE STREET GLOBAL ADVISORS]
[LOGO OF T. ROWE PRICE]
[LOGO OF WELLINGTON MANAGEMENT]
Dear Shareholder,
The economic and financial landscape has shifted dramatically since our last
report to you six months ago The Federal Reserve has finally achieved its goal
of slowing economic growth, and market sentiment has moved abruptly toward fear
of an impending recession.
The Fed acknowledged in December that economic weakness is now a greater concern
than inflation, but stopped short of lowering interest rates to stimulate the
economy at that time. However, the rate was cut at a special meeting called on
January 3, 2001. The overall macroeconomic picture right now is almost exactly
what Alan Greenspan has been targeting; growth still positive but slightly below
the economy's potential, minimal inflation, and a slight increase in the
unemployment rate.
There are two key reasons for the bleak mood in financial markets. First, the
economic slowdown, even if it proceeds exactly according to the Fed's plan,
implies a jarring halt to the recent pace of growth in corporate earnings.
Stocks and bonds are both being hit by changed expectations of profits and
defaults. Second, there is a legitimate fear that the Fed may have made a
mistake, overdoing the monetary tightening earlier in 2000. It takes up to a
year for the full impact of interest rate changes to work its way through the
economy, so there could still be more tightening in the pipeline from last May's
50-basis-point increase. While the best guess is that the Fed is getting it
right, and stands ready to ease rates again if the need is compelling, markets
are still reflecting a valid concern that we might already be on a slippery
slope.
But while the market was turbulent this past year, not everyone faired poorly.
Most financial pundits agree that those who had their assets well diversified in
year 2000 were generally much better off than those who weren't diversified.
John Hancock offers a unique and highly diversified group of funds for our
shareholders to select from for their variable life and annuity products.
Further, we monitor all of our funds regularly to ensure that each maintains its
stated investment style. By offering you many choices across all investment
styles, you can make sure that your variable life or variable annuity assets are
properly diversified.
It may be time for you to review the fund choices in your variable life and/or
annuity policies to see if the asset allocation you selected is still
appropriate for your current situation. If so, please contact the registered
representative who assisted you with the purchase of your policy and he or she
will assist you in that process. We want to help you get the most out of your
John Hancock variable products. Diversification of investment choices, which
meet your asset allocation preferences, is another way we may be able to achieve
your objectives.
Thank you for purchasing your variable life and/or annuity products from John
Hancock. You can rest assured that we will continue to work on your behalf.
Sincerely,
/s/ Michele G. Van Leer /s/ Thomas J. Lee
Michele G. Van Leer Thomas J. Lee
Chairman President and Vice Chairman
[PHOTO] [PHOTO]
Michele G. Van Leer Thomas J. Lee
Chairman President and Vice Chairman
Economic Overview
John Hancock Economic Research
Economic conditions in the US shifted dramatically during 2000, slowing from
over a 5% pace of growth in the first half to just over 2% in the second. The
abrupt downshift cut sharply into corporate earnings, resulting in rising loan
losses and bond defaults, and slumping equity prices for high-flying technology
stocks.
Changing conditions brought a chastened mood in financial markets and the
media, with widespread fears of recession for the first time in several years.
The Federal Reserve announced in December a reassessment of the relative risk
of recession and inflation, followed in January by a surprise half-point cut in
short-term interest rates.
Investors seemed reassured by the Fed's action, seeing it as proof that
Chairman Greenspan was on the job and ready to prevent a recession, despite
some fear that his surprise rate cut showed that the economy must be even
weaker than we had thought. Stock prices recovered some lost ground, and credit
spreads narrowed as money started moving back into higher-risk corporate bonds.
Overall, however, markets have remained volatile.
A soft landing: soft for whom?
We still appear to be headed for a soft landing rather than a recession. But
"soft" means only that overall growth remains positive--it does not mean
comfortable. A downshift from over 5% growth to under 2% may cause just as much
pain to many sectors as past recessions. In financial markets, the impact of
precipitous drops in corporate earnings can make a soft landing for the economy
feel very bumpy.
In addition, the risk of an actual recession has increased. Consumer confidence
has fallen sharply, which may cut into spending (auto sales are already down),
while lower stock prices and tighter credit cut into both the desire and the
ability of businesses to finance new capital investment. We still believe that
the Federal Reserve will successfully avert a recession, but the chance that a
mistake or an external shock will put us over the edge are clearly much higher
when growth is already sluggish.
Inflation: dead but not buried
With the economy slowing, the specter of inflation has almost evaporated as
cost pressures which had been building in the services sectors start to abate.
Wage
growth will probably slow as jobs become less plentiful.
Nonetheless, oil costs remain a constant worry, as OPEC tries to sustain high
prices. In addition, falling interest rates normally weaken the dollar,
boosting goods prices across the board. For the moment it seems that foreign
interest rates will follow US rates down, so that there will not necessarily be
any relative weakening of the dollar. But with slower US growth and a huge
trade deficit, there is a real risk that imported inflation could at some point
limit the Fed's freedom to stimulate the economy with more interest rate cuts.
1
Inception: March 29, 1986
Growth & Income Fund
Independence Investment Associates, Inc. Paul F. McManus
Putnam Investments C. Beth Cotner
Effective November 1, the Fund was modified to a multi-managed investment
approach
The Growth & Income Fund is a multi-manager fund with two sub-advisers each
independently managing their own portion of the Fund. The two managers employ
a distinct and complementary investment strategy. This unique multi-manager
approach seeks to produce more consistent investment returns over market
cycles and to reduce the risk of any one manager or strategy being out of
favor in certain market environments.
IIA selects stocks using a combination of fundamental equity research and
quantitative tools and focuses on large cap stocks that are undervalued
relative to the stock's history and have improving earnings growth prospects.
Putnam selects stocks using a systematic screening approach and fundamental
equity research and focuses on large and mid cap stocks with opportunities for
above average growth.
As of December 31, 2000, IIA managed approximately 77% and Putnam managed
approximately 23% of the Fund's assets. For the year, the Fund performed -
13.10% below the benchmark's performance of -9.11%.
Independence Investment Associates, Inc.
The Fund outperformed the benchmark in the fourth quarter. Stock prices
declined in the period as fears over an accelerating economic slowdown were
discounted in the market. Increasing numbers of technology companies began to
preannounce earnings shortfalls. The Fund was modestly underweight technology
stocks, and this benefited portfolio performance, although specific stock
selection skill was slightly negative. Health care was over weighted,
particularly in large drug companies. Both stock selection and the active
overweight benefited performance for the quarter. Holdings in Bristol Meyers,
Merck and Pharmacia Upjohn helped the portfolio. Electric utilities were
another positive are as investors were becoming even more defensive as the
economy was slowing. Perceived as safer technology stocks, information
services companies like First Data Corp and EDS did relatively well and helped
portfolio performance.
With the market being defensive, food and beverage stocks did well. We had an
underweight there as valuations did not justify the purchases of some of the
stocks. This relative underweight negatively impacted performance in the
quarter. In the media area, fears of the slowing economy affected the
broadcasters as advertising budgets became suspect. Also, the delay of Time
Warner--AOL adversely affected performance of those stocks.
Looking forward, we continue to maintain a broad sector neutral strategy
while emphasizing individual stock selection. Based upon the relative
valuation of stocks we will continue to select the best stocks within
industries based upon their valuation and outlook for sustainable earnings
growth.
Putnam Investments
The Fund benefited from overweighting the robust energy, conglomerate,
utilities, and financial sectors, along with strong stock selection. In
particular, exceptional stock performance by one of our holdings (Tyco) made
conglomerates the greatest contributor to performance. The next-largest
contribution came from energy, where oil services stocks boosted returns; in
financial services, insurance (American International Group) and investment
banking/brokerage (Goldman Sachs) aided performance.
The single largest detractor from performance came from technology, where the
benefit of being underweight in a very weak sector was more than offset by
poor stock performance in software (Openwave Systems, Veritas Software),
communications equipment (Redback Networks, Juniper Networks), and business
applications software (Agile Software, I2 Technologies). Fund performance was
also hindered by health care (underweighting pharmaceuticals and weak stock
selection in biotechnology); overweighting communications services (the worst-
performing sector), along with weak stock performance from that sector in the
cellular industry (Sprint PCS, Nextel); underweighting consumer staples (along
with not owning non-alcoholic beverage companies and owning weak TV
broadcasting companies); and finally, underweighting consumer cyclicals.
In the volatile environment of the new year, we anticipate additional
earnings disappointments, especially in stocks leveraged to the consumer. We
believe that the current environment will continue to place pressure on
rapidly expanding, high-quality growth companies. We have concentrated the
Fund on companies with a proven record of expanding profits even in unsettled
economic times. Higher energy prices should benefit oil and gas producers and
energy services companies. Going forward, we will be overweight energy (oil
services) and financial services (banking/brokerage services and insurance)
stocks while underweighting technology (communications equipment and software)
and consumer staples (media and TV broadcasting.)
2
Inception: March 29, 1986
Growth & Income Fund
Independence Investment Associates, Inc. Paul F. McManus
Putnam Investments C. Beth Cotner
3
Inception: May 1, 1996
Equity Index Fund
State Street Global Advisors Management Team
The year 2000 provided the first negative return of the S&P 500 since 1990.
This is only the second calendar year since 1980 to finish in the red. For the
year, the S&P 500 was down 9.09%. Technology stocks grabbed most of the
headlines during the year. The Nasdaq Composite Index fell more than 50% from
its high on March 10, and finished the year down approximately 40%.
The news was not all bad, as Financials, Health Care and Utilities all posted
strong returns. In fact, the S&P 500 ex-Technology posted a gain for 2000. The
smaller stocks in the Index performed much better than the giants in 2000. The
top quartile of names lost about 15% in 2000, while the other 4 quartiles all
posted gains ranging from 9.6% to 17.3%*. Value stocks outperformed their
growth counterparts by over 28% during the year.
The Equity Index Fund return was -9.15% for the year. The Index return was -
9.09% for the year. Fees cost the Fund -0.17% during the year. Removing these
from the calculation shows the Fund slightly outperformed its goal for the
year.
The Equity Index Fund attempts to track the performance of The S&P 500 Index
by fully replicating the index. The Fund attempts to match the index holdings
and weights for each security in order to provide returns close to the index
return.
* Source: Prudential Securities.
4
Inception: May 1, 1996
Large Cap Value Fund
T. Rowe Price Associates, Inc. Brian C. Rogers
In what will be remembered as one of the most tumultuous years in recent
history, the stock market limped to the finish line with its first loss in
several years and its worst overall showing in more than two decades. During
the year, the Fed maintained a generally restrictive monetary policy, the
economy showed signs of deceleration, and once high-flying sectors finally
experienced the effects of gravity. In this challenging environment, the trust
enjoyed an outstanding year as value stocks returned to favor.
The Fund posted a strong gain for the 12-month period ended December 31,
2000, 13.83%, comfortably ahead of the Russell 1000 Value Index, 7.01%.
Many of the beneficiaries of this difficult environment were companies with
defensive characteristics and those that appeared, according to our
assessment, to be undervalued. Companies with predictable revenue and earnings
streams fared especially well in the turmoil of 2000. After all, at the
beginning of the year, who would have guessed that the best performing S&P
sector would be the electric and gas utility industry?
Over the past 12 months, holdings in the utility, consumer products,
financial, and energy sectors helped the Fund's performance. These sectors
provided positive returns at a time when many stocks struggled. The trust also
benefited from continued merger and acquisition activity, such as the
acquisitions of Fort James, J.P. Morgan, and Honeywell International. Despite
the trust's strong return, we also had some losers in the Fund, including
Xerox and AT&T. Fortunately, some of the trust's better performing positions
more than offset the drag of declining share prices.
We made several transactions that are representative of how we manage the
trust. Many of the positions we reduced or eliminated had generated good
returns over the time we held the stocks. Our general strategy is to reduce
position size when price appreciation results in less attractive valuations
for the shares. For example, as Duke Energy's price rose last year, its
relative valuation appeal (the relationship between upside potential and
downside risk) became less attractive and we trimmed our stake. On the other
hand, the stock of Sprint had declined fairly sharply, increasing the appeal
of its relative valuation, which induced us to initiate a position in the
shares. Honeywell International's price declined so sharply in the first half
of the year that General Electric decided its relative valuation and strategic
appeal was so compelling that it opted to buy Honeywell in its entirety. In
making these Fund adjustments, we slightly increased the trust's volatility
relative to the S&P 500. As the market's value structure has changed, it makes
sense for us to take on slightly more risk. For example, at certain levels,
some technology companies may offer better opportunities as value plays than
utility stocks that have appreciated strongly.
5
Inception: August 31, 1999
Large Cap Value Core Fund
Goldman Sachs Asset Management Brown/Jones/Pinter
During the one-year reporting period the Large Cap Value CORE Fund generated a
total cumulative return of 5.12%, versus the 7.01% total cumulative return of
the Fund's benchmark, the Russell 1000 Value Index.
The Fund's strategy is a well-defined investment process that has historically
provided consistent, risk-managed performance. The diversification of our
models typically adds value because, when one theme doesn't work, others
usually do. For example, when momentum stocks underperform, value stocks
typically advance more than average.
Over the reporting period the returns of our various investment themes were
extremely erratic. In fact, virtually every theme experienced one of its best
months since inception, as well as at least one of its worst months ever. In
addition, some months saw extremely positive returns for one variable and
extremely negative for another--reflecting the high overall return dispersion
nature of the market.
The CORE themes struggled within the Index universe, especially the Value
theme. In particular, Value had its two worst quarters (second and fourth
quarters) since inception, and the fourth quarter of 2000 marked the worst
quarter since inception of our Momentum and Stability themes. Though Research
did not do as badly as the other three themes, it did have a slightly negative
return for the year. Strong stock selection within the Financial and Consumer
Non-Cyclical sectors helped returns, though we lagged the benchmark in the
Consumer Services and Consumer Cyclical sectors.
Looking ahead, we continue to believe that cheaper stocks should outpace more
expensive ones, good momentum stocks should do better than poor momentum
stocks, lower-risk stocks should perform better than higher risk stocks, as
should those favored by research analysts. As such, we anticipate remaining
fully invested and expect that the value we add over time will be due to stock
selection, as opposed to sector or size allocations.
6
Inception: June 30, 2000
American Leaders Large Cap Value Fund
Federated Investment Management Company M. Donnelly/K. McCloskey
The fourth quarter marked a dramatic shift in market leadership and investor
sentiment. Value strategies outperformed growth strategies during the quarter
as investors continued to flee technology and telecommunications shares, as
many of these companies lowered current and future earnings expectations. The
American Leaders Large Cap Value Fund returned 2.89% during the fourth quarter,
underperforming the benchmark Russell 1000 Value Index, which returned 3.6%.
Relative to the Russell 1000 Value Index, positive influences on performance
included an underweight position in Utilities and overweight positions in
Healthcare and Other. Additional positive influences on performance included
good security selection in Financial Services (Conseco up 73%, Cigna up 27%),
Consumer Discretionary (Waste Management up 59%, Charter Communications up
39%), and Consumer Staples (Philip Morris up 51%, Sara Lee up 22%). Offsetting
these positive influences on relative performance was an overweight position
and unfavorable security selection in Technology (Sun Microsystems down 53%,
Novell down 47%), as well as an underweight position in Consumer Staples.
Unfavorable security selection in Utilities (Worldcom down 54%, AT&T down 41%),
Producer Durables (Philips Electronics down 15%, Northrop Grumman down 8%) and
an unassigned sector (News Corp. Ltd down 38%) also detracted from relative
returns.
For the six-month period, positive influences on relative performance were an
underweight position in Utilities as well as an overweight position and
favorable security selection in Healthcare (Healthsouth up 127%, Unitedhealth
Group up 43%, Baxter Intl. up 27%). Favorable security selection in Financial
Services (Washington Mutual up 87%, PNC Financial up 58%, Allstate up 97%) and
Consumer Discretionary (Waste Management up 46%, Kimberly-Clark up 25%, Charter
Communications up 38%) also aided relative returns. Offsetting these positive
influences on performance were overweight positions in Technology and
Unassigned names, as well as unfavorable security selection in Other Energy
(Ensco Intl. down 5%) and Integrated Oils (Chevron up 1%, Royal Dutch Petroleum
down 1%).
7
Inception: March 29, 1986
Large Cap Growth Fund
Independence Investment Associates, Inc. Mark Lapman
We are pleased to report that your Fund ended a difficult and volatile
partial year well ahead of its benchmark. Your Fund returned -17.89% for the
year, over 4.5% ahead of the -22.42% return of the Russell 1000 Growth Index.
During 2000, there was an overall broadening of the US equity market, which we
view as healthy despite the market's negative absolute return.
While fourth quarter returns were negative, we were able to add value through
solid stock selection. Your Fund returned -18.29% over 3% ahead of the -21.35%
return of the Russell Growth Index. During the quarter, health care names such
as Universal Health Services, Merck and St. Jude Medical were especially
strong, due to their consistent and reliable earnings growth. Financial stocks
also performed well, driven higher by the sentiment that the Fed will soon
begin to cut interest rates. Holdings in Fannie Mae and Partnerre benefited
from this trend. Resistant to an economic slowdown, consumer non-cyclicals
such as Colgate Palmolive performed strongly, as investors focused on the fact
that people buy toothpaste no matter what the economy is doing. After taking a
beating earlier in the year, many retailers came back strong in the fourth
quarter. Investors began to anticipate the positive impact of lower interest
rates on consumer spending and snapped up shares of TJX and Kohls.
It was a difficult, emotional year for the stock market, yet we were pleased
to deliver a competitive return on your Fund, which exceeded your benchmark.
These results were achieved by sticking to our philosophy that cheap stocks
with improving fundamentals are attractive. We feel confident that with our
unique blend of strong fundamental research, a disciplined investment
philosophy and process, and strong risk control positions us well to have
another.
[GRAPH]
Large Cap Large Cap Large Cap Large Cap
Growth Growth Growth Growth
Fund Benchmark(1) Fund Benchmark(1)
6/29/90 $10,000 $10,000 7/31/95 $18,981 $22,266
7/31/90 10,052 10,442 8/31/95 19,127 22,479
8/31/90 9,532 11,190 9/29/95 19,903 22,695
9/28/90 9,162 11,456 10/31/95 19,674 23,029
10/31/90 9,172 11,488 11/30/95 20,491 23,832
11/30/90 9,809 11,980 12/29/95 20,777 23,866
12/31/90 10,155 11,432 1/31/96 21,264 22,467
1/31/91 10,632 11,967 2/29/96 21,514 23,047
2/28/91 11,363 12,249 3/29/96 21,787 24,725
3/28/91 11,712 12,048 4/30/96 22,154 24,873
4/30/91 11,742 12,209 5/31/96 22,643 26,741
5/31/91 12,250 11,716 6/28/96 22,617 26,217
6/28/91 11,658 13,055 7/31/96 21,114 28,055
7/31/91 12,034 12,812 8/30/96 21,788 27,864
8/30/91 12,278 12,976 9/30/96 23,122 26,356
9/30/91 12,073 12,722 10/31/96 23,293 28,107
10/31/91 12,129 13,092 11/29/96 24,983 30,136
11/27/91 11,705 13,163 12/31/96 24,572 31,341
12/31/91 12,739 12,972 1/31/97 25,978 34,112
1/31/92 12,545 13,495 2/28/97 26,171 32,116
2/28/92 12,686 13,222 3/31/97 24,939 33,696
3/31/92 12,460 13,374 4/30/97 26,258 32,450
4/30/92 12,853 13,422 5/30/97 27,770 33,829
5/29/92 13,001 13,875 6/30/97 28,869 34,208
6/30/92 12,897 14,056 7/31/97 31,656 35,230
7/31/92 13,358 14,159 8/29/97 30,080 37,880
8/31/92 13,109 14,350 9/30/97 31,954 39,391
9/30/92 13,239 14,659 10/31/97 30,666 39,935
10/30/92 13,255 14,299 11/28/97 31,806 38,801
11/30/92 13,746 14,686 12/31/97 32,163 41,175
12/31/92 14,006 14,734 1/31/98 33,023 40,903
1/29/93 14,138 14,665 2/27/98 36,148 34,764
2/26/93 14,395 15,223 3/31/98 38,193 37,434
3/31/93 14,832 15,111 4/30/98 38,483 40,443
4/30/93 14,297 15,418 5/29/98 37,652 43,521
5/28/93 14,726 15,273 6/30/98 39,523 47,447
6/30/93 14,940 15,460 7/31/98 39,331 50,232
7/30/93 14,825 15,978 8/31/98 33,172 47,936
8/31/93 15,468 15,547 9/30/98 35,113 50,462
9/30/93 15,661 14,871 10/30/98 37,758 50,528
10/29/93 15,897 15,064 11/30/98 40,758 48,977
11/30/93 15,722 15,310 12/31/98 44,872 52,405
12/31/93 15,939 14,931 1/29/99 47,369 50,739
1/31/94 16,423 15,426 2/26/99 45,089 51,566
2/28/94 15,914 16,053 3/31/99 46,987 50,483
3/31/94 15,400 15,667 4/30/99 47,680 54,294
4/29/94 15,702 16,025 5/28/99 46,300 57,226
5/31/94 15,651 15,437 6/30/99 49,748 63,178
6/30/94 15,417 15,663 7/30/99 48,102 60,215
7/29/94 15,803 16,070 8/31/99 48,377 63,159
8/31/94 16,356 16,693 9/30/99 47,268 67,681
9/30/94 15,865 17,187 10/29/99 50,039 64,460
10/31/94 16,016 17,688 11/30/99 51,727 61,211
11/30/94 15,549 18,386 12/31/99 55,671 65,851
12/30/94 15,782 18,818 1/31/00 52,340 63,105
1/31/95 16,078 19,445 2/29/00 53,994 68,816
2/28/95 16,687 19,498 3/31/00 59,753 62,306
3/31/95 17,065 20,314 4/28/00 57,723 59,359
4/28/95 17,487 20,243 5/31/00 55,633 50,609
5/31/95 18,082 21,134 6/30/00 58,852 49,010
6/30/95 18,386 21,525 7/31/00 56,070 63,105
8/31/00 61,542 68,816
9/30/00 55,095 62,306
10/31/00 53,458 59,359
11/30/00 46,338 50,609
12/31/00 45,017 49,010
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
General Electric Co. 5.7% 5.4%
Pfizer, Inc. 3.7% 1.9%
Cisco Systems, Inc. 3.3% 7.0%
Intel Corp. 2.9% 4.9%
EMC Corp. 2.6% 0.9%
Microsoft Corp. 2.5% 7.5%
Merck & Co., Inc. 2.1% 2.0%
Oracle Corp. 2.1% 3.4%
America Online, Inc. 2.0% 4.1%
International Business Machines Corp. 1.8% 2.1%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Large Cap Large Cap Growth MorningStar
Growth Fund Benchmark(1) Peer Group+
--------------- ---------------- -----------
1 Year -17.89% -22.42% -15.05%
3 Years 12.43 12.74 18.46
5 Years 17.08 17.89 18.78
10 Years 16.24 16.34 17.43
Top Ten Sectors (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
Technology 50.0% Consumer Cyclical 3.9%
Health Care 21.6% Energy 1.0%
Capital Equipment 13.1% Utility 0.7%
Retail 6.9% Governmental 0.2%
Financial 4.0% Consumer Staple N/A
(1) The benchmark is represented by the S&P 500 for the period April 1986
to April 1996 and the Russell Large Cap Growth Index for the period
May 1996 to present.
* Total returns are for the period ended December 31, 2000. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the MorningStar variable universe having a
Large Cap Growth investment category. Prior to May 1996 (concurrent
with the Fund's strategy change), the peer group represents the Large
Blend investment category.
8
Inception: August 31, 1999
Large Cap Aggressive Growth Fund
Alliance Capital Management L.P. J. Fogarty/A. Harrison
The Fund returned -18.77% compared to the Russell 1000 Growth Index return of
- -22.4% for the year ended December 31, 2000. The Fund outperformed due to an
underweight in the poor-performing technology sector and an overweight and
strong stock performance in financial services. Strong gains from capital
goods stocks were also positive contributors to performance. Although the
market is likely to remain volatile as sentiment vacillates with the economic
data and corporate earnings reports, we believe the stage is set for a rebound
during 2001. Looking out over the next six to twelve months, the most ideal,
and we believe the most likely, economic scenario continues to be a "soft
landing." In an economic environment of solid, albeit lower, growth and benign
inflation, high quality, industry dominant growth companies traditionally
outperform. We expect further interest rate cuts by the Federal Reserve to
provide a positive tailwind for the market. While the next few months will
likely bring more earnings disappointments and re-acceleration of earnings
growth may not be visible until mid-year, the speculative excesses have been
substantially reduced and many premier growth stocks, especially in
technology, have been beaten down to valuation levels not seen in two years.
We remain focussed on a relatively concentrated list of high quality growth
stocks in technology, consumer services, financial services and healthcare
that we believe will continue to generate superior investment returns. We will
actively trade the core holdings in the Fund to take advantage of the natural
volatility that is observed in the market and continue to strive to marry the
Fundamentals with price considerations on each specific stock decision.
9
Inception: August 31, 1999
Large/Mid Cap Value Fund
Wellington Management Company, LLP D. Chu/L. Gabriel
During the fourth quarter, the Large/Mid Cap Value Fund gained 4.14%,
outperforming the Fund's benchmark, the Russell 1000 Value Index, which
increased 3.6% for the quarter ended December 31, 2000. For the one-year
period ending December 31, 2000 the Fund returned 13.41% well ahead of its
2001 benchmark which only increased 7.0%.
The US equity market lost ground during the fourth quarter due to fears over
eroding corporate earnings, high energy prices, and uncertainty concerning the
outcome of the US presidential election. Growth stocks lagged while value
issues led the way as the Russell 1000 Value Index (3.6%) outperformed the
Russell 1000 Growth Index (-21.4%) during the fourth quarter.
During the quarter, the Fund's sector weights were kept closely in line with
those of the Russell 1000 Value Index. The sectors in the Fund that added the
most value were finance and energy. Conversely, the utilities and health care
sectors detracted from returns.
Some of the Fund's largest contributors through stock selection during the
quarter include: Washington Mutual, which was the Fund's top performer,
Ultramar Diamond Shamrock, which was a solid performer in the energy sector,
and Fannie Mae, which was able to beat expectations, driven by strong loan
growth and stable credit conditions.
The year 2000 was the beginning of what we believe to be a longer-term rally
in US larger capitalization value stocks. A Euro that has strengthened from
the 2000 lows will boost larger-company profits, while continued consolidation
in many economically sensitive sectors will drive the returns of many value
stocks upward in the quarters to come. As we begin the New Year, we continue
to believe that broad diversification across economic sectors is a central
tenet of the investment strategy. We will continue to look for opportunities
in large cap stocks that represent value through active Fund management.
[GRAPH]
Large/Mid Cap Russell 1000
Value Fund Value Index
8/31/99 $10,000 $10,000
9/30/99 9,787 9,650
10/31/99 10,352 10,206
11/30/99 10,295 10,126
12/31/99 10,472 10,175
1/31/00 10,031 9,843
2/29/00 9,614 9,112
3/31/00 10,829 10,223
4/30/00 10,445 10,105
5/31/00 10,607 10,211
6/30/00 10,218 9,744
7/31/00 10,452 9,866
8/31/00 11,179 10,415
9/30/00 11,405 10,510
10/31/00 11,710 10,769
11/30/00 11,229 10,370
12/31/00 11,877 10,889
Top Ten Holdings (as of December 31, 2000)
- --------------------------------------------------------------------------
% of six months ago
investments % of investments
Citigroup, Inc. 3.3% 2.2%
Verizon Communications 3.1% N/A
Washington Mutual, Inc. 2.9% N/A
Exxon Mobile Corp. 2.6% N/A
Federal National Mortgage Assoc. 2.4% 1.0%
American International Group, Inc. 2.4% 0.8%
Cigna Corp. 2.2% 0.7%
Wachovia Corp. 2.0% 0.7%
KeyCorp N/A N/A
Sara Lee Corp. 1.9% 0.3%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Large/Mid Cap Russell 1000 MorningStar
Value Fund Value Index Peer Group+
------------- ------------ -----------
1 Year 13.41% 7.01% 11.37%
Since Inception (8/31/99) 13.76 6.60 N/A
Top Ten Sectors (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
Financial 8.6% Utility 5.1%
Technology 8.5% Health Care 4.7%
Capital Equiptment 7.9% Consumer Staple 4.1%
Energy 7.6% Basic Material N/A
Consumer Staple 7.5% Retail 2.9%
* Total returns are for the period ended December 31, 2000. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. "Results may have been achieved during
market conditions or pursuing performance opportunities, including
investment in initial public offerings, that may not continue to occur in
the future." Investment returns and principal value of fund shares will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. Small-company investing entails special risks outlined
in the prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees and operating
expenses). It does not reflect expense and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the Morningstar variable universe having a 50%
weighting of the Large Cap Value category and a 50% weighting of the
Mid Cap Value category.
10
Inception: May 1, 1996
Mid Cap Value Fund
Neuberger Berman, LLC R. Gendelman
For the fourth quarter ended December 31, 2000, the Mid Cap Value Fund/1/
returned 6.20%. This gain fell short of the Russell Mid-Cap Value Index's/2/
return of 9.44%. However, the fund significantly outperformed the index for
the one-year period: the Mid Cap Value rose an impressive 28.38% while the
Russell Mid-Cap Value gained 19.18%.
In the fourth quarter, we continued our commitment to invest in good
businesses at attractive prices that possess positive risk-reward
characteristics. Our holdings within Financial Services (33.04% of total
market value as of 12-31-2000) had the most favorable impact on portfolio
total return. We were overweight the Russell Mid-Cap Value and our stock
selection led to better absolute returns. Dime Bancorp (1.75% of total net
assets) and M&T Bank Corp. (1.64% of total net assets) were two of the top
performers in the period. The Producer Durables sector (7.35% of total market
value) also had a positive impact on total return. As with Financial Services,
the fund was overweight the index and achieved superior absolute returns.
Waste Management (1.32% of total net assets) and General Dynamics (1.56% of
total net assets) both made solid contributions to portfolio return.
Contrarily, many of our Technology holdings (6.20% of total market value) were
not immune to the weakness in the sector and detracted from total return. 3Com
and Comdisco, both of which were sold during the period, had negative impacts
on return. Holdings within Materials & Processing (4.91% of total market
value) and Utilities (11.01%) led to lost ground versus the index. The fund
was underweight the M&P sector and had inferior returns. And while Utilities
did have a small positive impact on total return, the fund was underweight the
sector and had lower returns as compared to the index.
(1) 28.32% and 14.01% were the average annual returns for the 1-year and
since inception (5/01/96) periods through December 31, 2000. Results are
shown on a total return basis and include reinvestment of all dividends
and capital gains distributions. Performance data quoted represents past
performance, which is no guarantee of future results. The investment
return and principal value of an investment will fluctuate so that the
shares, when redeemed, may be worth more or less than their original
cost.
(2) The Russell Midcap Index measures the performance of the 800 smallest
companies in the Russell 1000 Index, which represents approximately 26%
of the total market capitalization of the Russell 1000 Index (which, in
turn, consists of the 1,000 largest U.S. companies, based on market
capitalization). The Russell Midcap Value Index measures the performance
of those Russell Midcap Index companies with lower price-to-book ratios
and lower forecasted growth values. Please note that indices do not take
into account any fees and expenses of investing in the individual
securities that they track, and that individuals cannot invest directly
in any index. Data about the performance of this index are prepared or
obtained by Neuberger Berman Management Inc. and include reinvestment of
all dividends and capital gain distributions. The Portfolio may invest in
many securities not included in the above-described index.
11
Inception: August 31, 1999
Fundamental Growth Fund (formerly Fundamental Mid Cap Growth Fund)
Putnam Investments Eric M. Wetlaufer
Effective August 1, 2000 Putnam Investments assumed management of the Fund.
The Fund returned -20.91% for the fourth quarter, outpacing the Russell Mid
Cap Growth Index return of -23.25%. Outperformance in this hostile environment
for growth investing was largely due to adept stock selection, particularly in
the battered technology sector. Selection in health care contributed early in
the period but detracted in the fourth quarter largely due to weakness in
biotechnology. Energy, utilities, and financial holdings benefited performance
throughout the period. Communications services holdings hurt results.
The U.S. equity market remains extremely volatile as we begin the new year.
We anticipate additional earnings disappointments, especially in stocks
leveraged to the consumer. In the light of signs that the economy is slowing
significantly, we expect several interest-rate cuts over the first half of
2001.
High energy prices will continue to act as a tax on the economy, reducing
consumers' disposable income and adding pressure to corporate profit margins.
A forecasted colder-than-average winter will exacerbate the effect of higher
oil and natural gas prices on local economies and on consumer spending.
We expect growing unemployment and business failures--especially in the dot-
com universe. As a result, consumer confidence will continue to erode,
creating a difficult environment for retailers.
We have concentrated the Fund on growth companies with a proven track record
of expanding profits even in unsettled economic times. Higher energy prices
should benefit oil and gas producers and energy services companies. Within the
financial sector we will emphasize the regional banks and credit-cards issuers
that should benefit from Fed rate cuts. While underweighting technology as a
whole--particularly semiconductors and components--we will overweight software
and communications and equipment. Within the underweight sector of consumer
staples, we will emphasize broadcasting and restaurants, while underweighting
foods.
12
Inception: August 31, 1999
Mid Cap Blend Fund
Independence Investment Associates, Inc. Coreen Kraysler
The Mid Cap Blend Fund posted another strong quarter, returning -1.5% vs. the
Frank Russell Midcap Index return of -3.59%, while for the year the Fund
returned 18.58%, far exceeding the benchmark return of 8.25%. Worried about an
impending economic slowdown, investors took a defensive posture during the most
recent quarter, and thus placed their bets on consumer noncyclical stocks such
as the food and beverage names. As a result, holdings in Archer-Daniels-Midland
and Conagra performed strongly. Unable to sustain high valuations after a
string of earnings disappointments, technology and telecom names remained weak,
hurting positions in Portal Software, Jabil Circuit and Vishay Intertechnology.
Instead, investors preferred to seek out value in beaten down basic materials
stocks. Consequently, paper & forest product holdings in Abitibi and Westvaco
performed well. Similarly, chemical stocks such as Avery Dennison, Eastman
Chemical and Air Products also outperformed. Industrial stocks such as
Ingersoll Rand and Parker Hannifin also made a comeback. In anticipation of a
decline in interest rates, financial stocks also outperformed. Holdings in
Golden West and Torchmark benefited from this trend. In addition to the
positive interest rate environment, property & casualty insurance stocks, such
as St. Paul, XL Capital and Partner Re benefited from an upturn in insurance
prices.
During the quarter, we sold Stryker Corp., Capital One Financial and Hispanic
Broadcasting after they met our price targets. We initiated positions in
Lincare, Southern Energy and Southtrust. As always, we continue to look for
inexpensive mid cap stocks with good growth potential.
13
Inception: May 1, 1996
Mid Cap Growth Fund
Janus James Goff
The Mid Cap Growth Fund lost 29.24% during the fourth quarter, a period that
saw our benchmark, the Russell Mid Cap Growth Index, lose 23.25% of its value.
For the year ended December 31, 2000, the Fund lost 35.86%, while the Index
lost 11.75%.
Both the Fund and its benchmark were pressured by evidence suggesting the
U.S. economy was slowing faster than many analysts expected--a development
that forced stocks lower nearly across the board. Fast-growing companies
suffered the most, as illustrated by the Nasdaq Composite Index's more than
32% plunge as disappointing earnings news from a number of high-profile
technology companies magnified the impacts of a slowing economy. Although
small- and mid-sized stocks fared somewhat better than the market at large,
many of the midcap market's most significant successes during the quarter fell
toward the value side of the spectrum.
Individual disappointments included biotechnology Millennium Pharmaceuticals
and Human Genome Sciences, both of which fell sharply as investors shied away
from the sector. While we were discouraged by the declines recorded by both
companies, Millennium's performance was particularly difficult to understand
given the progress of its anti-Leukemia drug Campath with FDA regulators.
Other setbacks included Web hosting company Exodus Communications and Internet
security and domain name registrar VeriSign.
Meanwhile, notable successes included Hanover Compressor, a company that
provides compression services critical to the production of natural gas from
existing wells. The company reported a 48% increase in net income and a
massive 60% increase in cash flow during the quarter, a strong performance
that provided lift for the shares.
Looking ahead, stocks could remain volatile as investors factor economic
weakness and uncertainty surrounding the corporate earnings outlook into share
prices. However, there is growing evidence that several key areas of the
market may finally be oversold, and we have actively tried to position the
Fund to benefit by using focused research to identify outstanding growth.
14
Inception: August 31, 1999
Small/Mid Cap Value Fund
The Boston Company Asset Management, LLC Peter I. Higgins
Value stocks have continued their dominance over growth stocks on a year-to-
date basis. The Fund was up 4.67% for the quarter while the Russell 2500 Value
Index was up 8.62%. For the year ended December 31, 2000 the Fund ended up
34.19% while the Russell 2500 Value ended up 20.79%
Our holdings in the energy, health care, consumer services and capital goods
sectors were up nicely and outperformed their respective sectors in the index.
Our energy holdings, with emphasis on natural gas exploration and production
and energy service companies, were again a successful strategy. These holdings
remain attractively priced even with the dramatic rise in oil prices in recent
quarters. Our best performing energy companies included Devon Energy Corp.,
Noble Affiliates, and Weatherford International. Our top performers in the
health care sector included Bausch & Lomb, Healthsouth and Bergen Brunswig.
The Fund has benefited from our overweight in the consumer services sector.
Our emphasis in this sector is in retailing and related areas where continued
strength in consumer spending has been the major earnings driver. Albertson's,
TJX, and Valassis Communications all had strong positive impacts on this
sector.
Sectors that lagged the index this quarter included utilities and financial
services and technology. Underweights in utilities and financial services had
negative contributions relative to the index. The Fund has a zero weighting in
utilities because we feel that stocks within that sector are trading at fair
valuations. We continue to emphasize the technology sector as our holdings
represent good value and growth prospects appear favorable.
The current investment strategy has yielded strong gains and will remain
unchanged. We will maintain our focus on undervalued securities with improving
business momentum and we believe that the Fund is well positioned to
outperform the benchmark over the long term
15
Inception: May 1, 1998
Small/Mid Cap CORE Fund
Goldman Sachs Asset Management Jones/Brown/Pinter
During the one-year reporting period the Fund generated a total cumulative
return of 4.63%, versus the 4.27% total cumulative return of the Fund's
benchmark, the Russell 2500 Index. The Fund's strategy is a well-defined
investment process that has historically provided consistent, risk-managed
performance. The diversification of our models typically adds value because,
when one theme doesn't work, others usually do. For example, when momentum
stocks underperform, value stocks typically advance more than average.
Overall, within the Index, the CORE themes performed well this year. Momentum
and Research had their highest positive returns of the year in the first
quarter, while Value's best quarter this year was the fourth quarter. However,
on a month-by-month basis, the themes varied significantly. For example,
Stability had its worst month ever among small/mid-cap stocks in April, but
came back to have one of its best ever in June. Value had its worst month ever
in February, followed by its best ever in March. For the period on average,
the returns to Momentum, Research, and Value were positive among Index names,
though Stability produced negative results. In the Fund, return to risk factor
exposures, especially positive exposures to earnings yield, value and earnings
variation, has been very positive. Stock selection was strongest within the
technology sector, followed by the Consumer Non-Cyclicals sector. The
Industrial and Basic Materials sectors lagged the benchmark in stock selection
for the year.
Looking ahead, we continue to believe that cheaper stocks should outpace more
expensive ones, good momentum stocks should do better than poor momentum
stocks, lower-risk stocks should perform better than higher risk stocks, as
should those favored by research analysts. As such, we anticipate remaining
fully invested and expect that the value we add over time will be due to stock
selection, as opposed to sector or size allocations.
16
Inception: May 1, 1994
Small/Mid Cap Growth Fund
Wellington Management Company, LLP Frank V. Wisneski
During the quarter, the Fund decreased by -4.32% compared to a -19.36% return
of the Russell 2500 Growth Index. For the one-year period ended December 31,
2000, the Fund gained 9.25% considerably ahead of the -16.11% return of the
Russell 2500 Growth Index.
The Fund's outperformance was achieved primarily through stock selection.
Strong positive performances in the Health Care and Energy sectors also led to
better than index returns. Even though the Technology sector performed poorly
during the quarter, the Fund was still able to benefit from its focus on
service companies within this sector. Companies with strong balance sheets
paid off as our technology names performed better than the index.
Some of the recent stock successes include ACNielsen Corp, which was the top
performing stock in the information and entertainment sector, IMS Health Inc.,
which is a leader in global marketing research and analysis for the healthcare
industry, and Hanover Compressor, which was the strongest contributor to
performance in the energy sector. In terms of additions to the Fund, we sought
to add names where we had strong conviction that the downside risk was
minimal. An example of this strategy would be CDW Computer Centers, a
distributor of laptops, PCs, and computer-related equipment.
The first quarter of 2001 will be challenging. The economy is cooling.
Layoffs have increased. Energy prices remain relatively high, and many
companies have cautioned about a much more lean 2001. On the positive side, a
stronger Euro, lower interest rates, a more favorable labor market are all
positives for equity investors. Nonetheless, we have positioned the Fund
somewhat defensively in this environment, but maintain our focus on growth. We
also believe that our investment approach, with its focus on stable
predictable growth companies, solid balance sheets, and sound business models
should continue to serve us well.
17
Inception: May 1, 1996
Small Cap Equity Fund (formerly the Small Cap Value Fund)
Capital Guardian Trust Company Management Team
Effective November 1, the Fund's sub-adviser changed to Capital Guardian Trust
Company.
The positioning of the Fund did not change since November and remains
overweight technology, media, and biotechnology companies, all of which hurt
relative performance significantly as these sectors fell the most in the recent
period.
One positive contributor to relative performance was the Fund's holdings in
the financial services sector, especially insurance companies, banks, and
investment management companies, which enjoyed the benefit of market rotation
into more stable sectors. These interest-rate-sensitive stocks also were helped
by the growing belief that the Federal Reserve would move to lower rates in
early 2001.
From a top-down perspective, small-cap stocks still represent good value
relative to large caps, and continue to trade at a large discount to them. We
feel the recent volatility in the small-cap universe is short-term oriented and
not related to the quality of individual companies within the universe. Looking
forward three to five years, the technology, media, and biotechnology companies
in the Fund are positioned to deliver superior results despite near-term
volatility, and we are enthusiastic about the potential for earnings growth of
our individual holdings. With financial services stocks having performed well
recently we would expect to reduce our holdings in some of these names.
18
Inception: May 1, 1996
Small Cap Growth Fund
John Hancock Advisers, Inc. Bernice Behar
The fourth quarter brought yet another challenging environment for equity
investors. A steady stream of pessimistic news fueled the volatility. Many
companies, across a broad spectrum of industries, reported lower than expected
earnings or reduced future growth rates. This led investors to more value-
oriented sectors such as utilities, energy, financial services and certain
health care groups. The trend caused a wide divergence between growth and
value--a trend most pronounced in the small caps. The Fund was hurt by this
market environment and underperformed the benchmark declining (21.43)% versus
(20.2%) for the Russell 2000 Growth Index.
Our healthcare holdings produced mixed results. After many months of
impressive performance, biotechnology stocks stalled in October. Our sizeable
allocation hurt performance as they underperformed through quarter end.
Fortunately, we purchased many biotechnology names in early 2000 at prices
well below current levels. Recently, their Fundamental outlook has weakened.
As a result, we expect to lock-in current profits. We also owned several
strong performing health care services companies. These stocks benefited from
increased government reimbursement due to the Balanced Budget Refinement Act.
The more reasonable reimbursement levels improved profit margins and revenue
growth. In addition, patient volumes have increased as HMOs eased restrictions
on admissions. We remain positive on the longer-term position for these stocks
and expect maintain a focus to this group.
Technology stocks were among the weakest performers in the benchmark
declining over 36%. Lofty valuations coupled with a barrage of bad news caused
the dramatic sell-off. We were underweight which helped relative performance
versus our benchmark. Despite our reduced exposure, the sector's dismal
results adversely impacted absolute performance. We expect negative news to
continue through early 2001 extending the period of volatility. Accordingly,
we will continue to underweight this sector.
19
Inception: May 2, 1988
International Equity Index Fund
Independence International Associates, Inc. B. Greenleaf/D. Nolan
During the fourth quarter of 2000, The International Equity Index Fund
returned -3.80%, outperforming its custom blended benchmark return of -5.32%.
In gross total return terms, the Fund has tracked the Custom Benchmark within
18 basis points for the quarter. For the year 2000, the Fund tracked its
benchmark within 54 basis points in net terms and within 32 basis points in
gross terms. This resulting tracking error is well within our expectations.
The source of outperformance during this last quarter of 2000 was attributable
to exchange rate differences between the fund administrator and the MSCI Index
in order to value securities in the Fund. The difference set of exchange rates
accounted for 14 basis points of performance. The most noticeable rate
differences came from the Japanese yen, the British pound and the Euro. If the
same set of rates were used, the Fund would have performed the Custom Benchmark
within 2 basis points.
It was generally a weak fourth quarter for both the developed and the emerging
markets. Among the developed markets as measured by the MSCI EAFE GDP Index,
information technology and telecommunications related shares were the bottom
performers while consumer staples and materials related shares were the top
performers. Country performance ranged from +15% in Switzerland to -15% in
Japan. The emerging markets experienced the same results as the developed
countries. Information technology shares plunged while consumer staples
climbed. Twenty-three of the twenty-six MSCI emerging market country indices
declined during the quarter. Individual market performance ranged from +18% in
Poland to -32% in Russia.
Our performance objective is to approximately track the Custom Index of 90%
EAFE GDP Index and 10% MSCI Emerging Markets Index. We manage the Fund using a
risk model that allows us to identify and capture the risk characteristics of
the custom index. In this way we can avoid the expense associated with full
replication.
20
Inception: May 1, 1996
International Opportunities Fund
T. Rowe Price International, Inc. Warren/Ford/Seddan/Bickford-Smith
International stocks fell sharply during the second half of 2000,
contributing to steep losses for the full year. In the first quarter, telecom,
media, and technology stocks carried over their heady performance of 1999. But
leadership began to change in the spring as a severe correction hit these
sectors, while the more defensive consumer staple, pharmaceutical, and banking
stocks found their footing. The recovery in defensive issues, however, failed
to compensate for the steep decline in tech stocks.
Broader concerns weighing on the equities markets included slower economic
growth, high oil prices, and euro weakness. Economic growth eased in Europe,
but the euro staged a recovery in the fourth quarter, cutting its losses to
just 6% against the U.S. dollar for the year. In Japan the consumer sector
remained weak and rising bankruptcies failed to alleviate concerns about
unemployment. Economic growth in the rest of Asia was strong, although
financial instability and political turmoil plagued Korea and Taiwan.
Fund performance during the 12-month period ended December 31, 2000
underperformed both the MSCI EAFE Index and the Lipper Variable Annuity
Average. The Fund's focus on telecom, media, and technology stocks and its
lower exposure to recovering defensive shares hurt results compared with the
benchmarks. The Fund's underweighted position in Japan aided results, but
underweighting Switzerland (where the financial sector was strong) and
overweighting Taiwan and Korea (where technology stocks were weak) crimped
performance. Within the telecom, media, and technology sectors, however, your
Fund's stocks outperformed those of the index.
21
Inception: August 31, 1999
International Equity Fund
Goldman Sachs Asset Management Maeda/Noble/Orchard
During the one-year reporting period the International Equity Fund generated a
total cumulative return of -14.37% at net asset value versus the -13.96% total
cumulative return of the Fund's benchmark, the MSCI EAFE Index. As these
returns indicate, it has been an extremely challenging period in the financial
markets. During the period we strategically moved to reduce the size of our
sector positions (overweight or underweight) in response to high market
volatility and intra-market rotation. We have focused instead on our key
strength, bottom-up stock selection.
Very few equity markets posted positive returns during the year. From a
country standpoint the Fund's strongest absolute returns came from Sweden and
Switzerland, while our stocks originating from Japan and The Netherlands
generated weak performance. On a sector basis, our Consumer Staples and
Utilities stocks enhanced returns, while our Telecom Services, Information
Technology and Industrial stocks produced poor results. In terms of individual
stocks, Epcos (0.0% of the total Fund at 12/31/00), Reuters Group (0.6%) and
Unilever (1.6%) were examples of stocks that enhanced performance. Conversely,
Advantest (0.2%), Rohm Co. (0.6%), TDK Corp. (0.0%) and United Pan-Europe
Communications (0.3%) all produced disappointing results.
22
Inception: May 1, 1998
Emerging Markets Equity Fund
MSDW INV. MGMT., INC. Meyer/Ramachandran
The Fund declined 20.41% during the quarter versus a decline of 13.32% for
the MSCI EMF Index. Underperformance was attributable to both stock selection
and country allocation. Stock selection in Mexico, South Korea, India, Israel,
and Turkey detracted from relative performance. Our overweight stance in South
Korea (index return, -27.1%), Russia (-32.2%) and our underweight positions in
Chile (-3.9%), Malaysia (-3.1%) and South Africa (+4.5%) detracted from
performance. Our underweight position in Taiwan (-26.2%) contributed
positively to relative performance.
In the near term, the emerging markets continue to suffer from fears of a
significant global economic slowdown and incredibly high levels of global
market volatility. However, we continue to be encouraged by trends in economic
recovery, greater fiscal discipline, and improved privatization prospects. We
are overweight Brazil and market weight Mexico, as we believe equities in
these markets shall fare well in the near term given a more benign global
backdrop and a supportive macroeconomic environment. We are currently
underweight the Latin American region as a whole due to underweights in the
smaller markets. We expect to maintain our underweight in Asia in the near
term. Within Asia, our largest overweight is in South Korea, which we believe
shall benefit in the longer term restructuring of its corporate and banking
sectors. We are underweight Emerging Europe, the Middle East and Africa, with
various overweight and underweight positions within the region. Our largest
overweight there is in Israel, where exporters of technology-related products
and services remain extremely competitive, possess excellent management and
are global leaders in their respective areas. We have a significant
underweight stance in Greek equities as we believe the market remains
expensive vis-a-vis other emerging markets. We expect to maintain our
underweight stance in South Africa, as we believe equities are likely to be
negatively affected in the near term by a downturn in the commodity cycle.
[GRAPH]
Emerging Markets MSCI Emerging
Equity Fund Markets Free Index
4/30/98 $10,000 $10,000
5/31/98 8,688 8,630
6/30/98 7,960 7,725
7/31/98 8,533 7,970
8/31/98 5,845 5,666
9/30/98 6,556 6,025
10/31/98 7,081 6,659
11/30/98 7,668 7,213
12/31/98 7,113 7,109
1/31/99 6,934 6,994
2/28/99 6,732 7,062
3/31/99 7,578 7,993
4/30/99 8,290 8,982
5/31/99 7,990 8,929
6/30/99 9,228 9,943
7/31/99 8,932 9,672
8/31/99 8,752 9,760
9/30/99 8,575 9,431
10/31/99 9,056 9,631
11/30/99 10,560 10,495
12/31/99 12,901 11,830
1/31/00 12,556 11,901
2/29/00 13,603 12,058
3/31/00 13,830 12,118
4/30/00 12,048 10,969
5/31/00 11,235 10,516
6/30/00 12,012 10,886
7/31/00 11,066 10,326
8/31/00 11,162 10,377
9/30/00 9,707 9,471
10/31/00 8,762 8,784
11/30/00 7,692 8,017
12/31/00 7,726 8,210
Top Ten Holdings (as of December 31, 2000)
- --------------------------------------------------------------------------
% of six months ago
investments % of investments
Samsung Electronics 5.5% 7.4%
Telefonos de Mexico SA 4.3% 4.1%
Korea Telecom Corp. 3.5% 2.0%
ECI Telecommunications, Ltd. 3.4% 1.4%
China Telecom (Hong Kong), Ltd. 3.2% 1.8%
SK Telecom Co., Ltd. 3.0% 5.0%
Check Point Software Technologies, Ltd. 2.0% 0.6%
Infosys Technologies, Ltd. 2.0% 2.6%
Teva Pharmaceutical Industries, Ltd. 1.9% N/A
Petroleo Brasileiro SA 1.4% 0.3%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Emerging Markets MSCI Emerging MorningStar
Equity Fund(1) Markets Free Index Peer Group+
-------------------- ------------------ -----------
1 Year -40.11% -30.61% -31.75%
Since Inception
(5/1/98) -9.21 -7.14 N/A
Top Ten Countries (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
South Korea 15.3% Hong Kong 6.7%
Israel 11.6% South Africa 4.8%
Mexico 11.1% Soviet Union 2.7%
Taiwan 9.3% Turkey 2.3%
India 7.2% Poland 1.9%
(1) Returns reflect extra-ordinary capital contribution of $445,000 in
June 1999
* Total returns are for the period ended December 31, 2000. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. "Results may have been achieved during
market conditions or pursuing performance opportunities, including
investment in initial public offerings, that may not continue to occur in
the future." Investment returns and principal value of fund shares will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost. International investing entails special risks as
outlined in the prospectus. The performance of the fund on this page is
reported net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for the sub-accounts of all
variable annuity and life products within the Morningstar variable universe
having a Diversified Emerging Markets investment category.
23
Inception: May 16, 1988
Real Estate Equity Fund
Independence Investment Associates, Inc. J. DeSantis/T. Spicer
MSDW Inv. Mgmt., Inc. T. Bigman/D. Funke
Effective June 30, the Fund was modified to a multi-managed investment
approach.
The Real Estate Equity Fund is multi-manager fund with two sub-advisers each
of which employs its own independent investment approach in managing its
portion of the Fund. The two managers employ a distinct and complementary
investment strategy. The multi-manager seeks to produce more consistent
investment returns over market cycles and to reduce the risk of any one
manager or strategy being out of favor in certain market environments.
IIA selects real estate stocks using a combination of bottom-up fundamental
equity research and quantitative tools. Real estate stocks are purchased that
are undervalued relative to the stock's history and have improving earnings
growth prospects.
Morgan Stanley Dean Witter (MSDW) uses a combination of top down market
analysis to identify undervalued real estate property sectors and geographic
regions and fundamental, bottom-up equity and real estate research to select
stocks that attractively priced relative to the underlying real estate value.
As of December 31, 2000, IIA managed approximately 49% and MSDW managed
approximately 51% of the Fund's assets. In the fourth quarter of 2000, the
Fund returned 4.95% versus 4.61% for the Wilshire Real Estate Securities
Index.
Independence Investment Associates, Inc.
To say the least, the year 2000 was a rewarding year for real estate
investors with the sector substantially outperforming the broad market and
returns exceeding 30%. The year began with an extension of the 1999 market in
which large cap, growth stocks continued to outperform value stocks by
historical proportions. Returns were dominated by technology and
telecommunications stocks while other sectors lagged significantly. In March,
however, this trend finally reversed as technology and telecommunications
names began to falter based on their inability to meet the inflated
expectations supporting valuation extremes. At the same time, many of the
recently under-appreciated and under-valued sectors, including REITs and
utilities, began to lead the market as the predictability of earnings growth
began to once again matter to investors. This was evident as REIT mutual funds
saw net inflows of $528 million for the year.
From a fundamental standpoint, real estate markets should remain healthy
going forward. These securities have solid and highly predictable earnings and
cash flow prospects. Their valuations relative to this growth are fair to
attractive. The sector has high current dividend yields and there are
expectations of rising payout announcements. Real estate supply and demand
will remain in approximate equilibrium and rent growth should continue to
outpace inflation. Additionally, REIT management's are committed to
maintaining conservative balance sheets with a continued focus on capital
recycling. With these characteristics in place, we believe REIT's will be a
sound investment into next year.
It was a difficult, emotional year for the stock market, yet we were pleased
to deliver a competitive return on your portfolio. These results were achieved
by sticking to our philosophy that cheap stocks with improving fundamentals
are attractive. We feel confident that with our unique blend of strong
fundamental research, a disciplined investment philosophy and process, and
strong risk control position us well to have another successful year in 2001.
MSDW Inv. Mgmt., Inc.
Modest outperformance resulted primarily from top-down sector allocation and
to a lesser degree by outperformance from stock selection. An overweight to
the manufactured home community sector--the top performer for the month--and
an underweight to the mixed office and industrial sector provided a positive
impact on performance. An overweight to owners of office space, an
underperforming sector, and an underweight to hotels, an outperforming sector,
detracted from performance. Bottom-up outperformance was strongest in the
lodging sector and in the multifamily sector. Bottom-up underperformance in
the office sector was a result of weaker performance from the companies with
concentrations on the West Coast and in markets with tech-led demand.
The top-down weightings in the Fund remain similar to last quarter with a
modest shift to a more defensive stance within the sector weightings. We
increased our overweighting to central business district and coastal office
markets as a large gap exists between lease rates and current market rents and
vacancy rates remain below equilibrium. We also added to the defensive
apartment and self storage sectors. We reduced our retail weighting to reflect
the continuation of oversupply and retailer problems.
We believe the outlook for the REIT market continues to be favorable. Given
the declining levels of construction versus total supply outstanding and low
vacancy rates, we believe the real estate market is prepared for a slowdown in
the economy. Based on the current discount to its underlying property value of
7.5% and the sector's defensive characteristics we believe the sector should
be able to produce its historical average returns, which investors may find
attractive given the recent volatility in the equity markets.
24
Inception: May 16, 1988
Real Estate Equity Fund
Independence Investment Associates, Inc. J. DeSantis/T. Spicer
MSDW Inv. Mgmt., Inc. T. Bigman/D. Funke
25
Inception: March 29, 1986
Managed Fund
Independence Investment Associates, Inc. J. Forrelli/J. Leu
Capital Guardian Trust Company Management Team
Effective November 1, the Fund was modified to a multi-managed investment
approach.
The Managed Fund is a multi-manager fund with two sub-advisers, each of which
employs its own investment approach and independently manages its portion of
the Fund. The two managers employ a distinct and complementary investment
strategy. The multi-manager approach seeks to produce more consistent
investment returns over market cycles and to reduce the risk of any one
manager or strategy being out of favor in certain market environments.
Independence has a normal target mix of 60% stocks and 40% bonds and selects
stocks and bonds using a combination of fundamental equity research and
quantitative tools Capital Guardian has a normal target of 70% stocks and 30%
bonds and selects stocks and bonds using a fundamental, research-driven
approach. Capital Guardian also employs a multiple-manager approach by which
each portfolio manager and the research analysts as a group each manage a
separate portion of the portfolio to capture the highest conviction ideas of
the investment team.
As of December 31, 2000, IIA managed approximately 84% and Capital Guardian
managed approximately 16% of the Fund's assets. The Fund returned 0.03%
compared to -0.99% for the benchmark.
Independence Investment Associates, Inc.
We are pleased to report that your portfolio ended a difficult and volatile
year ahead of its benchmark.
We were able to add value above the S&P 500 through solid stock selection
during the fourth quarter. Health care names such as Bristol Myers and Merck
were especially strong, due to their consistent and reliable earnings growth.
Financial stocks also performed well, driven higher by the sentiment that the
Fed will soon begin to cut interest rates. Finally, many retailers, such as
TJX and Kohls, came back strong in the fourth quarter.
The domestic fixed income portion of your portfolio outperformed the Lehman
Aggregate index during the quarter due to its overweight in agency bonds as
spreads tightened. The domestic fixed income portion benefited from its
overweight in finance, which was the stronger-performing corporate sector.
Your bond portfolio's international bond exposure was raised to 20% during the
quarter. The exposure to international bonds also had a positive impact on
your portfolio's performance.
The pressure on US corporate profits will continue into 2001. We project flat
corporate earnings in 2001, followed by a rebound in 2002. We expect US GDP to
increase 2% in 2001 after roaring ahead by 5% in 2000. A better environment
will unfold later in 2001 as central banks led by the US Fed begin to ease and
investors look past the slowdown. We also remain constructive on the fixed
income markets. Shorter-term interest rates should decline further as the
economy continues to moderate. Looking forward, corporate bonds will be helped
by a more accommodative Fed and a steepening yield curve. Deteriorating
fundamentals in the short term will make issue and sector selection critical.
Capital Guardian Trust Company
Overweighting stocks versus bonds hindered returns in the fourth quarter.
Within U.S. equities, owning significantly less in technology-related stocks
than the index was beneficial to returns. Holding several software stocks that
bucked the downward trend also helped. Over the quarter we reduced our
exposure to the communications services and equipment areas and increased our
exposure to food, beverage, drug, and semi-conductor-related companies.
Within the fixed-income Fund returns within sectors were good, though our
sector mix worked against us. Our overweight position in corporate securities
hindered relative returns. Duration was kept close to neutral, though more
importantly, we increased our exposure to the intermediate part of the yield
curve, which was helpful.
We are continuing to shift assets away from fixed income and toward U.S.
equities. Stock prices and interest rates have both declined significantly,
bringing equity valuations back to reasonable levels. From a bottom-up view,
our U.S. equity analysts are finding attractive opportunities. While we are
optimistic about equities in general, we continue to have concerns in the
technology, media, and telecommunications area, and another downturn would not
surprise us. Earnings estimates for these companies might be lowered further,
given the cooler economic environment.
Bonds, on the other hand, have rallied and real yields have dropped from near
the top of their traditional range to near the bottom. While we were early in
shifting away from bonds, we believe the market has now fully priced in a
major economic slowdown. Within our bond Funds we have an emphasis on
corporate securities. While government bonds have led the rally, spreads to
corporate securities are as wide or wider than in the early 1990s and have
much room for improvement.
26
Inception: March 29, 1986
Managed Fund
Independence Investment Associates, Inc. J. Forelli/J. Leu
Capital Guardian Trust Company Management Team
[GRAPH]
Managed Fund Managed Benchmark(1)
12/31/90 $10,000 $10,000
01/31/91 10,282 10,277
02/28/91 10,683 10,689
03/28/91 10,836 10,854
04/30/91 10,889 10,931
05/31/91 11,166 11,191
06/28/91 10,876 10,929
07/31/91 11,134 11,254
08/30/91 11,400 11,515
09/30/91 11,433 11,540
10/31/91 11,576 11,668
11/27/91 11,420 11,491
12/31/91 12,198 12,341
01/31/92 12,009 12,135
02/28/92 12,093 12,244
03/31/92 11,938 12,090
04/30/92 12,190 12,303
05/29/92 12,364 12,455
06/30/92 12,401 12,457
07/31/92 12,746 12,866
08/31/92 12,649 12,794
09/30/92 12,808 12,956
10/30/92 12,688 12,879
11/30/92 12,941 13,090
12/31/92 13,139 13,289
01/29/93 13,307 13,483
02/26/93 13,509 13,715
03/31/93 13,753 13,887
04/30/93 13,548 13,770
05/28/93 13,751 13,953
06/30/93 13,957 14,135
07/30/93 13,941 14,146
08/31/93 14,413 14,579
09/30/93 14,469 14,551
10/29/93 14,636 14,729
11/30/93 14,497 14,575
12/31/93 14,663 14,696
01/31/94 15,006 15,052
02/28/94 14,608 14,685
03/31/94 14,180 14,185
04/29/94 14,253 14,219
05/31/94 14,255 14,322
06/30/94 14,113 14,129
07/29/94 14,431 14,504
08/31/94 14,655 14,803
09/30/94 14,346 14,513
10/31/94 14,409 14,671
11/30/94 14,186 14,388
12/30/94 14,336 14,541
01/31/95 14,605 14,869
02/28/95 15,043 15,330
03/31/95 15,239 15,609
04/28/95 15,578 15,945
05/31/95 16,175 16,594
06/30/95 16,412 16,856
07/31/95 16,673 17,104
08/31/95 16,873 17,237
09/29/95 17,373 17,687
10/31/95 17,407 17,786
11/30/95 17,966 18,323
12/29/95 18,220 18,627
01/31/96 18,501 19,005
02/29/96 18,424 18,895
03/29/96 18,445 18,907
04/30/96 18,482 18,980
05/31/96 18,704 19,208
06/28/96 18,882 19,377
07/31/96 18,468 18,968
08/30/96 18,626 19,146
09/30/96 19,211 19,855
10/31/96 19,679 20,359
11/29/96 20,434 21,320
12/31/96 20,173 20,992
01/31/97 20,651 21,655
02/28/97 20,722 21,766
03/31/97 20,239 21,182
04/30/97 20,787 21,970
05/30/97 21,389 22,748
06/30/97 21,969 23,392
07/31/97 23,211 24,678
08/29/97 22,554 23,854
09/30/97 23,311 24,694
10/31/97 23,079 24,479
11/28/97 23,632 25,110
12/31/97 23,949 25,457
01/31/98 24,214 25,770
02/27/98 25,313 26,865
03/31/98 26,249 27,725
04/30/98 26,427 27,947
05/29/98 26,341 27,765
06/30/98 27,082 28,537
07/31/98 26,802 28,377
08/31/98 24,292 26,101
09/30/98 25,127 27,349
10/30/98 26,464 28,626
11/30/98 27,569 29,731
12/31/98 28,838 30,796
01/29/99 29,276 31,655
02/26/99 28,479 30,844
03/31/99 29,086 31,653
04/30/99 29,923 32,428
05/28/99 29,450 31,854
06/30/99 30,496 32,873
07/30/99 29,856 32,203
08/31/99 29,669 32,100
09/30/99 29,293 31,721
10/29/99 30,426 32,971
11/30/99 30,621 33,373
12/31/99 31,463 34,488
01/31/00 30,286 33,401
02/29/00 29,874 33,184
03/31/00 32,026 35,308
04/28/00 31,551 34,630
05/31/00 31,278 34,197
06/30/00 31,845 34,987
07/31/00 31,673 34,788
08/31/00 33,123 36,287
09/29/00 32,100 35,227
10/31/00 32,267 35,231
11/30/00 30,904 33,797
12/31/00 31,471 34,149
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
Federal National Mortgage Assoc. 2.7% 11.1%
U.S. Treasury 2.2% 3.1%
Pfizer, Inc. 1.8% 0.5%
General Electric Co. 1.6% 3.1%
Citigroup, Inc. 1.6% 2.2%
Government National Mortgage Assoc. 1.4% 3.4%
Republic of Italy 1.4% 1.2%
Bank of America Corp. 1.4% N/A
Exxon Mobil Corp. N/A 1.0%
Cisco Systems, Inc. 1.2% 2.6%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Managed Managed MorningStar
Fund Benchmark (1) Peer Group+
------- ------------- -----------
1 Year 0.03% -0.99% 2.10%
3 Years 9.53 10.28 8.39
5 Years 11.55 12.89 11.47
10 Years 12.15 12.41 12.21
Top Ten Sectors (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of % of
investments investments
Financial 23.7% Consumer Cyclical 5.3%
Governmental 22.7% Retail 4.1%
Technology 13.0% Energy 4.0%
Health Care 11.0% Utility 3.9%
Capital Equipment 7.3% Consumer Staple 2.8%
(1) The Managed Benchmark represents 50% S&P 500/50% Lehman Brothers
Government/Corporate Bond from April 1986 to December 1997 then 60% S&P
500/40% Lehman Brothers Government/Corporate Bond from 1998 to April 1998
and now 60% S&P 500/40% Lehman Brothers Aggregate Bond from May 1998 to
present.
* Total returns are for the period ended December 31, 2000. Returns
represent past performance, assume reinvestment of all distributions and
are not indicative of future performance. "Results may have been achieved
during market conditions or pursuing performance opportunities that may
not continue to occur in the future." Investment returns and principal
value of fund shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. The performance of the fund
on this page is reported net of Trust level charges (i.e. investment
management fees and operating expenses). It does not reflect expense and
charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product
prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the Morningstar variable universe having a
Domestic Hybrid investment category.
27
Inception: August 31, 1999
Aggressive Balanced Fund
Independence Investment Associates, Inc. J. Forelli/J. Leu
Your Fund returned -1.53% compared to -4.07% for your benchmark,
outperforming by over 2.5%. The importance of diversification between fixed
income and equities, stock selection, risk control, and the benefits of a
strong fundamental research team are highlighted during this past year of
tremendous uncertainty and unprecedented volatility.
We were able to add value above the S&P 500 through solid stock selection.
During the quarter, health care stocks were especially strong, due to their
consistent and reliable earnings growth. Financial stocks such also performed
well, driven higher by the sentiment that the Fed will soon begin to cut
interest rates. Finally, we also helped the Fund's performance by avoiding
very expensive technology stocks.
The domestic fixed income portion of your Fund matched the Lehman Aggregate
index during the quarter. An overweight in agency bonds helped the Fund as
spreads tightened and an overweight in the financial and energy sectors also
added to performance. However, this advantage was offset by an overweight in
BBB securities and the Fund's bar belled structure.
The pressure on US corporate profits will continue into 2001. We project flat
corporate earnings in 2001, followed by a rebound in 2002. We expect US GDP to
increase 2% in 2001 after roaring ahead by 5% in 2000. A better environment
will unfold later in 2001 as central banks led by the US Fed begin to ease and
investors look past the slowdown. We also remain constructive on the fixed
income markets. Shorter-term interest rates should decline further as the
economy continues to moderate. Looking forward, corporate bonds will be helped
by a more accommodative Fed and a steepening yield curve. Deteriorating
fundamentals in the short term will make issue and sector selection critical.
28
Inception: May 1, 1996
Global Balanced Fund (Formerly International Balanced Fund)
Capital Guardian Trust Company Management Team
Effective November 1, Capital Guardian Trust Company assumed management of the
Fund.
We began the period slightly underweight equities, and we increased our equity
exposure during the quarter. This was not helpful to returns. Within our equity
allocation, however, our overweight position in non-U.S. large caps along with
good relative returns from our U.S. large-cap Fund softened the blow. Within
our U.S. equity Fund, owning significantly less than the index in technology-
related stocks was helpful. On the fixed-income side, returns within sectors
were good, though our emphasis on corporate securities worked against us.
Most of our shift into equities has been the result of moving assets away from
U.S. fixed income and toward U.S. large caps. Equity valuations in the U.S.
have come down significantly in absolute terms as well as relative to other
developed markets. At the same time, interest rates have declined more in the
U.S. than in other markets, and real yields have moved from the top end of
their range to the bottom. These events have brought U.S. equity valuations
back to reasonable levels. From a bottom-up view, our analysts are finding
attractive opportunities. Today, our U.S. large cap position is only slightly
underweight, whereas it was significantly underweight earlier in the year on
valuation concerns. We continue to be overweight non-U.S. large caps, U.S.
small caps, and emerging markets equity, and underweight non-U.S. small caps.
While we were early in moving away from U.S. bonds, we believe the market has
now fully priced in a major economic slowdown. Non-U.S. bonds, while also
underweight, appear relatively more attractive having lagged the U.S. market
and due to our belief that the dollar will continue to weaken against the euro.
Within our bond Funds we have an emphasis on corporate securities. While
government bonds have led the rally, credit spreads have widened, leaving
corporate bonds room for improvement.
29
Inception: May 1, 1994
Short-Term Bond Fund
Independence Investment Associates, Inc. Jay Leu
Interest rates across all maturities continued to fall during the quarter
because of evidence of a sharper economic slowdown and equity market jitters.
The yield curve continued to "disinvert" with short and intermediate rates
falling more than longer term rates on expectations that the Federal Reserve
will need to aggressively lower interest rates. The Fund benefited from
investing in shorter maturity securities whose yields fell the farthest in the
fourth quarter.
Investment grade corporate bonds underperformed Treasury securities in the
fourth quarter. Corporate bonds have been impacted by deteriorating
fundamentals as the economy's growth rate slowed significantly. Corporate
bonds have been helped by the steepening or "disinverting" of the yield curve
as well as by the Federal Reserve's move to an accommodative stance. Corporate
bond performance has varied significantly by industry and issuer, though.
Within the corporate bond market, the finance sector led the way followed by
the utilities and then industrials.
The Short-Term Bond Fund outperformed its benchmark for the quarter despite
the difficult environment for corporate bonds. The Fund continues to benefit
from a yield advantage provided by an overweight in corporate and asset-backed
securities relative to the benchmark. The Fund also benefited from its
overweight in asset-backed securities that outperformed corporate bonds. Our
individual securities held in the Fund outperformed relative to the average
corporate bond in the benchmark. Strong performers included: Gulf Canada,
BankBoston, Donaldson, Lufkin, and Jenrette, Philip Morris, and FNMA.
Looking forward, corporate bonds will be helped by attractive valuations, a
more accommodative Federal Reserve, and a steepening yield curve.
Deteriorating fundamentals in the short term will make issue and sector
selection critical. We believe short maturity corporate bonds and asset-backed
securities are attractively priced relative to Treasury securities and we will
continue to overweight them.
30
Inception: May 1, 1998
Bond Index Fund
Mellon Bond Associates, LLP Gregory Curran
The Fund continues to meet its investment objective: to match the performance
of the Lehman Brothers Government Credit Index, which includes U.S. dollar-
based, fixed-coupon debt from the U.S. Government, its agencies and
investment-grade corporations. Performance net of fees for the portfolio was
2.03% for December, 4.59% for the fourth quarter, 11.81% for the year.
Corresponding returns for the benchmark were 1.97%, 4.37%, and 11.84%. The
Fund uses a representative sample of issues selected through proprietary
quantitative techniques. Selected issues have the best risk-adjusted expected
return and, as a group, match the characteristics of the 4,750 issues in the
Index including price sensitivity, industry, and quality exposures. An indexed
portfolio typically eliminates many risks associated with active management
and has lower fees and expenses.
Recent changes in supply of debt to the investment grade fixed income markets
are being reflected in the Lehman Brothers Government Credit Index, and
therefore in the portfolio as well. As the Treasury Department decreases the
new issuance of Treasury notes and bonds due to the budget surplus, the
representation in the Index has decreased. Treasuries were 51.53% of the Index
on December 31, 1999 and were only 43.58% of the Index on December 31, 2000.
We expect this trend to continue. The Government Sponsored Enterprises,
particularly Fannie Mae and Freddie Mac, have increased the size and liquidity
of their issuance to fund their portfolio growth and as an attempt to become
the replacement asset class of choice for Treasury investors. Agencies were
14.46% of the Index of the end of 1999 and were 17.62% of the Index at year
end 2000. Corporates have grown from 34.02% of the Index to 38.80% because of
the addition of 144A's to the Index in June and increased issuance in the
Telecom sector as they funded the purchase of licenses to expand their
businesses.
31
Inception: March 29, 1986
Active Bond Fund (Formerly Sovereign Bond Fund)
John Hancock Advisers, Inc. James Ho
During the quarter the Fund gained 3.84%, underperforming the Lehman
Aggregate Index at 4.21%. YTD the Fund performed well on an absolute basis,
returning 10.45%, though underperforming the index return of 11.63%.
Underperformance can be attributed to the Fund's bias towards spread product,
as most spread sectors underperformed Treasuries for both periods. Treasuries
had their best year of performance since 1995. Our underweight position in
this sector relative to the benchmark, for both the quarter and year,
detracted from performance results. The Fund's overweight position in
corporate bonds relative to the index detracted from performance results for
both the quarter and 2000.
With the unexpected and aggressive rate cut on January 3rd, the Fed
effectively put a floor under the economy and the risk of recession is greatly
reduced. Given an expected upturn in the economy later in 2001 in response to
this stimulus action, we think interest rates may be close to bottom. We plan
to use periods of market strength to reduce interest rate sensitivity by
shortening duration. With a backdrop of a stronger economy expected, we plan
to reduce our defensive stance. We'll likely reduce our Treasury holdings and
asset backed securities and increase investments in the high-yield sector,
which currently offers very attractive values and yields. We'll also look for
attractive values among lower-rated investment grade issues. Additionally,
we're likely to move away from defensive industry sectors-- such as energy,
health care and utilities-in favor of more economically sensitive sectors such
as autos, home building and financials. Our neutral weighting in mortgage
securities is likely to remain constant, and we will emphasize prepayment-
resistant securities with coupons of between 6% and 7%. Emerging markets may
present opportunities, especially if the U.S. economy rebounds.
[GRAPH]
Active Bond Active Bond Active Bond Active Bond
Fund Benchmark Fund Benchmark
12/31/90 $10,000 $10,000 01/31/96 $16,299 $16,061
01/31/91 10,081 10,112 02/29/96 15,986 15,721
02/28/91 10,204 10,199 03/31/96 15,888 15,589
03/31/91 10,298 10,269 04/30/96 15,808 15,481
04/30/91 10,448 10,387 05/31/96 15,804 15,455
05/31/91 10,526 10,436 06/30/96 15,964 15,662
06/30/91 10,534 10,425 07/31/96 16,015 15,698
07/31/91 10,648 10,556 08/31/96 16,027 15,660
08/31/91 10,889 10,799 09/30/96 16,317 15,939
09/30/91 11,110 11,025 10/31/96 16,664 16,311
10/31/91 11,219 11,123 11/30/96 16,925 16,611
11/30/91 11,313 11,234 12/31/96 16,868 16,426
12/31/91 11,666 11,613 01/31/97 16,931 16,446
01/31/92 11,553 11,441 02/28/97 17,011 16,481
02/29/92 11,583 11,501 03/31/97 16,831 16,284
03/31/92 11,554 11,438 04/30/97 17,061 16,522
04/30/92 11,628 11,507 05/31/97 17,253 16,676
05/31/92 11,822 11,730 06/30/97 17,479 16,876
06/30/92 11,976 11,902 07/31/97 18,003 17,392
07/31/92 12,265 12,207 08/31/97 17,826 17,198
08/31/92 12,398 12,316 09/30/97 18,115 17,468
09/30/92 12,565 12,483 10/31/97 18,271 17,747
10/31/92 12,412 12,292 11/30/97 18,372 17,841
11/30/92 12,374 12,281 12/31/97 18,573 18,028
12/31/92 12,559 12,492 01/31/98 18,828 18,283
01/31/93 12,783 12,765 02/28/98 18,812 18,246
02/28/93 13,049 13,030 03/31/98 18,919 18,303
03/31/93 13,121 13,075 04/30/98 19,011 18,394
04/30/93 13,203 13,175 05/31/98 19,180 18,591
05/31/93 13,196 13,169 06/30/98 19,364 18,781
06/30/93 13,467 13,468 07/31/98 19,400 18,796
07/31/93 13,581 13,554 08/31/98 19,591 19,162
08/31/93 13,868 13,865 09/30/98 20,040 19,710
09/30/93 13,936 13,914 10/31/98 19,852 19,570
10/31/93 13,951 13,971 11/30/98 20,043 19,688
11/30/93 13,846 13,813 12/31/98 20,102 19,735
12/31/93 13,911 13,874 01/31/99 20,287 19,875
01/31/94 14,114 14,082 02/28/99 19,871 19,402
02/28/94 13,855 13,775 03/31/99 20,013 19,499
03/31/94 13,561 13,438 04/30/99 20,076 19,548
04/30/94 13,440 13,326 05/31/99 19,859 19,346
05/31/94 13,417 13,302 06/30/99 19,809 19,286
06/30/94 13,404 13,271 07/31/99 19,769 19,232
07/31/94 13,621 13,537 08/31/99 19,730 19,217
08/31/94 13,654 13,542 09/30/99 19,906 19,390
09/30/94 13,495 13,338 10/31/99 19,946 19,462
10/31/94 13,473 13,323 11/30/99 20,016 19,460
11/30/94 13,448 13,299 12/31/99 19,913 19,366
12/31/94 13,554 13,387 01/31/00 19,830 19,302
01/31/95 13,812 13,644 02/29/00 20,053 19,536
02/28/95 14,143 13,960 03/31/00 20,256 19,794
03/31/95 14,253 14,054 04/30/00 20,178 19,736
04/30/95 14,459 14,249 05/31/00 20,160 19,727
05/31/95 15,081 14,846 06/30/00 20,583 20,137
06/30/95 15,211 14,965 07/31/00 20,748 20,320
07/31/95 15,145 14,907 08/31/00 21,062 20,615
08/31/95 15,320 15,098 09/30/00 21,181 20,745
09/30/95 15,474 15,252 10/31/00 21,293 20,882
10/31/95 15,726 15,476 11/30/00 21,576 21,224
11/30/95 15,960 15,731 12/31/00 21,994 21,619
12/31/95 16,203 15,962
Top Ten Holdings (as of December 31, 2000)
- ---------------------------------------------------------------------------
% of six months ago
investments % of investments
Government National Mortgage Assoc. 25.9% 22.1%
U.S. Treasury 11.4% 18.4%
Federal National Mortgage Assoc. 8.8% 10.4%
GMAC Commercial Mortgage Securities, Inc. 1.4% 1.4%
Peco Energy Transition Trust 1.3% 0.3%
Hydro-Quebec 1.1% 1.1%
Amresco Residential Securities 1.0% 1.0%
Morgan Stanley Capital 1.0% N/A
UCFC Home Equity Loan 1.0% 1.5%
Cleveland Electric Illuminating Co. 0.8% 0.8%
Average Annual Total Returns*
- ---------------------------------------------------------------------------
Active Bond Active Bond MorningStar
Fund Benchmark(1) Peer Group+
-------- --------------- -----------
1 Year 10.45% 11.63% 8.21%
3 Years 5.80 6.24 4.86
5 Years 6.30 6.25 5.69
10 Years 8.20 7.62 7.80
Fund Composition (as of December 31, 2000)
- ---------------------------------------------------------------------------
Credit Quality Duration
- -------------- --------
Short Term 5.30% less than 1 Year 5.30%
AAA 44.80% 1-3 Years 0.30%
AA 8.0% 3-5 Years 0.00%
A 13.80% 5-10 Years 86.60%
BBB 15.40% greater than 10 Years 7.80%
BB 8.80%
B 3.50%
Below B 0.00%
NR/NA 0.40%
(1) The Active Bond Benchmark represents the Lehman Brothers Government/
Corporate Bond Index from April 1986 to September 1999 and Lehman
Brothers Aggregate Bond Index from October 1999 to present.
* Total returns are for the period ended December 31, 2000, returns
represent past performance, assume reinvestment of all distributions,
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary
to a considerable extent and are described in your product
prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the MorningStar variable universe having an
Intermediate Term Bond investment category.
32
Inception: June 30, 2000
Core Bond Fund
Federated Investment Management Company Balestrino/Ellenberger/Durbiano
The 6 months ended December 31, 2000 were very profitable for bond investors
as interest rates fell precipitously on weak economic growth. The bond market
typically thrives on bad economic news as interest rates fall and, conversely,
bond prices rise.
Interest rates generally fell 50 to 125 basis points over the past three
months. Intermediate interest rates, such as the 2-year and 5-year Treasury
yields, experienced the greatest declines, falling 127 and 121 basis points,
respectively. This steep decline in the "belly of the yield curve" benefited
the Core Bond Fund, given that it has the bulk of investments in the 2 to 10
year maturity area. The Federal Reserve Board held monetary policy steady
throughout the whole period, causing the yield curve to be quite inverted with
long-term interest rates lower than short-term rates.
In terms of relative fixed income sector performance, the six months
demonstrated a preference for Treasury securities and other high quality,
highly liquid securities over less liquid or lower quality securities. The
higher quality spread sectors performed relatively well, while the lower
quality sectors underperformed the treasury market. The lower quality sectors
were undoubtedly dragged down by stock market volatility and nervousness that
spread worldwide. The election-results stalemate also caused quite a bit of
concern to the equity, high yield and investment-grade corporate markets.
The Fund outperformed the Lehman Brothers Aggregate Bond Index returning
4.11% during the fourth quarter of 2000 versus 4.21% for the benchmark. The
NAV of the Fund ended the quarter at $10.33 per share versus $10.00 at
initiation of the Fund on June 30, 2000.
For the six months, outperformance of the Fund versus the benchmark can be
attributed to positioning on the yield curve and security selection. Sector
allocation was a drag on the Fund for the quarter due to the overweight in
corporates and mortgage-backed securities, which performed relatively poorly
during the quarter. Duration stance was a slight negative for the six months.
Yield curve stance and security selection were definite positives to the Fund,
from holdings in 20-year Treasuries, Tosco, United Airlines, USA Waste,
Enterprise Oil, Lockheed Martin, Clear Channel Communications, and Inco.
[GRAPH]
Lehmen Brothers
Core Bond Fund Aggregate Bond Index
6/30/00 9,990 10,208
7/31/00 10,076 10,301
8/31/00 10,214 10,450
9/30/00 10,278 10,516
10/31/00 10,339 10,586
11/30/00 10,511 10,759
12/31/00 10,700 10,959
Top Ten Holdings (as of December 31, 2000)
- ------------------------------------------------------------------------------
- --
% of six months ago
investments % of investments
Federal National Mortgage Assoc. 34.5% N/A
U.S. Treasury 15.4% N/A
Federal Home Loan Mortgage Corp. 9.3% N/A
Government National Mortgage Assoc. 3.8% N/A
TOSCO Corp. 2.1% N/A
United Airlines 2.0% N/A
National Bank of Canada 2.0% N/A
Target Corp. 2.0% N/A
Hertz Corp. 2.0% N/A
International Speedway Corp. 2.0% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
- --
Core Bond Fund Lehman Brothers MorningStar
Aggregate Bond Index Peer Group+
-------------- -------------------- ----------
- -
Since Inception (6/30/00) 7.00% 7.36% N/A
Fund Composition (as of December 31, 2000)
- ------------------------------------------------------------------------------
- --
Credit Quality Duration
- -------------- --------
Short Term 2.54%
AAA 67.09% Less than 1 Year 6.35%
AA 1.46% 1-3 Years 34.11%
A 15.38% 3-5 Years 26.13%
BBB 12.82% 5-10 Years 23.47%
BB 0.00% Greater than 10 Years 9.94%
B 0.71%
* Total returns are for the period ended December 31, 2000. Returns
represent past performance, assume reinvestment of all distributions and are
not indicative of future performance. "Results may have been achieved during
market conditions or pursuing performance opportunities that may not
continue to occur in the future." Investment returns and principal value of
fund shares will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. The performance of the fund on this page
is reported net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary to a
considerate extent and are described in your product prospectus.
+ Source: MorningStar, Inc. Data as of 12/31/00. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and life
sub-accounts within the MorningStar variable universe having a Intermediate
Term Bond investment category.
33
Inception: May 1, 1998
High Yield Bond Fund
Wellington Management Company, LLP Crawford/Smith/McEvoy
During the quarter, the Fund decreased by -8.8% compared to a -5.24% return
of the Lehman High Yield Index.
In the fourth quarter of 2000, the US high yield market, as measured by the
Lehman HY Index, had a return of -5.2%. This performance lagged the 4.2%
return of investment grade bonds, as measured by the Lehman Brothers Aggregate
Index. This underperformance of the high yield market versus higher quality
bonds came from the widening of the spread of high yield versus the 10-year
treasury from 707 basis points on September 30 to 934 basis points on December
31, 2000. This widening of spreads was due to equity market volatility,
corporate earnings warnings, high yield mutual Fund outflows, and default
rates. However, the high yield market did stabilize in December, matching the
1.9% performance of the Lehman Aggregate. December's high yield market rebound
was attributed to high yield spreads widening to their most attractive levels
in nearly 10 years and prospects for improving liquidity conditions.
Within high yield, lower quality ("B- rated") bonds continued to lag higher
quality bonds ("BB-rated") throughout the quarter.
During the quarter, we continued to adhere to our long-running preference for
issuers that have recurring revenue from repeat customers. To that end, health
care, media/entertainment, and cable continue to be the three largest industry
weightings in the Fund.
34
Inception: May 1, 1996
Global Bond Fund
Capital Guardian Trust Company Management Team
Effective November 1, Capital Guardian Trust Company assumed management of the
Fund.
The Fund's slight overweight in U.S. bonds certainly added to overall
performance. Because we maintained our belief that there is little upside
potential in Japanese bonds, our underweight in Japan during the quarter hurt
Fund returns.
As has been the case for most of the year, exposure to corporate bonds in the
U.S. and Europe also hurt returns. Credit spreads continued to widen in even
the highest quality, most liquid sectors as corporate earnings downgrades
stung the markets. Additionally, spread widening in Europe was worse than the
U.S. due to liquidity concerns. Following the change in Fed policy in
December, however, corporate bonds showed signs of meaningful improvement.
The global government bond markets have priced in the beginning of a central
bank easing cycle. Despite the evidence of a slowdown in the global economy,
we believe there is little chance of an economic hard landing. With U.S.
government bonds becoming richly valued we will look for opportunities to add
quality corporate credits to the Fund. We will also continue to evaluate our
overweight position in the euro and add to our exposure as warranted. Finally,
based on the very attractive yield spreads available in corporate bonds
globally, we expect them to measurably outperform government bonds in 2001.
35
Inception: March 29, 1986
Money Market Fund
John Hancock Life Insurance Co. Peter Mitsopoulos
The Federal Reserve's monetary tightening actions starting in 1999 continued
as we entered 2000, but by mid-year the Fed abandoned further rate increases
as the economy showed signs of weakness. The Fed Funds target rate stood at
6.50% and the Fed remained on hold through December 31. Just a few days after
the New Year, however, the Fed enacted a 50 basis point reduction in the rate
to 6.0%. During the first half of the year we shortened the fund's weighted
average maturity (WAM) in order to capture higher yields under the tightening
policy. The WAM of the Fund was approximately 45 days at year-end 1999 and had
reached a low of 21 days in late April. We made efforts to push the level into
the 30 day to 40 day range for the later part of the year given growing
expectations for an end to fed tightening and ended the year with a WAM of 31
days.
The Fund performed generally in-line with expectations during the year. We
had become more cautious in our acquisition of adjustable rate securities
because of two factors: They were becoming more expensive and some of the more
active issuers were developing credit concerns. The Fund ended with only a 16%
position versus 22% at year-end 1999. The market continues to make it
difficult to pick up any appreciable yield differential by going out beyond
one or two months. However, when we see value out on the curve, we will
acquire securities in an effort to lock in yield and increase the Fund's
weighted average maturity.
The Fund is invested primarily in commercial paper (78%), adjustable rate
notes (16%) with other money market securities making up the balance.
36
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Emerging
Large Cap Fundamental Aggressive Active Markets International International
Growth Growth Balanced Bond CORE Bond Equity Equity Index Equity
---------- ----------- ---------- -------- --------- -------- ------------- -------------
ASSETS
Long-Term Investments at
cost.................... $1,127,776 $49,497 $20,328 $768,472 $5,100 $41,395 $ 183,681 $15,406
Net unrealized
appreciation
(depreciation) of
investments............. 14,405 (5,942) 182 12,367 166 (12,835) 4,768 (699)
Short-Term Investments
at market............... 10,374 2,023 1,853 50,033 69 2,076 5,935 800
---------- ------- ------- -------- ------ ------- --------- -------
Total Investments...... 1,152,555 45,578 22,363 830,872 5,335 30,636 194,384 15,507
Cash.................... 1,258 428 203
Receivable for:
Investments sold....... 544 153 541
Fund shares sold....... 165 15 21 25
Interest............... 69 11,939 73
Dividends.............. 667 7 16 26 230 22
Unrealized appreciation
in forward foreign
currency contracts..... 63
---------- ------- ------- -------- ------ ------- --------- -------
TOTAL ASSETS........... 1,153,222 46,294 22,463 844,069 5,429 31,243 195,218 15,757
LIABILITIES
Payables for:
Due to custodian....... 1
Investments purchased.. 5,558 164 1,506 1,258 60 24
Fund shares purchased.. 84 292 131 3
Futures contracts
variation margin....... 18 3
Other liabilities...... 792 16 16 220 1 42 185 14
---------- ------- ------- -------- ------ ------- --------- -------
TOTAL LIABILITIES...... 6,435 180 1,522 1,770 1 233 206 41
---------- ------- ------- -------- ------ ------- --------- -------
NET ASSETS.............. $1,146,787 $46,114 $20,941 $842,299 $5,428 $31,010 $ 195,012 $15,716
========== ======= ======= ======== ====== ======= ========= =======
Shares of beneficial
interest outstanding.... 60,719 3,684 2,046 89,197 525 4,629 12,668 1,595
---------- ------- ------- -------- ------ ------- --------- -------
Net asset value per
share................... $ 18.89 $ 12.52 $ 10.24 $ 9.44 $10.33 $ 6.70 $ 15.39 $ 9.85
========== ======= ======= ======== ====== ======= ========= =======
Composition of net
assets:
Capital Paid in........ 1,172,736 54,265 21,000 862,827 5,259 47,462 190,658 16,478
Accumulated net
realized gain (loss) on
investments............ (40,354) (2,209) (243) (38,924) (3,468) 150 (58)
Undistributed
(distribution in excess
of) net investment
income (loss).......... 2 6,029 3 (151) (441) 20
Net unrealized
appreciation
(depreciation) of:
Investments............ 14,405 (5,942) 182 12,367 166 (12,835) 4,768 (699)
Foreign currency
translation............ 2 47 (2)
Futures contracts...... (170) (23)
---------- ------- ------- -------- ------ ------- --------- -------
Net Assets.............. $1,146,787 $46,114 $20,941 $842,299 $5,428 $31,010 $ 195,012 $15,716
========== ======= ======= ======== ====== ======= ========= =======
See notes to financial statements.
37
STATEMENT OF ASSETS AND LIABILITIES--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Small Cap Global Mid Cap Mid Cap Large Cap Large Cap American Leaders Large/Mid
Growth Balanced Growth Blend Value Value CORE Large Cap Value Cap Value
--------- -------- -------- ------- --------- ---------- ---------------- ---------
ASSETS
Long-Term Investments at
cost.................... $237,946 $27,948 $426,286 $19,357 $179,326 $15,509 $5,383 $13,535
Net unrealized
appreciation
(depreciation) of
investments............. (9,242) (552) (59,334) 1,370 16,076 697 373 1,531
Short-Term Investments
at market............... 6,544 800 26,942 409 10,401 1,701 246 461
-------- ------- -------- ------- -------- ------- ------ -------
Total Investments...... 235,248 28,196 393,894 21,136 205,803 17,907 6,002 15,527
Cash.................... 152 105 143
Receivable for:
Investments sold....... 368 4 1,421 81
Fund shares sold....... 31 114 75 104 21 150
Interest............... 301
Dividends.............. 31 25 20 276 22 7 15
Unrealized appreciation
in forward foreign
currency contracts.....
-------- ------- -------- ------- -------- ------- ------ -------
TOTAL ASSETS........... 235,647 28,709 395,420 21,270 206,154 18,176 6,030 15,773
LIABILITIES
Payables for:
Due to custodian....... 2
Investments purchased.. 293 161 240 1,607 36
Fund shares purchased.. 755 1,120
Other liabilities...... 57 21 72 11 10 12 1 9
-------- ------- -------- ------- -------- ------- ------ -------
TOTAL LIABILITIES...... 1,105 182 1,432 11 1,619 12 1 45
-------- ------- -------- ------- -------- ------- ------ -------
NET ASSETS.............. $234,542 $28,527 $393,988 $21,259 $204,535 $18,164 $6,029 $15,728
======== ======= ======== ======= ======== ======= ====== =======
Shares of beneficial
interest outstanding.... 17,409 3,076 25,254 1,753 14,225 1,743 563 1,360
-------- ------- -------- ------- -------- ------- ------ -------
Net asset value per
share................... $ 13.47 $ 9.27 $ 15.60 $ 12.12 $ 14.38 $ 10.42 $10.71 $ 11.57
======== ======= ======== ======= ======== ======= ====== =======
Composition of net
assets:
Capital Paid in........ 256,144 29,929 494,657 20,346 188,660 17,535 5,656 14,276
Accumulated net
realized gain (loss) on
investments............ (12,360) (201) (41,335) (457) (252) (68) (79)
Undistributed
(distribution in excess
of) net investment
income................. (667) 51
Net unrealized
appreciation
(depreciation) of:
Investments............ (9,242) (552) (59,334) 1,370 16,076 697 373 1,531
Foreign currency
translation............ 18
-------- ------- -------- ------- -------- ------- ------ -------
Net Assets.............. $234,542 $28,527 $393,988 $21,259 $204,535 $18,164 $6,029 $15,728
======== ======= ======== ======= ======== ======= ====== =======
See notes to financial statements.
38
STATEMENT OF ASSETS AND LIABILITIES--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Money Mid Cap Small/Mid Cap Bond Large Cap Small/Mid Cap Small/Mid Cap Real Estate
Market Value Growth Index Aggressive Growth CORE Value Equity
-------- -------- ------------- ------- ----------------- ------------- ------------- -----------
ASSETS
Long-Term Investments
at cost................ $103,554 $176,651 $61,775 $28,690 $20,277 $28,089 $132,782
Net unrealized
appreciation
(depreciation) of
investments............ 18,934 3,509 698 (3,085) 281 (143) 21,083
Short-Term Investments
at market.............. $489,445 6,504 10,456 1,167 1,122 800 975 4,220
-------- -------- -------- ------- ------- ------- ------- --------
Total Investments..... 489,445 128,992 190,616 63,640 26,727 21,358 28,921 158,085
Cash................... 1 1 218 20
Receivable for:
Investments sold...... 1,366 106
Fund shares sold...... 5,891 180 62 64 71 64 508 332
Interest.............. 1,598 1,091
Dividends............. 80 38 6 27 21 992
-------- -------- -------- ------- ------- ------- ------- --------
TOTAL ASSETS.......... 496,935 129,252 192,082 64,795 26,805 21,667 29,470 159,515
LIABILITIES
Payables for:
Investments purchased. 2,024 550 20 637
Futures contracts
variation margin...... 16
Other liabilities..... 82 19 48 27 11 15 14 67
-------- -------- -------- ------- ------- ------- ------- --------
TOTAL LIABILITIES..... 82 19 2,072 27 561 31 34 704
-------- -------- -------- ------- ------- ------- ------- --------
NET ASSETS............. $496,853 $129,233 $190,010 $64,768 $26,244 $21,636 $29,436 $158,811
======== ======== ======== ======= ======= ======= ======= ========
Shares of beneficial
interest outstanding... 49,685 8,819 13,866 6,648 2,758 2,204 2,515 11,617
-------- -------- -------- ------- ------- ------- ------- --------
Net asset value per
share.................. $ 10.00 $ 14.65 $ 13.70 $ 9.74 $ 9.52 $ 9.82 $ 11.70 $ 13.67
======== ======== ======== ======= ======= ======= ======= ========
Composition of net
assets:
Capital Paid in....... 496,853 111,999 186,447 64,748 30,148 21,435 29,574 136,878
Accumulated net
realized gain (loss)
on investments........ (92) (1,700) 24 (723) (819) (112) 5 (87)
Undistributed
(distribution in
excess of) net
investment income..... 92 45 936
Net unrealized
appreciation
(depreciation) of:
Investments........... 18,934 3,509 698 (3,085) 281 (143) 21,083
Foreign currency
translation........... 1
Futures contracts..... 32
-------- -------- -------- ------- ------- ------- ------- --------
Net Assets............. $496,853 $129,233 $190,010 $64,768 $26,244 $21,636 $29,436 $158,811
======== ======== ======== ======= ======= ======= ======= ========
See notes to financial statements.
39
STATEMENT OF ASSETS AND LIABILITIES--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Growth & Short-Term Small Cap International Equity High Yield Global
Income Managed Bond Equity Opportunities Index Bond Bond
---------- ---------- ---------- --------- ------------- -------- ---------- -------
ASSETS
Long-Term Investments at
cost.................... $3,093,579 $2,733,012 $77,268 $ 81,153 $119,383 $491,247 $29,399 $62,664
Net unrealized
appreciation
(depreciation) of
investments............. 167,294 189,423 309 (13,694) (4,033) 15,336 (5,393) 2,743
Short-Term Investments
at market............... 106,957 242,351 1,289 3,191 3,919 18,699 1,127 1,716
---------- ---------- ------- -------- -------- -------- ------- -------
Total Investments...... 3,367,830 3,164,786 78,866 70,650 119,269 525,282 25,133 67,123
Cash.................... 512 761 68 29
Receivable for:
Investments sold....... 2,711 57,348 3
Fund shares sold....... 147 268 77
Interest............... 16,640 1,129 775 1,802
Dividends.............. 2,683 1,627 39 147 428
Futures contracts
variation margin....... 175
Unrealized appreciation
in forward foreign
currency contracts..... 3,780 21
---------- ---------- ------- -------- -------- -------- ------- -------
TOTAL ASSETS........... 3,373,224 3,244,868 80,142 70,689 120,177 526,046 26,014 68,949
LIABILITIES
Payables for:
Due to custodian.......
Investments purchased.. 46,640 238,293 175 29
Fund shares purchased.. 466 1,091 480 30 34
Futures contracts
variation margin....... 241
Unrealized depreciation
in forward foreign
currency contracts..... 8,831 434
Other liabilities...... 1,130 859 33 3 113 146 7 8
---------- ---------- ------- -------- -------- -------- ------- -------
TOTAL LIABILITIES...... 48,236 249,074 33 658 143 387 36 476
---------- ---------- ------- -------- -------- -------- ------- -------
NET ASSETS.............. $3,324,988 $2,995,794 $80,109 $ 70,031 $120,034 $525,659 $25,978 $68,473
========== ========== ======= ======== ======== ======== ======= =======
Shares of beneficial
interest outstanding.... 234,464 216,688 8,122 7,661 10,128 29,793 3,543 6,623
---------- ---------- ------- -------- -------- -------- ------- -------
Net asset value per
share................... $ 14.18 $ 13.82 $ 9.86 $ 9.14 $ 11.85 $ 17.64 $ 7.33 $ 10.34
========== ========== ======= ======== ======== ======== ======= =======
Composition of net
assets:
Capital Paid in........ 3,184,314 2,754,839 81,811 83,810 124,544 511,015 32,140 67,985
Accumulated net
realized gain (loss) on
investments............ (26,620) 7,732 (2,145) (100) (469) (119) (796) (3,395)
Undistributed
(distribution in excess
of) net investment
income................. 47,075 134 15 27 1,463
Net unrealized
appreciation
(depreciation) of:
Investments............ 167,294 189,423 309 (13,694) (4,033) 15,336 (5,393) 2,743
Foreign currency
translation............ (4,920) (8) (323)
Futures contracts...... 1,645 (573)
---------- ---------- ------- -------- -------- -------- ------- -------
Net Assets.............. $3,324,988 $2,995,794 $80,109 $ 70,031 $120,034 $525,659 $25,978 $68,473
========== ========== ======= ======== ======== ======== ======= =======
See notes to financial statements.
40
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Emerging
Large Cap Fundmental Aggressive Active CORE Markets International International
Growth Growth Balanced Bond Bond* Equity Equity Index Equity
--------- ---------- ---------- ------- ----- -------- ------------- -------------
INVESTMENT INCOME
Income
Interest............... $ 1,135 $ 129 $ 268 $60,911 $178 $ 112 $ 357 $ 53
Dividends (Note B)..... 6,567 40 139 334 2,899 175
Securities lending..... 130 162 172
--------- ------- ----- ------- ---- -------- -------- -------
7,832 169 407 61,073 178 446 3,428 228
Expenses
Investment advisory fee
(Note C)............... 4,956 249 104 2,573 18 524 354 139
Auditors fees.......... 102 2 1 59 3 16 1
Custodian fees......... 401 19 29 357 529 346 102
Fidelity Bond fees..... 1 1
Legal fees............. 22 13 1 4
Printing & mailing
fees................... 909 16 3 580 1 8 34 3
Trustees fees.......... 22 13 1 4
Other fees............. 9 2 5 6 1
--------- ------- ----- ------- ---- -------- -------- -------
6,422 288 137 3,601 19 1,066 764 246
Less expenses
reimbursed (Note C).... 10 18 202 500 196 92
--------- ------- ----- ------- ---- -------- -------- -------
6,422 278 119 3,399 19 566 568 154
--------- ------- ----- ------- ---- -------- -------- -------
Net Investment Income
(Loss).................. 1,410 (109) 288 57,674 159 (120) 2,860 74
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized gain
(loss) on sales of
investments............ 101,421 2,219 (221) (11,679) 27 (614) 6,657 454
Increase in unrealized
appreciation
(depreciation) of:
Investments............ (356,204) (8,121) (433) 36,205 166 (21,121) (51,096) (2,652)
Foreign currency
translation............ 144 70 (2)
Futures................ (177) (559) (43)
--------- ------- ----- ------- ---- -------- -------- -------
Net realized and
unrealized gain (loss)
on investments......... (254,783) (5,902) (654) 24,349 193 (21,591) (44,928) (2,243)
--------- ------- ----- ------- ---- -------- -------- -------
Net increase (decrease)
in net assets resulting
from operations ....... $(253,373) $(6,011) $(366) $82,023 $352 $(21,711) $(42,068) $(2,169)
========= ======= ===== ======= ==== ======== ======== =======
(*) Commenced investment operations on June 30, 2000
See notes to financial statements.
41
STATEMENT OF OPERATIONS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Small Cap Global Mid Cap Mid Cap Large Cap Large Cap American Leaders Large/Mid Cap Money
Growth Balanced Growth Blend Value Value CORE Large Cap Value* Value Market
--------- -------- --------- ------- --------- ---------- ---------------- ------------- -------
INVESTMENT INCOME
Income
Interest............ $ 306 $ 707 $ 1,570 $ 23 $ 442 $ 35 $ 9 $ 18 $26,023
Dividends (Note B).. 122 272 141 121 4,257 226 48 169
Securities lending.. 418 506 24
-------- ------- --------- ------ ------- ---- ---- ------ -------
846 979 2,217 144 4,723 261 57 187 26,023
Expenses
Investment advisory
fee (Note C)........ 1,965 261 4,303 84 1,222 82 22 88 1,026
Auditors fees....... 19 2 39 1 11 1 1 28
Custodian fees...... 127 100 140 30 68 36 36 91
Fidelity Bond fees.. 1
Legal fees.......... 4 1 9 3 7
Printing & mailing
fees................ 31 12 24 1 1 1 1 37
Trustees fees....... 4 1 9 2 6
Other fees.......... 4 3 1 1
-------- ------- --------- ------ ------- ---- ---- ------ -------
2,154 377 4,528 116 1,307 120 23 126 1,196
Less expenses
reimbursed (Note C). 86 21 27 29
-------- ------- --------- ------ ------- ---- ---- ------ -------
2,154 291 4,528 95 1,307 93 23 97 1,196
-------- ------- --------- ------ ------- ---- ---- ------ -------
Net Investment Income
(Loss)............... (1,308) 688 (2,311) 49 3,416 168 34 90 24,827
REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain
(loss) on sales of
investments......... (9,498) (789) (7,215) 324 7,226 79 18 103
Increase in
unrealized
appreciation
(depreciation) of:
Investments......... (67,925) (2,824) (229,686) 1,064 11,967 627 373 1,310
Foreign currency
translation......... 86
Futures............. (8)
-------- ------- --------- ------ ------- ---- ---- ------ -------
Net realized and
unrealized gain
(loss) on
investments......... (77,423) (3,527) (236,901) 1,388 19,193 698 391 1,413
-------- ------- --------- ------ ------- ---- ---- ------ -------
Net increase
(decrease) in net
assets resulting
from operations .... $(78,731) $(2,839) $(239,212) $1,437 $22,609 $866 $425 $1,503 $24,827
======== ======= ========= ====== ======= ==== ==== ====== =======
(*) Commenced investment operations on June 30, 2000
See notes to financial statements.
42
STATEMENT OF OPERATIONS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Mid Cap Small/Mid Bond Large Cap Small/Mid Cap Small/Mid Cap Real Estate
Value Cap Growth Index Aggressive Growth CORE Value Equity
------- ---------- ------ ----------------- ------------- ------------- -----------
INVESTMENT INCOME
Income
Interest............... $ 221 $ 489 $3,416 $ 55 $ 44 $ 31 $ 174
Dividends (Note B)..... 1,080 644 95 195 127 9,360
Securities lending..... 34 72
------- ------- ------ ------- ----- ------ -------
1,335 1,205 3,416 150 239 158 9,534
Expenses
Investment advisory fee
(Note C)............... 830 1,382 73 214 131 127 946
Auditors fees.......... 7 13 3 2 1 1 10
Custodian fees......... 52 74 48 29 67 43 42
Legal fees............. 1 3 2
Printing & mailing
fees................... 9 95 7 4 2 1 74
Trustees fees.......... 2 3 1 2
Other fees............. 1 1 1 2
------- ------- ------ ------- ----- ------ -------
902 1,571 132 249 202 172 1,078
Less expenses
reimbursed (Note C).... 11 11 54 32
------- ------- ------ ------- ----- ------ -------
902 1,571 121 238 148 140 1,078
------- ------- ------ ------- ----- ------ -------
Net Investment Income
(Loss).................. 433 (366) 3,295 (88) 91 18 8,456
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized gain
(loss) on sales of
investments ........... 12,793 18,384 (532) (648) 669 3,781 4,057
Increase in unrealized
appreciation
(depreciation) of:
Investments............ 13,928 (2,257) 2,964 (5,205) (561) (223) 25,633
Foreign currency
translation............ 1
Futures................ 25
------- ------- ------ ------- ----- ------ -------
Net realized and
unrealized gain (loss)
on investments......... 26,721 16,127 2,432 (5,853) 133 3,558 29,691
------- ------- ------ ------- ----- ------ -------
Net increase (decrease)
in net assets resulting
from operations ....... $27,154 $15,761 $5,727 $(5,941) $ 224 $3,576 $38,147
======= ======= ====== ======= ===== ====== =======
See notes to financial statements.
43
STATEMENT OF OPERATIONS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Growth & Short-Term Small Cap International Equity High Yield Global
Income Managed Bond Equity Opportunities Index Bond Bond
--------- -------- ---------- --------- ------------- -------- ---------- ------
INVESTMENT INCOME
Income
Interest............... $ 3,666 $ 83,116 $4,870 $ 120 $ 281 $ 336 $ 2,348 $3,593
Dividends (Note B)..... 44,115 22,600 1,479 1,049 6,368 11
Securities lending..... 255 391 7 53 19
--------- -------- ------ ------- -------- -------- ------- ------
48,036 106,107 4,877 1,599 1,383 6,704 2,359 3,612
Expenses
Investment advisory fee
(Note C)............... 12,188 12,069 221 602 820 682 159 468
Auditors fees.......... 283 230 4 5 7 35 2 5
Custodian fees......... 1,038 1,017 35 52 177 165 48 61
Fidelity Bond fees..... 4 3
Legal fees............. 64 52 1 1 1 7 1
Printing & mailing
fees................... 1,796 1,358 40 65 73 4 59
Trustees fees.......... 61 49 1 1 2 8 1 1
Other fees............. 24 19 1 11
--------- -------- ------ ------- -------- -------- ------- ------
15,458 14,797 262 702 1,072 981 214 595
Less expenses
reimbursed (Note C).... 23 154 30 64
--------- -------- ------ ------- -------- -------- ------- ------
15,458 14,797 262 679 918 981 184 531
--------- -------- ------ ------- -------- -------- ------- ------
Net Investment Income .. 32,578 91,310 4,615 920 465 5,723 2,175 3,081
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS
Net realized gain
(loss) on sales of
investments ........... 445,349 237,169 (582) 4,551 4,855 18,724 (518) (126)
Increase in unrealized
appreciation
(depreciation) of:
Investments............ (990,353) (319,332) 1,702 (12,268) (22,685) (76,321) (4,604) 6,101
Foreign currency
translation ........... (11,297) (3) (1,596)
Futures................ 1,645 (928) (90)
--------- -------- ------ ------- -------- -------- ------- ------
Net realized and
unrealized gain (loss)
on investments.......... (545,004) (91,815) 1,120 (7,717) (17,833) (58,525) (5,122) 4,289
--------- -------- ------ ------- -------- -------- ------- ------
Net increase (decrease)
in net assets resulting
from operations ........ $(512,426) $ (505) $5,735 $(6,797) $(17,368) $(52,802) $(2,947) $7,370
========= ======== ====== ======= ======== ======== ======= ======
See notes to financial statements.
44
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Large Cap Growth Fundamental Growth Aggressive Balanced
------------------------- -------------------------------- --------------------------------
Period from Period from
Year Ended Year Ended Year Ended August 31, 1999 (*) Year Ended August 31, 1999 (*)
December 31, December 31, December 31, to December 31, December 31, to December 31,
2000 1999 2000 1999 2000 1999
------------ ------------ ------------ ------------------- ------------ -------------------
INCREASE/(DECREASE)
IN NET ASSETS
From Operations
Net investment
income (loss).... $ 1,410 $ 4,048 $ (109) $ (11) $ 288 $ 60
Net realized gain
(loss) on sales
of investments... 101,421 246,459 2,219 786 (221) 73
Change in net
unrealized
appreciation
(depreciation) of
Investments...... (356,204) 20,524 (8,121) 2,179 (433) 615
Futures..........
---------- ---------- ------- ------ ------- -------
Net increase
(decrease) in net
assets resulting
from operations.. (253,373) 271,031 (6,011) 2,954 (366) 748
Distributions to
Shareholders From:
Net investment
income........... (2,000) (3,925) (289) (56)
In excess of net
investment
income...........
Realized gain on
investments...... (137,737) (208,789) (2,478) (516) (41) (39)
In excess of
realized gain.... (40,230) (2,097) (15)
Capital paid in.. (3,418) (111)
---------- ---------- ------- ------ ------- -------
Decrease in net
assets resulting
from
distributions... (183,385) (212,714) (4,686) (516) (345) (95)
Trust Share
Transactions
Proceeds from
shares sold...... 206,257 154,558 76,255 6,365 10,598 11,694
Distributions
reinvested....... 183,384 212,714 4,686 516 345 95
Payment for
shares redeemed.. (188,569) (169,880) (33,305) (144) (1,174) (559)
---------- ---------- ------- ------ ------- -------
Increase
(decrease) from
trust share
transactions.... 201,072 197,392 47,636 6,737 9,769 11,230
---------- ---------- ------- ------ ------- -------
NET INCREASE
(DECREASE) IN NET
ASSETS............ (235,686) 255,709 36,939 9,175 9,058 11,883
NET ASSETS
Beginning of
Period........... 1,382,473 1,126,764 9,175 11,883
---------- ---------- ------- ------ ------- -------
End of Period.... $1,146,787 $1,382,473 $46,114 $9,175 $20,941 $11,883
========== ========== ======= ====== ======= =======
Analysis of Trust
Share
Transactions:
Sold............. 7,547 5,540 4,670 608 1,004 1,164
Reinvested....... 9,625 8,043 383 41 33 9
Redeemed......... (7,033) (6,019) (2,005) (13) (110) (54)
---------- ---------- ------- ------ ------- -------
Net increase
(decrease) in
shares
outstanding....... 10,139 7,564 3,048 636 927 1,119
========== ========== ======= ====== ======= =======
Active Bond
-------------------------
Year Ended Year Ended
December 31, December 31,
2000 1999
------------ ------------
INCREASE/(DECREASE)
IN NET ASSETS
From Operations
Net investment
income (loss).... $ 57,674 $ 61,745
Net realized gain
(loss) on sales
of investments... (11,679) (25,838)
Change in net
unrealized
appreciation
(depreciation) of
Investments...... 36,205 (44,681)
Futures.......... (177) 177
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations.. 82,023 (8,597)
Distributions to
Shareholders From:
Net investment
income........... (53,480) (65,478)
In excess of net
investment
income...........
Realized gain on
investments......
In excess of
realized gain....
Capital paid in..
------------ ------------
Decrease in net
assets resulting
from
distributions... (53,480) (65,478)
Trust Share
Transactions
Proceeds from
shares sold...... 95,188 86,852
Distributions
reinvested....... 53,480 65,478
Payment for
shares redeemed.. (185,198) (135,090)
------------ ------------
Increase
(decrease) from
trust share
transactions.... (36,530) 17,240
------------ ------------
NET INCREASE
(DECREASE) IN NET
ASSETS............ (7,987) (56,835)
NET ASSETS
Beginning of
Period........... 850,286 907,121
------------ ------------
End of Period.... $842,299 $850,286
============ ============
Analysis of Trust
Share
Transactions:
Sold............. 10,355 9,038
Reinvested....... 5,823 6,931
Redeemed......... (20,181) (14,198)
------------ ------------
Net increase
(decrease) in
shares
outstanding....... (4,003) 1,771
============ ============
(*) Commencement of operations
See notes to financial statements.
45
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
International Equity
CORE Bond Emerging Markets Equity Index International Equity
----------------- ------------------------- ------------------------- -----------------------------
Period from Period from
June 29, 2000 (*) Year Ended Year Ended Year Ended Year Ended Year Ended August 1,1999(*)
to December 31, December 31, December 31, December 31, December 31, December 31, to December 31,
2000 2000 1999 2000 1999 2000 1999
----------------- ------------ ------------ ------------ ------------ ------------ ----------------
INCREASE/(DECREASE)
IN NET ASSETS
From Operations
Net investment
income (loss)....... $ 159 $ (120) $ 27 $ 2,860 $ 2,404 $ 74 $ 7
Net realized gain
(loss) on sales of
investments......... 27 (614) 1,607 6,657 4,750 454 190
Change in net
unrealized
appreciation
(depreciation) of
Investments......... 166 (21,121) 9,598 (51,096) 48,346 (2,652) 1,953
Foreign currency
translation......... 144 (142) 70 (133) (2)
Futures............. (559) 517 (43) 20
------ ------- ------- -------- -------- ------- -------
Net increase
(decrease) in net
assets resulting
from operations..... 352 (21,711) 11,090 (42,068) 55,884 (2,169) 2,170
Distributions to
Shareholders From:
Net investment
income.............. (156) (17) (2,257) (2,382) (47) (12)
In excess of net
investment income... (44)
Realized gain on
investments......... (27) (2,658) (250) (7,138) (4,633) (471) (175)
In excess of
realized gain....... (936) (583) (58)
Capital paid in..... (47) (916)
------ ------- ------- -------- -------- ------- -------
Decrease in net
assets resulting
from distributions. (183) (2,705) (1,247) (10,311) (7,598) (576) (187)
Capital Contribution. 445
Trust Share
Transactions
Proceeds from shares
sold................ 5,120 59,279 29,538 61,181 62,080 13,293 10,271
Distributions
reinvested.......... 183 2,705 1,247 10,313 7,598 576 187
Payment for shares
redeemed............ (44) (39,154) (15,787) (68,120) (47,084) (7,838) (11)
------ ------- ------- -------- -------- ------- -------
Increase from trust
share transactions. 5,259 22,830 14,998 3,374 22,594 6,031 10,447
------ ------- ------- -------- -------- ------- -------
NET INCREASE
(DECREASE) IN NET
ASSETS............... 5,428 (1,586) 25,286 (49,005) 70,880 3,286 12,430
NET ASSETS
Beginning of Period. 32,596 7,310 244,017 173,137 12,430
------ ------- ------- -------- -------- ------- -------
End of Period....... $5,428 $31,010 $32,596 $195,012 $244,017 $15,716 $12,430
====== ======= ======= ======== ======== ======= =======
Analysis of Trust
Share Transactions:
Sold................ 512 5,177 3,232 3,450 3,668 1,223 1,024
Reinvested.......... 18 408 113 651 428 59 17
Redeemed............ (5) (3,614) (1,719) (3,854) (2,802) (727) (1)
------ ------- ------- -------- -------- ------- -------
Net increase
(decrease) in shares
outstanding.......... 525 1,971 1,626 247 1,294 555 1,040
====== ======= ======= ======== ======== ======= =======
(*) Commencement of operations
See notes to financial statements.
46
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Small Cap Growth Global Balanced Mid Cap Growth Mid Cap Blend
------------------------- ------------------------- ------------------------- -------------------------------
Period from
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended August 31, 1999(*)
December 31, December 31, December 31, December 31, December 31, December 31, December 31, to December 31,
2000 1999 2000 1999 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------------
INCREASE
(DECREASE) IN NET
ASSETS
From Operations
Net investment
income (loss)... $ (1,308) $ (679) $ 688 $ 813 $ (2,311) $ (1,351) $ 49 $ 14
Net realized
gain (loss) on
sales of
investments..... (9,498) 24,283 (789) 1,839 (7,215) 55,989 324 268
Change in net
unrealized
appreciation
(depreciation)
of Investments.. (67,925) 41,804 (2,824) (519) (229,686) 148,557 1,064 306
Foreign currency
translation..... 86 (606) (33)
-------- -------- ------- ------- --------- -------- ------- ------
Net increase
(decrease) in
net assets
resulting from
operations...... (78,731) 65,408 (2,839) 1,527 (239,212) 203,162 1,437 588
Distributions to
Shareholders
From:
Net investment
income.......... (703) (565) (51) (13)
In excess of net
investment
income..........
Realized gain on
investments..... (1,933) (21,491) (41) (1,836) (8,563) (46,186) (391) (204)
In excess of
realized gain... (283) (33,799) (455)
Capital paid in. (20,976) (355) (230) (22,185)
-------- -------- ------- ------- --------- -------- ------- ------
Decrease in net
assets resulting
from
distributions... (22,909) (21,491) (1,382) (2,631) (64,547) (46,186) (897) (217)
Trust Share
Transactions
Proceeds from
shares sold..... 239,410 66,717 8,360 6,406 311,599 192,846 17,016 5,275
Distributions
reinvested...... 22,968 21,491 1,382 2,631 64,547 46,186 897 217
Payment for
shares redeemed. (105,766) (27,404) (8,571) (6,772) (131,336) (37,156) (3,004) (53)
-------- -------- ------- ------- --------- -------- ------- ------
Increase from
trust share
transactions.... 156,612 60,804 1,171 2,265 244,810 201,876 14,909 5,439
-------- -------- ------- ------- --------- -------- ------- ------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 54,972 104,721 (3,050) 1,161 (58,949) 358,852 15,449 5,810
NET ASSETS
Beginning of
Period.......... 179,570 74,849 31,577 30,416 452,937 94,085 5,810
-------- -------- ------- ------- --------- -------- ------- ------
End of Period... $234,542 $179,570 $28,527 $31,577 $ 393,988 $452,937 $21,259 $5,810
======== ======== ======= ======= ========= ======== ======= ======
Analysis of Trust
Share
Transactions:
Sold............ 11,984 4,233 848 590 10,835 9,353 1,377 526
Reinvested...... 1,788 1,245 145 251 4,228 1,749 75 22
Redeemed........ (5,757) (1,847) (867) (625) (5,305) (1,830) (242) (5)
-------- -------- ------- ------- --------- -------- ------- ------
Net increase in
shares
outstanding...... 8,015 3,631 126 216 9,758 9,272 1,210 543
======== ======== ======= ======= ========= ======== ======= ======
(*) Commencement of operations
See notes to financial statements.
47
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
American Leaders
Large Cap Large Cap
Large Cap Value Value CORE Value Large/Mid Cap Value
------------------------- ------------------------------- ---------------- -------------------------------
Period from Period from Period from
Year Ended Year Ended Year Ended August 31, 1999(*) June 30, 2000(*) Year Ended August 31, 1999(*)
December 31, December 31, December 31, to December 31, to December 31, December 31, to December 31,
2000 1999 2000 1999 2000 2000 1999
------------ ------------ ------------ ------------------ ---------------- ------------ ------------------
INCREASE
(DECREASE) IN NET
ASSETS
From Operations
Net investment
income.......... $ 3,416 $ 2,774 $ 168 $ 21 $ 34 $ 90 $ 17
Net realized
gain on sales of
investments..... 7,226 7,671 79 100 18 103 11
Change in net
unrealized
appreciation
(depreciation)
of
Investments..... 11,967 (7,556) 627 70 373 1,310 221
Futures......... (8) 8
-------- -------- ------- ------ ------ ------- ------
Net increase
(decrease) in
net assets
resulting from
operations...... 22,609 2,889 866 199 425 1,503 249
Distributions to
Shareholders
From:
Net investment
income.......... (3,459) (2,733) (169) (19) (34) (91) (15)
In excess of net
investment
income.......... (6)
Realized gain on
investments..... (7,200) (7,756) (93) (82) (18) (106) (11)
In excess of
realized gain... (131) (28) (59) (4) (71) (4)
Capital paid in. (90) (14) (9)
-------- -------- ------- ------ ------ ------- ------
Decrease in net
assets resulting
from
distributions... (10,886) (10,517) (335) (114) (52) (268) (30)
Trust Share
Transactions
Proceeds from
shares sold..... 73,820 64,676 11,275 6,323 6,694 8,712 5,905
Distributions
reinvested...... 10,886 10,517 335 114 51 268 30
Payment for
shares redeemed. (47,743) (35,081) (348) (151) (1,089) (588) (53)
-------- -------- ------- ------ ------ ------- ------
Increase from
trust share
transactions.... 36,963 40,112 11,262 6,286 5,656 8,392 5,882
-------- -------- ------- ------ ------ ------- ------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 48,686 32,484 11,793 6,371 6,029 9,627 6,101
NET ASSETS
Beginning of
Period.......... 155,849 123,365 6,371 6,101
-------- -------- ------- ------ ------ ------- ------
End of Period... $204,535 $155,849 $18,164 $6,371 $6,029 $15,728 $6,101
======== ======== ======= ====== ====== ======= ======
Analysis of Trust
Share
Transactions:
Sold............ 5,462 4,383 1,118 630 662 806 588
Reinvested...... 780 774 33 12 4 24 3
Redeemed........ (3,569) (2,404) (35) (15) (103) (56) (5)
-------- -------- ------- ------ ------ ------- ------
Net increase in
shares
outstanding...... 2,673 2,753 1,116 627 563 774 586
======== ======== ======= ====== ====== ======= ======
(*) Commencement of operations
See notes to financial statements.
48
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Money Market Mid Cap Value Small/Mid Cap Growth Bond Index
------------------------- ------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
2000 1999 2000 1999 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
INCREASE
(DECREASE) IN NET
ASSETS
From Operations
Net investment
income (loss)... $ 24,827 $ 19,133 $ 433 $ 584 $ (366) $ (497) $ 3,295 $ 2,119
Net realized
gain (loss) on
sales of
investments..... 12,793 (2,104) 18,384 26,575 (532) (186)
Change in net
unrealized
appreciation
(depreciation)
of investments.. 13,928 5,960 (2,257) (17,156) 2,964 (2,724)
-------- -------- -------- ------- -------- -------- ------- -------
Net increase
(decrease) in
net assets
resulting from
operations...... 24,827 19,133 27,154 4,440 15,761 8,922 5,727 (791)
Distributions to
Shareholders
From:
Net investment
income.......... (25,112) (19,133) (434) (580) (26,069) (3,317) (2,057)
In excess of net
investment
income..........
Realized gain on
investments..... (3,233) (17,683) (1,884)
In excess of
realized gain... (9,663) (1,947)
Capital paid in.
-------- -------- -------- ------- -------- -------- ------- -------
Decrease in net
assets resulting
from
distributions... (25,112) (19,133) (13,330) (580) (19,630) (27,953) (3,317) (2,057)
Capital
Contribution..... 284
Trust Share
Transactions
Proceeds from
shares sold..... 582,795 557,157 46,034 29,586 35,984 22,355 45,465 14,617
Distributions
reinvested...... 25,121 19,133 13,330 580 19,630 27,953 1,488 2,057
Payment for
shares redeemed. (562,297) (520,250) (36,105) (36,696) (43,666) (42,678) (23,031) (3,391)
-------- -------- -------- ------- -------- -------- ------- -------
Increase
(decrease) from
trust share
transactions.... 45,619 56,040 23,259 (6,530) 11,948 7,630 23,922 13,283
-------- -------- -------- ------- -------- -------- ------- -------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 45,618 56,040 37,083 (2,670) 8,079 (11,401) 26,332 10,435
NET ASSETS
Beginning of
Period.......... 451,235 395,195 92,150 94,820 181,931 193,332 38,436 28,001
-------- -------- -------- ------- -------- -------- ------- -------
End of Period... $496,853 $451,235 $129,233 $92,150 $190,010 $181,931 $64,768 $38,436
======== ======== ======== ======= ======== ======== ======= =======
Analysis of Trust
Share
Transactions:
Sold............ 58,279 55,717 3,243 2,380 2,392 1,398 4,808 1,516
Reinvested...... 2,512 1,913 935 48 1,474 2,105 158 213
Redeemed........ (56,230) (52,025) (2,571) (2,997) (2,963) (2,669) (2,443) (352)
-------- -------- -------- ------- -------- -------- ------- -------
Net increase
(decrease) in
shares
outstanding...... 4,561 5,605 1,607 (569) 903 834 2,523 1,377
======== ======== ======== ======= ======== ======== ======= =======
See notes to financial statements.
49
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Large Cap Aggressive Growth Small/Mid Cap CORE Small/Mid Cap Value
-------------------------------- ------------------------- --------------------------------
Period from Period from
Year Ended August 31, 1999 (*) Year Ended Year Ended Year Ended August 31, 1999 (*)
December 31, to December 31, December 31, December 31, December 31, to December 31,
2000 1999 2000 1999 2000 1999
------------ ------------------- ------------ ------------ ------------ -------------------
INCREASE
(DECREASE) IN NET
ASSETS
From Operations
Net investment
income (loss).... $ (88) $ (15) $ 91 $ 18 $ 18 $ (2)
Net realized gain
(loss) on sales
of investments... (648) 133 669 714 3,781 190
Change in net
unrealized
appreciation
(depreciation) of
Investments...... (5,205) 2,120 (561) 578 (223) 80
Foreign currency
translation......
Futures.......... 25 7
------- ------- ------- ------ ------- ------
Net increase
(decrease) in net
assets resulting
from operations.. (5,941) 2,238 224 1,317 3,576 268
Distributions to
Shareholders From:
Net investment
income........... (90) (18) (17)
In excess of net
investment
income...........
Realized gain on
investments...... (28) (93) (671) (715) (3,779) (185)
In excess of
realized gain.... (168) (102)
Capital paid in.. (284) (53)
------- ------- ------- ------ ------- ------
Decrease in net
assets resulting
from
distributions.... (480) (93) (916) (733) (3,796) (185)
Trust Share
Transactions
Proceeds from
shares sold...... 24,586 12,920 22,514 5,301 21,624 5,326
Distributions
reinvested....... 481 93 669 733 3,796 185
Payment for
shares redeemed.. (7,476) (84) (9,103) (3,385) (1,334) (24)
------- ------- ------- ------ ------- ------
Increase
(decrease) from
trust share
transactions.... 17,591 12,929 14,080 2,649 24,086 5,487
------- ------- ------- ------ ------- ------
NET INCREASE
(DECREASE) IN NET
ASSETS............ 11,170 15,074 13,388 3,233 23,866 5,570
NET ASSETS
Beginning of
Period........... 15,074 8,248 5,015 5,570
------- ------- ------- ------ ------- ------
End of Period.... $26,244 $15,074 $21,636 $8,248 $29,436 $5,570
======= ======= ======= ====== ======= ======
Analysis of Trust
Share
Transactions:
Sold............. 2,136 1,262 2,174 557 1,733 533
Reinvested....... 51 8 70 80 339 19
Redeemed......... (692) (7) (880) (353) (107) (2)
------- ------- ------- ------ ------- ------
Net increase
(decrease) in
shares
outstanding....... 1,495 1,263 1,364 284 1,965 550
======= ======= ======= ====== ======= ======
Real Estate Equity
-------------------------
Year Ended Year Ended
December 31, December 31,
2000 1999
------------ ------------
INCREASE
(DECREASE) IN NET
ASSETS
From Operations
Net investment
income (loss).... $ 8,456 $ 8,880
Net realized gain
(loss) on sales
of investments... 4,057 (5,679)
Change in net
unrealized
appreciation
(depreciation) of
Investments...... 25,633 (5,829)
Foreign currency
translation...... 1
Futures..........
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations.. 38,147 (2,628)
Distributions to
Shareholders From:
Net investment
income........... (8,456) (8,957)
In excess of net
investment
income........... (404)
Realized gain on
investments...... (649)
In excess of
realized gain.... (3,328)
Capital paid in.. (1,440)
------------ ------------
Decrease in net
assets resulting
from
distributions.... (14,277) (8,957)
Trust Share
Transactions
Proceeds from
shares sold...... 51,873 19,688
Distributions
reinvested....... 14,277 8,957
Payment for
shares redeemed.. (57,423) (43,635)
------------ ------------
Increase
(decrease) from
trust share
transactions.... 8,727 (14,990)
------------ ------------
NET INCREASE
(DECREASE) IN NET
ASSETS............ 32,597 (26,575)
NET ASSETS
Beginning of
Period........... 126,214 152,789
------------ ------------
End of Period.... $158,811 $126,214
============ ============
Analysis of Trust
Share
Transactions:
Sold............. 4,031 1,643
Reinvested....... 1,085 756
Redeemed......... (4,499) (3,662)
------------ ------------
Net increase
(decrease) in
shares
outstanding....... 617 (1,263)
============ ============
(*) Commencement of operations
See notes to financial statements.
50
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Growth & Income Managed Short-Term Bond Small Cap Equity
------------------------- ------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
2000 1999 2000 1999 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
INCREASE
(DECREASE) IN NET
ASSETS
From Operations
Net investment
income........... $ 32,578 $ 38,514 $ 91,310 $ 92,042 $ 4,615 $ 4,503 $ 920 $ 501
Net realized gain
(loss) on sales
of investments... 445,349 516,452 237,169 287,125 (582) (1,350) 4,551 950
Change in net
unrealized
appreciation
(depreciation) of
Investments...... (990,353) 38,349 (319,332) (97,986) 1,702 (1,085) (12,268) (3,703)
Foreign currency
translation...... (11,297) 11,252
Futures.......... 1,645 (316)
---------- ---------- ---------- ---------- ------- -------- ------- --------
Net increase
(decrease) in net
assets resulting
from operations.. (512,426) 593,315 (505) 292,117 5,735 2,068 (6,797) (2,252)
Distributions to
Shareholders From:
Net investment
income........... (33,412) (37,895) (93,117) (89,766) (4,591) (4,483) (1,004) (419)
In excess of net
investment
income...........
Realized gain on
investments...... (519,555) (444,028) (235,437) (236,198) (990) (92)
In excess of
realized gain.... (25,745) (1,431) (1,087)
Capital paid in . (44,762) (2,130)
---------- ---------- ---------- ---------- ------- -------- ------- --------
Decrease in net
assets resulting
from
distributions.... (623,474) (481,923) (328,554) (325,964) (4,591) (4,483) (5,555) (1,598)
Trust Share
Transactions
Proceeds from
shares sold...... 110,896 271,718 66,759 229,925 29,529 33,554 33,823 26,942
Distributions
reinvested....... 623,473 481,923 328,531 325,964 4,591 4,483 5,555 1,598
Payment for
shares redeemed.. (492,322) (316,977) (501,356) (393,033) (23,999) (43,972) (25,895) (19,885)
---------- ---------- ---------- ---------- ------- -------- ------- --------
Increase
(decrease) from
trust share
transactions.... 242,047 436,664 (106,066) 162,856 10,121 (5,935) 13,483 8,655
---------- ---------- ---------- ---------- ------- -------- ------- --------
NET INCREASE
(DECREASE) IN NET
ASSETS............ (893,853) 548,056 (435,125) 129,009 11,265 (8,350) 1,131 4,805
NET ASSETS
Beginning of
Period........... 4,218,841 3,670,785 3,430,919 3,301,910 68,844 77,194 68,900 64,095
---------- ---------- ---------- ---------- ------- -------- ------- --------
End of Period.... $3,324,988 $4,218,841 $2,995,794 $3,430,919 $80,109 $ 68,844 $70,031 $ 68,900
========== ========== ========== ========== ======= ======== ======= ========
Analysis of Trust
Share
Transactions:
Sold............. 5,816 13,198 4,373 14,370 3,035 3,382 3,114 2,410
Reinvested....... 43,333 24,670 23,203 21,188 472 455 614 152
Redeemed......... (25,508) (15,364) (32,979) (24,638) (2,466) (4,438) (2,378) (1,782)
---------- ---------- ---------- ---------- ------- -------- ------- --------
Net increase
(decrease) in
shares
outstanding....... 23,641 22,504 (5,403) 10,920 1,041 (601) 1,350 780
========== ========== ========== ========== ======= ======== ======= ========
See notes to financial statements.
51
STATEMENT OF CHANGES NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
International
Opportunities Equity Index High Yield Bond Global Bond
------------------------- ------------------------- ------------------------- -------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31,
2000 1999 2000 1999 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
INCREASE
(DECREASE) IN NET
ASSETS
From Operations
Net investment
income.......... $ 465 $ 518 $ 5,723 $ 4,679 $ 2,175 $ 1,357 $ 3,081 $ 3,346
Net realized
gain (loss) on
sales of
investments..... 4,855 4,853 18,724 14,409 (518) (275) (126) (178)
Change in net
unrealized
appreciation
(depreciation)
of
Investments..... (22,685) 15,077 (76,321) 45,659 (4,604) (223) 6,101 (5,951)
Foreign currency
translation..... (3) (7) (1,596) 1,134
Futures......... (928) 99 (90) 75
-------- -------- -------- -------- ------- -------- ------- -------
Net increase
(decrease) in
net assets
resulting from
operations...... (17,368) 20,441 (52,802) 64,846 (2,947) 859 7,370 (1,574)
Distributions to
Shareholders
From:
Net investment
income.......... (423) (565) (5,292) (4,536) (2,186) (1,323) (4,040) (3,871)
In excess of net
investment
income.......... (2)
Realized gain on
investments..... (4,722) (4,642) (20,438) (13,884)
In excess of
realized gain... (390) (180) (231)
Capital paid in. (749) (555)
-------- -------- -------- -------- ------- -------- ------- -------
Decrease in net
assets resulting
from
distributions... (6,284) (5,389) (26,516) (18,420) (2,186) (1,323) (4,040) (3,871)
Trust Share
Transactions
Proceeds from
shares sold..... 81,609 34,115 226,311 220,255 22,157 18,264 11,709 29,103
Shares issued in
reorganization
(Note F)........ 22,528
Distributions
reinvested...... 6,285 5,389 26,516 18,420 2,227 1,323 4,046 3,871
Payment for
shares redeemed. (46,530) (39,012) (99,146) (66,383) (13,194) (13,991) (21,603) (23,329)
-------- -------- -------- -------- ------- -------- ------- -------
Increase
(decrease) from
trust share
transactions.... 63,892 492 153,681 172,292 11,190 5,596 (5,848) 9,645
-------- -------- -------- -------- ------- -------- ------- -------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 40,240 15,544 74,363 218,718 6,057 5,132 (2,518) 4,200
NET ASSETS
Beginning of
Period.......... 79,794 64,250 451,296 232,578 19,921 14,789 70,991 66,791
-------- -------- -------- -------- ------- -------- ------- -------
End of Period... $120,034 $ 79,794 $525,659 $451,296 $25,978 $ 19,921 $68,473 $70,991
======== ======== ======== ======== ======= ======== ======= =======
Analysis of Trust
Share
Transactions:
Sold............ 5,776 2,657 11,361 11,477 2,663 2,003 1,168 2,816
Shares issued in
reorganization
(Note F)........ 1,947
Reinvested...... 536 388 1,473 939 273 146 401 382
Redeemed........ (3,390) (3,046) (5,101) (3,495) (1,610) (1,534) (2,176) (2,269)
-------- -------- -------- -------- ------- -------- ------- -------
Net increase
(decrease) in
shares
outstanding...... 4,869 (1) 7,733 8,921 1,326 615 (607) 929
======== ======== ======== ======== ======= ======== ======= =======
See notes to financial statements.
52
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
year end indicated:
Income from Investment Operations Less Distributions
--------------------------------------- -------------------------------------------------------
Net Realized
Net Asset Net and Total Distribution Distribution Distribution in Distributions
Value at Investment Unrealized From From Net From Net Excess of From
Beginning Income Gain (Loss) Investment Investment Gains on Net Investment Capital
of Period (Loss) on Investments(a) Operations Income Investments Income/Gains Paid in
--------- ---------- ----------------- ---------- ------------ ------------ --------------- -------------
Large Cap Growth
Year Ended
December 31,
2000............ $27.33 $0.03 $(4.89) $(4.86) $(0.04) $(2.69) $(0.78) $(0.07)
1999............ 26.19 0.09 6.03 6.12 (0.09) (4.89) -- --
1998............ 20.82 0.14 8.05 8.19 (0.14) (2.68) -- --
1997............ 17.49 0.17 5.21 5.38 (0.17) (1.88) -- --
1996............ 17.37 0.25 2.89 3.14 (0.25) (2.77) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Fundamental
Growth
Year Ended
December 31,
2000 (c)........ 14.42 (0.02) (0.44) (0.46) -- (0.76) (0.65) (0.03)
Period from
August 31, to
December 31,
1999 (e)........ 10.00 (0.02) 5.34 5.32 -- (0.90) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Aggressive
Balanced
Year Ended
December 31,
2000............ 10.62 0.19 (0.35) (0.16) (0.19) (0.02) (0.01) --
Period from
August 31, to
December 31,
1999 (e)........ 10.00 0.06 0.64 0.70 (0.05) (0.03) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Active Bond
Year Ended
December 31,
2000............ 9.12 0.64 0.28 0.92 (0.60) -- -- --
1999............ 9.92 0.67 (0.76) (0.09) (0.71) -- -- --
1998............ 9.95 0.69 0.11 0.80 (0.69) (0.14) -- --
1997............ 9.77 0.71 0.24 0.95 (0.71) (0.06) -- --
1996............ 10.13 0.69 (0.31) 0.38 (0.69) (0.05) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
CORE Bond
Period from June
30, to
December 31,
2000 (e)........ 10.00 0.32 0.37 0.69 (0.31) (0.05) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Markets
Equity
Year Ended
December 31,
2000............ 12.26 (0.02) (4.91) (4.93) -- (0.62) -- (0.01)
1999 (k)........ 7.09 0.03 5.35 5.38 (0.01) (0.10) (0.42) --
Period from May
1, to
December 31,
1998 (e)........ 10.00 0.03 (2.91) (2.88) (0.02) -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------
Number of Net
Net Asset Shares Net Assets Operating Investment
Value at Outstanding Total End of Period Expenses to Income (Loss)
Total Capital End (000's Investment (000's Average to Average
Distributions Contributions of Period Omitted) Return(b) Omitted) Net Assets Net Assets
------------- ------------- --------- ----------- ------------- ------------- --------------- -------------
Large Cap Growth
Year Ended
December 31,
2000............ $(3.58) -- $18.89 60,719 (17.89)% $1,146,787 0.46% 0.10%
1999............ (4.98) -- 27.33 50,580 24.07% 1,382,473 0.39% 0.33%
1998............ (2.82) -- 26.19 43,016 39.51% 1,126,764 0.41% 0.59%
1997............ (2.05) -- 20.82 36,236 30.89% 754,398 0.44% 0.86%
1996............ (3.02) -- 17.49 29,965 18.27% 524,145 0.44% 1.35%
- ------------------------------------------------------------------------------------------------------------------------------
Fundamental
Growth
Year Ended
December 31,
2000 (c)........ (1.44) -- 12.52 3,684 (3.03)% 46,114 0.96%(d) (0.38)%
Period from
August 31, to
December 31,
1999 (e)........ (0.90) -- 14.42 636 54.57%(f) 9,175 0.95%(d)(g) (0.55)%(g)
- ------------------------------------------------------------------------------------------------------------------------------
Aggressive
Balanced
Year Ended
December 31,
2000............ (0.22) -- 10.24 2,046 (1.53)% 20,941 0.78%(h) 1.87%
Period from
August 31, to
December 31,
1999 (e)........ (0.08) -- 10.62 1,119 7.09%(f) 11,883 0.78%(g)(h) 1.68%(g)
- ------------------------------------------------------------------------------------------------------------------------------
Active Bond
Year Ended
December 31,
2000............ (0.60) -- 9.44 89,197 10.45% 842,299 0.41%(i) 6.98%
1999............ (0.71) -- 9.12 93,200 (0.94)% 850,286 0.28% 6.97%
1998............ (0.83) -- 9.92 91,429 8.23% 907,121 0.29% 6.84%
1997............ (0.77) -- 9.95 80,789 10.11% 803,770 0.31% 7.18%
1996............ (0.74) -- 9.77 74,315 4.10% 726,111 0.29% 7.07%
- ------------------------------------------------------------------------------------------------------------------------------
CORE Bond
Period from June
30, to
December 31,
2000 (e)........ (0.36) -- 10.33 525 7.00%(f) 5,428 0.75%(g) 16.09%(g)
- ------------------------------------------------------------------------------------------------------------------------------
Emerging Markets
Equity
Year Ended
December 31,
2000............ (0.63) -- 6.70 4,629 (40.11)% 31,010 1.32%(j) (0.28)%
1999 (k)........ (0.53) $0.32 12.26 2,658 81.37%(12) 32,596 1.39%(j) 0.19%
Period from May
1, to
December 31,
1998 (e)........ (0.03) -- 7.09 1,032 (28.87)%(f) 7,310 1.55%(g)(j) 0.51%(g)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio
Turnover
Rate
---------
Large Cap Growth
Year Ended
December 31,
2000............ 89.30%
1999............ 37.42%
1998............ 56.41%
1997............ 83.82%
1996............ 135.98%
- ----------------------------------------------
Fundamental
Growth
Year Ended
December 31,
2000 (c)........ 250.46%
Period from
August 31, to
December 31,
1999 (e)........ 61.66%(f)
- ----------------------------------------------
Aggressive
Balanced
Year Ended
December 31,
2000............ 164.89%
Period from
August 31, to
December 31,
1999 (e)........ 70.28%(f)
- ----------------------------------------------
Active Bond
Year Ended
December 31,
2000............ 164.34%
1999............ 182.90%
1998............ 228.74%
1997............ 138.29%
1996............ 119.12%
- ----------------------------------------------
CORE Bond
Period from June
30, to
December 31,
2000 (e)........ 131.71%(f)
- ----------------------------------------------
Emerging Markets
Equity
Year Ended
December 31,
2000............ 103.90%
1999 (k)........ 196.32%
Period from May
1, to
December 31,
1998 (e)........ 53.95%(f)
- ----------------------------------------------
53
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
year end indicated:
Income from Investment Operations Less Distributions
--------------------------------------- -------------------------------------------------------
Net Realized
Net Asset Net and Total Distribution Distribution Distribution in Distributions
Value at Investment Unrealized From From Net From Net Excess of From
Beginning Income Gain (Loss) Investment Investment Gains on Net Investment Capital
of Period (Loss) on Investments(a) Operations Income Investments Income/Gains Paid in
--------- ---------- ----------------- ---------- ------------ ------------ --------------- -------------
International
Equity Index
Year Ended
December 31,
2000............ $19.64 $0.23 $(3.64) $(3.41) $(0.18) $(0.59) -- $(0.07)
1999............ 15.56 0.21 4.51 4.72 (0.21) (0.38) $(0.05) --
1998............ 15.20 0.23 2.91 3.14 (0.23) (2.55) -- --
1997............ 16.83 0.13 (0.97) (0.84) (0.13) (0.66) -- --
1996............ 15.61 0.21 1.22 1.43 (0.21) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
International
Equity
Year ended
December 31,
2000............ 11.95 0.06 (1.78) (1.72) (0.04) (0.30) (0.04) --
Period from
August 31, to
December 31,
1999 (e)........ 10.00 0.01 2.12 2.13 (0.01) (0.17) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Growth
Year ended
December 31,
2000............ 19.12 (0.02) (4.16) (4.18) -- (0.12) -- (1.35)
1999............ 12.99 (0.21) 9.06 8.85 -- (2.72) -- --
1998............ 11.34 (0.05) 1.70 1.65 -- -- -- --
1997............ 9.93 (0.02) 1.44 1.42 -- -- -- (0.01)
Period from May
1, to December
31, 1996 (e).... 10.00 0.01 (0.06) (0.05) (0.02) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Global Balanced
Year ended
December 31,
2000 (o)........ 10.71 0.23 (1.20) (0.97) (0.24) (0.01) (0.10) (0.12)
1999............ 11.12 0.29 0.25 0.54 (0.29) (0.44) (0.16) (0.06)
1998............ 10.11 0.34 1.44 1.78 (0.34) (0.42) -- (0.01)
1997............ 10.39 0.33 (0.05) 0.28 (0.33) (0.22) -- (0.01)
Period from May
1, to December
31, 1996 (e).... 10.00 0.24 0.41 0.65 (0.24) (0.02) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------------------
Number of Net
Net Asset Shares Net Assets Operating Investment
Value at Outstanding Total End of Period Expenses to Income (Loss) Portfolio
Total End (000's Investment (000's Average to Average Turnover
Distributions of Period Omitted) Return(b) Omitted) Net Assets Net Assets Rate
------------- --------- ----------- ------------- ------------- --------------- ------------- ------------
International
Equity Index
Year Ended
December 31,
2000............ $(0.84) $15.39 12,668 (17.42)% $195,012 0.28%(l) 1.40% 14.86%
1999............ (0.64) 19.64 12,421 30.87% 244,017 0.31%(l) 1.26% 19.01%
1998............ (2.78) 15.56 11,127 20.82% 173,137 0.56%(l) 1.45% 158.63%
1997............ (0.79) 15.20 10,024 (5.03)% 152,359 0.79% 0.78% 83.13%
1996............ (0.21) 16.83 9,254 9.19% 155,753 0.76% 1.30% 92.03%
- -----------------------------------------------------------------------------------------------------------------------------
International
Equity
Year ended
December 31,
2000............ (0.38) 9.85 1,595 (14.37)% 15,716 1.10%(m) 0.53% 75.41%
Period from
August 31, to
December 31,
1999 (e)........ (0.18) 11.95 1,040 21.49%(f) 12,430 1.10%(g)(m) 0.21%(g) 26.76%(f)
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Growth
Year ended
December 31,
2000............ (1.47) 13.47 17,409 (21.43)% 234,542 0.82% (0.50)% 97.73%
1999............ (2.72) 19.12 9,394 70.38% 179,570 0.89% (0.70)% 113.11%
1998............ -- 12.99 5,763 14.49% 74,849 1.00%(n) (0.65)% 101.16%
1997............ (0.01) 11.34 4,298 14.26% 48,761 1.00%(n) (0.28)% 86.23%
Period from May
1, to December
31, 1996 (e).... (0.02) 9.93 2,077 (0.50)%(f) 20,633 1.00%(g)(n) 0.12%(g) 50.93%(f)
- -----------------------------------------------------------------------------------------------------------------------------
Global Balanced
Year ended
December 31,
2000 (o)........ (0.47) 9.27 3,076 (9.08)% 28,527 0.98%(p) 2.32% 171.38%
1999............ (0.95) 10.71 2,950 5.11% 31,577 1.00%(p) 2.73% 131.21%
1998............ (0.77) 11.12 2,734 17.99% 30,416 1.10%(p) 3.20% 103.55%
1997............ (0.56) 10.11 2,514 2.65% 25,420 1.10%(p) 3.18% 81.04%
Period from May
1, to December
31, 1996 (e).... (0.26) 10.39 2,319 6.73%(f) 24,098 1.10%(g)(p) 3.59%(g) 22.21%(f)
- -----------------------------------------------------------------------------------------------------------------------------
54
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
year end indicated:
Income from Investment Operations Less Distributions
------------------------------------ -----------------------------------------------------
Net Realized
Net Asset Net and Distribution Distribution Distribution
Value at Investment Unrealized Total From From Net From Net in Excess of Distribution
Beginning Income Gain (Loss) on Investment Investment Gains on Net Investment From Capital
of Period (Loss) Investments(a) Operations Income Investments Income/Gains Paid in
--------- ---------- -------------- ---------- ------------ ------------ -------------- ------------
Mid Cap Growth
Year ended
December 31,
2000............ $29.22 $(0.05) $(10.49) $(10.54) -- $(0.41) $(1.61) $(1.06)
1999............ 15.12 (0.19) 17.70 17.51 -- (3.41) -- --
1998............ 11.93 (0.09) 4.75 4.66 -- (1.32) -- (0.15)
1997............ 10.22 (0.02) 1.73 1.71 -- -- -- --
Period from May
1, to December
31, 1996 (e).... 10.00 0.05 0.22 0.27 $(0.05) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Mid Cap Blend
Year ended
December 31,
2000............ 10.70 0.04 1.93 1.97 (0.04) (0.24) (0.27) --
Period from
August 31, to
December 31,
1999 (e)........ 10.00 0.03 1.10 1.13 (0.03) (0.40) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Large Cap Value
Year ended
December 31,
2000............ 13.49 0.27 1.45 1.72 (0.28) (0.53) (0.01) (0.01)
1999............ 14.02 0.27 0.18 0.45 (0.27) (0.71) -- --
1998............ 13.57 0.28 0.96 1.24 (0.28) (0.51) -- --
1997............ 11.09 0.29 2.84 3.13 (0.29) (0.36) -- --
Period from May
1, to December
31, 1996 (e).... 10.00 0.16 1.22 1.38 (0.16) (0.13) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Large Cap Value
CORE
Year ended
December 31,
2000............ 10.16 0.15 0.36 0.51 (0.15) (0.06) (0.03) ((0.01)
Period from
August 31, to
December 31,
1999 (e)........ 10.00 0.04 0.31 0.35 (0.03) (0.14) (0.01) (0.01)
- ----------------------------------------------------------------------------------------------------------------------------
American Leaders
Large Cap Value
Period from June
30, to December
31, 2000 (e).... 10.00 0.06 0.74 0.80 (0.06) (0.03) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------------------
Number of Net
Net Asset Shares Net Assets Operating Investment
Value at Outstanding Total End of Period Expenses to Income (Loss) Portfolio
Total End (000's Investment (000's Average to Average Turnover
Distributions of Period Omitted) Return(b) Omitted) Net Assets Net Assets Rate
------------- --------- ----------- ------------ ------------- --------------- ------------- ------------
Mid Cap Growth
Year ended
December 31,
2000............ $(3.08) $15.60 25,254 (35.86)% $393,988 0.85% (0.43)% 140.94%
1999............ (3.41) 29.22 15,496 118.31% 452,937 0.93% (0.68)% 106.06%
1998............ (1.47) 15.12 6,224 39.07% 94,085 1.10%(q) (0.64)% 137.01%
1997............ -- 11.93 3,374 16.66% 40,235 1.10%(q) (0.26)% 124.04%
Period from May
1, to December
31, 1996 (e).... (0.05) 10.22 1,613 2.69%(f) 16,492 1.10%(g)(q) 0.92%(g) 71.25%(f)
- ----------------------------------------------------------------------------------------------------------------------------
Mid Cap Blend
Year ended
December 31,
2000............ (0.55) 12.12 1,753 18.58% 21,259 0.85%(r) 0.44% 138.64%
Period from
August 31, to
December 31,
1999 (e)........ (0.43) 10.70 543 11.53%(f) 5,810 0.85%(g)(r) 0.82%(g) 55.68%(f)
- ----------------------------------------------------------------------------------------------------------------------------
Large Cap Value
Year ended
December 31,
2000............ (0.83) 14.38 14,225 12.97% 204,535 0.78% 2.04% 42.12%
1999............ (0.98) 13.49 11,552 3.28% 155,849 0.85% 1.88% 32.62%
1998............ (0.79) 14.02 8,799 9.26% 123,365 0.92% 2.08% 18.46%
1997............ (0.65) 13.57 5,399 28.56% 73,269 1.00%(s) 2.42% 19.21%
Period from May
1, to December
31, 1996 (e).... (0.29) 11.09 1,784 13.90%(f) 19,781 1.00%(g)(s) 2.74%(g) 19.95%(f)
- ----------------------------------------------------------------------------------------------------------------------------
Large Cap Value
CORE
Year ended
December 31,
2000............ (0.25) 10.42 1,743 5.12% 18,164 0.85%(t) 1.54% 59.15%
Period from
August 31, to
December 31,
1999 (e)........ (0.19) 10.16 627 3.58%(f) 6,371 0.85%(g)(t) 1.13%(g) 30.90%(f)
- ----------------------------------------------------------------------------------------------------------------------------
American Leaders
Large Cap Value
Period from June
30, to December
31, 2000 (e).... (0.09) 10.71 563 8.02%(f) 6,029 0.85%(g) 1.22%(g) 17.16%(f)
- ----------------------------------------------------------------------------------------------------------------------------
55
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
year end indicated:
Income from Investment Operations Less Distributions
--------------------------------------- -----------------------------------------------------
Net Realized
Net Asset and Distribution Distribution Distribution
Value at Net Unrealized Total From From Net From Net in Excess of Distribution
Beginning Investment Gain/(Loss) on Investment Investment Gains on Net Investment From Capital
of Period Income/(Loss) Investments(a) Operations Income Investments Income/Gains Paid in
--------- ------------- -------------- ---------- ------------ ------------ -------------- ------------
Large/Mid Cap
Value
Year ended
December 31,
2000............ $10.42 $ 0.09 $ 1.30 $ 1.39 $(0.10) $(0.08) $(0.06) --
Period from
August 31, to
December 31,
1999 (e)........ 10.00 0.03 0.45 0.48 (0.03) (0.02) (0.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market
Year ended
December 31,
2000............ 10.00 0.60 -- 0.60 (0.60) -- -- $(0.01)
1999............ 10.00 0.45 -- 0.45 (0.45) -- -- --
1998............ 10.00 0.53 -- 0.53 (0.53) -- -- --
1997............ 10.00 0.53 -- 0.53 (0.53) -- -- --
1996............ 10.00 0.52 -- 0.52 (0.52) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Mid Cap Value
Year ended
December 31,
2000............ 12.78 0.06 3.51 3.57 (0.06) (0.41) (1.23) --
1999............ 12.19 0.08 0.59 0.67 (0.08) -- -- --
1998............ 13.87 0.11 (1.68) (1.57) (0.11) -- -- --
1997............ 11.35 0.05 3.59 3.64 (0.05) (1.07) -- --
Period from May
1, to December
31, 1996 (e).... 10.00 0.04 1.57 1.61 (0.04) (0.22) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
Growth
Year ended
December 31,
2000............ 14.03 (0.02) 1.27 1.25 -- (1.43) (0.15) --
1999............ 15.94 (0.07) 0.74 0.67 -- (2.41) -- (0.17)
1998............ 15.39 (0.02) 0.88 0.86 -- (0.31) -- --
1997............ 16.52 0.01 0.56 0.57 (0.01) (1.69) -- --
1996............ 13.18 0.02 3.99 4.01 (0.02) (0.65) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-------------------------------------------
Number of Net
Net Asset Shares Net Assets Operating Investment
Value at Outstanding Total End of Period Expenses to Income (Loss)
Total Capital End (000's Investment (000's Average to Average
Distributions Contributions of Period Omitted) Return(b) Omitted) Net Assets Net Assets
------------- ------------- --------- ----------- ------------ ------------- --------------- -------------
Large/Mid Cap
Value
Year ended
December 31,
2000............ $(0.24) -- $11.57 1,360 13.41% $ 15,728 1.05%(u) 0.97%
Period from
August 31, to
December 31,
1999 (e)........ (0.06) -- 10.42 586 4.72%(f) 6,101 1.05%(g)(u) 0.94%(g)
- ------------------------------------------------------------------------------------------------------------------------------
Money Market
Year ended
December 31,
2000............ (0.61) $0.01 10.00 49,685 6.29%(v) 496,853 0.29% 6.05%
1999............ (0.45) -- 10.00 45,124 5.05% 451,235 0.31% 4.95%
1998............ (0.53) -- 10.00 39,519 5.40% 395,195 0.31% 5.29%
1997............ (0.53) -- 10.00 22,944 5.38% 229,443 0.33% 5.32%
1996............ (0.52) -- 10.00 21,324 5.32% 213,235 0.30% 5.20%
- ------------------------------------------------------------------------------------------------------------------------------
Mid Cap Value
Year ended
December 31,
2000............ (1.70) -- 14.65 8,819 28.38% 129,233 0.87% 0.42%
1999............ (0.08) -- 12.78 7,212 5.52% 92,150 0.92% 0.64%
1998............ (0.11) -- 12.19 7,781 (11.33)% 94,820 0.96% 0.93%
1997............ (1.12) -- 13.87 4,686 32.17% 64,973 1.05%(w) 0.53%
Period from May
1, to December
31, 1996 (e).... (0.26) -- 11.35 963 16.18%(f) 10,926 1.05%(g)(w) 0.69%(g)
- ------------------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
Growth
Year ended
December 31,
2000............ (1.58) -- 13.70 13,866 9.25% 190,010 0.85% (0.20)%
1999............ (2.58) -- 14.03 12,963 5.15% 181,931 0.85% (0.27)%
1998............ (0.31) -- 15.94 12,129 5.61% 193,332 0.89% (0.11)%
1997............ (1.70) -- 15.39 13,884 3.44% 213,612 0.85% 0.09%
1996............ (0.67) -- 16.52 11,749 30.33% 194,108 0.84% 0.18%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio
Turnover
Rate
---------
Large/Mid Cap
Value
Year ended
December 31,
2000............ 86.97%
Period from
August 31, to
December 31,
1999 (e)........ 23.03%(f)
- --------------------------------------
Money Market
Year ended
December 31,
2000............ n/a
1999............ n/a
1998............ n/a
1997............ n/a
1996............ n/a
- --------------------------------------
Mid Cap Value
Year ended
December 31,
2000............ 235.80%
1999............ 137.06%
1998............ 173.33%
1997............ 93.78%
Period from May
1, to December
31, 1996 (e).... 62.99%(f)
- --------------------------------------
Small/Mid Cap
Growth
Year ended
December 31,
2000............ 103.19%
1999............ 172.58%
1998............ 162.21%
1997............ 331.19%
1996............ 217.84%
- --------------------------------------
56
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
year end indicated:
Income from Investment Operations Less Distributions
------------------------------------ -----------------------------------------------------
Net Realized
Net Asset and Distribution Distribution Distribution
Value at Net Unrealized Total From From Net From Net in Excess of Distribution
Beginning Investment Gain/(Loss) on Investment Investment Gains on Net Investment From Capital
of Period Income Investments(a) Operations Income Investments Income/Gains Paid in
--------- ---------- -------------- ---------- ------------ ------------ -------------- ------------
Bond Index
Year ended
December 31,
2000............ $ 9.32 $ 0.62 $ 0.43 $ 1.05 $(0.63) -- -- --
1999............ 10.19 0.63 (0.89) (0.26) (0.61) -- -- --
Period from May
1, to December
31, 1998 (e).... 10.00 0.42 0.29 0.71 (0.42) $(0.10) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Large Cap
Aggressive Growth
Year ended
December 31,
2000............ 11.94 (0.03) (2.21) (2.24) -- (0.01) $(0.06) $(0.11)
Period from
August 31, to
December 31,
1999 (e)........ 10.00 (0.01) 2.03 2.02 -- (0.08) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
CORE
Year ended
December 31,
2000............ 9.82 0.05 0.39 0.44 (0.05) (0.32) (0.05) (0.02)
1999............ 9.02 0.02 1.77 1.79 (0.03) (0.96) -- --
Period from May
1, to December
31, 1998 (e).... 10.00 -- (0.98) (0.98) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
Value
Year ended
December 31,
2000............ 10.13 0.01 3.37 3.38 (0.01) (1.80) -- --
Period from
August 31, to
December 31,
1999 (e)........ 10.00 -- 0.49 0.49 -- (0.36) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Real Estate
Equity
Year ended
December 31,
2000 (k)........ 11.47 0.76 2.73 3.49 (0.76) (0.06) (0.17) (0.30)
1999............ 12.46 0.78 (0.99) (0.21) (0.78) -- -- --
1998............ 15.91 0.77 (3.38) (2.61) (0.70) (0.14) -- --
1997............ 14.64 0.77 1.68 2.45 (0.71) (0.41) -- (0.06)
1996............ 11.70 0.76 2.97 3.73 (0.76) (0.03) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
---------------------------------------------------------
Number of Net
Net Asset Shares Net Assets Operating Investment
Value at Outstanding Total End of Period Expenses to Income (Loss) Portfolio
Total End (000's Investment (000's Average to Average Turnover
Distributions of Period Omitted) Return(b) Omitted) Net Assets Net Assets Rate
------------- --------- ----------- ------------- ------------- --------------- -------------- ------------
Bond Index
Year ended
December 31,
2000............ $(0.63) $ 9.74 6,648 11.81% $ 64,768 0.25%(x) 6.80% 33.14%
1999............ (0.61) 9.32 4,125 (2.57)% 38,436 0.29%(x) 6.56% 17.06%
Period from May
1, to December
31, 1998 (e).... (0.52) 10.19 2,748 7.20%(f) 28,001 0.40%(g)(x) 6.17%(g) 21.09%(f)
- ------------------------------------------------------------------------------------------------------------------------------
Large Cap
Aggressive Growth
Year ended
December 31,
2000............ (0.18) 9.52 2,758 (18.77)% 26,244 1.00%(y) (0.37)% 75.97%
Period from
August 31, to
December 31,
1999 (e)........ (0.08) 11.94 1,263 20.18%(f) 15,074 1.08%(g)(y) (0.39)%(g) 18.97%(f)
- ------------------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
CORE
Year ended
December 31,
2000............ (0.44) 9.82 2,204 4.63% 21,636 0.90%(z) 0.56% 94.78%
1999............ (0.99) 9.82 840 20.54% 8,248 0.94%(z) 0.30% 109.12%
Period from May
1, to December
31, 1998 (e).... -- 9.02 556 (9.81)%(f) 5,015 1.05%(g)(z) (0.01)%(g) 60.51%(f)
- ------------------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
Value
Year ended
December 31,
2000............ (1.81) 11.70 2,515 34.19% 29,436 1.05%(1) 0.13% 220.80%
Period from
August 31, to
December 31,
1999 (e)........ (0.36) 10.13 550 5.08%(f) 5,570 1.05%(g)(1) (0.12)%(g) 51.97%(f)
- ------------------------------------------------------------------------------------------------------------------------------
Real Estate
Equity
Year ended
December 31,
2000 (k)........ (1.29) 13.67 11,617 31.29% 158,811 0.76% 5.99% 58.81%
1999............ (0.78) 11.47 11,000 (1.69)% 126,214 0.70% 6.38% 12.95%
1998............ (0.84) 12.46 12,263 (16.71)% 152,789 0.69% 5.48% 22.69%
1997............ (1.18) 15.91 12,830 17.22% 204,131 0.69% 5.12% 20.04%
1996............ (0.79) 14.64 10,325 33.07% 151,105 0.69% 6.14% 18.37%
- ------------------------------------------------------------------------------------------------------------------------------
57
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
year end indicated:
Income from Investment Operations Less Distributions
------------------------------------ -----------------------------------------------------
Net Realized
Net Asset and Distribution Distribution Distribution
Value at Net Unrealized Total From From Net From Net in Excess of Distribution
Beginning Investment Gain/(Loss) on Investment Investment Gains on Net Investment From Capital
of Period Income Investments(a) Operations Income Investments Income/Gains Paid in
--------- ---------- -------------- ---------- ------------ ------------ -------------- ------------
Growth & Income
Year ended
December 31,
2000 (c)........ $20.01 $0.17 $(2.77) $(2.60) $(0.17) $(2.69) $(0.14) $(0.23)
1999............ 19.49 0.20 2.88 3.08 (0.20) (2.36) -- --
1998............ 16.61 0.23 4.75 4.98 (0.23) (1.87) -- --
1997............ 14.65 0.27 4.07 4.34 (0.27) (2.11) -- --
1996............ 13.94 0.34 2.43 2.77 (0.34) (1.72) -- --
- -------------------------------------------------------------------------------------------------------------------------
Managed
Year ended
December 31,
2000 (o)........ 15.45 0.44 (0.45) (0.01) (0.44) (1.18) -- --
1999............ 15.64 0.44 0.94 1.38 (0.43) (1.14) -- --
1998............ 14.35 0.46 2.43 2.89 (0.46) (1.09) -- (0.05)
1997............ 13.35 0.59 1.86 2.45 (0.59) (0.78) -- (0.08)
1996............ 13.73 0.61 0.81 1.42 (0.61) (1.19) -- --
- -------------------------------------------------------------------------------------------------------------------------
Short-Term Bond
Year ended
December 31,
2000............ 9.72 0.61 0.14 0.75 (0.61) -- -- --
1999............ 10.05 0.61 (0.33) 0.28 (0.61) -- -- --
1998............ 10.08 0.61 (0.03) 0.58 (0.61) -- -- --
1997............ 10.05 0.59 0.03 0.62 (0.59) -- -- --
1996............ 10.23 0.54 (0.18) 0.36 (0.54) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Small Cap Equity
Year ended
December 31,
2000 (o)........ 10.92 0.14 (1.13) (0.99) (0.15) (0.14) (0.20) (0.30)
1999............ 11.59 0.09 (0.50) (0.41) (0.07) (0.01) (0.18) --
1998............ 12.40 0.07 (0.81) (0.74) (0.07) -- -- --
1997............ 10.73 0.08 2.66 2.74 (0.08) (0.99) -- --
Period from May
1, to December
31, 1996 (e).... 10.00 0.07 0.96 1.03 (0.07) (0.23) -- --
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------
Number of Net
Net Asset Shares Net Assets Operating Investment
Value at Outstanding Total End of Period Expenses Income to Portfolio
Total End (000's Investment (000's to Average Average Turnover
Distributions of Period Omitted) Return(b) Omitted) Net Assets Net Assets Rate
------------- --------- ----------- ------------ ------------- -------------- ----------- ------------
Growth & Income
Year ended
December 31,
2000 (c)........ $(3.23) $14.18 234,464 (13.10)% $3,324,988 0.40% 0.84% 112.94%
1999............ (2.56) 20.01 210,823 16.23% 4,218,841 0.28% 0.98% 70.16%
1998............ (2.10) 19.49 188,319 30.25% 3,670,785 0.27% 1.24% 48.45%
1997............ (2.38) 16.61 167,773 29.79% 2,785,964 0.28% 1.61% 74.56%
1996............ (2.06) 14.65 139,748 20.10% 2,047,927 0.27% 2.24% 81.02%
- -------------------------------------------------------------------------------------------------------------------------
Managed
Year ended
December 31,
2000 (o)........ (1.62) 13.82 216,688 0.03% 2,995,794 0.46% 2.86% 199.27%
1999............ (1.57) 15.45 222,091 9.10% 3,430,919 0.36% 2.75% 203.86%
1998............ (1.60) 15.64 211,171 20.42% 3,301,910 0.36% 2.99% 160.57%
1997............ (1.45) 14.35 195,139 18.72% 2,800,127 0.37% 4.18% 200.41%
1996............ (1.80) 13.35 178,745 10.72% 2,386,660 0.36% 4.41% 113.61%
- -------------------------------------------------------------------------------------------------------------------------
Short-Term Bond
Year ended
December 31,
2000............ (0.61) 9.86 8,122 7.98% 80,109 0.36% 6.27% 45.27%
1999............ (0.61) 9.72 7,081 2.96% 68,844 0.43% 6.25% 100.04%
1998............ (0.61) 10.05 7,682 5.82% 77,194 0.53% 6.17% 184.50%
1997............ (0.59) 10.08 5,070 6.41% 51,120 0.57% 5.67% 108.29%
1996............ (0.54) 10.05 5,840 3.61% 58,676 0.75%(2) 5.66% 20.68%
- -------------------------------------------------------------------------------------------------------------------------
Small Cap Equity
Year ended
December 31,
2000 (o)........ (0.79) 9.14 7,661 (8.89)% 70,031 0.92%(3) 1.25% 189.57%
1999............ (0.26) 10.92 6,311 (3.43)% 68,900 0.95%(3) 0.78% 117.33%
1998............ (0.07) 11.59 5,531 5.96% 64,095 1.05%(3) 0.63% 100.83%
1997............ (1.07) 12.40 3,488 25.57% 43,261 1.05%(3) 0.68% 126.10%
Period from May
1, to December
31, 1996 (e).... (0.30) 10.73 982 10.33%(f) 10,541 1.05%(g)(3) 1.15%(g) 66.31%(f)
- -------------------------------------------------------------------------------------------------------------------------
58
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
year end indicated:
Income from Investment Operations Less Distributions
------------------------------------ -----------------------------------------------------
Net Realized
Net Asset and Distribution Distribution Distribution
Value at Net Unrealized Total From From Net From Net in Excess of Distribution
Beginning Investment Gain/(Loss) on Investment Investment Gains on Net Investment From Capital
of Period Income Investments(a) Operations Income Investments Income/Gains Paid in
--------- ---------- -------------- ---------- ------------ ------------ -------------- ------------
International
Opportunities
Year ended
December 31,
2000 (4)........ $15.17 $0.07 $(2.57) $(2.50) $(0.06) $(0.62) $(0.05) $(0.09)
1999............ 12.21 0.10 3.95 4.05 (0.11) (0.94) (0.04) --
1998............ 10.63 0.11 1.57 1.68 (0.10) -- -- --
1997............ 10.60 0.10 0.11 0.21 (0.10) (0.08) -- --
Period from May
1, to December
31, 1996 (e).... 10.00 0.07 0.60 0.67 (0.07) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Equity Index
Year ended
December 31,
2000............ 20.46 0.22 (2.09) (1.87) (0.22) (0.72) -- (0.01)
1999............ 17.70 0.27 3.41 3.68 (0.26) (0.66) -- --
1998............ 14.21 0.25 3.76 4.01 (0.24) (0.28) -- --
1997............ 11.10 0.24 3.41 3.65 (0.24) (0.25) -- (0.05)
Period from May
1, to December
31, 1996 (e).... 10.00 0.15 1.26 1.41 (0.15) (0.10) -- (0.06)
- ------------------------------------------------------------------------------------------------------------------------------
High Yield Bond
Year ended
December 31,
2000............ 8.99 0.73 (1.65) (0.92) (0.74) -- -- --
1999............ 9.23 0.72 (0.26) 0.46 (0.70) -- -- --
Period from May
1, to December
31, 1998 (e).... 10.00 0.46 (0.76) (0.30) (0.46) (0.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Global Bond
Year ended
December 31,
2000 (o)........ 9.82 0.48 0.67 1.15 (0.63) -- -- --
1999............ 10.60 0.48 (0.70) (0.22) (0.56) -- -- --
1998............ 10.24 0.54 0.38 0.92 (0.29) (0.09) -- (0.18)
1997............ 10.16 0.59 0.30 0.89 (0.61) (0.15) -- (0.05)
Period from May
1, to December
31, 1996 (e).... 10.00 0.38 0.28 0.66 (0.38) (0.12) -- --
Ratios/Supplemental Data
-------------------------------------------------------
Number of Net
Net Asset Shares Net Assets Operating Investment
Value at Outstanding Total End of Period Expenses to Income to Portfolio
Total End (000's Investment (000's Average Average Turnover
Distributions of Period Omitted) Return(b) Omitted) Net Assets Net Assets Rate
------------- --------- ----------- --------------- ------------- ---------------- ----------- ------------
International
Opportunities
Year ended
December 31,
2000 (4)........ $(0.82) $11.85 10,128 (16.36)%(6) $120,034 0.93%(5) 0.47% 37.92%
1999............ (1.09) 15.17 5,259 34.01% 79,794 1.02%(5) 0.77% 34.02%
1998............ (0.10) 12.21 5,260 15.92% 64,250 1.16%(5) 0.89% 18.67%
1997............ (0.18) 10.63 2,882 1.95% 30,631 1.22%(5) 0.65% 21.09%
Period from May
1, to December
31, 1996 (e).... (0.07) 10.60 1,689 6.72%(f) 17,898 1.25%(g)(5) 0.87%(g) 5.46%(f)
- ------------------------------------------------------------------------------------------------------------------------------
Equity Index
Year ended
December 31,
2000............ (0.95) 17.64 29,793 (9.15)% 525,659 0.19% 1.12% 34.11%
1999............ (0.92) 20.46 22,060 21.08% 451,296 0.00%(7) 1.42% 55.24%
1998............ (0.52) 17.70 13,139 28.45% 232,578 0.00%(7) 1.59% 43.31%
1997............ (0.54) 14.21 7,134 32.79%(8) 101,390 0.00%(7) 1.97% 64.56%
Period from May
1, to December
31, 1996 (e).... (0.31) 11.10 1,320 14.23%(f)(9) 14,650 0.00%(g)(7) 2.47%(g) 15.72%(f)
- ------------------------------------------------------------------------------------------------------------------------------
High Yield Bond
Year ended
December 31,
2000............ (0.74) 7.33 3,543 (10.81)% 25,978 0.75%(10) 8.88% 21.94%
1999............ (0.70) 8.99 2,217 5.13% 19,921 0.80%(10) 7.94% 38.62%
Period from May
1, to December
31, 1998 (e).... (0.47) 9.23 1,602 (2.98)%(f) 14,789 0.90%(g)(10) 7.43%(g) 17.67%(f)
- ------------------------------------------------------------------------------------------------------------------------------
Global Bond
Year ended
December 31,
2000 (o)........ (0.63) 10.34 6,623 12.00% 68,473 0.81%(11) 4.71% 209.39%
1999............ (0.56) 9.82 7,230 (2.16)% 70,991 0.83%(11) 4.70% 332.06%
1998............ (0.56) 10.60 6,301 9.15% 66,791 0.95%(11) 5.27% 186.70%
1997............ (0.81) 10.24 2,797 9.05% 28,647 1.00%(11) 5.80% 69.38%
Period from May
1, to December
31, 1996 (e).... (0.50) 10.16 1,271 6.71%(f) 12,907 1.00%(g)(11) 6.05%(g) 171.39%(f)
59
(a) The amount shown at this caption for each share outstanding throughout the
year may not accord with the change in the aggregate gains and losses in
the portfolio securities for the year because of the timing of the
purchases and withdrawals of the shares in relation to the fluctuation
market values of the portfolio.
(b) The performance of the Funds shown on this page does not reflect expenses
and charges of the applicable separate accounts and variable products, all
of which vary to a considerable extent and are described in your product's
prospectus.
(c) The Fund entered into a new Sub-Advisory agreement with Putnam Investment
Management, Inc. during the period shown.
(d) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.00%, and 1.09% for the years
ended December 31, 2000 and 1999, respectively.
(e) Commencement of investment operations.
(f) Not annualized.
(g) Annualized.
(h) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .89%, and .96% for the years
ended December 31, 2000 and 1999, respectively.
(i) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .44% for the year ended
December 31, 2000.
(j) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 2.49%, 3.44%, and 3.69% for
the years ended December 31, 2000, 1999 and 1998, respectively.
(k) The Fund entered into a new Sub-Advisory agreement with Morgan Stanley
Investment Management, Inc. during the period shown.
(l) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .37%, .38% and .63% for the
years ended December 31, 2000, 1999 and 1998, respectively.
(m) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.76% and 1.71% for the years
ended December 31, 2000 and 1999, respectively.
(n) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.05%, 1.12%, and 1.55%, for
the years ended December 31, 1998, 1997 and 1996, respectively.
(o) The Fund entered into a new Sub-Advisory agreement with Capital Guardian
Trust Company during the period shown.
(p) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.27%, 1.31%, 1.82, 1.56% and
1.44% for the years ended December 31, 2000, 1999, 1998, 1997 and 1996,
respectively.
(q) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.13%, 1.42%, and 2.34% for
the years ended December 31, 1998, 1997 and 1996, respectively.
(r) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.04% and 1.20% for the years
ended December 31, 2000 and 1999, respectively.
(s) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.06% and 2.74% for the years
ended December 31, 1997 and 1996 respectively.
(t) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.09% and 1.17% for the years
ended December 31, 2000 and 1999, respectively.
(u) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.36%, and 1.42% for the years
ended December 31, 2000 and 1999, respectively.
(v) The Total Investment Return includes the effect of the capital
contribution of $0.01 per share. The Total Investment Return without the
capital contribution would have been 6.18%.
(w) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.14% and 2.15% for the years
ended December 31, 1997 and 1996, respectively.
(x) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .27%, .35%, and .71%, for the
years ended December 31, 2000, 1999 and 1998, respectively.
(y) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.05% and 1.17% for the years
ended December 31, 2000 and 1999, respectively.
(z) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.23%, 2.24%, and 4.55% for
the years ended December 31, 2000, 1999 and 1998, respectively.
60
(1) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.29% and 1.61% for the years
ended December 31, 2000 and 1999, respectively.
(2) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .79% for the year ended
December 31, 1996.
(3) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .95%, .96%, 1.08%, 1.30% and
2.06% for the years ended December 31, 2000, 1999, 1998, 1997 and 1996,
respectively.
(4) The Fund entered into a new Sub-Advisory agreement with T. Rowe Price
International, Inc. during the period shown.
(5) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been 1.09%, 1.15%, 1.46%, 1.57% and
2.76% for the years ended December 31, 2000, 1999, 1998, 1997 and 1996,
respectively.
(6) The Total Investment Return rate excludes merger activity.
(7) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .22%, .34%, .65%, and 1.61%
for the years ended December 31, 1999, 1998, 1997 and 1996, respectively.
(8) The Total Investment Return includes the effect of the capital
contribution of $.04 per share. The Total Investment Return without the
capital contribution would have been 32.47%.
(9) The Total Investment Return includes the effect of the capital
contribution of $.06 per share. The Total Investment Return without the
capital contribution would have been 13.59%.
(10) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .87%, 1.04% and 2.03% for the
years ended December 31, 2000, 1999 and 1998, respectively.
(11) Expense ratio is net of expense reimbursement. Had such reimbursement not
been made the expense ratio would have been .91%, .84%, 1.02%, 1.32%, and
1.57% for the years ended December 31, 2000, 1999, 1998, 1997 and 1996,
respectively.
(12) The Total Investment Return includes the effect of the capital
contribution of $.32 per share. The Total Investment Return without the
capital contribution would have been 79.02%.
61
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Auto & Truck Parts - 0.4%
General Motors Corp. - Cl. H ................ 180,600 $ 4,154
Business Services - 0.5%
Automatic Data Processing, Inc. ............. 96,000 6,078
Commercial Sevices - 2.0%
Convergys Corp. * ........................... 169,300 7,671
Interpublic Group Cos., Inc. ................ 106,600 4,537
Lamar Advertising Co. * ..................... 117,700 4,543
Omnicom Group, Inc. ......................... 66,900 5,544
----------
22,295
Computer Equipment - 9.3%
Brocade Communications Systems,
Inc. * .................................... 67,600 6,207
Compaq Computer Corp. ....................... 150,500 2,265
Comverse Technology, Inc. * ................. 89,400 9,711
Hewlett-Packard Co. ......................... 216,200 6,824
Intel Corp. ................................. 1,400,000 42,087
International Business Machines Corp ........ 276,000 23,460
Network Appliance, Inc. * ................... 93,200 5,982
VERITAS Software Corp. * .................... 112,900 9,879
----------
106,415
Computer Software & Services - 18.6%
Adobe Systems, Inc. ......................... 126,800 7,378
America Online, Inc. * ...................... 677,100 23,563
Cadence Design Systems, Inc. * .............. 130,900 3,600
DST Systems, Inc. * ......................... 114,700 7,685
EMC Corp. * ................................. 570,000 37,905
First Data Corp. ............................ 224,700 11,839
Fiserv, Inc. ................................ 85,700 4,065
Intuit, Inc. * .............................. 109,900 4,334
Juniper Networks, Inc. * .................... 74,400 9,379
Microsoft Corp. ............................. 773,000 33,529
Oracle Corp. * .............................. 1,000,000 29,063
Siebel Systems, Inc. * ...................... 148,900 10,069
Sun Microsystems, Inc. * .................... 799,700 22,292
SunGard Data Systems, Inc. .................. 105,000 4,948
Yahoo!, Inc. * .............................. 121,500 3,666
----------
213,315
Consumer Miscellaneous - 0.6%
Black & Decker Corp. ........................ 186,700 7,328
Cosmetic & Personal Care - 0.5%
Colgate-Palmolive Co. ....................... 80,000 5,164
Diversified Operations - 10.4%
Corning, Inc. ............................... 251,534 13,284
El Paso Energy Corp. ........................ 139,200 9,970
General Electric Co. ........................ 1,900,000 91,082
Tyco International, Ltd. .................... 90,000 4,995
----------
119,331
Electric Power - 1.1%
AES Corp. * ................................. 120,000 6,645
Calpine Corp. * ............................. 137,900 6,214
----------
12,859
Electronic Products & Services - 14.3%
Altera Corp. * .............................. 214,700 5,649
Analog Devices, Inc. * ...................... 190,000 9,726
Applied Materials, Inc. * ................... 169,400 6,469
Atmel Corp. * ............................... 400,000 4,650
Cisco Systems, Inc. * ....................... 1,689,200 64,612
Jabil Circuit, Inc. * ....................... 115,600 2,933
Linear Technology Corp. ..................... 170,000 7,862
Maxim Integrated Products, Inc. * ........... 152,800 7,306
Motorola, Inc. .............................. 156,000 3,159
Novellus Systems, Inc. * .................... 182,200 6,548
PMC-Sierra, Inc. * .......................... 33,000 2,595
Sanmina Corp. * ............................. 91,200 6,988
SCI Systems, Inc. * ......................... 125,700 3,315
Texas Instruments, Inc. ..................... 378,600 17,936
Vishay Intertechnology, Inc. * .............. 160,400 2,426
Vitesse Semiconductor Corp. * ............... 82,400 4,558
Xilinx, Inc. * .............................. 150,000 6,919
----------
163,651
Energy - Alternative Source - 0.8%
Dynegy, Inc. - Cl.A ......................... 169,500 9,503
Financial Services - 1.4%
Citigroup, Inc. ............................. 313,333 16,000
Health Care Products - 21.5%
Allergan, Inc. .............................. 116,900 11,317
ALZA Corp. * ................................ 176,300 7,493
American Home Products Corp. ................ 219,000 13,917
Aviron * .................................... 42,800 2,860
Baxter International, Inc. .................. 50,000 4,416
Bristol-Myers Squibb Co. .................... 167,000 12,348
Cardinal Health, Inc. ....................... 27,900 2,780
Cephalon, Inc. * ............................ 53,100 3,362
CV Therapeutics, Inc. * ..................... 48,200 3,410
Eli Lilly & Co. ............................. 110,500 10,283
ENZON , Inc. ................................ 56,700 3,519
Forest Laboratories, Inc. * ................. 43,400 5,767
Genetech, Inc. * ............................ 52,200 4,254
Invitrogen Corp. * .......................... 47,700 4,120
King Pharmaceuticals, Inc. * ................ 65,400 3,380
Laboratory Corporation of America
Holdings .................................. 34,300 6,037
Merck & Co., Inc. ........................... 311,100 29,127
Pfizer, Inc. ................................ 1,616,900 74,377
Pharmacia Corp. ............................. 229,500 13,999
Schering-Plough Corp. ....................... 339,600 19,272
Waters Corp. * .............................. 131,700 10,997
----------
247,035
62
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Health Care Services - 0.7%
Universal Health Services, Inc. - Cl. B * ............... 76,000 $ 8,493
Insurance - 2.8%
Hartford Financial Services Group, Inc. ................. 182,300 12,875
Lincoln National Corp. .................................. 137,000 6,482
PartnerRe, Ltd. ......................................... 86,200 5,258
St. Paul Cos., Inc. ..................................... 135,000 7,332
---------
31,947
Machinery - 0.4%
Ingersoll-Rand Co. ...................................... 94,700 3,966
Media - Publishing - 0.3%
AT&T Corp. - Liberty Media Group -
Cl. A * ............................................... 216,500 2,936
Media - TV/Radio - 2.8%
Clear Channel Communications, Inc. * .................... 62,200 3,013
Infinity Broadcasting Corp. - Cl. A * ................... 148,200 4,140
Time Warner, Inc. ....................................... 182,400 9,529
Univision Communications, Inc. -
Cl. A * ............................................... 117,600 4,814
Viacom, Inc. - Cl. B * .................................. 173,600 8,116
Westwood One, Inc. * .................................... 124,400 2,402
---------
32,014
Oil & Natural Gas Exploration & Production - 0.3%
Noble Drilling Corp. * .................................. 80,000 3,475
Retail - Department Stores - 6.0%
Family Dollar Stores, Inc. .............................. 176,400 3,782
Home Depot, Inc. ........................................ 442,700 20,226
Kohl's Corp. ............................................ 237,200 14,469
Lowe's Cos., Inc. ....................................... 92,100 4,098
RadioShack Corp. ........................................ 178,800 7,655
Tiffany & Co. ........................................... 135,700 4,291
Wal-Mart Stores, Inc. ................................... 272,500 14,477
---------
68,998
Retail - Drug Stores - 1.6%
CVS Corp. ............................................... 75,000 4,495
TJX Cos., Inc. .......................................... 134,300 3,727
Walgreen Co. ............................................ 250,000 10,453
---------
18,675
Telecommunication Equipment - 1.8%
ADC Telecommunications, Inc. * .......................... 277,600 5,032
CIENA Corp. * ........................................... 20,000 1,625
JDS Uniphase Corp. * .................................... 139,400 5,811
Nokia Oyj - ADR ......................................... 67,100 2,919
Nortel Networks Corp. ................................... 78,200 2,507
Scientific-Atlanta, Inc. ................................ 96,500 3,142
---------
21,036
Telecommunication Services - 1.0%
Qwest Communications International,
Inc. * ................................................ 165,000 6,765
Sprint PCS (PCS Group) * ................................ 250,000 5,109
---------
11,874
U.S. Government Agencies - 0.5%
Federal National Mortgage Assoc. ........................ 65,000 5,639
---------
TOTAL COMMON STOCK- .............................. 99.6% 1,142,181
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 0.9%
Investment in joint trading account
(Note B)
6.695% due 01/02/01 ..................................... $ 10,374 10,374
-------- ---------
TOTAL INVESTMENTS- 100.5% 1,152,555
Payables, less cash and receivables- (0.5)% (5,768)
-------- ---------
NET ASSETS- 100.0% 1,146,787
======== =========
* Non-income producing security.
ADR-American Depository Receipt
See notes to financial statements.
63
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
FUNDAMENTAL GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Bank - 1.7%
M & T Bank Corp. ......................... 6,100 $ 415
Zions Bancorp ............................ 5,900 368
-------
783
Brokerage & Investment Management - 1.8%
Investment Technology Group, Inc. ........ 8,500 355
Legg Mason, Inc. ......................... 8,400 458
-------
813
Business Services - 0.3%
DiamondCluster, Inc. * ................... 4,600 140
Commercial Sevices - 4.9%
Cintas Corp. ............................. 11,100 590
Convergys Corp. * ........................ 14,300 648
Ecolab, Inc. ............................. 8,300 359
Lamar Advertising Co. * .................. 4,900 189
Macrovision Corp. * ...................... 2,700 200
The Dun & Bradstreet Corp. * ............. 11,300 290
-------
2,276
Computer Equipment - 7.4%
Brocade Communications Systems, Inc. * ... 13,600 1,249
Comverse Technology, Inc. * .............. 3,500 380
Palm, Inc. ............................... 40,500 1,147
Redback Networks, Inc. * ................. 11,600 475
SanDisk Corp. * .......................... 6,300 175
-------
3,426
Computer Software & Services - 13.6%
Ariba, Inc. * ............................ 3,600 193
Electronic Arts, Inc. * .................. 2,000 85
Fiserv, Inc. ............................. 14,300 678
Internet Security System, Inc. ........... 4,900 384
Intuit, Inc. * ........................... 7,000 276
Mercury Interactive Corp. * .............. 5,600 506
Micromuse, Inc. * ........................ 7,800 471
Openwave Systems, Inc. * ................. 5,900 283
Peregrine Systems, Inc. * ................ 34,300 678
Portal Software, Inc. * .................. 6,500 51
Rational Software Corp. * ................ 24,200 942
Research in Motion, Ltd. * ............... 6,300 504
Retek, Inc. * ............................ 4,300 105
Tibco Software, Inc. * ................... 10,100 484
Vignette Corp. * ......................... 20,000 360
webMethods, Inc. * ....................... 2,800 249
-------
6,249
Cosmetic & Personal Care - 0.4%
Estee Lauder Cos., Inc. - Cl. A .......... 3,900 171
Diversified Operations - 0.7%
Danaher Corp. ............................ 4,700 321
Electric Power - 2.2%
Calpine Corp. * .......................... 11,300 509
CMS Energy Corp. ......................... 9,400 298
Southern Energy, Inc. * .................. 6,600 187
-------
994
Electronic Products & Services - 8.6%
Applied Micro Circuits Corp. * ........... 9,800 735
Atmel Corp. * ............................ 35,500 413
Emulex Corp. * ........................... 7,800 624
GlobeSpan, Inc. * ........................ 6,750 186
Maxim Integrated Products, Inc. * ........ 3,500 167
PerkinElmer, Inc. ........................ 7,900 830
QLogic Corp. * ........................... 1,700 131
Sawtek, Inc. * ........................... 7,500 346
Vitesse Semiconductor Corp. * ............ 9,550 528
-------
3,960
Energy - Alternative Source - 0.8%
Dynegy, Inc. - Cl.A ...................... 6,700 376
Financial Services - 1.2%
Providian Financial Corp. * .............. 9,800 563
Food, Beverage & Tobacco - 1.4%
Starbucks Corp. * ........................ 14,500 642
Health Care Products - 21.6%
Abgenix, Inc. * .......................... 3,850 227
Allergan, Inc. ........................... 13,600 1,317
Andrx Corp - Andrx Group * ............... 3,200 185
Applera Corporation - Applied Biosystems
Group .................................. 11,300 1,063
Diversa Corp. ............................ 3,800 68
Forest Laboratories, Inc. * .............. 4,000 532
Gilead Sciences, Inc. * .................. 4,200 348
Human Genome Sciences, Inc. * ............ 2,200 153
IDEXX Laboratories, Inc. * ............... 7,900 174
Immunex Corp. * .......................... 19,900 808
Inhale Therapeutic Systems, Inc. * ....... 8,400 424
IVAX Corp. ............................... 15,800 605
Laboratory Corporation of America Holdings 1,600 282
Medarex, Inc. * .......................... 3,800 155
MedImmune, Inc. * ........................ 19,800 944
Millennium Pharmaceuticals, Inc. * ....... 11,600 718
Protein Design Labs, Inc. * .............. 3,700 321
Sepracor, Inc. * ......................... 8,600 689
UnitedHealth Group, Inc. ................. 5,400 331
Waters Corp. * ........................... 7,300 610
-------
9,954
Health Care Services - 2.3%
Idec Pharmaceuticals Corp. ............... 3,200 607
Quest Diagnostics, Inc. * ................ 3,200 454
-------
1,061
Insurance - 0.7%
Ace, Ltd. * .............................. 2,900 123
64
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
FUNDAMENTAL GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Insurance - Continued
XL Capital, Ltd. - Cl. A ..................... 2,100 $ 183
--------
306
Leisure & Recreation - 0.8%
Four Seasons Hotels, Inc. .................... 3,300 210
International Game Technology ................ 3,700 177
--------
387
Media - Publishing - 0.2%
Radio One, Inc. - Cl. D * .................... 7,600 84
Media - TV / Radio - 1.7%
Cox Radio, Inc. - Cl. A * .................... 9,600 217
Radio One, Inc. * ............................ 4,900 52
Spanish Broadcasting Systems, Inc. * ......... 8,500 43
Univision Communications, Inc. - Cl. A * ..... 11,200 458
--------
770
Oil - 1.5%
BJ Services Co. * ............................ 6,100 420
Cooper Cameron Corp. * ....................... 4,400 291
--------
711
Oil & Natural Gas Exploration & Production - 4.8%
Devon Energy Corp. * ......................... 7,600 463
Global Marine, Inc. * ........................ 21,000 596
Murphy Oil Corp. ............................. 6,300 381
Transocean Sedco Forex, Inc. ................. 17,100 786
--------
2,226
Oil - Equipment & Service - 2.1%
Nabors Industries, Inc. * .................... 9,800 580
Smith International, Inc. .................... 5,500 410
--------
990
Personal & Commercial Lending - 1.1%
Capital One Financial Corp. .................. 7,800 513
Real Estate Investment Trust - 0.3%
Boston Properties, Inc. ...................... 3,500 152
Retail - Department Stores - 3.4%
BJ's Wholesale Club, Inc. .................... 9,900 380
Family Dollar Stores, Inc. ................... 24,700 529
RadioShack Corp. ............................. 6,700 287
Tiffany & Co. ................................ 12,367 391
--------
1,587
Retail - Food - 0.8%
Darden Restaurants, Inc. ..................... 15,900 364
Telecommunication Equipment - 4.8%
Avanex Corp. * ............................... 2,800 167
Crown Castle International Corp. ............. 13,600 368
Finisar Corp. * .............................. 21,900 635
Polycom, Inc. * .............................. 6,700 216
Sonus Networks, Inc. * ....................... 3,400 86
Symbol Technologies, Inc. .................... 21,200 763
--------
2,235
Telecommunication Services - 1.0%
Allegiance Telecom, Inc. * ................... 6,200 138
McLeodUSA, Inc. - Cl. A * .................... 22,000 311
--------
449
Telephone - 0.9%
Telephone and Data Systems, Inc. ............. 4,700 424
Transportation Services - 1.4%
Harley-Davidson, Inc. ........................ 15,800 628
--------
TOTAL COMMON STOCK- ................... 94.4% 43,555
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 4.4%
Investment in joint trading account
(Note B) 6.695% due 01/02/01 ................. $ 2,023 2,023
------- --------
TOTAL INVESTMENTS- 98.8% 45,578
Cash and Receivables, less payables- 1.2% 536
------- --------
NET ASSETS- 100.0% 46,114
======= ========
* Non-income producing security.
See notes to financial statements.
65
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
AGGRESSIVE BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 1.3%
General Dynamics Corp. .................... 1,100 $ 86
Honeywell International, Inc. ............. 900 43
United Technologies Corp. ................. 1,900 149
--------
278
Automobile - 0.5%
Ford Motor Co. ............................ 4,700 110
Bank - 4.4%
Bank of America Corp. ..................... 3,600 165
Bank of New York Co., Inc. ................ 3,900 215
Comerica, Inc. ............................ 900 53
Firstar Corp. ............................. 3,400 79
FleetBoston Financial Corp. ............... 7,200 271
J.P. Morgan & Co., Inc. ................... 900 149
--------
932
Business Services - 0.8%
Automatic Data Processing, Inc. ........... 2,600 165
Chemical - 1.1%
Air Products & Chemicals, Inc. ............ 1,900 78
Dow Chemical Co. .......................... 2,700 99
Praxair, Inc. ............................. 1,900 84
--------
261
Commercial Sevices - 1.3%
Convergys Corp. ........................... 1,700 77
Interpublic Group Cos., Inc. .............. 2,400 102
Omnicom Group, Inc. ....................... 1,100 91
--------
270
Computer Equipment - 3.2%
Comverse Technology, Inc. ................. 400 43
Hewlett-Packard Co. ....................... 2,200 69
Intel Corp. ............................... 9,300 280
International Business Machines Corp. ..... 2,100 178
Network Appliance, Inc. ................... 700 45
VERITAS Software Corp. .................... 600 53
--------
668
Computer Software & Services - 6.1%
Adobe Systems, Inc. ....................... 400 23
America Online, Inc. ...................... 4,000 139
DST Systems, Inc. ......................... 700 47
EMC Corp. ................................. 3,200 213
First Data Corp. .......................... 4,600 243
Microsoft Corp. ........................... 6,000 260
Oracle Corp. .............................. 6,200 180
Siebel Systems, Inc. ...................... 700 47
Sun Microsystems, Inc. .................... 4,200 117
--------
1,269
Consumer Miscellaneous - 1.1%
Avery Dennison Corp. ...................... 1,600 88
Black & Decker Corp. ...................... 2,200 86
Parker-Hannifin Corp. ..................... 1,300 57
--------
231
Cosmetic & Personal Care - 0.5%
Colgate-Palmolive Co. ..................... 1,000 65
Procter & Gamble Co. ...................... 500 39
--------
104
Diversified Operations - 6.4%
Corning, Inc. ............................. 1,400 74
El Paso Energy Corp. ...................... 2,400 172
General Electric Co. ...................... 16,100 772
Minnesota Mining & Manufacturing Co. ...... 800 96
Tyco International, Ltd. .................. 4,100 227
--------
1,341
Electric Power - 2.4%
AES Corp. ................................. 1,200 67
Allegheny Energy, Inc. .................... 900 43
Constellation Energy Group ................ 800 36
Dominion Resources, Inc. .................. 200 14
Duke Energy Co. ........................... 1,700 145
Exelon Corp. .............................. 1,600 112
Pinnacle West Capital Corp. ............... 800 38
Reliant Energy, Inc. ...................... 1,000 43
--------
498
Electronic Products & Services - 4.3%
Altera Corp. ............................. 1,200 32
Analog Devices, Inc. ...................... 1,300 67
Cisco Systems, Inc. ....................... 9,800 375
Linear Technology Corp. ................... 1,500 69
Maxim Integrated Products, Inc. ........... 800 38
Millipore Corp. ........................... 700 44
Motorola, Inc. ............................ 2,200 45
Novellus Systems, Inc. .................... 1,000 36
Sanmina Corp. ............................. 600 46
Texas Instruments, Inc. ................... 1,800 85
Xilinx, Inc. .............................. 1,200 55
--------
892
Energy - Alternative Source - 0.6%
Dynegy, Inc. - Cl.A ....................... 2,100 118
Financial Services - 3.3%
Citigroup, Inc. ........................... 11,000 562
Mellon Financial Corp. .................... 700 34
Stillwell Financial, Inc. ................. 2,300 91
--------
687
Food, Beverage & Tobacco - 1.2%
Anheuser-Busch Cos., Inc. ................. 1,200 55
ConAgra, Inc. ............................. 2,400 62
66
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
AGGRESSIVE BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Food, Beverage & Tobacco - Continued
PepsiCo, Inc. ................................ 600 $ 30
Philip Morris Cos., Inc. ..................... 2,300 101
--------
248
Health Care Products - 12.2%
Abbott Laboratories .......................... 3,000 145
Allergan, Inc. ............................... 1,000 97
ALZA Corp. ................................... 1,100 47
American Home Products Corp. ................. 2,700 172
Baxter International, Inc. ................... 1,200 106
Bristol-Myers Squibb Co. ..................... 4,300 318
Eli Lilly & Co. .............................. 200 19
ENZON , Inc. ................................. 700 43
Forest Laboratories, Inc. .................... 200 27
Johnson & Johnson ............................ 2,800 294
Laboratory Corporation of America
Holdings ................................... 400 70
Merck & Co., Inc. ............................ 4,300 403
Pfizer, Inc. ................................. 11,100 511
Pharmacia Corp. .............................. 2,200 134
Schering-Plough Corp. ........................ 2,000 113
Waters Corp. ................................. 700 58
--------
2,557
Health Care Services - 0.3%
St. Jude Medical, Inc. ....................... 400 25
Wellpoint Health Networks, Inc. .............. 300 34
--------
59
Insurance - 4.5%
Allstate Corp. ............................... 1,200 52
American International Group, Inc. ........... 1,400 138
Chubb Corp. .................................. 1,100 95
Hartford Financial Services Group, Inc. ...... 2,500 177
Lincoln National Corp. ....................... 2,500 118
Marsh & McLennan Cos., Inc. .................. 600 70
St. Paul Cos., Inc. .......................... 2,000 109
Torchmark, Inc. .............................. 2,300 89
XL Capital, Ltd. - Cl. A ..................... 1,000 87
--------
935
Machinery - 0.5%
Ingersoll-Rand Co. ........................... 2,500 105
Media - Publishing - 0.4%
AT&T Corp. - Liberty Media Group -
Cl. A ...................................... 8,400 114
Media - TV / Radio - 1.7%
Clear Channel Communications, Inc. ........... 2,000 97
Infinity Broadcasting Corp. - Cl. A .......... 1,800 50
The Walt Disney Co. .......................... 1,800 52
Time Warner, Inc. ............................ 1,200 63
Viacom, Inc. - Cl. B ......................... 1,900 89
--------
351
Metals & Mining - 0.4%
Alcoa, Inc. .................................. 2,300 77
Oil - 0.7%
Royal Dutch Petroleum Co. - NY
Shares ..................................... 2,400 145
Oil & Natural Gas Exploration & Production - 2.2%
Chevron Corp. ................................ 700 59
Exxon Mobil Corp. ............................ 3,200 278
Kerr-McGee Corp. ............................. 700 47
Noble Drilling Corp. ......................... 800 35
USX-Marathon Group ........................... 1,200 33
--------
452
Oil - Equipment & Service - 0.4%
Baker Hughes, Inc. ........................... 1,800 75
Paper & Forest Products - 0.4%
Kimberly-Clark Corp. ......................... 1,300 92
Retail - Department Stores - 4.0%
Gap, Inc. .................................... 1,600 41
Home Depot, Inc. ............................. 3,400 155
Kohl's Corp. ................................. 2,600 159
Limited, Inc. ................................ 1,700 29
Lowe's Cos., Inc. ............................ 1,400 62
RadioShack Corp. ............................. 2,700 116
Tiffany & Co. ................................ 1,700 54
Wal-Mart Stores, Inc. ........................ 4,000 212
--------
828
Retail - Drug Stores - 0.9%
CVS Corp. .................................... 800 48
TJX Cos., Inc. ............................... 2,800 78
Walgreen Co. ................................. 1,300 54
--------
180
Retail - Food - 0.2%
Brinker International, Inc. .................. 800 34
Shoe & Apparel Manufacturing - 0.1%
Intimate Brands, Inc. ........................ 1,800 27
Steel - 0.2%
Nucor Corp. .................................. 1,100 44
Telecommunication Equipment - 0.7%
JDS Uniphase Corp. ........................... 800 33
Nortel Networks Corp. ........................ 3,400 109
--------
142
Telecommunication Services - 1.3%
Qwest Communications International, Inc. ..... 2,900 119
Sprint PCS (PCS Group) ....................... 2,100 43
67
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
AGGRESSIVE BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Telecommunication Services - Continued
Verizon Communications .................... 2,200 $ 110
-------
272
Telephone - 1.1%
SBC Communications, Inc. .................. 3,600 172
Sprint Corp. .............................. 2,400 49
-------
221
Transportation Services - 0.1%
Union Pacific Corp. ....................... 600 30
U.S. Government Agencies - 1.3%
Federal National Mortgage Assoc ........... 3,200 278
-------
TOTAL COMMON STOCK- .................. 72.1% 15,090
Par
Value
(000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 0.1%
Lockheed Martin Corp. - Bonds
8.5% due 12/01/29 ....................................... $ 15 17
Automobile - 0.2%
Ford Motor Co. - Bonds
6.625% due 10/01/28 ..................................... 60 51
Bank - 1.1%
Bank of America Corp. - Sub. Notes
7.8% due 02/15/10 ....................................... 80 83
BankBoston Corp. - Sr. Notes
6.125% due 03/15/02 ..................................... 50 50
Korea Development Bank - Bonds
7.125% due 09/17/01 ..................................... 50 50
Wells Fargo Bank NA - Sub.
7.55% due 06/21/10 ...................................... 40 43
-------
226
Brokerage & Investment Management - 0.2%
Lehman Brothers Holdings, Inc. -
Notes
6.5% due 10/01/02 ....................................... 50 50
Computer Equipment - 0.1%
International Business Machines Corp.
- Notes
5.625% due 04/12/04 ..................................... 30 29
Financial Services - 1.3%
Associates Corp. of North America -
Sr. Notes
6.25% due 11/01/08 ...................................... 45 43
First Union National Nank - Sub.
Notes
7.8% due 08/18/10 ....................................... 40 41
General Electric Capital Corp.
7.5% due 05/15/05 ....................................... 30 32
General Motors Acceptance Corp.
7.5% due 07/15/05 ....................................... 40 41
Green Tree Financial Corp. - Ser
1996-8 Cl. A6
7.6% due 10/15/27 ....................................... 50 52
PNC Funding Corp.
7.0% due 09/01/04 ....................................... 50 51
-------
260
Foreign Governmental - 0.2%
Province of Quebec - Debs
7.5% due 09/15/29 ....................................... 45 48
Media - TV / Radio - 0.3%
News America, Inc. - Debs
7.125% due 04/08/28 ..................................... 20 16
Time Warner, Inc.
6.625% due 05/15/29 ..................................... 20 18
Viacom, Inc.
7.7% due 07/30/10 ....................................... 30 32
-------
66
Natural Gas Distribution - 0.2%
Enron Corp. - Debs
9.125% due 04/01/03 ..................................... 30 32
Oil & Natural Gas Exploration & Production - 0.1%
Amerada Hess Corp. - Bonds
7.875% due 10/01/29 ..................................... 20 21
Oil - Equipment & Service - 0.1%
Petroleum Geo-Services ASA - Sr
Notes
7.125% due 03/30/28 ..................................... 20 16
Personal & Commercial Lending - 0.5%
Goldman Sachs Group, Inc.
7.8% due 01/28/10 ....................................... 40 42
Household Finance Corp. - Notes
6.0% due 05/01/04 ....................................... 30 29
8.0% due 07/15/10 ....................................... 30 32
U.S. West Capital Funding, Inc.
6.875% due 07/15/28 ..................................... 10 9
-------
112
Retail - Department Stores - 0.2%
Wal Mart Stores, Inc.
7.55% due 02/15/30 ...................................... 40 44
U.S. Government Agencies - 12.2%
Federal National Mortgage Assoc
6.0% due 12/01/99 ....................................... 150 148
6.0% due 12/01/99 ....................................... 350 339
6.625% due 11/15/30 ..................................... 168 178
7.0% due 12/01/99 ....................................... 310 310
7.125% due 06/15/10 ..................................... 270 292
7.25% due 05/15/30 ...................................... 60 68
68
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
AGGRESSIVE BALANCED FUND
Par Market
Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
7.5% due 12/01/99 ................. $ 420 $ 429
7.5% due 12/01/99 ................. 279 283
Federal National Mortgage Assoc. -
Notes
4.75% due 11/14/03 ................ 50 49
7.0% due 07/15/05 ................. 420 441
-------
2,537
U.S. Governmental - 9.1%
U.S. Treasury
5.875% due 02/15/04 ............... 300 306
U.S. Treasury - Bonds
5.25% due 02/15/29 ................ 47 45
5.875% due 11/15/04 ............... 450 462
8.875% due 08/15/17 ............... 210 286
U.S. Treasury - Notes
6.25% due 10/31/01 ................ 265 266
6.5% due 02/15/10 ................. 105 115
6.625% due 05/15/07 ............... 400 431
-------
1,911
-------
TOTAL PUBLICLY-TRADED
BONDS- 25.9% 5,420
SHORT-TERM INVESTMENTS - 8.8%
Investment in joint trading account
(Note B)
6.695% due 01/02/01 1,852 1,853
-------- -------
TOTAL INVESTMENTS- 106.8% 22,363
Payables, less cash and receivables- (6.8)% (1,422)
-------- -------
NET ASSETS- 100.0% 20,941
======== =======
See notes to financial statements.
69
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.2%
Jet Equipment Trust
10.91% due 08/15/14 ........................... $ 2,100 $ 2,305
Lockheed Martin Corp. - Bonds
8.5% due 12/01/29 ............................. 2,635 2,990
Raytheon Co.
7.9% due 03/01/03 ............................. 2,605 2,678
Raytheon Co. - Notes
8.3% due 03/01/10 ............................. 1,650 1,808
--------
9,781
Agricultural Operations - 0.3%
Marlin Water Trust - Sr. Notes 144A (a)
7.09% due 12/15/01 ............................ 2,553 2,557
Automobile - 0.8%
Ford Motor Co. - Bonds
7.45% due 07/16/31 ............................ 2,675 2,516
Toyota Auto Receivables Owner Trust - Ser
2000-B Cl. A4
6.8% due 04/15/07 ............................. 3,715 3,804
--------
6,320
Bank - 3.2%
Abbey National First Capital - Sr
Sub. Notes
8.2% due 10/15/04 ............................. 4,000 4,242
Bank of America Corp. - Sub. Notes
7.8% due 02/15/10 ............................. 2,685 2,795
BNP PARIBAS Capital Trust
9.003% due 12/29/49 ........................... 1,785 1,857
International Bank of Reconstruction &
Development - Debs
8.25% due 09/01/16 ............................ 2,150 2,571
National Westminister Bank, NY - Sub.
Notes
9.45% due 05/01/01 ............................ 5,000 5,050
NB Capital Trust IV
8.25% due 04/15/27 ............................ 1,680 1,593
RBSG Capital Corp. - Notes
10.125% due 03/01/04 .......................... 5,000 5,489
Royal Bank of Scotland Group plc
8.817% due 03/31/05 ........................... 1,870 1,958
--------
25,555
Brokerage & Investment Management - 0.2%
Salomon Brothers Mortgage Securities VII
6.75% due 07/25/24 ............................ 1,890 1,886
Chemical - 0.2%
Akzo Nobel, Inc. - Bonds 144A (a)
6.0% due 11/15/03 ............................. 1,630 1,609
Cosmetic & Personal Care - 0.2%
Procter & Gamble Co. - Debs
6.45% due 01/15/26 ............................ 1,755 1,681
Electric Power - 8.4%
AES Corp.
9.375% due 09/15/10 ........................... 725 747
AES Corp. - Sr. Notes
9.5% due 06/01/09 ............................. 1,645 1,703
AES Corp. - Sr. Sub. Notes
10.25% due 07/15/06 ........................... 2,243 2,316
AES Eastern Energy
9.0% due 01/02/17 ............................. 2,130 2,166
Beaver Valley Funding Corp. - Debs
9.0% due 06/01/17 ............................. 2,365 2,586
BVPS II Funding Corp. - Coll. Lease Bonds
8.89% due 06/01/17 ............................ 2,464 2,622
CalEnergy Co., Inc. - Bonds
8.48% due 09/15/28 ............................ 2,685 2,904
Calpine Corp. - Sr. Notes
10.5% due 05/15/06 ............................ 1,920 1,978
Cleveland Electric Illuminating Co.
7.88% due 11/01/17 ............................ 480 483
Cleveland Electric Illuminating Co. - 1st
Mtge
9.5% due 05/15/05 ............................. 5,775 5,932
CMS Energy Corp. - Sr. Notes
6.75% due 01/15/04 ............................ 2,040 1,921
8.125% due 05/15/02 ........................... 2,650 2,625
CMS ENERGY Corp.
9.875% due 10/15/07 ........................... 730 763
Connecticut Light & Power Co.
7.75% due 06/01/02 ............................ 1,090 1,108
Connecticut Light & Power Co. - Notes
144A (a)
8.59% due 06/04/03 ............................ 1,310 1,316
East Coast Power LLC - Secd. Notes
7.066% due 03/31/12 ........................... 1,855 1,776
Long Island Lighting Co. - Debs
8.2% due 03/15/23 ............................. 3,235 3,313
Midland Cogeneration Venture - Debs
10.33% due 07/23/02 ........................... 411 421
10.33% due 07/23/02 ........................... 1,694 1,735
Monterrey Power SA de CV - Sec. Bonds
144A (a)
9.625% due 11/15/09 ........................... 650 633
Niagara Mohawk Power Corp. - Debs
8.77% due 01/01/18 ............................ 3,909 4,223
North Atlantic Energy Corp. - 1st Mtge
9.05% due 06/01/02 ............................ 1,230 1,245
Peco Energy Transition Trust
7.625% due 03/01/10 ........................... 7,630 8,016
PNPP II Funding Corp. - Debs
9.12% due 05/30/16 ............................ 2,455 2,641
Quest Diagnostic, Inc.
10.75% due 12/15/06 ........................... 1,847 1,939
Sierra Pacific Resources - Notes
8.75% due 05/15/05 ............................ 2,535 2,660
70
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Electric Power - Continued
System Energy Resources, Inc. - 1st Mtge.
7.71% due 08/01/01..................................... $ 2,590 $ 2,604
TXU Electric & Gas
8.175% due 01/30/37 ................................... 1,810 1,665
Waterford 3 Funding - Entergy - Bonds
8.09% due 01/02/17 .................................... 4,488 4,409
XCEL Energy, Inc. - Sr. Notes
7.0% due 12/01/10 ..................................... 2,470 2,449
--------
70,899
Energy - Alternative Source - 0.2%
Pugent Sound Energy, Inc.
7.69% due 02/01/11 .................................... 1,785 1,861
Financial Services - 4.6%
Associates Corp. of North America - Debs.
6.95% due 11/01/18 .................................... 1,465 1,388
Bank of New York Institution Capital -
144A (a)
7.78% due 12/01/26 .................................... 3,350 3,157
Barclays North America Capital Corp. -
Debs.
9.75% due 05/15/21 .................................... 4,650 4,886
Citigroup , Inc.
7.25% due 10/01/10 .................................... 3,280 3,380
ERAC USA Finance Co.
7.95% due 12/15/09 .................................... 1,675 1,660
General Electric Cap Corp. - Notes
6.875% due 11/15/10 ................................... 2,670 2,800
General Motors Acceptance Corp.
7.5% due 07/15/05 ..................................... 2,535 2,595
HSBC Capital Funding LP - Ser. 144A (a)
9.547% due 12/31/49 ................................... 2,115 2,325
ING Capital Funding Trust III
8.439% due 12/31/49 ................................... 1,770 1,801
NiSource Finance Corp. - 144A (a)
7.875% due 11/15/10 ................................... 1,980 2,080
Peco Energy Transition Trust
6.05% due 03/01/09 .................................... 2,600 2,579
Spear Leeds & Kellogg lp - Notes
8.25% due 08/15/05 .................................... 2,015 2,135
Sun Canada Financial Co. - Bonds 144A (a)
6.625% due 12/15/07 ................................... 3,345 3,329
The MONY Group, Inc. - Sr. Notes
7.45% due 12/15/05 .................................... 1,155 1,169
UBS Preferred Funding TRI
8.622% due 10/29/49 ................................... 1,805 1,894
URC Holdings Corp. - Sr. Notes 144A (a)
7.875% due 06/30/06 ................................... 1,840 1,913
--------
39,091
Food, Beverage & Tobacco - 0.6%
Canandaigua Brands, Inc. - Sr. Sub. Notes
8.75% due 12/15/03 ................................ 2,365 2,318
Earthgrains Co.
8.375% due 08/01/03................................ 2,500 2,519
--------
4,837
Foreign Governmental - 2.1%
Hydro-Quebec - Debs. Ser. IF
7.375% due 02/01/03 ............................... 1,000 1,026
Hydro-Quebec - Debs.
9.4% due 02/01/21 ................................. 610 761
Hydro-Quebec - Debs. Ser. FU
11.75% due 02/01/12 ............................... 5,000 7,019
Nova Scotia
8.75% due 04/01/22 ................................ 3,000 3,608
Province of Quebec - Debs
7.5% due 09/15/29 ................................. 2,970 3,198
Province of Saskatchewan
9.375% due 12/15/20 ............................... 1,500 1,889
--------
17,501
Health Care Products - 0.2%
Fresenius Medical Capital Trust II
7.875% due 02/01/08 ............................... 1,740 1,583
Health Care Services - 0.5%
Dynacare, Inc. - Sr. Notes
10.75% due 01/15/06 ............................... 2,125 1,997
HCA - The Healthcare Co. - Notes
8.75% due 09/01/10 ................................ 910 958
Tenet Healthcare Corp. - Sr. Notes
8.0% due 01/15/05 ................................. 1,295 1,311
--------
4,266
Insurance - 1.3%
AXA - Sub Notes
8.6% due 12/15/30 ................................. 1,770 1,822
Equitable Life Assurance Society USA -
Notes 144A (a)
6.95% due 12/01/05 ................................ 1,240 1,251
Mass. Mutual Life Insurance Co. - Notes
144A (a)
7.625% due 11/15/23 ............................... 2,640 2,629
New York Life Insurance Co. - Sr. Notes
144A (a)
7.5% due 12/15/23 ................................. 5,970 5,324
--------
11,026
Leisure & Recreation - 0.2%
MGM Mirage, Inc.
8.5% due 09/15/10 ................................. 1,430 1,472
Media - TV / Radio - 2.3%
Adelphia Communications Corp. - Sr. Notes
8.125% due 07/15/03 ............................... 1,270 1,181
9.25% due 10/01/02 ................................ 2,460 2,374
British Sky Broadcasting
8.2% due 07/15/09 ................................. 1,845 1,741
71
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Media - TV / Radio - Continued
Clear Channel Communications - Sr. Notes
7.875% due 06/15/05 ................................. $ 1,690 $ 1,757
Continental Cablevision - Sr. Notes
8.3% due 05/15/06 ................................... 2,165 2,320
EchoStar DBS Corp. - Sr. Notes
9.375% due 02/01/09 .................................
Lenfest Communications, Inc.
8.375% due 11/01/05 ................................. 1,690 1,808
News America Holdings, Inc. - Debs.
8.25% due 08/10/18 .................................. 1,275 1,250
Rogers Cablesystems - Sr. Notes
10.0% due 03/15/05 .................................. 1,205 1,271
TCI Communications, Inc. - Debs.
7.875% due 02/15/26 ................................. 1,780 1,739
Time Warner, Inc. - Debs.
9.125% due 01/15/13 ................................. 3,133 3,640
----------
19,081
Metal Production & Fabrication - 0.2%
Yanacocha Receivables - Pass thru Certs.
144A (a)
8.4% due 06/15/05 ................................... 1,466 1,397
Municipals - 0.4%
New Hampshire State - Taxable Pease Dev.
Auth.
7.7% due 07/01/12 ................................... 3,000 3,182
Natural Gas Distribution - 0.4%
Keyspan Corp. - Notes
7.625% due 11/15/10 ................................. 1,775 1,886
Louis Dreyfus Natural Gas Corp.
6.875% due 12/01/07 ................................. 1,690 1,675
----------
3,561
Oil - 0.3%
TOSCO Corp. 8.125% due 02/15/30 ..................... 2,650 2,854
Oil & Natural Gas Exploration & Production - 1.6%
Alberta Energy Co., Ltd. - Notes
8.125% due 09/15/30 ................................. 1,800 1,910
Amerada Hess Corp. - Bonds
7.875% due 10/01/29 ................................. 2,625 2,745
Apache Finance of Canada
7.75% due 12/15/29 .................................. 2,685 2,833
Occidental Petroleum Corp. - Sr. Debs.
10.125% due 09/15/09 ................................ 3,000 3,531
Ocean Energy, Inc.
8.875% due 07/15/07 ................................. 1,325 1,358
Snyder Oil Corp.
8.75% due 06/15/07 .................................. 805 835
----------
13,212
Oil - Equipment & Service - 0.6%
EL Paso Energy Corp. 8.05% due 10/15/30 ............. 2,635 2,770
Humpuss Funding Corp. - 144A (a)
7.72% due 12/15/09 .................................. 1,038 816
Petroleum Geo-Services ASA - Sr. Notes
7.125% due 03/30/28 ................................. 2,165 1,745
----------
5,331
Paper & Forest Products - 0.3%
International Paper Co. Notes 144A (a)
8.125% due 07/08/05 ................................. 2,540 2,636
Personal & Commercial Lending - 8.3%
Boeing Cap. Corp.
7.375% due 09/27/10 ................................. 2,685 2,877
Commercial Mortgage Acceptance Corp. -
Ser. 1991-C1 A1
6.79% due 06/15/31 .................................. 3,278 3,348
CS First Boston Mortgage Securities Corp. -
Ser. 1998-C1 A1A
6.26% due 04/11/30 .................................. 2,567 2,576
Deutsche Mortgage & Asset Receiving
Corp. - Ser. 1998-C1 Cl. C
6.861% due 03/15/08 ................................. 2,170 2,168
EQCC Home Equity Loan Trust
6.57% due 02/15/29 .................................. 2,120 2,118
Ford Credit Auto Owner Trust
6.58% due 11/15/04 .................................. 5,025 5,119
Ford Motor Credit Co. - Notes
6.125% due 04/28/03 ................................. 3,185 3,157
GMAC Commercial Mortgage Securities,
Inc.
6.566% due 11/15/07 ................................. 3,385 3,402
GMAC Commercial Mortgage Securities,
Inc. - 1997-C1 A2
6.853% due 09/15/06 ................................. 7,325 7,483
Household Finance Corp. - Notes
5.875% due 11/01/02 ................................. 3,955 3,923
Household Finance Corp. - Sr. Unsub.
5.875% due 02/01/09 ................................. 1,820 1,678
LB Commercial Conduit Mortgage Trust -
Ser. 1999-C1
6.41% due 08/15/07 .................................. 3,348 3,379
Midland Funding Corp. II - Debs.
11.75% due 07/23/05 ................................. 3,185 3,344
MMCA Auto Owner Trust
6.86% due 06/15/05 .................................. 4,092 4,195
Money Store Home Equity Trust - Ser. 1997-
C1 DAF7
6.485% due 12/15/28 ................................. 4,060 4,061
Morgan Stanley Capital Ser. 1999-CAM1
Cl. A3
6.92% due 11/15/18 .................................. 7,605 7,828
72
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Personal & Commercial Lending - Continued
U.S. West Capital Funding, Inc.
6.875% due 07/15/28 ................................. $ 2,675 $ 2,339
UCFC Home Equity Loan
7.18% due 02/15/25 .................................. 1,115 1,137
UCFC Home Equity Loan - Ser. 1997-A1 A8
7.22% due 06/15/28 .................................. 6,177 6,289
---------
70,421
Pollution Control - 0.3%
Enron Corp. - Notes 144A (a)
8.0% due 08/15/05 ................................... 2,510 2,622
Real Estate Investment Trust - 2.4%
American Health Properties, Inc. - Notes
7.5% due 01/15/07 ................................... 1,350 1,278
Amresco Residential Securities - Mtge. Loan
6.51% due 08/25/27 .................................. 7,885 7,873
Cabot Industrial Properties LP - Notes
7.125% due 05/01/04 ................................. 1,975 1,976
Camden Property Trust - Sr. Notes
7.0% due 04/15/04 ................................... 2,170 2,148
IMC Home Equity Loan Trust - Ser. 1998-1
A4
6.6% due 03/20/25 ................................... 3,280 3,292
Liberty Property LP - Notes
6.6% due 06/05/02 ................................... 1,675 1,679
TriNet Corp. Realty Trust, Inc. - Notes
7.3% due 05/15/01 ................................... 2,070 2,027
---------
20,273
Real Estate Operations - 0.2%
HMH Properties, Inc. - Ser. A
7.875% due 08/01/05 ................................. 2,075 1,992
Telecommunication Equipment - 0.2%
BellSouth Capital Funding - Debs
7.875% due 02/15/30 ................................. 1,755 1,801
Telecommunication Services - 2.1%
Cox Communications, Inc. - Notes
7.75% due 11/01/10 .................................. 1,785 1,854
CSC Holdings, Inc. - Sr. Notes
8.125% due 07/15/09 ................................. 2,055 2,101
Dominion Resources, Inc.
8.125% due 06/15/10 ................................. 2,680 2,895
McLeodUSA, Inc. - Sr. Notes
9.5% due 11/01/08 ................................... 1,520 1,368
NTL Communications Corp. - Sr. Notes
11.5% due 10/01/08 .................................. 1,625 1,446
Telecorp PCS, Inc.
11.625% due 04/15/09 ................................ 1,715 1,175
Verizon Global Funding Corp. - Bonds
144A (a)
7.75% due 12/01/30 .................................. 2,640 2,686
Voicestream Wireless Corp. Sr. Notes
10.375% due 11/15/09 ................................ 545 586
Voicestream Wireless Corp.
11.5% due 09/15/09 .................................. 1,540 1,709
Worldcom, Inc.
8.0% due 05/15/06 ................................... 2,350 2,391
---------
18,211
Telephone - 1.0%
Calpine Corp.
8.25% due 08/15/05 .................................. 3,450 3,426
LCI International, Inc. - Sr. Notes
7.25% due 06/15/07 .................................. 2,205 2,230
MetroNet Communications Corp. - Sr. Notes
12.0% due 08/15/07 .................................. 1,770 1,948
Pinnacle Partners
8.83% due 08/15/04 .................................. 1,350 1,395
---------
8,999
Transportation Services - 2.4%
America West Airlines, Inc. - Pass thru Certs.
6.93% due 01/02/08 .................................. 1,522 1,504
Burlington North Santa Fe
7.95% due 08/15/30 .................................. 2,625 2,746
Continental Airlines, Inc. - Pass thru Certs.
7.206% due 06/30/04 ................................. 2,634 2,640
Delta Air Lines - Ser. 00-1
7.57% due 11/18/10 .................................. 1,785 1,884
Erac USA Finance Co. - Notes 144A (a)
6.625% due 02/15/05 ................................. 900 874
Northwest Airlines Corp.
8.375% due 03/15/04 ................................. 1,350 1,296
Northwest Airlines Corp. - Ser. 1996-1
8.97% due 01/02/15 .................................. 211 222
NWA Trust - Sr. Notes
9.25% due 06/21/14 .................................. 2,248 2,455
Railcar Trust - Pass thru Notes Ser
1992 -1
7.75% due 06/01/04 .................................. 1,476 1,511
U.S. Air, Inc. - Pass thru Certs. Ser. 1990 -
A1
11.2% due 03/19/05 .................................. 1,193 1,209
United Air Lines
7.032% due 04/01/12 ................................. 2,475 2,533
Wisconsin Central Transportation Corp. -
Notes
6.625% due 04/15/08 ................................. 1,360 1,343
---------
20,217
U.S. Government Agencies - 31.9%
Federal National Mortgage Assoc.
6.0% due 09/01/14 ................................... 9,209 9,091
6.5% due 09/01/13 ................................... 131 131
6.5% due 07/01/14 ................................... 8,314 8,312
6.5% due 11/01/14 ................................... 125 125
73
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
6.5% due 01/01/15 ................................. $ 59 $ 59
6.5% due 02/01/15 ................................. 99 99
6.5% due 06/01/15 ................................. 439 439
6.5% due 11/01/28 ................................. 10,199 10,065
6.625% due 09/15/09 ............................... 9,920 10,337
Federal National Mortgage Assoc. Ser. 1997-M8 Cl.A
6.94% due 01/25/22 ................................ 1,418 1,455
Federal National Mortgage Assoc.
7.0% due 09/01/10 ................................. 4,039 4,093
7.0% due 11/01/14 ................................. 5,778 5,839
7.385% due 03/25/21 ............................... 1,010 1,036
Federal National Mortgage Assoc. - Notes
7.125% due 01/15/30 ............................... 13,165 14,736
Government National Mortgage Assoc.
6.0% due 01/15/29 ................................. 9,564 9,280
6.5% due 01/15/29 ................................. 4,362 4,313
6.5% due 07/15/28 ................................. 14,515 14,352
6.5% due 02/15/29 ................................. 12,211 12,073
6.5% due 04/15/29 ................................. 8,031 7,940
6.5% due 05/15/29 ................................. 8,921 8,821
6.5% due 06/15/29 ................................. 26,859 26,557
6.5% due 08/15/29 ................................. 6,947 6,868
7.0% due 09/15/25 ................................. 2,104 2,117
7.0% due 08/15/28 ................................. 6,421 6,449
7.0% due 03/15/29 ................................. 7,492 7,525
7.0% due 04/15/29 ................................. 12,036 12,089
7.0% due 06/15/29 ................................. 422 424
7.0% due 09/15/29 ................................. 31,713 31,852
7.0% due 10/15/30 ................................. 6,201 6,228
7.5% due 09/15/29 ................................. 17,845 18,151
7.5% due 12/15/29 ................................. 8,583 8,731
7.5% due 10/15/30 ................................. 6,196 6,302
7.5% due 11/15/30 ................................. 864 879
8.0% due 05/15/25 ................................. 290 298
8.0% due 06/15/25 ................................. 273 281
8.0% due 09/15/25 ................................. 563 578
8.0% due 01/15/26 ................................. 276 283
8.0% due 08/15/27 ................................. 1,473 1,512
8.0% due 07/15/30 ................................. 6,650 6,824
8.5% due 09/15/21 ................................. 607 631
9.0% due 05/15/21 ................................. 415 437
9.0% due 08/15/21 ................................. 486 511
9.5% due 06/15/16 ................................. 321 339
---------
268,462
U.S. Governmental - 13.6%
U.S. Treasury - Notes
5.625% due 05/15/08 ............................... 15,490 15,897
5.75% due 08/15/03 ................................ 39,750 40,328
5.75% due 08/15/10 ................................ 3,625 3,799
7.0% due 07/15/06 ................................. 4,799 5,223
U.S. Treasury - Bonds
6.125% due 08/15/29 ............................... 3,705 4,035
7.125% due 02/15/23 ............................... 2,057 2,451
U.S. Treasury - Notes
7.5% due 02/15/05 ................................. 27,721 30,142
U.S. Treasury - Bonds
8.875% due 08/15/17 ............................... 9,239 12,558
---------
114,433
---------
TOTAL PUBLICLY-TRADED BONDS- 92.7% 780,610
WARRANTS
Telephone - 0.0%
MetroNet Communications Corp. - CW07
144A (a)
expires 08/15/07 (Cost $58)........................ 2 229
---------
TOTAL WARRANTS- 0.0% 229
SHORT-TERM INVESTMENTS - 5.9%
Investment in joint trading account (Note B)
6.695% due 01/02/01 50,007 50,033
--------- ---------
TOTAL INVESTMENTS- 98.6% 830,872
Cash and Receivables, less payables- 1.4% 11,427
--------- ---------
NET ASSETS- 100.00% 842,299
========= =========
(a) Pursuant to Rule 144A (a) under the Securities Act of 1993, these
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At December 31, 2000, securities
aggregated $35,217 or 4.18% of net assets of the Portfolio.
See notes to financial statements.
74
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
CORE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.0%
Lockheed Martin Corp.
8.2% due 12/01/09 .................................... $ 50 $ 55
Automobile - 1.9%
Hertz Corp.
7.625% due 08/15/07 .................................. 100 103
Bank - 4.3%
Barclays Bank plc - Bonds 144A (a)
8.55% due 09/29/49 ................................... 75 79
Korea Development Bank
6.5% due 11/15/02 .................................... 50 49
National Bank of Canada - Notes Ser. B
8.125% due 08/15/04 .................................. 100 105
------
233
Brokerage & Investment Management - 1.0%
Lehman Brothers Holdings, Inc.
7.875% due 08/15/10 .................................. 50 52
Computer Equipment - 2.4%
Adaptec Inc.
4.75% due 02/01/04 ................................... 50 38
Dell Computer Corp.
7.1% due 04/15/28 .................................... 100 90
------
128
Electric Power - 1.9%
Isreal Electric Corp. Ltd.
8.25% due 10/15/09 ................................... 100 102
Financial Services - 5.1%
Amvescap plc
6.6% due 05/15/05 .................................... 75 74
General Electric Capital Corp.
6.65% due 09/03/02 ................................... 100 101
General Motors Acceptance Corp.
7.5% due 07/15/05 .................................... 100 103
------
278
Leisure & Recreation - 1.9%
International Speedway Corp.
7.875% due 10/15/04 .................................. 100 103
Media - TV / Radio - 0.9%
Clear Channel Communications
7.65% due 09/15/10 ................................... 50 51
Metals & Mining - 0.7%
Inco, Ltd. - Debs.
9.6% due 06/15/22 .................................... 40 40
Oil - 2.0% TOSCO Corp.
8.125% due 02/15/30 .................................. 100 108
Oil & Natural Gas Exploration & Production - 1.8%
Union Pacific Resources Group, Inc.
7.0% due 10/15/06 .................................... 50 51
Enterprise Oil - Bonds
7.0% due 05/01/18 .................................... 50 47
------
98
Personal & Commercial Lending - 1.0%
Prime Credit Card Master Trust
6.7% due 11/15/05 .................................... 50 50
Pollution Control - 1.3%
USA Waste Service , Inc.
7.125% due 10/01/07 .................................. 75 72
Real Estate Development - 0.5%
EOP Operating LP - Notes
7.375% due 11/15/03 .................................. 25 25
Retail - Department Stores - 1.9%
Target Corp.
7.5% due 02/15/05 .................................... 100 104
Telecommunication Services - 3.5%
Deutsche Telekom International Finance
8.25% due 06/15/30 ................................... 100 99
Sprint Capital Corp.
6.375% due 05/01/09 .................................. 100 90
------
189
Transportation Services - 2.9%
Delta Air Lines - Ser. 00-1
7.57% due 11/18/10 ................................... 50 53
United Airlines
7.73% due 07/01/10 ................................... 100 105
------
158
U.S. Government Agencies - 46.1%
Federal Home Loan Mortgage Corp. - Notes
5.75% due 07/15/03 ................................... 200 200
Federal Home Loan Mortgage Corp.
6.0% due 01/01/29 .................................... 194 188
7.5% due 01/01/30 .................................... 99 100
Federal National Mortgage Assoc.
5.125% due 02/13/04 .................................. 350 345
6.0% due 11/01/28 .................................... 194 188
7.0% due 07/01/30 .................................... 195 196
7.5% due 08/01/15 .................................... 387 396
7.5% due 07/01/30 .................................... 199 202
8.0% due 12/01/29 .................................... 280 287
8.5% due 01/01/31 .................................... 200 206
Government National Mortgage Assoc.
7.0% due 08/15/29 .................................... 99 100
75
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
CORE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
7.5% due 07/15/30 ................................. $ 97 $ 99
--------
2,507
U.S. Governmental - 14.9%
U.S. Treasury
4.25% due 01/15/10 ................................ 103 107
U.S. Treasury - Notes
5.25% due 05/15/04 ................................ 50 50
U.S. Treasury - Bonds
7.25% due 05/15/16 ................................ 350 412
7.25% due 08/15/22 ................................ 200 241
--------
810
--------
TOTAL PUBLICLY-TRADED BONDS- 97.0% 5,266
SHORT-TERM INVESTMENTS - 1.3%
Investment in joint trading account
(Note B)
6.695% due 01/02/01 69 69
------- --------
TOTAL INVESTMENTS- 98.3% 5,335
Cash and Receivables, less payables- 1.7% 93
------- --------
NET ASSETS- 100.0% 5,428
======= ========
(a) Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 2000, securities aggregated
$79 or 1.5% of net assets of the Portfolio.
See notes to financial statements
76
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Argentina - 0.5%
Acindar Industria Argentina de Aceros
SA - Ser. B * (STEE) ............................ 6,311 $ 5
Banco Frances del Rio de la Plata SA -
ADR (BANK) ...................................... 560 12
Grupo Financiero Galicia SA (FINL) ................ 2,384 35
IRSA Inverionses York Represent
(READ) .......................................... 953 16
Siderar SAIC - Cl. A * (STEE) ..................... 2,797 7
Telecom Argentina Stet-France Telecom
SA - ADR (TELS) ................................. 4,860 76
-------
151
Brazil - 8.9%
Centrais Electricas Brasileiras SA (UTIE) ......... 845,000 16
Centrais Electricas Brasileiras SA ADR -
ADR (UTIE) ...................................... 1,000 9
Companhia Energetica de Minas Gerias -
ADR (UTIE) ...................................... 3,540 51
Companhia Vale do Rio Doce - ADR
(META) .......................................... 1,605 39
Embraer - Empresa Brasileira de
Aeronautica SA (AERO) ........................... 4,800 191
Embratel Participacoes SA - ADR (UTIT) ............ 15,286 240
Petroleo Brasileiro SA * (OILX) ................... 11,400 288
Petroleo Brasileiro SA - ADR (OILX) ............... 3,545 83
Tele Celular Sul Participacoes SA - ADR
(TELS) .......................................... 3,798 99
Tele Norte Leste Participacoes SA - ADR
(TELS) .......................................... 14,832 338
Telecomunicacoes Brasileiras SA - ADR
(UTIT) .......................................... 4,943 360
Telecomunicacoes do Parana SA (TELS) .............. 5,205 307
Telemig Celular Participacoes SA - ADR
(TELS) .......................................... 997 59
Telesp Celular Participacoes SA - ADR
(TELS) .......................................... 7,424 201
Unibanco - Uniao de Bancos Brasileiros
SA - GDR (BANK) ................................. 13,501 398
Votorantim Celulose e Papel SA - ADR
(PAPR) .......................................... 4,400 61
--------
2,740
Cayman Islands - 0.0%
SINA.com * (SOFT) ................................. 1,100 3
Chile - 0.2%
Compania de Telecomunicaciones de
Chile SA (UTIT) ................................. 4,700 62
China - 0.9%
China Petroleum (OILE) ............................ 313,000 49
Great Wall Technology Co. * (ETRN) ................ 393,000 128
Guandong Kelon Electrical Holdings Co.,
Ltd. - H Shares (APPL) .......................... 34,000 6
Nanjing Panda Electric (UTIE) ..................... 222,000 49
Yanzhou Coal Mining Co., Ltd. ADR -
ADR (META) ...................................... 3,960 55
--------
287
Czech Republic - 0.3%
Cesky Telecom AS - GDR * (TELS) ................... 4,270 57
SPT Telecom AS (TELS) ............................. 3,510 48
--------
105
Egypt - 0.6%
Egypt Gas Co. (OILX) .............................. 700 27
Egypt Mobile Phone * (TELS) ....................... 8,448 165
--------
192
Greece - 1.3%
Alpha Credit Bank * (BANK) ........................ 1,770 61
Bank of Piraeus (BANK) ............................ 2,770 43
Commercial Bank of Greece (BANK) .................. 980 48
EFG Eurobank * (BANK) ............................. 494 10
Hellenic Telecommunications
Organization SA (UTIT) .......................... 948 14
Hellenic Telecommunications
Organization SA - ADR (UTIT) .................... 20,974 152
National Bank of Greece SA (BANK) ................. 1,940 74
National Bank of Greece SA - ADR *
(BANK) .......................................... 680 5
--------
407
Hong Kong - 6.2%
Asia Satellite Telecommunications
Holdings, Ltd. (TELS) ........................... 17,000 35
China Merchants Holdings International
Co., Ltd. (CNSU) ................................ 123,000 89
China Mobile (Hong Kong) Limited
(TELS) .......................................... 13,100 355
China Telecom (Hong Kong), Ltd.
(TELS) .......................................... 140,000 765
China Unicom, Ltd. * (TELS) ....................... 1,900 28
China Unicom, Ltd. * (TELS) ....................... 18,000 28
Citic Pacific, Ltd. (DIOP) ........................ 33,000 117
Cosco Pacific, Ltd. (COMM) ........................ 141,000 109
Founder Holdings, Ltd. (META) ..................... 136,000 38
Legend Holdings (COMP) ............................ 205,000 129
Sun Television Cybernetworks
Holdings, Ltd. (MEDI) ............................. 1,269,000 30
TCL International Holdings, Ltd. *
(ETRN) .......................................... 452,000 103
Timeless Software, Ltd. * (SOFT) .................. 204,000 26
Yue Yuen Industrial Holdings (APPA) ............... 32,000 55
--------
1,907
77
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Hungary - 1.1%
Gedeon Richter Rt. (HEAL) ......................... 585 $ 35
Magyar Tavkozlesi Rt. (UTIT) ...................... 12,354 51
Magyar Tavkozlesi Rt. - ADR (UTIT) ................ 7,637 156
OTP Bank Rt. (BANK) ............................... 1,620 91
--------
333
India - 6.7%
Aptech, Ltd. * (SOFT) ............................. 5,600 45
Bharat Heavy Electricals, Ltd. (ELEQ) ............. 38,200 134
BSES, Ltd. * (UTIE) ............................... 12,500 53
Cipla, Ltd. (HEAL) ................................ 1,750 39
Container Corp. of India, Ltd. (TRAN) ............. 24,092 87
Dabur India, Ltd. (HEAL) .......................... 22,000 32
Dr. Reddy's Laboratories, Ltd. (HEAL) ............. 3,500 95
HCL Technologies, Ltd. * (SOFT) ................... 5,500 63
Hero Honda Motors, Ltd. * (AUTO) .................. 3,550 66
Hindustan Lever Ltd. (CNSU) ....................... 24,750 109
Housing Development Financing Corp.,
Ltd. (LEND) ..................................... 12,380 144
Indialnfo, Ltd. (SOFT) ............................ 10,639 44
Indo Gulf Corp., Ltd. (CHEM) ...................... 20,500 19
Infosys Technologies, Ltd. * (SOFT) ............... 2,565 313
Lupin Laboratories, Ltd. (HEAL) ................... 4,600 22
Mahanagar Telephone Nigam, Ltd.
(TELS) .......................................... 29,750 135
NIIT, Ltd. (SOFT) ................................. 2,850 97
Ranbaxy Laboratories, Ltd. * (HEAL) ............... 12,250 176
Reliance Industries, Ltd. - GDR *
(CHEM) .......................................... 7,950 129
Satyam Computer Services Limited
(SOFT) .......................................... 17,435 121
STERLITE Industries (DIOP) ........................ 5,950 20
Strides Arcolab, Ltd. (CNSU) ...................... 2,500 9
Tata Engineering and Locomotive Co.,
Ltd. - GDR (AUTO) ............................... 11,000 20
Zee Telefilms Ltd. (MEDI) ......................... 14,800 88
--------
2,060
Indonesia - 0.6%
PT Gudang Garam Tbk (FOOD) ........................ 99,500 134
PT Indah Kiat Pulp & Paper Corp. Tbk
(PAPR) .......................................... 159,000 13
PT Telekomunikasi Indonesia - ADR
(UTIT) .......................................... 7,510 31
--------
178
Israel - 10.7%
Aladdin Knowledge Systems (SOFT) .................. 5,187 19
AudioCodes, Ltd. * (TELE) ......................... 9,000 122
BATM Advanced Communications
Limited (COMP) .................................. 3,557 6
Breezecom, Ltd. * (TELE) .......................... 7,644 109
CERAGON NETWORKS, Ltd. (TELE) ..................... 2,300 28
Check Point Software Technologies, Ltd.
* (SOFT) ........................................ 5,428 725
ECI Telecommunications, Ltd. (MEDI) ............... 49,540 693
Galileo Technology, Ltd. * (ETRN) ................. 12,926 174
Gilat Satellite Networks, Ltd. * (TELE) ........... 969 25
Nice Systems, Ltd. (TELE) ......................... 813 27
Nice Systems, Ltd. - ADR * (TELE) ................. 2,619 53
Optibase, Ltd. * (COMP) ........................... 5,826 39
RADVision, Ltd. * (SOFT) .......................... 7,767 96
Radware, Ltd. * (SOFT) ............................ 8,889 150
Tecnomatix Technologies, Ltd. * (SOFT) ............ 5,682 30
Teva Pharmaceutical Industries, Ltd. ..............
(HEAL) .......................................... 1,490 105
Teva Pharmaceutical Industries, Ltd. -
ADR (HEAL) ...................................... 10,750 786
TTI Team Telecom International, Ltd. *
(TELS) .......................................... 8,556 128
--------
3,315
Malaysia - 2.1%
British American Tobacco (Malaysia)
Berhad (FOOD) ................................... 14,000 129
Commerce Asset Holding Bhd (BANK) ................. 14,000 30
Digi Swisscom * (TELS) ............................ 40,000 51
Malayan Banking Berhad (BANK) ..................... 38,000 135
Malaysian Pacific Industries (ETRN) ............... 10,000 41
Resorts World Berhad (LEIS) ....................... 19,000 31
Telekom Malaysia Berhad (TELS) .................... 36,000 107
Tenaga Nasional Berhad (UTIE) ..................... 38,000 116
--------
640
Mexico - 10.2%
Alfa, SA * (DIOP) ................................. 44,890 62
Cemex SA de CV - ADR Participation
Certificates * (CONS) ........................... 3,448 62
Cemex SA de CV - CPO * (CONS) ..................... 54,839 198
Cifra SA de CV - Ser. V (RETS) .................... 49,700 99
Fomento Economico Mexicano SA de CV
(FOOD) .......................................... 15,699 47
Fomento Economico Mexicano SA de CV
- ADR (FOOD) .................................... 8,750 261
Grupo Aeroportuario del Sureste SA de
CV * (TRAN) ..................................... 18,100 29
Grupo Aeroportuario Sur - ADR *
(TRAN) .......................................... 5,900 98
Grupo Carso SA de CV - Ser. A1 (DIOP) ............. 15,200 38
Grupo Financiero Banamex Accival, SA
de CV (FINL) .................................... 223,700 368
Grupo Financiero Bancomer SA de CV -
Cl. O (FINL) .................................... 296,850 164
Grupo Modelo SA de CV - Ser. C
(FOOD) .......................................... 8,200 22
Grupo Sanborns SA - Ser. B1 * (RETS) .............. 2,025 3
Grupo Televisa SA - GDR * (MEDI) .................. 7,184 323
78
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Mexico - Continued
IRSA Inversiones y Representaciones SA
- GDR (FINL) .................................... 2,100 $ 23
Kimberly-Clark de Mexico SA de CV
(PAPR) .......................................... 38,030 105
Telefonos de Mexico SA - ADR (UTIT) ............... 25,800 1,164
Wal-Mart de Mexico SA de CV - ADR *
(RETS) .......................................... 3,216 64
Wal-Mart de Mexico SA de CV - Ser. C
(RETS) .......................................... 18,300 34
--------
3,164
Poland - 1.8%
Bank Polska Kasa Opieki SA * (BANK) ............... 1,963 30
BRE Bank SA (BANK) ................................ 170 5
Elektrim Spolka Akcyjna SA (ETRN) ................. 4,506 55
Powszechny Bank Kredytowy SA
(BANK) .......................................... 126 3
Telekomunikacja Polska - GDR * (TELS) ............. 66,965 452
Wielkopolski Bank Kredytowy SA
(BANK) .......................................... 240 2
--------
547
South Africa - 4.4%
Anglo American Platinum Corp., Ltd.
(PMET) .......................................... 3,628 169
Bidvest Group, Ltd. (DIOP) ........................ 13,801 83
De Beers - ADR (PMET) ............................. 1,131 30
De Beers Centenary AG (UTIE) ...................... 7,815 207
Dimension Data Holdings plc (SOFT) ................ 12
Ellerine Holdings, Ltd. (RETS) .................... 10,560 24
FirstRand, Ltd. (FINL) ............................ 12,100 13
Impala Platinum Holdings, Ltd. (META) ............. 509 26
Liberty Life Association of Africa, Ltd.
(INSU) .......................................... 3,600 32
M-Cell, Ltd. (TELS) ............................... 25,170 84
Nedcor, Ltd. (BANK) ............................... 5,400 122
Rembrandt Group, Ltd. (DIOP) ...................... 21,380 57
Remgro, Ltd. * (DIOP) ............................. 21,380 146
Sanlam, Ltd. * (INSU) ............................. 52,300 66
Sasol, Ltd. (OILX) ................................ 25,213 163
South African Breweries plc (FOOD) ................ 21,400 151
--------
1,373
South Korea - 13.9%
39SHOPPING Corp. (RETS) ........................... 1,270 14
Cheil Communications, Inc. (MEDP) ................. 2,120 104
Communication Network Interface, Inc. *
(TELE) .......................................... 9,530 16
Hana Bank (BANK) .................................. 7,020 33
Housing & Commercial Bank, Korea
(BANK) .......................................... 11,664 265
Humax Co., Ltd. * (APPL) .......................... 11,105 92
Hyundai Electronics Industries Co.
(ETRN) .......................................... 27,870 89
Hyundai Motor Co., Ltd. (AUTO) .................... 6,330 61
Kookmin Bank (BANK) ............................... 14,423 170
Korea Electric Power Corp. (UTIE) ................. 6,050 113
Korea Electric Power Corp. - ADR
(UTIE) .......................................... 5,950 61
Korea Telecom Corp. * (TELS) ...................... 10,640 563
Korea Telecom Corp. - ADR * (TELS) ................ 12,490 387
Korea Telecom Freetel * (TELS) .................... 1,630 42
LG Home Shopping, Inc. (RETS) ..................... 1,390 31
LG Investment & Securities Co., Ltd.
(FINL) .......................................... 7,760 36
Pohang Iron & Steel Co., Ltd. (STEE) .............. 530 32
Samsung Electro-Mechanics Co. (ETRN) .............. 4,970 135
Samsung Electronics (ETRN) ........................ 9,100 1,137
Samsung Securities Co., Ltd. (FUND) ............... 3,870 71
Shinhan Bank (BANK) ............................... 15,860 130
SK Telecom Co., Ltd. (TELS) ....................... 2,920 584
SK Telecom Co., Ltd. - ADR (TELS) ................. 3,740 88
Telson Electronics Co., Ltd. (TELE) ............... 11,084 47
Tongyang Cement Co. (CONS) ........................ 1,940 26
--------
4,327
Soviet Union - 2.5%
LUKoil Holding - ADR (OILS) ....................... 8,002 252
RAO Unified Energy Systems - GDR
(UTIE) .......................................... 14,476 119
Rostelecom - ADR * (TELS) ......................... 2,660 14
Surgutneftegaz - ADR (OILS) ....................... 34,786 362
Surgutneftegaz JSC (OILS) ......................... 1,270 11
Vimpel-Communications - ADR *
(TELS) .......................................... 1,550 23
--------
781
Taiwan - 8.5%
Advantech Co., Ltd. (ETRN) ........................ 19,000 60
Ambit Microsystems Corp. (COMP) ................... 17,000 72
Ase Test, Ltd. * (ETRN) ........................... 3,700 31
Asustek Computer (COMP) ........................... 3,000 9
Asustek Computer, Inc. - GDR (COMP) ............... 27,424 82
Chinatrust Commercial Bank (BANK) ................. 94,000 57
Compal Electronics Inc. (COMP) .................... 81,000 110
Delta Electronics Inc. (ETRN) ..................... 78,000 244
Far Eastern Textile, Ltd. - GDR * (APPA) .......... 2,849 20
Far Eastern Textile, Ltd. - GDR 144A (a)
* (APPA) ........................................ 2,780 19
Hon Hai Precision Industry Co., Ltd. -
GDR * (ETRN) .................................... 18,890 219
Hon Hai Precision Insustry Co., Ltd. Cl. G
* (ETRN) ........................................ 17,000 86
Macronix International Co., Ltd. *
(COMP) .......................................... 53,000 64
Powerchip Semiconductor Corp. *
(ETRN) .......................................... 110,000 55
President Chain Store Corp. (RETS) ................ 21,000 55
79
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Taiwan - Continued
Pro Mos Technologies Inc. * (COMP) ................ 20,000 $ 18
Quanta Computer, Inc. (COMP) ...................... 35,000 92
Siliconware Precision (SOFT) ...................... 90,000 50
Siliconware Precision - ADR * (ETRN) .............. 15,552 39
Taishin International Bank (BANK) ................. 43,000 18
Taiwan Semiconductor (ETRN) ....................... 81,000 194
Taiwan Semiconductor Manufacturing
Co., Ltd. ADR (ETRN) ............................ 24,405 421
Uni-President Enterprises Co. * (FOOD) ............ 50,000 33
United Microelectronics Corp. (COMP) .............. 258,000 375
Winbond Electronic (ETRN) ......................... 39,000 37
Winbond Electronics Corp. - GDR *
(ETRN) .......................................... 9,847 92
Yageo Corp. * (ETRN) .............................. 104,000 82
Zinwell Corp. * (TELE) ............................ 9,000 13
--------
2,647
Thailand - 1.3%
Advanced Info Service Public Co., Ltd.
(TELS) .......................................... 15,900 154
BEC World Public Co., Ltd. (MEDI) ................. 12,700 58
Delta Electronics (Thailand) Public Co.,
Ltd. (ETRN) ..................................... 17,020 73
Shin Corp. Public Co., Ltd. (COMP) ................ 14,700 54
Thai Farmers Bank Public Co., Ltd.
(BANK) .......................................... 58,600 29
Total Access Communication Public Co.,
Ltd (TELS) ...................................... 14,000 38
--------
406
Turkey - 2.1%
Alcatel Teletas Telekomunikasyon
Endustri ve Ticaret AS (TELE) ................... 197,626 21
Anadolu Efes Biracilik ve Malt Sanayii
AS (FOOD) ....................................... 1,209,995 59
Netas Northern Electric
Telekomunikasyon AS (TELE) ...................... 1,521,639 157
Turkcell Iletisim Hizmetleri AS (TELS) ............ 7,008 49
Turkiye Garanti Bankasi AS (BANK) ................. 9,650,518 54
Vestel Elektronik Sanayi ve Ticaret A.S
(ETRN) .......................................... 9,097,620 34
Yapi ve Kredi Bankasi AS - GDR *
(BANK) .......................................... 1,045 5
Yapi ve Kredi Bankasi AS (BANK) ................... 55,623,378 286
--------
665
United Kingdom - 0.1%
South African Breweries plc * (FOOD) .............. 3,923 28
United States - 1.6%
Advanced Semiconductor (ETRN) ..................... 14,175 44
Amdocs, Ltd. * (TELS) ............................. 1,861 123
AsiaInfo Holdings, Inc. * (SOFT) .................. 30
Comverse Technology, Inc. * (COMP) ................ 1,638 178
Metalink, Ltd. * (ETRN) ........................... 2,300 22
Netease.com, Inc. (SOFT) .......................... 6,500 20
Sohu.com, Inc. (SOFT) ............................. 5,100 12
Wipro, Ltd. * (DIOP) .............................. 600 30
Zoran Corp. * (ETRN) .............................. 4,215 66
--------
495
--------
TOTAL COMMON STOCK- 86.5% 26,813
PREFERRED STOCK
Brazil - 5.4%
Banco Itau SA (BANK) .............................. 893,000 85
Celular CRT Participacoes * (TELS) ................ 1,045,321 338
Centrais Electricas Brasileires SA - Cl. B
(UTIE) .......................................... 453,000 8
Companhia Energetica de Minas Gerais -
CEMIG (UTIE) .................................... 2,843,400 41
Companhia Riograndense de
Telecomunicacoes * (TELS) ....................... 800,100 322
Companhia Vale do Rio Doce - Cl. A *
(META) .......................................... 11,639 284
Embratel Participacoes SA (UTIT) .................. 7,783,000 118
Petroleo Brasileiro SA - Petrobras (OILS) ......... 6,236 147
Tele Celular Sul Participacoes SA (TELS) .......... 8,034,000 21
Tele Centro Sul Participacoes SA (UTIT) ........... 6,041,000 69
Tele Nordeste Celular Participacoes SA
(TELS) .......................................... 12,797,600 26
Tele Norte Leste Participacoes SA (UTIT) .......... 4,093,062 88
Telemig Celular Participacoes SA (TELS) ........... 13,849,850 42
Telesp Celular Participacoes SA * (TELS) .......... 9,982,286 105
--------
1,694
South Korea - 0.2%
Samsung Electronics (ETRN) ........................ 960 53
--------
TOTAL PREFERRED STOCK- 5.6% 1,747
80
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS - 6.7%
Investment in joint trading account
(Note B)
6.695% due 01/02/01 ............... $ 2,076 $ 2,076
----------- ---------
TOTAL INVESTMENTS- 98.8% 30,636
Cash and Receivables, less payables- 1.2% 374
NET ASSETS- 100.0% 31,010
=========== =========
* Non-income producing security.
ADR-American Depositary Receipt
GDR-Global Depository Receipt
(a) Pursuant to Rule 144A under the Securities Act of 1993, these
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 2000,
securities aggregated $19 or .06% of net assets of the Portfolio.
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Telecommunication Services...... TELS 6,438 22.5%
Electronic Products & Services.. ETRN 3,713 13.0%
Telephone ...................... UTIT 2,507 8.8%
Bank ........................... BANK 2,199 7.7%
Computer Software & Services.... SOFT 1,815 6.4%
Health Care Products ........... HEAL 1,292 4.5%
Computer Equipment ............. COMP 1,226 4.3%
Media - TV / Radio ............. MEDI 1,192 4.2%
Food, Beverage & Tobacco ....... FOOD 862 3.0%
Electric Power ................. UTIE 843 3.0%
Oil ............................ OILS 772 2.7%
Financial Services ............. FINL 640 2.2%
Telecommunication Equipment..... TELE 617 2.2%
Oil & Natural Gas...............
Exploration & Production ....... OILX 562 2.0%
Diversified Operations ......... DIOP 551 1.9%
Metals & Mining ................ META 441 1.5%
Retail - Department Stores...... RETS 323 1.1%
Construction ................... CONS 287 1.0%
Transportation Services ........ TRAN 214 0.8%
Consumer Miscellaneous ......... CNSU 207 0.7%
Precious Metals/Gems/Stones..... PMET 200 0.7%
Aerospace & Defense ............ AERO 191 0.7%
Paper & Forest Products ........ PAPR 180 0.6%
Chemical ....................... CHEM 148 0.5%
Automobile ..................... AUTO 147 0.5%
Personal & Commercial Lending .. LEND 144 0.5%
Electrical Equipment ........... ELEQ 134 0.5%
Commercial Sevices ............. COMM 109 0.4%
Media - Publishing ............. MEDP 104 0.4%
Insurance ...................... INSU 98 0.3%
Household Appliances /
Furnishings .................. APPL 98 0.3%
Shoe & Apparel Manufacturing ... APPA 95 0.3%
Brokerage & Investment .........
Management ................... FUND 71 0.2%
Oil - Equipment & Service ...... OILE 49 0.2%
Steel .......................... STEE 44 0.2%
Leisure & Recreation ........... LEIS 30 0.1%
Real Estate Development ........ READ 16 0.1%
-------- --------
$ 28,560 100.0%
======== ========
81
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Argentina - 0.2%
Banco Frances SA (BANK) .......................... 10,000 $ 69
GPO Finance GALICIA (FINL) ....................... 40,460 60
IRSA Inversiones y Representaciones
SA (READ) ...................................... 29,022 49
PC Holdings SA - Cl. B (FINL) .................... 53,132 82
Siderca SAIC (STEE) .............................. 35,000 68
---------
328
Australia - 2.4%
Amcor, Ltd. (CONT) ............................... 25,300 74
AMP Diversified Property Trust (REIT)............. 106,700 145
AMP, Ltd. * (INSU) ............................... 33,300 375
Aristocrat Leisure Limited (LEIS) ................ 30,900 89
Brambles Industries, Ltd. (DIOP) ................. 7,200 168
Broken Hill Proprietary Co., Ltd. (DIOP).......... 35,100 370
Coles Myer, Ltd. (RETS) .......................... 39,400 153
CSL Limited (HEAL) ............................... 2,600 56
CSR, Ltd. (CONS) ................................. 37,900 99
Foster's Brewing Group, Ltd. (FOOD) .............. 70,100 184
General Property Trust (REIT) .................... 53,300 82
Lend Lease Corp. (FINL) .......................... 13,200 123
National Australia Bank, Ltd. (BANK) ............. 30,600 490
News Corp., Ltd. (MEDI) .......................... 45,600 355
ONESTEEL (STEE) .................................. 8,775 5
Orica, Ltd. (DIOP) ............................... 15,500 50
Pacific Dunlop, Ltd. (DIOP) ...................... 59,000 49
Paperlinx (PAPR) ................................. 4,800 9
QBE Insurance Group, Ltd. (INSU) ................. 11,200 62
Rio Tinto, Ltd. (PMET) ........................... 7,900 129
Santos, Ltd. (OILX) .............................. 38,000 127
TABCORP Holdings, Ltd. (LEIS) .................... 16,400 100
Telstra Corp., Ltd. (TELS) ....................... 166,200 594
Westfield Trust (REIT) ........................... 54,000 102
Westpac Banking Corp., Ltd. (BANK) ............... 46,600 342
WMC, Ltd. (DIOP) ................................. 29,500 126
Woolworth's, Ltd. (RETS) ......................... 30,300 142
---------
4,600
Austria - 1.3%
Austria Tabak AG (FOOD) .......................... 3,700 205
Austrian Airlines (TRAN) ......................... 5,550 64
Bank Austria AG (BANK) ........................... 16,200 892
BBAG Oesterreichische Brau
Beteiligungs AG (FOOD) ......................... 2,150 93
Bohler-Uddeholm AG (STEE) ........................ 1,500 49
BWT AG (POLL) .................................... 2,000 66
EA-Generali AG (INSU) ............................ 1,050 181
Flughafen Wien AG (TRAN) ......................... 4,000 151
Mayr-Melnhof Karton Ag (PAPR) .................... 1,800 79
Oesterreichische
Elektrizitaetswirtschafts AG (UTIE) ............ 3,900 396
OMV AG (OILX) .................................... 3,000 232
VA Technologie AG (ENGI) ......................... 2,100 63
Wienerberger Baustoffindustrie AG
(CONS) ......................................... 7,200 129
---------
2,600
Belgium - 1.5%
Barco NV (ETRN) ............................... 559 42
BarcoNet NV * (ETRN) .......................... 1,118 9
Bekaert NV (METP) ............................. 1,390 65
Colruyt, NV (RETF) ............................ 1,870 82
Compagnie Maritime Belge SA (TRAN)............. 1,921 144
D' Ieteren SA (AUTO) .......................... 190 42
Delhaize "Le Lion" SA (RETF) .................. 1,255 60
Electrabel SA (UTIE) .......................... 1,536 347
Fortis (B) (INSU) ............................. 30,692 997
Groupe Bruxelles Lambert SA (FUND)............. 1,094 260
KBC Bancassurance Holding NV (BANK) 10,840 470
N.V. Union Miniere SA * (META) ................ 1,461 55
Solvay SA (FINL) .............................. 2,115 118
Suez Lyonnaise des Eaux SA - Strip
VVPR * (DIOP) ............................... 2,341
Total Fina SA - Strip VVPR * (DIOP) 3,609
UCB SA (HEAL) ................................. 4,800 178
---------
2,869
Bermuda - 0.0%
Brierly Investments, Ltd. (FUND) .............. 295,300 38
Brazil - 0.2%
Centrais Electricas Brasileiras SA
(UTIE) ...................................... 10,577,000 196
Companhia de Bebidas das Americas *
(FOOD) ...................................... 482,000 116
Tele Norte Leste Participacoes SA
(UTIT) ...................................... 11,096,000 182
---------
494
Chile - 0.4%
Banco Santiago SA - ADR (BANK) ................ 2,900 57
Compania Cervecerias Unidas SA -
ADR (FOOD) .................................. 3,900 84
Compania de Telecomunicaciones de
Chile SA (UTIT) ............................. 8,000 106
Embotelladora Andina SA - ADR
(FOOD) ...................................... 6,100 73
Empresa Nacional de Electricidad SA -
ADR (UTIE) .................................. 10,100 110
Enersis SA - ADR (UTIE) ....................... 3,700 65
Laboratorio Chile SA - ADR (HEAL) 5,700 102
Madeco SA - ADR (META) ........................ 13,000 62
Sociedad Quimica y Minera de Chile SA
- ADR (CHEM) ................................ 3,400 71
---------
730
82
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
China - 0.1%
Beijing Datang Power Generation
Company Limited (UTIE) ......................... 287,000 $ 75
Guangshen Railway Company Limited
(TRAN) ......................................... 544,000 68
Huaneng Power International, Inc. -
ADR * (UTIE) ................................... 4,900 92
---------
235
Czech Republic - 0.2%
Ceska Sporitelna AS (BANK) ....................... 9,500 59
Ceske Energeticke Zavody AS (UTIE)................ 35,500 94
Komercni Banka AS (BANK) ......................... 4,100 99
SPT Telecom AS (TELS) ............................ 6,300 85
---------
337
Denmark - 1.0%
A/S Dampskibsselskabet Svendborg -
Cl. B (TRAN) ................................... 27 316
D/S 1912 - Cl. B (TRAN) .......................... 40 348
Danisco AS (FOOD) ................................ 1,650 68
Danske Bank (BANK) ............................... 11,500 207
ISS AS (COMM) .................................... 1,650 112
Novo Nordisk AS - Cl. B .......................... 2,350 422
(HEAL)
Novozymes AS - Ser. B * (HEAL) ................... 2,350 47
Tele Danmark AS (TELS) ........................... 6,850 279
Vestas Wind Systems AS (ENER) .................... 2,500 135
---------
1,934
Finland - 0.7%
Nokia Oyj (HEAL) ................................. 24,900 1,111
Sampo Insurance Co. plc (INSU) ................... 1,900 102
Sonera Oyj (TELS) ................................ 5,432 98
UPM-Kymmene Corp. * (PAPR) ....................... 2,700 93
---------
1,404
France - 9.0%
Accor SA (LEIS) .................................. 5,285 223
Air Liquide (CHEM) ............................... 1,306 195
Alcatel (TELE) ................................... 18,887 1,073
AXA SA (INSU) .................................... 7,233 1,046
Banque Nationale de Paris (BANK) ................. 7,536 662
Bouygues SA (CONT) ............................... 6,110 277
Canal Plus (MEDI) ................................ 2,215 8
Cap Gemini SA (COMM) ............................. 1,622 262
Carrefour SA (RETF) .............................. 11,715 736
Casino Guichard-Perrachon SA (RETF)............... 2,053 207
Club Mediterranee SA (LEIS) ...................... 838 71
Compagnie de St. Gobain (CONS) ................... 1,795 282
Dassault Systemes SA (SOFT) ...................... 1,995 137
Eridania Beghin-Say SA (FOOD) .................... 98 8
Essilor International SA (HEAL) .................. 188 61
France Telecom (TELS) ............................ 17,681 1,527
Groupe Danone (FOOD) ............................. 2,269 342
Imercys (CONS) ................................... 794 90
L'Oreal SA (HNBA) ................................ 11,360 974
Lafarge SA (CONS) ................................ 2,526 212
Lagardere SCA (DIOP) ............................. 2,436 141
LVMH (Louis Vuitton Moet Hennessy)
(FOOD) ......................................... 8,190 542
Michelin (PART) .................................. 1,649 60
Pernod Ricard (FOOD) ............................. 1,763 122
Pinault-Printemps-Redoute SA (RETS)............... 1,992 428
PSA Peugeot Citroen (AUTO) ....................... 921 209
Rhone-Poulenc SA (BANK) .......................... 13,304 1,168
Sagem SA (ETRN) .................................. 627 84
Sanofi-Synthelabo SA * (HEAL) .................... 12,652 843
Schneider SA (MACH) .............................. 2,599 190
Sidel SA (MACH) .................................. 1,162 53
Societe BIC SA (COMM) ............................ 1,234 48
Societe Eurafrance SA (FINL) ..................... 128 93
Societe Generale - Cl. A (BANK) .................. 7,301 454
STMICROELECTRONICS (ETRN) ........................ 15,453 675
Suez Lyonnaise des Eaux (FOOD) ................... 3,904 713
Thomson CFS (ETRN) ............................... 3,440 165
Total Fina SA - Cl. B (OILX) ..................... 13,079 1,945
Unibail (REAL) ................................... 700 112
Usinor SA (STEE) ................................. 5,194 69
Valeo SA (PART) .................................. 1,712 76
Vivendi Universal SA (DIOP) ...................... 15,051 991
---------
17,574
Germany - 12.2%
Adidas-Salomon AG (APPA) ......................... 1,920 119
Allianz AG - Reg. (INSU) ......................... 8,130 3,043
BASF AG (CHEM) ................................... 20,210 914
Bayer AG (CHEM) .................................. 22,930 1,203
Bayerische Vereinsbank AG (BANK) ................. 13,272 751
Beiersdorf AG (HNBA) ............................. 2,220 232
Continental AG (PART) ............................ 1,100 18
DaimlerChrysler AG (AUTO) ........................ 31,945 1,342
Deutsche Bank AG (BANK) .......................... 19,450 1,635
Deutsche Telekom AG (UTIT) ....................... 100,890 3,041
Douglas Holding AG (HNBA) ........................ 1,090 42
Dresdner Bank AG (BANK) .......................... 18,460 805
E.On AG (DIOP) ................................... 23,048 1,402
EM.TV & Merchandising AG (MEDI) .................. 4,391 24
Fresenius Medical Care AG (HEAL) ................. 2,350 192
Heidelberg Zement (CONS) ......................... 1,480 68
Heidelberger Zement AG * (CONS) .................. 1,048 46
Hochtief AG (CONS) ............................... 3,810 75
Kamps AG (FOOD) .................................. 2,666 28
Karstadt AG (RETS) ............................... 4,100 127
Linde AG (ENGI) .................................. 3,300 160
Lufthansa AG (TRAN) .............................. 9,730 251
MAN AG (DIOP) .................................... 4,400 112
Merck KGaA (HEAL) ................................ 6,110 270
Metro AG * (RETS) ................................ 9,200 430
83
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Germany - Continued
Muenchener Rueckversicherungs-
Gesellschaft AG - Reg. (INSU) .................... 5,760 $ 2,061
Preussag AG (DIOP) ............................... 6,400 231
RWE AG (UTIE) .................................... 14,500 651
SAP AG (SOFT) .................................... 6,160 716
Schering AG (HEAL) ............................... 4,890 278
SGL Carbon AG (CHEM) ............................. 1,190 64
Siemens AG (DIOP) ................................ 19,860 2,596
Thyssen Krupp AG (CONS) .......................... 16,413 254
Volkswagen AG (AUTO) ............................. 10,119 529
WCM Beteiligungs-und Grundbesitz AG
(DIOP) ......................................... 7,132 106
----------
23,816
Greece - 0.5%
Alpha Credit Bank (BANK) ......................... 4,410 153
Commercial Bank of Greece (BANK).................. 1,780 87
EFG Eurobank * (BANK) ............................ 4,407 85
Hellenic Bottling Co. SA (FOOD) .................. 3,500 57
Hellenic Telecommunication
Organization SA (UTIT) ......................... 13,420 200
Intracom SA (TELE) ............................... 4,860 110
National Bank of Greece SA (BANK)................. 5,160 197
Titan Cement Co. SA (CONS) ....................... 1,400 55
----------
944
Hong Kong - 1.5%
Cathay Pacific Airways (TRAN) .................... 32,000 59
China Southern Airlines Company
Limited * (TRAN) ............................... 286,000 87
China Telecom (Hong Kong), Ltd.
(TELS) ......................................... 107,000 584
CLP Holdings, Ltd. (UTIE) ........................ 25,500 127
Hang Seng Bank, Ltd. (BANK) ...................... 22,700 306
Henderson Land Development Co., Ltd.
(READ) ......................................... 22,000 112
Hutchison Whampoa, Ltd. (COMM) ................... 52,500 655
LEGEND Holdings (COMP) ........................... 122,000 77
Li & Fung, Ltd. (COMM) ........................... 36,000 65
New World Development Co., Ltd.
(READ) ......................................... 48,000 58
Pacific Century Cyberworks, Ltd. *
(TELE) ......................................... 202,380 130
Sun Hung Kai Properties, Ltd.(REIT)............... 31,000 309
Swire Pacific, Ltd. - Cl. A (DIOP)................ 23,500 169
Wharf (Holdings), Ltd. (DIOP) .................... 44,000 107
----------
2,845
Hungary - 0.3%
Danubius Hotel and Spa Rt. (LEIS)................. 3,600 56
Gedeon Richter Rt. (HEAL) ........................ 900 53
Magyar Tavkozlesi Rt. (UTIT) ..................... 36,200 151
MOL Magyar Olaj-es Gazipari Rt.
(OILX) ......................................... 7,500 127
OTP Bank Rt. (BANK) .............................. 2,300 129
----------
516
India - 0.7%
Bajaj Auto, Ltd. - GDR (AUTO) .................... 14,300 79
EIH, Ltd. - GDR (REAL) ........................... 23,000 122
Grasim Industries, Ltd. - GDR (DIOP).............. 15,000 101
Gujarat Ambuja Cements, Ltd. - GDR
(CONS) ......................................... 23,800 80
Hindalco Industries, Ltd. - GDR
(META) ......................................... 5,500 98
Indian Hotels Co., Ltd. - GDR (REAL).............. 16,700 79
ITC, Ltd. - GDR * (FOOD) ......................... 13,600 262
Larsen & Toubro, Ltd. - GDR (DIOP)................ 13,500 113
Mahindra & Mahindra, Ltd. - GDR *
(AUTO) ......................................... 16,500 50
Ranbaxy Laboratories, Ltd. - GDR
(HEAL) ......................................... 5,700 91
Reliance Industries, Ltd. - GDR *
(CHEM) ......................................... 13,100 212
Tata Engineering and Locomotive Co.,
Ltd. - GDR (AUTO) .............................. 34,600 62
----------
1,349
Ireland - 0.6%
Allied Irish Banks plc (BANK) .................... 26,800 311
CRH plc (CONS) ................................... 13,300 248
Eircom plc * (TELS) .............................. 69,432 176
Greencore Group plc (FOOD) ....................... 26,000 68
Irish Life & Permanent plc (FINL)................. 9,553 118
Jefferson Smurfit Group plc
(CONT) ......................................... 47,000 93
Kerry Group plc (FOOD) ........................... 8,400 109
Ryanair Holdings plc * (TRAN) .................... 11,421 123
----------
1,246
Israel - 0.6%
Bank Hapoalim (BANK) ............................. 43,700 127
Bezeq Israeli Telecommunication Corp.,
Ltd. (UTIT) .............................. 28,300 152
Check Point Software Technologies, Ltd.
* (SOFT) ....................................... 3,200 427
IDB Holding Corp., Ltd. (FUND) ................... 5,700 201
Industrial Building Corp. (CONS).................. 45,100 68
Makteshim-Agan Industries, Ltd. *
(CHEM) ......................................... 26,900 66
Teva pharmaceutical Industries, Ltd.
(HEAL) ......................................... 3,200 226
----------
1,267
Italy - 7.7%
Alitalia SpA (TRAN) .............................. 60,000 108
Assicurazioni Generali (INSU) .................... 44,632 1,773
Autogrill SpA (RETF) ............................. 10,001 123
Banca Di Roma (BANK) ............................. 60,000 65
84
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Italy - Continued
Banca Intesa SpA (BANK) .......................... 178,800 $ 860
Banca Intesa SpA - RNC (BANK) .................... 37,400 108
Banca Popolare di Milano (BANK)................... 18,100 90
Benetton Group SpA (APPA) ........................ 103,979 217
Bulgari SpA (RETS) ............................... 8,900 110
Enel SpA * (UTIE) ................................ 248,583 966
ENI SpA (OILS) ................................... 285,800 1,825
Fiat SpA (AUTO) .................................. 15,350 361
Fiat SpA - RNC (AUTO) ............................ 720 10
Italcementi SpA (CONS) ........................... 10,920 91
ITALGAS(SOC ITAL) (UTIG) ......................... 12,650 128
La Rinascente SpA (CONS) ......................... 10,500 62
Marzotto & Figli SpA (APPA) ...................... 7,500 89
Mediaset SpA (MEDI) .............................. 44,200 528
Mediobanca SpA (FUND) ............................ 24,000 272
Mondadori (Arnoldo) Editore SpA
(MEDP) ......................................... 10,800 100
Olivetti SpA (COMM) .............................. 178,400 426
Parmalat Finanziaria SpA (FOOD)................... 77,600 126
Pirelli SpA (DIOP) ............................... 71,100 253
Riunione Adriatica di Sicorta SpA
(INSU) ......................................... 25,379 396
Riunione Adriatica di Sicorta SpA -
RNC (INSU) ..................................... 2,920 35
SAI spa (INSU) ................................... 4,300 85
San Paolo-IMI SpA (BANK) ......................... 57,310 927
Seat Pagine Gialle SpA (MEDP) .................... 10,012 22
Sirti SpA (TELE) ................................. 11,100 19
Telecom Italia Mobile SpA (TELS).................. 240,100 1,916
Telecom Italia Mobile SpA - RNC
(TELS) ......................................... 48,200 210
Telecom Italia SpA (TELS) ........................ 131,500 1,455
Telecom Italia SpA - RNC (TELS)................... 47,300 284
UniCredito Italiano SpA (BANK) ................... 196,600 1,028
----------
15,068
Japan - 26.8%
77 Bank, Ltd. (BANK) ............................. 18,000 103
Acom Co., Ltd. (LEND) ............................ 4,200 310
Ajinomoto Co., Inc. (FOOD) ....................... 20,000 260
Alps Electric Co. (ETRN) ......................... 6,000 91
Amada Co., Ltd (MACH) ............................ 13,000 97
Asahi Bank, Ltd. (BANK) .......................... 73,000 248
Asahi Breweries, Ltd. (FOOD) ..................... 13,000 132
Asahi Chemical Industry Co., Ltd.
(CHEM) ......................................... 42,000 242
Asahi Glass Co., Ltd. (APPL) ..................... 39,000 322
Bank of Tokyo-Mitsubishi (BANK)................... 127,000 1,263
Bank of Yokohama, Ltd. (BANK) .................... 22,000 100
Benesse Corp. (COMM) ............................. 2,600 96
Bridgestone Corp. (PART) ......................... 21,000 191
Canon, Inc. (COMM) ............................... 22,000 770
Casio Computer Co. (ETRN) ........................ 9,000 76
Central Japan Railway Co. (TRAN).................. 61 375
Chugai Pharmaceutical Co., Ltd.
(HEAL) ......................................... 4,000 67
Citizen Watch Co., Ltd. (RETS) ................... 10,000 73
Cosmo Oil Co., Ltd. (OILX) ....................... 33,000 59
Credit Saison Co., Ltd. (FINL) ................... 5,600 120
CSK Corp. (SOFT) ................................. 3,200 47
Dai Nippon Printng Co., Ltd. (COMM)............... 19,000 283
Daicel Chemical Industries, Ltd.
(CHEM) ......................................... 16,000 49
Daiichi Pharmaceutical Co., Ltd.
(HEAL) ......................................... 10,000 297
Daikin Industries, Ltd. (CONS) ................... 10,000 192
Dainippon Ink & Chemicals, Inc.
(CHEM) ......................................... 28,000 83
Dainippon Screen Manufacturing Co.,
Ltd. (ELEQ) .................................... 15,000 72
Daito Trust Construction Co., Ltd.
(REAL) ......................................... 3,600 65
Daiwa House Industry Co., Ltd.(HOUS).............. 17,000 106
Daiwa Securities Group, Inc. (FUND)............... 37,000 386
Denso Corp. (ETRN) ............................... 19,000 411
East Japan Railway Co. (TRAN) .................... 107 627
Ebara Corp. (MACH) ............................... 9,000 98
Eisai Co. Ltd. (HEAL) ............................ 10,000 350
Fanuc, Ltd. (ELEQ) ............................... 6,300 428
Fuji Machine Mfg. CO., LTD. (MACH)................ 1,000 27
Fuji Photo Film (LEIS) ........................... 14,000 585
Fuji Soft ABC, Inc. (SOFT) ....................... 1,000 64
Fujikura (ELEQ) .................................. 11,000 82
Fujitsu, Ltd. (ELEQ) ............................. 51,000 751
Furukawa Electric Co. (TELE) ..................... 16,000 279
Hankyu Corp. (TRAN) .............................. 18,000 57
Hirose Electric Co., Ltd. (ETRN).................. 1,200 115
Hitachi, Ltd. (ETRN) ............................. 88,000 784
Honda Motor Co. (AUTO) ........................... 25,000 932
Hoya Corp. (ETRN) ................................ 3,000 220
Isetan Co., Ltd. (RETS) .......................... 14,000 148
Ishikawajima-Harima Heavy Industries
Co., Ltd. (DIOP) ............................... 28,000 60
Ito-Yokado Co., Ltd. (RETS) ...................... 11,000 548
Itochu Corp. (DIOP) .............................. 42,000 195
Japan Airlines Co., Ltd. (TRAN)................... 50,000 229
Japan Energy Corp. (OILX) ........................ 54,000 84
Japan Tobacco, Inc. (FOOD) ....................... 45 349
Joyo Bank, Ltd. (BANK) ........................... 29,000 92
JUSCO Co., Ltd. * (RETS) ......................... 10,000 217
Kajima Corp. (CONS) .............................. 35,000 97
Kaneka Corp. (CHEM) .............................. 5,000 47
Kansai Electric Power Co., Inc.(UTIE)............. 22,800 387
KAO Corp. (HNBA) ................................. 16,000 465
Kawasaki Heavy Industry, Ltd. (DIOP).............. 46,000 49
Kawasaki Steel Corp. (STEE) ...................... 100,000 103
85
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Japan - Continued
Keihin Electric Express Railway Co.,
Ltd. (TRAN) .................................... 17,000 $ 68
Kinden Corp. (ENGI) .............................. 12,000 69
Kinki Nippon Railway (TRAN) ...................... 35,000 146
Kirin Brewery Co. (FOOD) ......................... 21,000 188
Kokuyo Co. (COMM) ................................ 6,000 89
Komatsu, Ltd. (MACH) ............................. 30,000 133
Komori Corp. (MACH) .............................. 4,000 67
Konami Co., Ltd. (COMP) .......................... 3,700 277
Konica Corp. (LEIS) .............................. 17,000 139
Kubota Corp. (MACH) .............................. 48,000 146
Kuraray Co., Ltd. (APPA) ......................... 10,000 93
Kurita Water Industries, Ltd. (POLL).............. 5,000 65
Kyocera Corp. (ETRN) ............................. 5,200 567
Kyowa Hakko Kogyo Co., LTD.
(HEAL) ......................................... 9,000 62
Makita Corp. (CNSU) .............................. 8,000 56
Marubeni Corp. (DIOP) ............................ 31,000 73
Marui Co., Ltd. (RETS) ........................... 13,000 196
Matsushita Electric Industrial Co.
(ETRN) ......................................... 53,000 1,266
Minebea Co., Ltd. (ETRN) ......................... 4,000 37
Mitsubishi Chemical Corp. (CHEM) ................. 61,000 161
Mitsubishi Corp. (DIOP) .......................... 44,000 324
Mitsubishi Electric Corp. (ETRN) ................. 52,000 320
Mitsubishi Estate Co., Ltd. (REAL)................ 37,000 395
Mitsubishi Heavy Industries, Ltd.
(MACH) ......................................... 90,000 392
Mitsubishi Logistcs Corp. (TRAN) ................. 7,000 61
Mitsubishi Materials Corp. (PMET) ................ 39,000 93
Mitsubishi Rayon Co., Ltd. (APPA) ................ 27,000 81
Mitsubishi Trust & Banking Corp.
(BANK) ......................................... 37,000 254
Mitsui & Co., Ltd. (DIOP) ........................ 31,000 195
Mitsui Fudosan Co., Ltd. (REAL) .................. 24,000 238
Mitsui Marine & Fire Insurance Co.,
Ltd. (INSU) .................................... 25,000 143
Mitsui Mining & Smelting Co., Ltd.
(META) ......................................... 17,000 131
Mitsukoshi, Ltd. (RETS) .......................... 14,000 57
Mizuho Holdings, Inc. * (FINL) ................... 160 991
Mori Seiki Co., Ltd. (MACH) ...................... 5,000 55
Murata Manufacturing Co., Ltd. (ETRN)............. 6,500 762
Mycal Corp. (RETS) ............................... 20,000 43
NAMCO, Ltd. (LEIS) ............................... 3,800 70
NEC Corp. (COMP) ................................. 43,000 786
NGK Insulators (PART) ............................ 11,000 146
NGK Spark Plug Co. (PART) ........................ 9,000 131
Nidec Corp. (MACH) ............................... 2,000 94
Nikon Corp. (LEIS) ............................... 11,000 118
Nintendo Corp., Ltd. (LEIS) ...................... 3,800 598
Nippon Comsys Corp. (ENGI) ....................... 6,000 108
Nippon Express Co., Ltd. (TRAN) .................. 31,000 187
Nippon Mitsubishi Oil Co., Ltd. (OILX)............ 27,000 130
Nippon Paper Industries Co. (PAPR)................ 25,000 149
Nippon Sheet Glass Co., Ltd. (DIOP)............... 14,000 171
Nippon Steel Co. (STEE) .......................... 133,000 220
Nippon Telegraph & Telephone Corp.
(UTIT) ......................................... 333 2,397
Nippon Yusen Kabushiki Kaisha
(TRAN) ......................................... 40,000 165
Nissan Motor Acceptance Corp. (FINL).............. 101,000 581
Nitto Denko Corp. (ETRN) ......................... 4,000 108
Nomura Securities Co., Ltd. (FUND)................ 53,000 953
NSK, Ltd. (META) ................................. 20,000 122
NTN Corp. (METP) ................................. 19,000 59
Obayashi Corp. (CONS) ............................ 22,000 95
Oji Paper Co. (PAPR) ............................. 27,000 139
Olympus Optical Co. (LEIS) ....................... 9,000 156
Omron Corp. (ETRN) ............................... 8,000 166
Onward Kashiyama Co., Ltd. (APPA) ................ 9,000 75
Oriental Land Co., Ltd. (LEIS) ................... 2,000 134
Orix Corp. (FINL) ................................ 2,400 241
Osaka Gas Co. (UTIG) ............................. 81,000 246
Pioneer Corp. (ETRN) ............................. 6,000 160
Promise Co., Ltd. (LEND) ......................... 2,600 184
Rohm Co., Ltd. (ETRN) ............................ 3,100 588
Sakura Bank, Ltd. (BANK) ......................... 112,000 676
Sankyo Co., Ltd. (HEAL) .......................... 13,000 312
Sanrio Co., Ltd. * (CNSU) ........................ 3,000 52
Sanyo Electric Co. (ETRN) ........................ 52,000 432
Secom Co. (COMM) ................................. 7,000 456
Sega Enterprises (CNSU) .......................... 4,300 42
Sekisui Chemical Co. (CHEM) ...................... 20,000 57
Sekisui House, Ltd. (CONS) ....................... 23,000 210
Sharp Corp. (ETRN) ............................... 29,000 350
Shimamura Co., Ltd. (RETS) ....................... 1,000 55
SHIMANO, Inc. (LEIS) ............................. 5,000 98
Shimizu Corp. (CONS) ............................. 29,000 86
Shin-Etsu Chemical Co. (CHEM) .................... 9,000 346
Shionogi & Co., Ltd. (HEAL) ...................... 14,000 285
Shiseido Co., Ltd. (CHEM) ........................ 14,000 156
Shizuoka Bank, Ltd. (BANK) ....................... 19,000 173
Showa Shell Sekiyu K.K. (OILX) ................... 21,000 88
Skylark Co., Ltd. (FOOD) ......................... 3,000 84
SMC Corp. (MACH) ................................. 2,000 257
Softbank Corp. (SOFT) ............................ 8,800 306
Sony Corp. (ETRN) ................................ 23,500 1,624
Sumitomo Bank (BANK) ............................. 86,000 882
Sumitomo Chemical Co. (CHEM) ..................... 48,000 238
Sumitomo Corp. (DIOP) ............................ 22,000 158
Sumitomo Electric Industries (TELE)............... 19,000 311
Sumitomo Heavy Industry (MACH) ................... 31,000 48
Sumitomo Marine & Fire Insurance Co.,
Ltd. (INSU) .................................... 24,000 155
Sumitomo Metal Industries (STEE) ................. 102,000 58
Sumitomo Metal Mining Co. (PMET) ................. 17,000 89
86
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Japan - Continued
Taisho Pharmaceutical Co., Ltd.(HEAL) 10,000 $ 270
Taiyo Yuden Co., Ltd. (ELEQ) ........... 4,000 134
Takara Shuzo Co., LTD. (FOOD) .......... 4,000 70
Takashimaya Co. (RETS) ................. 12,000 82
Takeda Chemical Industries (CHEM) ...... 24,000 1,419
Takefuji Corp. (LEND) .................. 5,000 315
Teijin, Ltd. (APPA) .................... 30,000 155
Teikoku Oil Co., Ltd. (OILX) ........... 19,000 79
Terumo Corp. (HEAL) .................... 4,000 87
The Bank of Fukuoka, Ltd. (BANK) ....... 8,000 34
The Chuo Mitsui Trust and Banking Co., .
Ltd. (BANK) .......................... 17,000 52
The Daiwa Bank, Ltd. (BANK) ............ 52,000 85
Tobu Railway Co., Ltd. (TRAN) .......... 36,000 106
Toho Co., Ltd. (MEDI) .................. 1,200 165
Tohoku Electric Power (UTIE) ........... 13,000 174
Tokai Bank Ltd. (BANK) ................. 53,000 230
Tokio Marine & Fire Insurance Co.
(INSU) ............................... 42,000 481
Tokyo Broadcasting (MEDI) .............. 4,000 118
Tokyo Electric Power (UTIE) ............ 35,700 885
Tokyo Electron, Ltd. (ETRN) ............ 4,700 258
Tokyo Gas Co. (OILX) ................... 27,000 80
Tokyu Corp. (TRAN) ..................... 26,000 140
Toppan Printing Co. (CNSU) ............. 20,000 174
Toray Industries, Inc. (APPA) .......... 33,000 124
Toshiba Corp. (ETRN) ................... 78,000 521
Tostem Corp. (CONS) .................... 8,000 99
Toto, Ltd. (APPL) ...................... 13,000 93
Toyo Seikan Kaisha, Ltd. (CONT) ........ 8,000 130
Toyota Motor Corp. (AUTO) .............. 95,700 3,056
Trans Cosmos, Inc. (SOFT) .............. 700 30
Uni-Charm Corp. (PAPR) ................. 3,000 152
UNY Co., Ltd. (RETS) ................... 10,000 107
Wacoal Corp. (APPA) .................... 11,000 92
WORLD CO., LTD. (APPA) ................. 1,400 53
Yamaha Corp. (LEIS) .................... 6,000 59
Yamanouchi Pharmaceutical Co., Ltd.
(HEAL) ............................... 10,000 432
Yamato Transport Co., Ltd. (TRAN) ...... 13,000 239
Yokogawa Electric (ETRN) ............... 11,000 93
--------
52,322
Malaysia - 0.6%
Berjaya Sports Toto Berhad (LEIS) ...... 47,000 57
Commerce Asset Holding Bhd (BANK) ...... 40,000 86
Gamuda Berhad (CONS) ................... 52,000 51
IJM Corporation Berhad (CONS) .......... 77,000 54
Magnum Corp. Berhad (LEIS) ............. 158,000 61
Malayan Banking Berhad (BANK) .......... 48,000 170
Malaysia International Shipping Berhad
(TRAN) ............................... 61,000 100
Public Bank Berhad (FINL) .............. 58,000 45
Resorts World Berhad (LEIS) ............ 35,000 56
RHB Capital Berhad (BANK) .............. 63,000 40
Sime Darby Berhad (FINL) ............... 68,000 85
Telekom Malaysia Berhad (TELS) ......... 60,000 178
Tenaga Nasional Berhad (UTIE) .......... 61,000 186
YTL Corp., Berhad (DIOP) ............... 65,000 84
--------
1,253
Mexico - 1.0%
Cemex SA de CV - CPO * (CONS) .......... 34,000 123
Cifra SA de CV - Ser. V (RETS) ......... 96,000 191
Fomento Economico Mexicano SA de
CV (FOOD) ............................ 20,000 60
Grupo Carso SA de CV - Ser. A1(DIOP) 24,000 59
Grupo Financiero Banamex Accival, SA
de CV (FINL) ......................... 105,000 173
Grupo Financiero Bancomer SA de CV -
Cl. O (FINL) ......................... 157,000 87
Grupo Modelo SA de CV - Ser. C
(FOOD) ............................... 62,000 165
Grupo Televisa SA * (MEDI) ............. 60,000 135
Kimberly-Clark de Mexico SA de CV
(PAPR) ............................... 47,000 130
Nuevo Grupo Mexico * (META) ............ 18,000 54
Telephonos de Mexico SA - Ser. L
(UTIT) ............................... 326,000 732
Wal-Mart de Mexico SA de CV - Ser. C
(RETS) ............................... 25,000 46
--------
1,955
Netherlands - 2.8%
ABN Amro Holding NV (BANK) ............. 18,400 419
Aegon NV (INSU) ........................ 14,500 600
Akzo Nobel NV (CHEM) ................... 3,850 207
ASM Lithography Holding NV (COMP) ...... 5,900 134
Elsevier NV (MEDP) ..................... 10,500 154
Heineken NV (FOOD) ..................... 4,375 265
ING Groep NV (BANK) .................... 9,800 783
Koninklije KPN NV (TELS) ............... 11,420 131
Koninklijke (Royal) Philips Electronics
NV (ETRN) ............................ 13,656 500
Koninklijke Ahold NV (RETF) ............ 7,000 226
Royal Dutch Petroleum Co. (OILE) ....... 22,650 1,388
TNT Post Group NV (TRAN) ............... 5,610 136
Unilever NV - CVA (CNSU) ............... 5,819 368
Wolters Kluwer NV - CVA (MEDP) ......... 4,400 120
--------
5,431
New Zealand - 0.3%
Carter Holt Harvey, Ltd. (PAPR) ........ 75,200 55
Contact Energy Limited (UTIE) .......... 62,600 73
87
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
New Zealand - Continued
Fisher & Paykel Industries Limited
(APPL) ......................... 23,000 $ 81
Fletcher Challenge Building
(CONS) ......................... 73,900 64
Telecom Corp. of New Zealand, Ltd.
(TELS) ......................... 111,100 237
The Warehouse Group Limited
(RETS) ......................... 29,000 77
--------
587
Norway - 1.1%
Bergesen d.y. ASA - Cl. A (TRAN) . 4,300 68
Den Norske Bank (BANK) ........... 43,960 238
Elkem ASA (META) ................. 4,400 70
Kvaerner plc (CONS) .............. 7,600 54
Leif Hoegh & Co. ASA (TRAN) ...... 8,340 70
Merkantildata ASA (SOFT) ......... 9,800 38
Norsk Hydro ASA (DIOP) ........... 11,140 472
Norske Skogsindustrier ASA - Cl. A
(PAPR) ......................... 3,800 160
Orkla ASA (DIOP) ................. 23,420 463
Petroleum Geo-Services ASA
(OILE) ......................... 6,240 82
SMEDVIG (OILS) ................... 7,000 67
Smedvig ASA - B Shares (OILS) .... 7,600 61
Storebrand ASA (INSU) ............ 16,140 115
Tomra Systems ASA (POLL) ......... 11,200 218
--------
2,176
Philippines - 0.1%
Ayala Land, Inc. (READ) .......... 36,460 4
Metropolitan Bank & Trust Co.
(BANK) ......................... 13,090 48
Petron Corp. (OILS) .............. 468,400 11
Philippine Long Distance Telephone
Co. (UTIT) ..................... 3,200 56
SM Prime Holdings, Inc. (READ) ... 545,000 63
--------
182
Portugal - 0.6%
Banco Comercial Portgues, SA
(BANK) ......................... 33,000 175
BPI-SGPS, SA - Registered Shares
(FUND) ......................... 32,490 102
Brisa-Auto Estradas de Portugal,
SA (CONS) ...................... 8,375 75
Electricidade de Portugal, SA
(UTIE) ......................... 67,500 223
Jeronimo Martins, SGPS, SA
(RETF) ......................... 3,600 37
Portugal Telecom, SA (TELS) ...... 46,000 421
Sonae, SGPS, SA (RETS) ........... 87,600 98
--------
1,131
Singapore - 0.5%
Chartered Semiconductor
Manufacturing * (ETRN) ......... 12,000 33
City Developments, Ltd. (READ) ... 29,000 135
Cycle & Carriage, Ltd. (AUTO) .... 14,000 27
DBS Group Holdings, Ltd. (BANK) .. 17,000 192
Oversea-Chinese Banking
Corporation Limited (BANK) ..... 16,000 119
Singapore Airlines (TRAN) ........ 12,000 119
Singapore Telecommunications, Ltd.
(TELS) ......................... 114,000 177
United Overseas Bank, Ltd.
(BANK) ......................... 13,448 101
--------
903
South Africa - 1.1%
ABSA Group, Ltd. (BANK) .......... 24,600 93
Anglo American Platinum Corp.,
Ltd. (PMET) .................... 5,400 252
Barlow, Ltd. (DIOP) .............. 11,700 74
De Beers Centenary AG (UTIE) ..... 9,100 241
Dimension Data Holdings plc
(SOFT) ......................... 28,883 196
FirstRand, Ltd. (FINL) ........... 164,400 182
Foschini, Ltd. * (RETS) .......... 37,100 32
Impala Platinum Holdings, Ltd.
(META) ......................... 2,600 132
Imperial Holdings, Ltd. (DIOP) ... 9,952 79
Investec Group, Ltd. (FUND) ...... 2,300 77
Liberty Life Association of
Africa, Ltd. (INSU) ............ 12,400 111
M-Cell, Ltd. (TELS) .............. 40,200 134
Nampak, Ltd. (CONT) .............. 25,500 37
Nedcor, Ltd. (BANK) .............. 6,600 149
Rembrandt Group, Ltd. (DIOP) ..... 15,300 41
Remgro, Ltd. * (DIOP) ............ 15,300 104
Sappi, Ltd. (READ) ............... 10,900 78
Sasol, Ltd. (OILX) ............... 12,800 83
--------
2,095
South Korea - 0.8%
Cheil Jedang Corp. (FOOD) ........ 1,246 30
Hyundai Motor Co., Ltd. (AUTO) ... 6,490 62
Kookmin Bank (BANK) .............. 8,310 98
Korea Electric Power Corp.
(UTIE) ......................... 11,760 219
Korea Telecom Corp. * (TELS) ..... 920 49
LG Chemicals, Ltd. (CHEM) ........ 4,630 42
LG Electronics (ETRN) ............ 3,990 38
Pohang Iron & Steel Co., Ltd.
(STEE) ......................... 1,230 74
Samsung Corp. (ETRN) ............. 6,120 25
Samsung Display Devices Co.
(ETRN) ......................... 1,410 52
Samsung Electro-Mechanics Co.
(ETRN) ......................... 2,760 75
Samsung Electronics (ETRN) ....... 3,520 440
Samsung Fire & Marine Insurance
(INSU) ......................... 2,272 49
Shinhan Bank (BANK) .............. 7,310 60
SK Telecom Co., Ltd. (TELS) ...... 1,530 306
--------
1,619
88
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Spain - 3.6%
ACS, Actividades de Construccion y
Servicios, SA * (CONS) .......... 2,419 $ 57
Autopistas Concesionaria Espanola
SA (TRAN) ....................... 13,503 118
Banco Bilbao Vizcaya SA (BANK) .... 90,135 1,342
Banco Santander Central Hispano SA
(BANK) .......................... 118,400 1,267
Corporacion Financiera Alba SA
(FUND) .......................... 6,000 139
Endesa SA (UTIE) .................. 28,100 479
Fomento de Construcciones y
Contratas SA (CONS) ............. 4,600 87
Gas Natural SDG SA - E Shares
(UTIG)........................... 13,800 251
Grupo Dragados SA (CONS) .......... 8,400 91
Iberdrola SA (UTIE) ............... 27,500 345
Repsol SA (OILX) .................. 30,000 479
Sociedad General de Aguas de
Barcelona SA (FOOD) ............. 8,484 104
Sol Melia SA (LEIS) ............... 5,700 59
Tabacalera SA - Cl. A (FOOD) ...... 7,714 120
Telefonica SA (UTIT) .............. 101,745 1,681
TelePizza, SA * (RETF) ............ 7,559 18
Union Electrica Fenosa SA (UTIE) .. 12,200 224
Vallehermoso SA (READ) ............ 8,700 53
Zardoya Otis SA (MACH) ............ 9,752 86
--------
7,000
Sweden - 1.5%
Drott AB - B Shares (REAL) ........ 8,300 114
ForeningsSparbanken AB (BANK) ..... 8,700 133
Hennes & Mauritz AB - B Shares
(RETS) .......................... 10,300 159
NetCom Systems, Inc. - Cl. B
(TELS) .......................... 1,732 72
NORDIC BALTIC Holding (BANK) ...... 29,218 228
Nordic Baltic Holding AB (BANK) ... 20,910 158
SANDVIK AB (MACH) ................. 4,950 119
Securitas AB - B Shares (COMM) .... 8,250 153
Skand Enskilda Banken - Cl. A
(BANK) .......................... 10,200 112
Skandia Forsakrings AB (INSU) ..... 13,900 226
Skanska AB (CONS) ................. 3,100 128
Svenska Cellulosa AB - Cl. B
(PAPR) .......................... 4,500 96
Svenska Handelsbanken, Inc. -
A Shares (BANK) ................. 6,350 109
Telefonaktiebolaget LM Ericsson
AB * (TELS) ..................... 82,050 935
Telia AB * (TELS) ................. 17,050 88
Volvo AB (AUTO) ................... 5,750 95
--------
2,925
Switzerland - 2.0%
ABB, Ltd. * (ENGI) ................ 2,168 231
Adecco SA - Reg. (COMM) ........... 60 38
Credit Suisse Group - Reg. (BANK) . 1,970 374
Givaudan * (HNBA) ................. 55 15
Nestle SA (FOOD) .................. 260 606
Novartis AG - Reg. (HEAL) ......... 380 672
Roche Holding AG (HEAL) ........... 55 582
Schweizerische Rueckversicherungs-
Gesellschaft (INSU) ............. 110 264
Swisscom AG - Reg. (UTIT) ......... 400 104
Syngenta AG * (CHEM) .............. 547 29
UBS AG (BANK) ..................... 3,226 526
Zurich Finance (FINL) ............. 633 382
--------
3,823
Thailand - 0.1%
ABN Amro Asia Secuities Public Co.,
Ltd. (FINL) ..................... 23,000 13
Advanced Info Service Public Co.,
Ltd. (TELS) ..................... 7,700 74
PTT Exploration & Production Public
Co., Ltd. (OILX) ................ 22,200 52
Siam Cement Public Co., Ltd. (CONS) 4,000 38
TelecomAsia Corp. Public Co.,
Ltd. * (UTIT) ................... 113,200 46
--------
223
Turkey - 0.3%
Arcelik AS (APPL) .............. 2,623,000 45
Kartonsan Karton Sanayi Ve
Ticaret AS (PAPR) ............ 1,083,000 56
Migros Turk TAS (RETF) ......... 387,000 50
Tupras-Turkiye Petrol
Rafinerileri A.S. (OILX) ..... 1,009,000 37
Turkiye Garanti Bankasi AS
(BANK) ....................... 12,113,000 68
Turkiye Is Bankasi (Isbank) -
Cl. C (BANK) ................. 11,517,060 189
Yapi ve Kredi Bankasi AS (BANK) 12,211,870 63
--------
508
United Kingdom - 10.1%
Abbey National First Capital BV
(BANK) ....................... 16,000 292
Airtours plc (LEIS) ............ 11,300 34
Amvescap plc (BANK) ............ 5,300 109
ARM Holdings plc * (ETRN) ...... 9,700 73
AstraZeneca Group plc (HEAL) ... 18,239 920
Barclay's plc (BANK) ........... 16,300 505
Barratt Developments plc (CONS) 10,100 45
Bass plc (FOOD) ................ 17,200 188
Berkeley Group (The) plc (READ) 6,100 69
BG Group plc (UTIG) ............ 37,866 148
BOC Group plc (CHEM) ........... 7,000 106
Boots Co. plc (RETD) ........... 13,800 126
BP Amoco plc (OILE) ............ 233,500 1,885
British Aerospace plc (AERO) ... 32,263 184
British Airport Authority plc
(TRAN) ....................... 11,700 108
British Airways plc (TRAN) ..... 11,300 66
89
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
United Kingdom - Continued
British American Tobacco plc * (FOOD)....... 26,500 $ 202
British Land Co. plc (REAL) ................ 11,000 78
British Sky Broadcast plc (MEDI) ........... 19,900 334
British Telecommunications plc (TELS)....... 68,700 588
Cadbury Schweppes plc (FOOD) ............... 26,600 184
Canary Wharf Finance PLC * (REIT) .......... 11,700 85
Carlton Communications plc (MEDI) .......... 16,300 149
Centrica plc * (UTIG) ...................... 58,900 228
CGU plc (INSU) ............................. 23,900 387
Diageo plc (FOOD) .......................... 30,200 339
Dixons Group plc * (TELE) .................. 23,200 78
EMI Group plc (LEIS) ....................... 12,400 102
GKN plc (AUTO) ............................. 9,200 97
GlaxoSmithKline plc * (HEAL) ............... 62,893 1,760
Granada Compass plc (LEIS) ................. 25,122 274
Halifax Group plc (LEND) ................... 24,700 245
Hanson plc (CONS) .......................... 8,990 62
Hays plc (DIOP) ............................ 14,400 83
Hilton Group plc (LEIS) .................... 27,700 87
HSBC Holdings plc (BANK) ................... 100,300 1,478
Imperial Chemical Industries plc
(CHEM) ................................... 7,100 59
Innogy Holdings * (UTIG) ................... 16,500 48
Invensys, plc (DIOP) ....................... 38,785 91
J Sainsbury plc (RETF) ..................... 24,100 143
Kingfisher plc (RETS) ...................... 18,500 138
Land Securities plc (REAL) ................. 8,400 106
Lattice Group * (ETRN) ..................... 37,866 85
Legal & General Group plc (INSU) ........... 62,800 173
Lloyds TSB Group plc (BANK) ................ 58,900 624
Logica plc (SOFT) .......................... 6,700 175
Marconi plc (TELE) ......................... 28,600 307
Marks & Spencer plc (RETS) ................. 39,600 110
Misys plc (COMP) ........................... 6,300 62
National Grid Group plc (UTIE) ............. 22,500 205
National Power plc (UTIE) .................. 16,500 62
Nycomed Amersham plc (HEAL) ................ 5,700 48
P&O Princess Cruises plc * (LEIS) .......... 12,900 55
Pearson plc (MEDP) ......................... 8,100 193
Peninsular & Oriental Steam Navigation
Co. (TRAN) ............................... 6,800 32
Prudential Corp. (INSU) .................... 22,500 362
Railtrack Group plc (TRAN) ................. 6,700 93
Rank Group plc (DIOP) ...................... 35,700 93
Reed International plc (MEDP) .............. 15,400 161
Rentokil Initial plc (DIOP) ................ 29,600 102
Reuters Group plc (BUSI) ................... 15,900 269
Rio Tinto plc - Reg. (DIOP) ................ 12,700 224
Royal Bank of Scotland Group (BANK) ........ 11,500 272
Schroders (BANK) ........................... 4,050 80
Scottish Power plc (UTIE) .................. 17,100 135
Slough Estates Finance plc * (READ) ........ 9,900 61
Tesco plc (FOOD) ........................... 76,800 313
The Great Universal Stores plc (RETS) ...... 15,500 122
The Sage Group plc (MEDI) .................. 22,100 101
Unilever plc (CNSU) ........................ 26,703 229
United Utilities plc (AGRI) ................ 10,400 103
Vodafone AirTouch plc (TELS) ............... 648,818 2,364
WPP Group plc * (COMM) ..................... 7,500 98
--------
19,596
United States - 0.0%
Great Eastern Shipping Co. - GDR *
(TRAN) .......................... 25,120 85
--------
TOTAL COMMON STOCK- 94.4% 184,040
PREFERRED STOCK
Australia - 0.2%
News Corp., Ltd. (MEDI) .................... 342
Brazil - 0.7%
Aracruz Celulose SA (TELS) ................. 108
Banco Bradesco SA (BANK) ................... 109
Banco Itau SA (BANK) ....................... 109
Bradespar SA (FINL) ........................ 108
Centrais Electricas Brasileires SA
(UTIE) ................................... 109
Compahnia de Bebidas das Americas
(FOOD) ................................... 109
Companhia Energetica de Minas Gerais -
CEMIG (UTIE) ............................. 108
Companhia Vale do Rio Doce (META) .......... 109
Embratel Participacoes SA (UTIT) ........... 108
Tele Centro Sul Participacoes SA
(UTIT) ................................... 108
Tele Norte Leste Participacoes SA
(UTIT) ................................... 109
Telesp Celular Participacoes SA (TELS) ..... 108
Telesp Participacoes SA (TELS) ............. 108
--------
1,410
Germany - 0.4%
Dyckerhoff AG (CONS) ....................... 263
SAP AG - Vorzug (SOFT) ..................... 264
Volkswagen AG (AUTO ........................ 264
--------
791
--------
TOTAL PREFERRED STOCK - 1.3% 2,543
90
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
United Kingdom - 0.0%
British Aerospace plc - Bonds (AERO)
7.45% due 11/29/03................ $ 4 $ 6
---------
TOTAL PUBLICLY-TRADED
BONDS- 0.0% 6
WARRANTS
Mexico - 0.0%
Cemex SA de CV (CONS)
expires 12/12/02 (Cost $1)........ 2,000 0
United States - 1.0%
Morgan Stanley Capital Llc (FINL)
expires 04/07/07 (Cost $3,107).... 23,600 1,854
---------
TOTAL WARRANTS- 1.0% 1,854
RIGHTS
Brazil - 0.0%
Banco Bradesco SA (BANK)
expires 12/26/00 (Cost $0)........ 1,012,456 3
Bradespar SA (FINL)
expires 01/10/01 (Cost $0)........ 5,919,441 0
---------
3
Malaysia - 0.0%
Gamuda Berhad (CONS)
expires 12/11/00 (Cost $0)........ 13,000 0
Thailand - 0.0%
TelecomAsia (UTIT)
expires 04/03/00 (Cost $0)........ 35,747 0
---------
TOTAL RIGHTS- 0.0% 3
SHORT-TERM INVESTMENTS - 3.0%
Investment in joint trading account
(Note B)
6.695% due 01/02/01........... 5,587 5,587
U.S. Treasury Bill
5.88% due 03/15/01 #.......... 300 299
U.S. Treasury Bill
5.92% due 03/15/01 #.......... 50 49
--------- ---------
5,937 5,935
--------- ---------
TOTAL INVESTMENTS- 99.7% 194,384
Cash and Receivables, less payables- 0.3% 628
--------- ---------
NET ASSETS- 100.0% 195,012
========= =========
* Non-income producing security.
ADR-American Depository Receipt
GDR-Global Depository Receipt
# Securities, or a portion thereof, with an aggregate market value of $333 have
been segregated to collateralize financial futures contracts.
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Bank ..................... BANK 27,848 14.8%
Insurance ................ INSU 13,220 7.0%
Telecommunication
Services ............... TELS 13,099 6.9%
Electronic Products &
Services ............... ETRN 11,246 6.0%
Diversified Operations ... DIOP 10,281 5.5%
Health Care Products ..... HEAL 10,093 5.4%
Telephone ................ UTIT 9,217 4.9%
Electric Power ........... UTIE 7,211 3.8%
Automobile ............... AUTO 7,069 3.7%
Food, Beverage & Tobacco . FOOD 6,979 3.7%
Chemical ................. CHEM 5,966 3.2%
Financial Services ....... FINL 5,357 2.8%
Transportation Services .. TRAN 5,113 2.7%
Retail -
Department Stores ...... RETS 3,854 2.0%
Construction ............. CONS 3,612 1.9%
Oil & Natural Gas
Exploration & Production . OILX 3,603 1.9%
Commercial Sevices ....... COMM 3,552 1.9%
Oil - Equipment &
Service................. OILE 3,356 1.8%
Leisure & Recreation ..... LEIS 3,279 1.7%
Computer Software &
Services ............... SOFT 2,766 1.5%
Brokerage & Investment
Management ............. FUND 2,428 1.3%
Telecommunication
Equipment .............. TELE 2,308 1.2%
Media - TV / Radio ....... MEDI 2,260 1.2%
Oil ...................... OILS 1,964 1.0%
Machinery ................ MACH 1,861 1.0%
Cosmetic & Personal Care . HNBA 1,727 0.9%
Retail - Food ............ RETF 1,682 0.9%
Electrical Equipment ..... ELEQ 1,468 0.8%
Computer Equipment ....... COMP 1,336 0.7%
Real Estate Operations ... REAL 1,308 0.7%
Paper & Forest Products .. PAPR 1,173 0.6%
Shoe & Apparel
Manufacturing .......... APPA 1,097 0.6%
Personal & Commercial
Lending ................ LEND 1,054 0.6%
Natural Gas Distribution . UTIG 1,050 0.6%
Consumer Miscellaneous ... CNSU 921 0.5%
Metals & Mining .......... META 920 0.5%
Media - Publishing ....... MEDP 751 0.4%
Real Estate Investment
Trust .................. REIT 724 0.4%
Real Estate Development .. READ 681 0.4%
Steel .................... STEE 646 0.3%
Engineering &
Construction ........... ENGI 631 0.3%
Auto & Truck Parts ....... PART 622 0.3%
Container ................ CONT 611 0.3%
Precious ................. PMET 563 0.3%
Metals/Gems/Stones
Household Appliances /
Furnishings .............. APPL 541 0.3%
Pollution Control ........ POLL 349 0.2%
Business Services ........ BUSI 269 0.1%
Aerospace & Defense ...... AERO 190 0.1%
Energy - Alternative
Source ................. ENER 135 0.1%
--------- ---------
$188,449 100.0%
========= =========
91
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Australia - 2.1%
Brambles Industries, Ltd. (DIOP) ...... 1,836 $ 43
Broken Hill Proprietary Co., Ltd.
(DIOP) ................................ 10,015 106
TABCORP Holdings, Ltd. (LEIS) ......... 13,628 83
Woolworth's, Ltd. (RETS) .............. 21,099 99
--------
331
Finland - 2.5%
Nokia Oyj (HEAL) ...................... 8,305 370
Sonera Oyj (TELS) ..................... 1,098 20
--------
390
France - 10.6%
Air Liquide (CHEM) .................... 825 123
Alcatel (TELE) ........................ 3,193 181
Alstom (MACH) ......................... 2,631 68
AXA SA (INSU) ......................... 1,158 168
Cap Gemini SA (COMM) .................. 300 48
Carrefour SA (RETF) ................... 624 39
France Telecom (TELS) ................. 1,288 111
Havas Advertising SA (BUSI) ........... 3,288 48
Lafarge SA (CONS) ..................... 1,426 120
LVMH (Louis Vuitton Moet Hennessy)
(FOOD) .............................. 758 50
Rhone-Poulenc SA (BANK) ............... 1,434 126
Suez Lyonnaise des Eaux (FOOD) ........ 488 89
Total Fina SA - Cl. B (OILX) .......... 1,407 209
Vivendi Environment (POLL) ............ 2,138 93
Vivendi Universal SA (DIOP) ........... 3,016 199
--------
1,672
Germany - 4.1%
Allianz AG - Reg. (INSU) .............. 377 141
Bayerische Motoren Werke AG (AUTO) .... 1,199 39
DaimlerChrysler AG (AUTO) ............. 636 27
Deutsche Bank AG (BANK) ............... 2,095 176
Deutsche Telekom AG (UTIT) ............ 2,808 85
Muenchener Rueckversicherungs-
Gesellschaft AG - Reg. (INSU) ....... 304 109
Siemens AG (DIOP) ..................... 566 74
--------
651
Hong Kong - 2.4%
Giordano International Ltd. (APPA) .... 44,000 20
Hang Seng Bank, Ltd. (BANK) ........... 10,100 136
Hutchison Whampoa, Ltd. (COMM) ........ 6,700 84
Li & Fung, Ltd. (COMM) ................ 36,000 65
Swire Pacific, Ltd. - Cl. A (DIOP) .... 10,000 72
--------
377
Ireland - 1.1%
Bank of Ireland (BANK) ................ 11,718 118
Elan Corp. plc - ADR * (HEAL) ......... 1,100 51
--------
169
Italy - 3.3%
Banca Nazionale del Lavoro (BANK) ..... 27,684 85
San Paolo-IMI SpA (BANK) .............. 10,300 166
Telecom Italia Mobile SpA (TELS) ...... 9,000 72
Telecom Italia SpA (TELS) ............. 9,983 110
UniCredito Italiano SpA (BANK) ........ 16,000 84
--------
517
Japan - 24.0%
ADERANS Co., Ltd. (HNBA) .............. 2,400 99
Advantest (ETRN) ...................... 400 37
Asahi Chemical Industry Co., Ltd.
(CHEM) ................................ 17,000 98
Asahi Glass Co., Ltd. (APPL) .......... 9,000 74
Bank of Tokyo-Mitsubishi (BANK) ....... 4,000 40
Canon, Inc. (COMM) .................... 4,000 140
Chiba Bank, Ltd. (BANK) ............... 13,000 51
Circle K Japan Co., Ltd. (RETF) ....... 2,400 84
Daiwa Securities Group, Inc. (FUND) ... 4,000 42
Fanuc, Ltd. (ELEQ) .................... 1,000 68
Fuji Photo Film (LEIS) ................ 3,000 126
Fujitsu, Ltd. (ELEQ) .................. 3,000 44
Honda Motor Co. (AUTO) ................ 2,000 75
KAO Corp. (HNBA) ...................... 6,000 174
Kirin Brewery Co. (FOOD) .............. 11,000 98
Minebea Co., Ltd. (ETRN) .............. 5,000 46
Mitsui Marine & Fire Insurance Co., Ltd.
(INSU) .............................. 14,000 80
Mizuho Holdings, Inc. * (FINL) ........ 19 118
Murata Manufacturing Co., Ltd. (ETRN) . 1,000 117
NEC Corp. (COMP) ...................... 3,000 55
NGK Insulators (PART) ................. 4,000 53
Nintendo Corp., Ltd. (LEIS) ........... 700 110
Nippon Telegraph & Telephone Corp.
(UTIT) .............................. 21 151
Nomura Securities Co., Ltd. (FUND) .... 4,000 72
Ricoh Co., Ltd. (ETRN) ................ 7,000 129
Rohm Co., Ltd. (ETRN) ................. 500 95
Sakura Bank, Ltd. (BANK) .............. 6,000 36
Sanwa Bank, Ltd. (BANK) ............... 5,000 35
Sanyo Electric Co. (ETRN) ............. 9,000 75
Secom Co. (COMM) ...................... 1,500 98
Sharp Corp. (ETRN) .................... 6,000 72
Shin-Etsu Chemical Co. (CHEM) ......... 2,000 77
Skylark Co., Ltd. (FOOD) .............. 3,000 84
SMC Corp. (MACH) ...................... 500 64
Sony Corp. (ETRN) ..................... 1,000 69
Sumitomo Corp. (DIOP) ................. 15,000 108
Takeda Chemical Industries (CHEM) ..... 2,000 118
Takefuji Corp. (LEND) ................. 1,900 120
Terumo Corp. (HEAL) ................... 2,000 44
Tokyo Electric Power (UTIE) ........... 5,500 136
Toppan Forms Co., Ltd. (COMM) ......... 4,400 66
Toyota Motor Corp. (AUTO) ............. 4,800 153
92
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Japan - Continued
Yamanouchi Pharmaceutical Co., Ltd.
(HEAL)............................... 3,000 $ 130
--------
3,761
Netherlands - 7.1%
ASM Lithography Holding NV (COMP)...... 4,004 91
Fortis (NL) NV (INSU).................. 2,315 75
ING Groep NV (BANK).................... 3,424 273
Koninklije KPN NV (TELS)............... 7,389 85
Koninklijke (Royal) Philips Electronics
NV (ETRN)............................ 4,527 166
Royal Dutch Petroleum Co. (OILE)....... 4,713 289
United Pan Europe (TELS)............... 5,005 51
VNU NV (MEDP).......................... 1,931 95
--------
1,125
Portugal - 0.6%
Electricidade de Portugal, SA (UTIE)... 26,971 89
Singapore - 1.6%
City Developments, Ltd. (READ)......... 6,000 28
DBS Group Holdings, Ltd. (BANK)........ 6,000 68
Singapore Press Holdings, Ltd. (MEDP).. 3,000 44
Singapore Technology Engineering, Ltd.
(ENGI)............................... 45,000 73
Singapore Telecommunications, Ltd.
(TELS)............................... 26,000 40
--------
253
Spain - 1.9%
Acerinox SA (STEE)..................... 2,695 82
Banco Santander Central Hispano SA
(BANK)............................... 4,120 44
Telefonica SA (UTIT)................... 10,175 168
--------
294
Sweden - 4.9%
Investor AB - B Shares (FUND).......... 7,799 117
Nordic Baltic Holding AB (BANK)........ 15,169 115
Securitas AB - B Shares (COMM)......... 6,675 124
Skandia Forsakrings AB (INSU).......... 10,884 177
Telefonaktiebolaget LM Ericsson AB *
(TELS)............................... 20,415 232
--------
765
Switzerland - 7.9%
ABB, Ltd. * (ENGI)..................... 978 104
Adecco SA - Reg. (COMM)................ 92 58
Nestle SA (FOOD)....................... 134 313
Novartis AG - Reg. (HEAL).............. 95 168
Roche Holding AG (HEAL)................ 22 224
Schweizerische Rueckversicherungs-
Gesellschaft (INSU).................. 59 141
UBS AG (BANK).......................... 1,007 164
Zurich Finance (FINL).................. 119 72
--------
1,244
United Kingdom - 18.7%
Amvescap plc (BANK).................... 2,908 60
AstraZeneca Group plc (HEAL)........... 1,392 70
BP Amoco plc (OILE).................... 30,507 246
British Aerospace plc (AERO)........... 7,766 44
British American Tobacco plc (FOOD).... 6,518 50
British Telecommunications plc (TELS).. 19,191 164
Cable & Wireless plc (TELS)............ 4,324 58
Diageo plc (FOOD)...................... 15,463 173
GKN plc (AUTO)......................... 765 8
GlaxoSmithKline plc * (HEAL)........... 15,882 449
HSBC Holdings plc (BANK)............... 13,550 200
Imperial Chemical Industries plc (CHEM) 6,542 54
Lloyds TSB Group plc (BANK)............ 4,338 46
Marconi plc (TELE)..................... 4,324 47
National Grid Group plc (UTIE)......... 6,463 59
P&O Princess Cruises plc * (LEIS)...... 23,650 100
Reuters Group plc (BUSI)............... 5,577 95
Royal Bank of Scotland Group (BANK).... 4,954 117
Tesco plc (FOOD)....................... 34,560 141
Unilever plc (CNSU).................... 28,527 244
Vodafone AirTouch plc (TELS)........... 139,652 513
--------
2,938
--------
TOTAL COMMON STOCK-................. 92.8% 14,576
PREFERRED STOCK - 0.8%
Germany - 0.8%
SAP AG - Vorzug)........................ 131
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 5.1%
Investment in joint repurchase agreement
with Goldman Sachs & Co. dated
12/29/00, 6.481% due 01/02/01 (Secured
by various U.S. Treasury
obligations and U.S.
Government Agency Bonds) $ 800 800
------ ------
TOTAL INVESTMENTS- 98.7% 15,507
Cash and Receivables, less payables- 1.3% 209
------ ------
NET ASSETS- 100.0% 15,716
====== ======
* Non-income producing security.
ADR-American Depository Receipts
See notes to financial statements.
93
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Bank ...................... BANK 2,140 14.6%
Health Care Products ...... HEAL 1,506 10.2%
Telecommunication
Services ................ TELS 1,458 9.9%
Food, Beverage & Tobacco .. FOOD 998 6.8%
Insurance ................. INSU 891 6.1%
Electronic Products &
Services ................ ETRN 807 5.5%
Commercial Sevices ........ COMM 683 4.6%
Diversified Operations .... DIOP 601 4.1%
Oil - Equipment & Service . OILE 535 3.6%
Chemical .................. CHEM 470 3.2%
Leisure & Recreation ...... LEIS 419 2.8%
Telephone ................. UTIT 404 2.7%
Automobile ................ AUTO 302 2.1%
Electric Power ............ UTIE 284 1.9%
Cosmetic & Personal Care .. HNBA 273 1.9%
Consumer Miscellaneous .... CNSU 245 1.7%
Brokerage & Investment
Management .............. FUND 230 1.6%
Telecommunication
Equipment ............... TELE 228 1.5%
Oil & Natural Gas
Exploration &
Production ............ OILX 209 1.4%
Financial Services ........ FINL 189 1.3%
Engineering &
Construction ............ ENGI 177 1.2%
Computer Equipment ........ COMP 146 1.0%
Business Services ......... BUSI 142 1.0%
Media - Publishing ........ MEDP 139 0.9%
Machinery ................. MACH 132 0.9%
Computer Software &
Services ................ SOFT 130 0.9%
Retail - Food ............. RETF 124 0.8%
Construction .............. CONS 120 0.8%
Personal & Commercial
Lending ................. LEND 120 0.8%
Electrical Equipment ...... ELEQ 112 0.8%
Retail - Department
Stores .................. RETS 99 0.7%
Pollution Control ......... POLL 93 0.6%
Steel ..................... STEE 82 0.6%
Household Appliances /
Furnishings ............. APPL 74 0.5%
Auto & Truck Parts ........ PART 53 0.4%
Aerospace & Defense ....... AERO 44 0.3%
Real Estate Development ... READ 28 0.2%
Shoe & Apparel
Manufacturing ........... APPA 20 0.1%
-------- --------
$ 14,707 100.0%
======== ========
94
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Bank - 3.4%
Greater Bay Bancorp ........................... 61,600 $ 2,526
Investors Financial Services Corp. ............ 23,500 2,021
Southwest Bancorporation of Texas, Inc. * ..... 39,600 1,700
Sterling Bancshares, Inc. ..................... 81,900 1,618
--------
7,865
Brokerage & Investment Management - 1.2%
Affiliated Managers Group, Inc. * ............. 50,700 2,782
Business Services - 5.7%
Corporate Executive Board Co. * ............... 79,700 3,169
Forrester Research, Inc. * .................... 50,100 2,508
Heidrick & Struggles International, Inc. ...... 43,200 1,817
Management Network Group, Inc. * .............. 110,100 1,308
On Assignment, Inc. * ......................... 94,600 2,696
ProBusiness Services, Inc. * .................. 70,800 1,881
--------
13,379
Commercial Sevices - 3.8%
Corinthian Colleges, Inc. ..................... 58,000 2,200
Education Management Corp. * .................. 58,600 2,095
Plexus Corp. * ................................ 38,400 1,167
ProsoftTraining.com, Inc. * ................... 76,300 925
Quanta Services, Inc. * ....................... 33,749 1,086
Veritas DGC, Inc. * ........................... 44,100 1,425
--------
8,898
Computer Equipment - 2.7%
Cerner Corp. * ................................ 37,700 1,743
M-Systems Flash Disk Pioneers, Ltd. * ......... 92,700 1,292
PRI Automation, Inc. * ........................ 65,700 1,232
Quantum Corp. - Hard Disk Drive * ............. 70,000 560
Tech Data Corp. * ............................. 53,600 1,450
--------
6,277
Computer Software & Services - 6.4%
Advent Software, Inc. * ....................... 41,000 1,643
Aspen Technologies, Inc. * .................... 22,000 732
Avantgo, Inc. * ............................... 106,200 664
Avocent Corporation * ......................... 27,646 746
Broadbase Software, Inc. * .................... 45,200 283
Data Return Corp. * ........................... 133,400 500
Embarcadero Technologies, Inc. * .............. 39,800 1,791
Intranet Solutions, Inc. * .................... 30,500 1,555
Manugistics Group, Inc. * ..................... 34,400 1,961
National Instruments Corp. * .................. 25,350 1,231
Pivotal Corp. * ............................... 27,200 1,008
Secure Computing Corp. * ...................... 124,000 1,224
TeleCommunication Systems, Inc. ............... 60,200 203
WatchGuard Technologies, Inc. ................. 47,500 1,502
--------
15,043
Construction - 0.5%
Toll Brothers, Inc. * ......................... 31,300 1,279
Consumer Miscellaneous - 2.6%
DigitalThink, Inc. * .......................... 64,700 1,104
NetRatings, Inc. * ............................ 81,400 1,196
ScanSource, Inc. * ............................ 50,000 1,950
University of Phoenix Online * ................ 57,000 1,838
--------
6,088
Diversified Operations - 0.9%
CoorsTek, Inc. * .............................. 31,900 1,001
Varian, Inc. * ................................ 35,300 1,196
--------
2,197
Electric Power - 1.0%
Wilson Greatbatch Technologies, Inc. * ........ 81,800 2,311
Electrical Equipment - 0.2%
Nu Horizons Electronics Corp. * ............... 47,650 426
Electronic Products & Services - 10.3%
Aeroflex, Inc. * .............................. 77,000 2,220
Atmi, Inc. * .................................. 59,300 1,156
Brooks Automation, Inc. * ..................... 29,100 817
Caliper Technologies Corp. * .................. 14,500 681
Credence Systems Corp. * ...................... 51,200 1,178
Cytyc Corp. * ................................. 33,600 2,102
DDI, Corp. * .................................. 61,400 1,673
DuPont Photomasks, Inc. * ..................... 47,000 2,484
Elantec Semiconductor, Inc. * ................. 25,400 705
Electro Scientific Industries, Inc. * ......... 37,700 1,056
Exar, Corp. * ................................. 47,700 1,478
Kent Electronics Corp. * ...................... 50,200 828
Merix Corp. * ................................. 53,250 712
Microsemi Corp. ............................... 53,700 1,494
Nanometrics, Inc. * ........................... 53,400 738
Pixelworks, Inc. * ............................ 44,750 1,001
PLX Technology, Inc. * ........................ 105,400 876
Rudolph Technologies, Inc. * .................. 55,500 1,675
Semtech Corp. * ............................... 58,800 1,297
--------
24,171
Financial Services - 1.3%
Actrade Financial Technologies, Ltd. * ........ 67,500 1,489
Advest Group, Inc. ............................ 30,300 1,078
Medallion Financial Corp. ..................... 36,600 535
--------
3,102
Food, Beverage & Tobacco - 0.6%
Performance Food Group Co. .................... 25,700 1,318
Health Care Products - 12.3%
Alexion Pharmaceuticals, Inc. * ............... 24,800 1,610
Alkermes, Inc. * .............................. 51,600 1,619
Alpharma, Inc. - Cl. A ........................ 44,800 1,966
Aurora Biosciences Corp. * .................... 40,100 1,261
Cell Therapeutics, Inc. * ..................... 31,000 1,397
COR Therapeutics, Inc. * ...................... 47,500 1,671
Corvas International, Inc. * .................. 89,500 1,287
95
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Health Care Products - Continued
CV Therapeutics, Inc. * ....................... 31,900 $ 2,257
Exelixis, Inc. * .............................. 67,400 986
Inhale Therapeutic Systems, Inc. * ............ 47,000 2,374
Inspire Pharmaceuticals, Inc. ................. 52,600 1,371
Interpore International, Inc. * ............... 6,200 24
Invitrogen Corp. * ............................ 25,100 2,168
NPS Pharmaceuticals, Inc. * ................... 57,000 2,736
Renal Care Group, Inc. * ...................... 77,500 2,125
Techne Corp. * ................................ 39,000 1,406
Titan Pharmeceuticals, Inc. * ................. 43,000 1,521
Virologic, Inc. * ............................. 131,500 1,200
--------
28,979
Health Care Services - 10.1%
Accredo Health, Inc. .......................... 52,600 2,640
AmeriSource Health Corp. - Cl. A * ............ 60,200 3,040
Arena Pharmaceuticals, Inc. ................... 3,200 50
Bindley Western Industries, Inc. .............. 77,200 3,209
Genome Therapeutics Corp. * ................... 5,400 38
GENOMICA Corp. ................................ 22,400 118
IDX Systems Corp. ............................. 65,500 1,638
LifePoint Hospitals, Inc. * ................... 62,600 3,138
Lincare Holdings, Inc. * ...................... 38,400 2,191
Physiometrix, Inc. ............................ 74,800 1,192
Province Healthcare Co. * ..................... 78,100 3,075
Transgenomic, Inc. ............................ 67,650 710
Vascular Solutions, Inc. ...................... 82,500 608
Visible Genetics, Inc. * ...................... 54,600 2,061
--------
23,708
Insurance - 2.7%
Fidelity National Financial, Inc. ............. 77,600 2,866
HCC Insurance Holdings, Inc. .................. 71,600 1,929
Philadelphia Consolidated Holding Corp. * ..... 15,900 491
Renaissancere Holdings, Ltd. .................. 14,000 1,096
--------
6,382
Leisure & Recreation - 0.2%
Six Flags, Inc. ............................... 20,800 358
Media - Publishing - 2.0%
Houghton Mifflin Co. .......................... 44,200 2,050
Radio One, Inc. - Cl. D * ..................... 61,200 673
Scholastic Corp. * ............................ 22,500 1,994
--------
4,717
Media - TV / Radio - 3.0%
Entercom Communications Corp. * ............... 23,200 799
Getty Images, Inc. ............................ 68,600 2,195
Pegasus Communications Corp. * ................ 17,200 443
Radio One, Inc. * ............................. 49,900 533
Regent Communications, Inc. * ................. 190,600 1,132
Sinclair Broadcast Group, Inc. ................ 113,800 1,142
Westwood One, Inc. * .......................... 40,700 786
--------
7,030
Oil & Natural Gas Exploration & Production - 4.7%
Newfield Exploration Co. * .................... 60,600 2,874
Patterson Energy, Inc. * ...................... 70,500 2,626
Pride International, Inc. * ................... 105,700 2,603
Spinnaker Exploration Co. * ................... 5,100 217
Stone Energy Corp. * .......................... 41,300 2,666
--------
10,986
Oil - Equipment & Service - 4.6%
Dril Quip, Inc. * ............................. 31,300 1,070
Hanover Compressor Co. * ...................... 57,700 2,571
Hydril Co. * .................................. 72,000 1,265
Marine Drilling Companies, Inc. * ............. 96,700 2,587
Natco Group, Inc. - Cl. A ..................... 74,600 615
Universal Compression Holdings * .............. 74,200 2,796
--------
10,904
Personal & Commercial Lending - 0.8%
Metris Cos., Inc. ............................. 67,400 1,774
Real Estate Development - 0.5%
Standard Pacific Corp. ........................ 49,600 1,159
Retail - Department Stores - 3.2%
99 Cents Only Stores * ........................ 58,799 1,610
Cost Plus, Inc. * ............................. 69,050 2,028
Insight Enterprises, Inc. * ................... 73,050 1,310
The Gymboree Corporation * .................... 69,600 966
Too, Inc. * ................................... 78,900 986
Tweeter Home Entertainment Group, Inc. ........ 57,100 696
--------
7,596
Retail - Drug Stores - 0.6%
Duane Reade, Inc. * ........................... 43,400 1,326
Retail - Food - 2.9%
Applebee's International, Inc. ................ 49,300 1,550
P.F. Chang's China Bistro, Inc. * ............. 32,400 1,018
RARE Hospitality International, Inc. * ........ 82,600 1,843
Whole Foods Market, Inc. * .................... 40,000 2,445
--------
6,856
Shoe & Apparel Manufacturing - 0.8%
Columbia Sportswear Co. * ..................... 40,000 1,990
Steel - 1.1%
Lone Star Technologies, Inc. * ................ 65,800 2,533
Telecommunication Equipment - 3.9%
Brightpoint, Inc. * ........................... 210,300 736
Novatel Wireless, Inc. ........................ 96,700 1,197
Powertel, Inc. ................................ 15,700 972
Powerwave Technologies, Inc. * ................ 23,300 1,363
Repeater Technologies, Inc. ................... 113,400 227
SBA Communications Corp. * .................... 60,000 2,464
Stratos Lightwave, Inc. * ..................... 66,200 1,129
WJ Communications, Inc. * ..................... 75,500 1,076
--------
9,164
96
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Telecommunication Services - 1.9%
Airgate PCS, Inc. * ........................... 55,800 $ 1,981
Intermedia Communications, Inc. * ............. 101,600 730
Jupiter Media Metrix, Inc. * .................. 34,243 319
o2wireless Solutions, Inc. * .................. 14,200 132
Rural Cellular Corp. - Cl. A * ................ 27,800 824
Ubiquitel, Inc. * ............................. 62,500 344
Wink Communications, Inc. * ................... 18,900 113
--------
4,443
Transportation Services - 1.6%
Expeditors International of Washington,
Inc ......................................... 33,200 1,782
Forward Air Corp. * ........................... 50,400 1,881
--------
3,663
--------
TOTAL COMMON STOCK- 97.5% 228,704
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 2.8%
Investment in joint repurchase agreement
with UBS Securities dated 12/29/00,
5.95% due 01/02/01 (Secured by various
U.S. Treasury obligations and U.S.
Government Agency Bonds) $ 6,544 6,544
-------- --------
TOTAL INVESTMENTS- 100.3% 235,248
Cash and Receivables, less payables- (0.3)% (706)
-------- --------
NET ASSETS- 100.0% 234,542
======== ========
* Non-income producing security.
See notes to financial statements.
97
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Australia - 1.5%
Australia & New Zealand Banking Group, Ltd.
(FINL) ...................................... 5,000 $ 40
Broken Hill Proprietary Co., Ltd. (DIOP) ...... 9,300 98
CSL Limited (HEAL) ............................ 6,900 150
National Australia Bank, Ltd. (BANK) .......... 2,100 34
QBE Insurance Group, Ltd. (INSU) .............. 7,100 39
WMC, Ltd. (DIOP) .............................. 18,200 77
--------
438
Bermuda - 0.1%
PartnerRe, Ltd. (INSU) ........................ 700 43
Canada - 1.4%
Alcan Aluminum, Ltd. (META) ................... 1,700 58
Bombardier Inc. - Cl. B (DIOP) ................ 4,600 71
Investors Group, Inc. (FINL) .................. 6,400 111
Magna International, Inc. (AUTO) .............. 900 38
Nortel Networks Corp. (TELE) .................. 1,000 32
The Thomson Corp. (SOFT) ...................... 2,000 76
--------
386
Cayman Islands - 0.2%
Transocean Sedco Forex, Inc. (OILX) ........... 1,000 46
Finland - 1.7%
Nokia Oyj (HEAL) .............................. 9,500 424
Nokia Oyj - ADR (TELE) ........................ 1,500 65
--------
489
France - 1.9%
Bouygues SA (CONT) ............................ 1,800 82
Groupe Danone (FOOD) .......................... 600 90
Louis Vuitton Moet Hennessy (FOOD) ............ 1,300 86
Sanofi-Synthelabo SA (HEAL) ................... 2,100 140
Societe Television Francaise 1 (MEDI) ......... 1,800 97
ST Microelectronics (ETRN) .................... 1,100 48
--------
543
Germany - 1.3%
DaimlerChrysler AG (AUTO) ..................... 3,400 141
Infineon Technologies AG (ETRN) ............... 3,200 119
Metro AG (RETS) ............................... 1,100 51
Siemens AG (DIOP) ............................. 500 65
--------
376
Hong Kong - 2.0%
Cheung Kong (Holdings), Ltd. (READ) ........... 7,000 89
China Telecom (Hong Kong), Ltd. (TELS) ........ 13,500 74
Hutchison Whampoa, Ltd. (COMM) ................ 5,000 62
Li & Fung, Ltd. (COMM) ........................ 48,000 87
Sun Hung Kai Properties, Ltd. (REIT) .......... 12,000 120
Swire Pacific, Ltd. - Cl. A (DIOP) ............ 18,500 133
--------
565
Italy - 0.9%
Assicurazioni Generali (INSU) ................. 1,500 59
ENI SpA (OILS) ................................ 18,600 119
Olivetti SpA (COMM) ........................... 30,100 72
--------
250
Japan - 7.4%
Advantest (ETRN) .............................. 1,100 103
DISCO Corp. (MACH) ............................ 600 33
Enplas Corp. (ETRN) ........................... 1,800 61
Hirose Electric Co., Ltd. (ETRN) .............. 400 39
JUSCO Co., Ltd. (RETS) ........................ 5,000 108
Matsumotokiyoshi Co., Ltd. (RETD) ............. 1,000 27
Mitsubishi Heavy Industries, Ltd. (MACH) ...... 19,000 83
Mitsui Fudosan Co., Ltd. (REAL) ............... 4,000 40
Mitsui Marine & Fire Insurance Co., Ltd.
(INSU) ...................................... 16,000 92
Murata Manufacturing Co., Ltd. (ETRN) ......... 900 106
NEC Corp. (COMP) .............................. 8,000 146
Nintendo Corp., Ltd. (LEIS) ................... 400 63
Nippon Television Network Corp. (MEDP) ........ 100 34
Nissan Motor Acceptance Corp. (FINL) .......... 25,000 144
NTT Mobile Communications Network, Inc.
(TELS) ...................................... 10 172
Rohm Co., Ltd. (ETRN) ......................... 600 114
Sakura Bank, Ltd. (BANK) ...................... 9,000 54
Sanwa Bank, Ltd. (BANK) ....................... 13,000 91
Shionogi & Co., Ltd. (HEAL) ................... 5,000 102
Sony Corp. (ETRN) ............................. 2,000 138
Suzuki Motor Corp. (AUTO) ..................... 3,000 32
Taiyo Yuden Co., Ltd. (ELEQ) .................. 2,000 67
Tokyo Seimitsu Co., Ltd. (ETRN) ............... 2,400 136
Toray Industries, Inc. (APPA) ................. 18,000 68
USHIO, Inc. (ELEQ) ............................ 3,000 49
--------
2,102
Mexico - 0.6%
Telefonos de Mexico SA - ADR (UTIT) ........... 4,100 185
Netherlands - 1.9%
Aegon NV (INSU) ............................... 4,400 182
ASM Lithography Holding NV (COMP) ............. 4,200 95
Heineken NV (FOOD) ............................ 1,500 91
ING Groep NV (BANK) ........................... 1,100 88
Koninklijke (Royal) Philips Electronics NV
(ETRN) ...................................... 1,200 44
United Pan Europe (TELS) ...................... 2,900 30
--------
530
Norway - 0.5%
Norsk Hydro ASA (DIOP) ........................ 3,300 140
Panama - 0.6%
Carnival Corp. (LEIS) ......................... 5,400 167
Singapore - 0.6%
DBS Group Holdings, Ltd. (BANK) ............... 7,000 79
98
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Singapore - Continued
Singapore Technology Engineering, Ltd.
(ENGI) ...................................... 53,000 $ 86
--------
165
South Korea - 0.7%
Samsung Electronics 144A (a) (ETRN) ........... 2,800 198
Soviet Union - 0.2%
LUKoil Holding - ADR (OILS) ................... 1,600 57
Spain - 0.6%
Banco Bilbao Vizcaya SA (BANK) ................ 6,900 103
Telefonica SA (UTIT) .......................... 5,000 82
--------
185
Sweden - 0.7%
ForeningsSparbanken AB (BANK) ................. 7,200 110
Telefonaktiebolaget LM Ericsson AB ............ 7,200 82
--------
192
Switzerland - 2.1%
Compagnie Financiere Richemont AG (RETS) ...... 50 134
Holderbank Financiere Glarus AG - Cl. B
(CONS) ...................................... 99 119
Nestle SA (FOOD) .............................. 18 42
Novartis AG - Reg. (HEAL) ..................... 101 178
Schweizerische Rueckversicherungs-
Gesellschaft (INSU) ......................... 50 120
Syngenta AG (CHEM) ............................ 383 21
--------
614
Taiwan - 0.4%
Taiwan Semiconductor Manufacturing Co.,
Ltd. - ADR (ETRN) ........................... 6,700 116
United Kingdom - 6.3%
AstraZeneca Group plc (HEAL) .................. 12,200 616
Corus Group (STEE) ............................ 59,000 62
Dimension Data Holdings plc (SOFT) ............ 8,900 60
Dixons Group plc (TELE) ....................... 16,900 57
Halifax Group plc (LEND) ...................... 4,800 48
Lloyds TSB Group plc (BANK) ................... 14,800 157
Reuters Group plc (BUSI) ...................... 4,600 78
Shell Transport & Trading Co. plc (OILX) ...... 24,700 203
Unilever plc (CNSU) ........................... 9,400 80
Vodafone AirTouch plc (TELS) .................. 122,400 449
--------
1,810
United States - 25.9%
Advanced Micro Devices, Inc. (ETRN) ........... 6,700 93
AES Corp. (UTIE) .............................. 3,000 166
Agilent Technologies, Inc. (ETRN) ............. 2,000 109
Alcoa, Inc. (META) ............................ 3,100 104
Allstate Corp. (INSU) ......................... 2,300 100
America Online, Inc. (SOFT) ................... 1,700 59
American Greetings Corp. - Cl. A (COMM) ....... 5,200 49
Anheuser-Busch Cos., Inc. (FOOD) .............. 1,600 73
Applied Materials, Inc. (ETRN) ................ 3,700 141
AT&T Corp. - Liberty Media Group - Cl. A (MEDP) 12,000 163
Baker Hughes, Inc. (OILE) ..................... 2,400 100
Bank of America Corp. (BANK) .................. 6,000 275
Berkshire Hathaway Inc. - Cl. A (DIOP) ........ 2 142
Cablevision Systems Corp. - Cl. A (MEDI) ...... 2,500 212
Cadence Design Systems, Inc. (SOFT) ........... 2,100 58
Campbell Soup Co. (FOOD) ...................... 3,300 114
Charter Communications, Inc. - Cl. A (MEDI) ... 3,000 68
CheckFree Corp. (SOFT) ........................ 1,900 81
Circuit City Stores, Inc. (RETS) .............. 6,900 79
Cisco Systems, Inc. (ETRN) .................... 2,000 77
Compaq Computer Corp. (COMP) .................. 9,300 140
Dell Computer Corp. (COMP) .................... 3,200 56
Delphi Automotive Systems Corp. (AUTO) ........ 6,700 75
DoubleClick, Inc. (SOFT) ...................... 3,100 34
Ecolab, Inc. (COMM) ........................... 1,300 56
Exxon Mobil Corp. (OILX) ...................... 400 35
FleetBoston Financial Corp. (BANK) ............ 4,200 158
Fluor Corp. (UTIE) ............................ 2,700 89
General Mills, Inc. (FOOD) .................... 2,300 102
Genetech, Inc. (HEAL) ......................... 1,200 98
H.J. Heinz Co. (FOOD) ......................... 1,300 62
Hewlett-Packard Co. (COMP) .................... 2,500 79
Household International, Inc. (FINL) .......... 3,800 209
Illinois Tool Works, Inc. (DIOP) .............. 4,800 286
IMC Global, Inc. (CHEM) ....................... 7,200 112
Intel Corp. (COMP) ............................ 2,100 63
International Business Machines Corp.
(COMP) ...................................... 900 77
International Paper Co. (PAPR) ................ 1,300 53
Intersil Holding Corp. (ETRN) ................. 1,700 39
Kellogg Co. (FOOD) ............................ 3,200 84
Kimberly-Clark Corp. (PAPR) ................... 1,700 120
KLA-Tencor Corp. (ETRN) ....................... 2,900 98
Limited, Inc. (RETS) .......................... 2,900 49
Lowe's Cos., Inc. (RETS) ...................... 3,300 147
Macromedia, Inc. (SOFT) ....................... 1,200 73
Maxim Integrated Products, Inc. (ETRN) ........ 1,500 72
Medtronic, Inc. (HEAL) ........................ 1,800 109
Motorola, Inc. (ETRN) ......................... 3,800 77
Nike, Inc. - Cl. B (APPA) ..................... 2,400 134
Novellus Systems, Inc. (ETRN) ................. 1,200 43
PepsiCo, Inc. (FOOD) .......................... 2,200 109
Pfizer, Inc. (HEAL) ........................... 5,000 230
PMC-Sierra, Inc. (ETRN) ....................... 800 63
Raytheon Co. - Cl. A (AERO) ................... 6,500 188
Sprint PCS (PCS Group) (TELS) ................. 2,500 51
Teradyne, Inc. (ETRN) ......................... 4,300 160
Texas Instruments, Inc. (ETRN) ................ 2,700 128
Time Warner, Inc. (MEDI) ...................... 2,000 104
TMP Worldwide, Inc. (COMM) .................... 600 33
99
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
United States - Continued
TyCom, Ltd. (TELE) ............................ 2,700 $ 60
UAL Corp. (TRAN) .............................. 2,700 105
United Parcel Service, Inc. - Cl. B (BUSI) .... 700 41
United Technologies Corp. (AERO) .............. 1,800 142
USA Education, Inc. (LEND) .................... 2,600 177
USA Networks, Inc. (MEDI) ..................... 4,500 87
Viacom, Inc. - Cl. B (MEDI) ................... 2,000 94
W.W. Grainger, Inc. (DIOP) .................... 2,300 84
Washington Mutual, Inc. (BANK) ................ 4,300 228
Weatherford International, Inc. (OILE) ........ 1,200 57
Williams Cos., Inc. (FOOD) .................... 2,700 108
WorldCom, Inc. (TELS) ......................... 2,100 30
--------
7,371
--------
TOTAL COMMON STOCK- 59.5% 16,968
Par
Value
(000's)
PUBLICLY-TRADED BONDS
Canada - 1.0%
Government of Canada (GOVF)
7.25% due 06/01/07 ............................ $ 405 297
Denmark - 0.6%
Kingdom of Denmark - Bullet Bond (GOVF)
8.0% due 03/15/06 ............................. 1,100 157
Finland - 0.9%
Republic of Finland - Bonds (GOVF)
5.75% due 02/23/11 ............................ 250 247
France - 1.1%
Government of France - Debs. (GOVF)
4.0% due 10/25/09 ............................. 370 321
Germany - 4.7%
Federal Republic of Germany - Bonds (GOVF)
5.25% due 01/04/08 ............................ 1,000 966
Treuhandanstalt (FORG)
7.375% due 12/02/02 ........................... 375 370
--------
1,336
Japan - 1.1%
International Bank of
Reconstruction &
Development - Debs. (BANK)
4.75% due 12/20/04 ............................ 30,000 303
Netherlands - 9.5%
Deutsche Telekom International Finance
(TELS)
6.625% due 07/06/10 ........................... 250 239
Netherlands Government - Bonds Ser. 1 & 2
(GOVF)
6.0% due 01/15/06 ............................. 2,500 2,486
--------
2,725
Spain - 1.7%
Kingdom of Spain - Notes (GOVF)
3.1% due 09/20/06 ............................. 50,000 488
Supra National - 3.4%
Asian Development Bank (BANK)
5.625% due 02/18/02 ........................... 40,000 371
Bank of Ireland (BANK)
6.45% due 02/10/10 ............................ 250 241
International-American Development Bank -
Bonds (BANK)
1.9% due 07/08/09 ............................. 40,000 364
--------
976
United Kingdom - 1.8%
U.K. Treasury (GOVF)
7.25% due 12/07/07 ............................ 300 504
United States - 10.7%
Amazon.Com, Inc. (RETS)
4.75% due 02/01/09 ............................ 127 48
Federal National Mortgage Assoc. - Sr. Notes
(GOVF)
2.125% due 10/09/07 ........................... 40,000 369
Federal National Mortgage Assoc. (GOVA)
5.25% due 01/15/09 ............................ 340 325
KFW International Finance (BANK)
1.0% due 12/20/04 ............................. 30,000 264
U.S. Treasury - Notes (GOVE)
5.75% due 08/15/03 ............................ 740 751
6.625% due 05/31/02 ........................... 489 496
U.S. Treasury - Bonds (GOVE)
8.0% due 11/15/21 ............................. 635 821
--------
3,074
--------
TOTAL PUBLICLY-TRADED BONDS- 36.5% 10,428
SHORT-TERM INVESTMENTS - 2.8%
Investment in joint trading account (Note B)
6.695% due 01/02/01 $ 800 800
-------- --------
TOTAL INVESTMENTS- 98.8% 28,196
Cash and Receivables, less payables- 1.2% 331
-------- --------
NET ASSETS- 100.0% 28,527
======== ========
ADR-American Depository Receipts
(a) Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 2000, securities aggregated
$198 or 0.7% of net assets of the Portfolio.
See notes to financial statements.
100
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Foreign Governmental ................. GOVF 5,835 21.3%
Bank ................................. BANK 2,920 10.7%
Electronic Products & Services ....... ETRN 2,321 8.5%
U.S. Governmental .................... GOVE 2,069 7.6%
Health Care Products ................. HEAL 2,046 7.5%
Telecommunication Services ........... TELS 1,127 4.1%
Diversified Operations ............... DIOP 1,096 4.0%
Food, Beverage & Tobacco ............. FOOD 739 2.7%
Media - TV / Radio ................... MEDI 663 2.4%
Insurance ............................ INSU 635 2.3%
Retail - Department Stores ........... RETS 618 2.3%
Computer Equipment ................... COMP 600 2.2%
Financial Services ................... FINL 504 1.8%
Computer Software & Services ......... SOFT 407 1.5%
Foreign .............................. FORG 370 1.4%
Commercial Sevices ................... COMM 360 1.3%
Aerospace & Defense .................. AERO 330 1.2%
U.S. Government Agencies ............. GOVA 325 1.2%
Automobile ........................... AUTO 286 1.1%
Oil & Natural Gas Exploration &
Production ........................ OILX 284 1.0%
Telephone ............................ UTIT 268 1.0%
Electric Power ....................... UTIE 255 0.9%
Leisure & Recreation ................. LEIS 229 0.8%
Personal & Commercial Lending ........ LEND 224 0.8%
Food, Beverage & Tobacco ............. FOOD 222 0.8%
Telecommunication Equipment .......... TELE 214 0.8%
Shoe & Apparel Manufacturing ......... APPA 202 0.7%
Media - Publishing ................... MEDP 197 0.7%
Oil .................................. OILS 176 0.7%
Paper & Forest Products .............. PAPR 173 0.6%
Metals & Mining ...................... META 162 0.6%
Oil - Equipment & Service ............ OILE 156 0.6%
Chemical ............................. CHEM 133 0.5%
Real Estate Investment Trust ......... REIT 120 0.4%
Business Services .................... BUSI 119 0.4%
Construction ......................... CONS 119 0.4%
Electrical Equipment ................. ELEQ 116 0.4%
Machinery ............................ MACH 115 0.4%
Transportation Services .............. TRAN 105 0.4%
Real Estate Development .............. READ 89 0.3%
Engineering & Construction ........... ENGI 85 0.3%
Container ............................ CONT 82 0.3%
Consumer Miscellaneous ............... CNSU 81 0.3%
Steel ................................ STEE 62 0.2%
Computer Equipment ................... COMP 56 0.2%
Real Estate Operations ............... REAL 40 0.2%
Computer Software & Services ......... SOFT 34 0.1%
Retail - Drug Stores ................. RETD 27 0.1%
------- ------
$27,396 100.0%
======= ======
101
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Brokerage & Investment Management - 0.9%
E*TRADE Group, Inc. * ......................... 489,625 $ 3,611
Commercial Sevices - 9.7%
Apollo Group, Inc. - Cl. A * .................. 289,694 14,249
Lamar Advertising Co. * ....................... 280,820 10,838
Plexus Corp. * ................................ 127,490 3,875
TMP Worldwide, Inc. * ......................... 168,820 9,285
--------
38,247
Computer Equipment - 1.3%
VeriSign, Inc. * .............................. 66,430 4,928
Computer Software & Services - 1.3%
Exodus Communications, Inc. * ................. 248,285 4,966
Consumer Miscellaneous - 0.8%
University of Phoenix Online * ................ 100,000 3,225
Electronic Products & Services - 15.8%
Cree, Inc. * .................................. 500,610 17,787
Integrated Device Technology, Inc. * .......... 386,120 12,790
Intersil Holding Corp. * ...................... 361,680 8,296
SDL, Inc. * ................................... 22,010 3,262
Semtech Corp. * ............................... 271,890 5,998
Viasytsems Group, Inc. * ...................... 366,505 3,047
Vitesse Semiconductor Corp. * ................. 200,855 11,110
--------
62,290
Financial Services - 4.1%
Paychex, Inc. ................................. 336,013 16,339
Health Care Products - 19.3%
Abgenix, Inc. * ............................... 162,380 9,591
Alexion Pharmaceuticals, Inc. * ............... 79,925 5,190
Andrx Corp - Andrx Group * .................... 65,200 3,774
Biovail Corp. * ............................... 32,040 1,244
CuraGen Corp. * ............................... 112,785 3,080
Human Genome Sciences, Inc. * ................. 199,130 13,802
Maxygen, Inc. * ............................... 100,930 2,473
Medarex, Inc. * ............................... 267,655 10,907
Millennium Pharmaceuticals, Inc. * ............ 188,905 11,689
MiniMed, Inc. * ............................... 85,705 3,602
Sepracor, Inc. * .............................. 134,465 10,774
--------
76,126
Media - TV / Radio - 4.0%
Cox Radio, Inc. - Cl. A * ..................... 211,295 4,767
Entercom Communications Corp. * ............... 108,070 3,722
Hispanic Broadcasting Corp. * ................. 291,030 7,421
--------
15,910
Oil & Natural Gas Exploration & Production - 8.1%
Apache Corp. .................................. 58,810 4,121
Devon Energy Corp. * .......................... 66,430 4,050
EOG Resources, Inc. ........................... 432,825 23,670
--------
31,841
Oil - Equipment & Service - 4.0%
Barrett Resources Corp. * ..................... 18,020 1,024
Hanover Compressor Co. * ...................... 243,065 10,831
Universal Compression Holdings * .............. 108,420 4,086
--------
15,941
Telecommunication Equipment - 17.8%
ADC Telecommunications, Inc. * ................ 392,010 7,105
American Tower Corp. - Cl. A .................. 507,070 19,205
Avanex Corp. * ................................ 252,500 15,040
Crown Castle International Corp. * ............ 564,155 15,268
ONI Systems Corp. * ........................... 8,115 321
Powertel, Inc. ................................ 88,000 5,451
SBA Communications Corp. * .................... 79,520 3,265
TriQuint Semiconductor, Inc. * ................ 101,750 4,445
--------
70,100
Telecommunication Services - 5.4%
AT&T Canada, Inc. * ........................... 65,930 1,924
McLeodUSA, Inc. - Cl. A * ..................... 680,035 9,605
Microcell Telecommunications, Inc. * .......... 99,846 1,897
Western Wireless Corp. - Cl. A * .............. 196,045 7,683
--------
21,109
Telephone - 0.6%
Metromedia Fiber Network, Inc. - Cl. A * ...... 229,045 2,319
--------
TOTAL COMMON STOCK- 93.1% 366,952
Par
Value
(000's)
COMMERCIAL PAPER - 6.9%
Financial Services - 4.4%
CIT Group Holdings, Inc.
6.5% due 01/02/01 ............................. $ 17,000 16,997
U.S. Government Agencies - 2.5%
Federal Home Loan Bank Discount Note
6.38% due 02/02/01 ............................ 10,000 9,945
-------- --------
27,000 26,942
-------- --------
TOTAL INVESTMENTS- 100.0% 393,894
Cash and Receivables, less payables- 0.0% 94
-------- --------
NET ASSETS- 100.0% 393,988
======== ========
* Non-income producing security.
See notes to financial statements.
102
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MID CAP BLEND FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 0.6%
General Dynamics Corp. ........................ 1,500 $ 117
Auto & Truck Parts - 1.8%
B.F. Goodrich Co. ............................. 2,700 98
Dana Corp. .................................... 4,400 67
Johnson Controls, Inc. ........................ 900 47
Lear Corp. .................................... 2,600 65
Visteon Corp. ................................. 9,500 109
--------
386
Bank - 4.6%
Comerica, Inc. ................................ 8,100 481
Golden West Financial Corp. ................... 5,100 344
SouthTrust Corp. .............................. 3,700 151
--------
976
Chemical - 2.6%
Air Products & Chemicals, Inc. ................ 4,700 193
Ashland, Inc. ................................. 1,400 50
Eastman Chemical Co. .......................... 2,100 102
Praxair, Inc. ................................. 3,500 155
Rohm & Haas Co. ............................... 1,500 55
--------
555
Commercial Sevices - 3.1%
Convergys Corp. ............................... 6,100 276
Lamar Advertising Co. ......................... 5,400 208
R.R. Donnelley & Sons Co. ..................... 1,800 49
Sybase, Inc. .................................. 4,100 81
WPP Group plc - ADR ........................... 900 57
--------
671
Computer Software & Services - 6.1%
Cadence Design Systems, Inc. .................. 7,800 215
DST Systems, Inc. ............................. 3,900 261
Fiserv, Inc. .................................. 3,600 171
Intuit, Inc. .................................. 4,900 193
NCR Corp. ..................................... 4,400 216
Network Associates, Inc. ...................... 8,100 34
SunGard Data Systems, Inc. .................... 4,400 207
--------
1,297
Consumer Miscellaneous - 3.2%
Avery Dennison Corp. .......................... 3,400 187
Black & Decker Corp. .......................... 6,300 247
Clorox Co. .................................... 2,700 96
Parker-Hannifin Corp. ......................... 2,700 119
Sherwin-Williams Co. .......................... 1,600 42
--------
691
Container - 0.1%
Sealed Air Corp. .............................. 900 27
Cosmetic & Personal Care - 0.8%
Avon Products, Inc. ........................... 3,400 163
Diversified Operations - 2.5%
Danaher Corp. ................................. 1,300 89
El Paso Energy Corp. .......................... 4,200 301
ITT Industries, Inc. .......................... 2,500 97
Reynolds & Reynolds Co. - Cl. A ............... 2,300 46
--------
533
Electric Power - 11.1%
Allegheny Energy, Inc. ........................ 4,500 217
Calpine Corp. ................................. 3,900 176
Constellation Energy Group .................... 4,300 194
DPL, Inc. ..................................... 5,200 173
DQE, Inc. ..................................... 6,300 206
Energy East Corp. ............................. 2,900 57
Exelon Corp. .................................. 4,600 323
Pinnacle West Capital Corp. ................... 3,700 176
Reliant Energy, Inc. .......................... 4,400 191
Southern Energy, Inc. ......................... 14,200 402
Teco Energy, Inc. ............................. 2,300 74
UtiliCorp United, Inc. ........................ 5,000 155
--------
2,344
Electrical Equipment - 0.3%
American Power Conversion ..................... 4,900 61
Electronic Products & Services - 10.2%
Atmel Corp. ................................... 25,700 299
Jabil Circuit, Inc. ........................... 6,700 170
Lam Research Corp. ............................ 9,500 138
Linear Technology Corp. ....................... 1,700 79
Maxim Integrated Products, Inc. ............... 1,100 52
Millipore Corp. ............................... 2,700 170
Novellus Systems, Inc. ........................ 7,500 269
Pitney Bowes, Inc. ............................ 4,500 149
Rockwell International Corp. .................. 1,800 86
Sanmina Corp. ................................. 2,000 153
Sawtek, Inc. .................................. 2,200 102
SCI Systems, Inc. ............................. 6,600 174
Tektronix, Inc. ............................... 4,600 155
Teradyne, Inc. ................................ 1,600 60
Vishay Intertechnology, Inc. .................. 7,700 116
--------
2,172
Financial Services - 2.1%
Stillwell Financial, Inc. ..................... 11,500 454
Food, Beverage & Tobacco - 2.5%
Archer-Daniels-Midland Co. .................... 11,600 174
Coca-Cola Enterprises, Inc. ................... 2,200 42
ConAgra, Inc. ................................. 6,700 174
Kellogg Co. ................................... 1,600 42
Ralston Purina Group .......................... 4,200 110
--------
542
Health Care Products - 9.2%
Allergan, Inc. ................................ 2,800 271
103
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MID CAP BLEND FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Health Care Products - Continued
Boston Scientific Corp. ....................... 5,500 $ 75
Cephalon, Inc. ................................ 2,400 152
CV Therapeutics, Inc. ......................... 900 64
ENZON , Inc. .................................. 2,900 180
Forest Laboratories, Inc. ..................... 1,300 173
Genzyme Corp. (General Division) .............. 1,000 90
Invitrogen Corp. .............................. 1,600 138
King Pharmaceuticals, Inc. .................... 4,500 232
Laboratory Corporation of America Holdings .... 1,000 176
Waters Corp. .................................. 4,800 401
--------
1,952
Health Care Services - 4.1%
Biogen, Inc. .................................. 2,700 162
Idec Pharmaceuticals Corp. .................... 500 95
Lincare Holdings, Inc. ........................ 2,400 137
St. Jude Medical, Inc. ........................ 3,000 184
Universal Health Services, Inc. - Cl. B ....... 2,200 246
Wellpoint Health Networks, Inc. ............... 500 58
--------
882
Housing - 1.5%
Centex Corp. .................................. 2,900 109
Masco Corp. ................................... 7,800 200
--------
309
Insurance - 6.2%
Lincoln National Corp. ........................ 7,600 360
PartnerRe, Ltd. ............................... 2,200 134
St. Paul Cos., Inc. ........................... 7,700 418
Torchmark, Inc. ............................... 5,100 196
XL Capital, Ltd. - Cl. A ...................... 2,200 192
--------
1,300
Leisure & Recreation - 1.7%
Marriott International, Inc. - Cl. A .......... 3,300 140
SABRE Group Holdings, Inc. .................... 5,200 224
--------
364
Machinery - 1.3%
Deere & Co. ................................... 2,300 105
Ingersoll-Rand Co. ............................ 4,200 176
--------
281
Media - Publishing - 0.9%
Knight-Ridder, Inc. ........................... 2,100 120
New York Times Co. - Cl. A .................... 1,700 68
--------
188
Media - TV / Radio - 2.1%
Clear Channel Communications, Inc. ............ 1,700 82
Univision Communications, Inc. - Cl. A ........ 6,100 250
Westwood One, Inc. ............................ 6,200 120
--------
452
Metals & Mining - 0.4%
Alcan Aluminum, Ltd. .......................... 2,600 89
Oil - 0.5%
Conoco, Inc. - Cl. A .......................... 3,600 103
Oil & Natural Gas Exploration & Production - 7.3%
Amerada Hess Corp. ............................ 1,900 139
Anadarko Petroleum Corp. ...................... 2,500 178
Apache Corp. .................................. 3,100 217
Devon Energy Corp. ............................ 1,800 110
Kerr-McGee Corp. .............................. 1,100 74
Noble Drilling Corp. .......................... 8,100 352
Sunoco, Inc. .................................. 2,600 87
Transocean Sedco Forex, Inc. .................. 5,600 258
USX-Marathon Group ............................ 4,700 130
--------
1,545
Paper & Forest Products - 0.5%
Abitibi-Consolidated, Inc. .................... 5,100 47
Westvaco Corp. ................................ 2,100 61
--------
108
Retail - Department Stores - 2.8%
Family Dollar Stores, Inc. .................... 4,700 101
Limited, Inc. ................................. 5,000 85
RadioShack Corp. .............................. 5,300 227
Tiffany & Co. ................................. 5,500 174
--------
587
Retail - Drug Stores - 0.7%
TJX Cos., Inc. ................................ 5,300 147
Retail - Food - 0.4%
Brinker International, Inc. ................... 2,100 89
Shoe & Apparel Manufacturing - 0.2%
Intimate Brands, Inc. ......................... 3,300 49
Steel - 0.3%
Nucor Corp. ................................... 1,600 63
Telecommunication Equipment - 0.6%
Scientific-Atlanta, Inc. ...................... 4,000 130
Telecommunication Services - 1.4%
Broadwing, Inc. ............................... 6,800 155
EchoStar Communications Corp. - Cl. A ......... 6,600 150
--------
305
Telephone - 0.9%
CenturyTel, Inc. .............................. 2,100 75
Telephone and Data Systems, Inc. .............. 1,200 108
--------
183
Transportation Services - 2.9%
AMR Corp. ..................................... 2,400 94
Burlington Northern Santa Fe .................. 4,800 136
Canadian Pacific, Ltd. ........................ 3,100 89
104
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MID CAP BLEND FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Transportation Services - Continued
Continental Airlines, Inc. - Cl. B ............ 800 $ 41
Northwest Airlines Corp. ...................... 2,700 81
Southwest Airlines Co. ........................ 5,100 171
--------
612
--------
TOTAL COMMON STOCK- 97.5% 20,727
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 1.9%
Investment in joint trading
account (Note B)
6.695% due 01/02/01 ........................... $ 409 409
-------- --------
TOTAL INVESTMENTS- 99.4% 21,136
Cash and Receivables, less payables- 0.6% 123
-------- --------
NET ASSETS- 100.0% 21,259
ADR-American Depository Receipts
See notes to financial statements.
105
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.5%
Honeywell International, Inc. ................. 28,400 $ 1,344
Lockheed Martin Corp. ......................... 111,000 3,768
--------
5,112
Auto & Truck Parts - 0.6%
Dana Corp. .................................... 7,400 113
Genuine Parts Co. ............................. 45,400 1,189
--------
1,302
Automobile - 0.5%
Ford Motor Co. ................................ 43,500 1,020
Bank - 7.8%
Bank of America Corp. ......................... 37,200 1,706
Bank One Corp. ................................ 69,700 2,553
Firstar Corp. ................................. 43,700 1,016
FleetBoston Financial Corp. ................... 82,972 3,117
J.P. Morgan & Co., Inc. ....................... 17,900 2,962
Mercantile Bankshares Corp. ................... 20,900 903
National City Corp. ........................... 44,100 1,268
Wells Fargo & Co. ............................. 43,900 2,445
--------
15,970
Business Services - 0.8%
Dun & Bradstreet Corp. ........................ 15,700 406
H & R Block, Inc. ............................. 28,000 1,159
--------
1,565
Chemical - 3.3%
Dow Chemical Co. .............................. 40,800 1,494
E.I. du Pont de Nemours & Co. ................. 59,500 2,874
Great Lakes Chemical Corp. .................... 29,600 1,101
Hercules, Inc. ................................ 71,700 1,367
--------
6,836
Commercial Sevices - 0.9%
R.R. Donnelley & Sons Co. ..................... 41,700 1,126
The Dun & Bradstreet Corp. * .................. 31,400 807
--------
1,933
Computer Equipment - 1.7%
Compaq Computer Corp. ......................... 43,400 653
Hewlett-Packard Co. ........................... 58,000 1,831
Intel Corp. ................................... 28,400 854
Xerox Corp. ................................... 33,800 156
--------
3,494
Computer Software & Services - 1.1%
BMC Software, Inc. * .......................... 17,700 248
Microsoft Corp. ............................... 39,400 1,709
Unisys Corp. * ................................ 15,200 222
--------
2,179
Construction - 0.0%
Armstrong Holdings, Inc. ...................... 18,400 38
Consumer Miscellaneous - 1.7%
Black & Decker Corp. .......................... 17,700 695
Clorox Co. .................................... 5,000 177
Fortune Brands, Inc. .......................... 39,300 1,179
Stanley Works ................................. 47,300 1,475
--------
3,526
Cosmetic & Personal Care - 3.0%
Gillette Co. .................................. 76,800 2,774
International Flavors & Fragrances, Inc. ...... 46,200 939
Procter & Gamble Co. .......................... 30,100 2,361
--------
6,074
Diversified Operations - 3.6%
Cooper Industries, Inc. ....................... 13,000 597
Eaton Corp. ................................... 9,500 714
Illinois Tool Works, Inc. ..................... 19,400 1,156
Minnesota Mining & Manufacturing Co. .......... 29,400 3,543
Pall Corp. .................................... 62,500 1,332
--------
7,342
Electric Power - 4.6%
Duke Energy Co. ............................... 20,400 1,739
Exelon Corp. .................................. 36,375 2,554
Firstenergy Corp. ............................. 38,800 1,224
Niagara Mohawk Holdings, Inc. ................. 30,900 516
Reliant Energy, Inc. .......................... 27,100 1,174
Southern Co. .................................. 65,900 2,191
--------
9,398
Electronic Products & Services - 3.2%
Hubbell, Inc. - Cl. B ......................... 35,600 943
Motorola, Inc. ................................ 94,400 1,912
Rockwell International Corp. .................. 59,000 2,810
Texas Instruments, Inc. ....................... 18,400 872
--------
6,537
Financial Services - 3.9%
Citigroup, Inc. ............................... 51,566 2,633
Mellon Financial Corp. ........................ 108,400 5,332
--------
7,965
Food, Beverage & Tobacco - 8.7%
Brown-Forman Corp. - Cl. B .................... 20,000 1,330
Campbell Soup Co. ............................. 61,300 2,123
General Mills, Inc. ........................... 51,200 2,282
H.J. Heinz Co. ................................ 49,800 2,362
Hershey Foods Corp. ........................... 46,000 2,961
Kellogg Co. ................................... 33,900 890
McCormick & Co., Inc. ......................... 40,100 1,446
Philip Morris Cos., Inc. ...................... 66,200 2,913
UST, Inc. ..................................... 55,600 1,560
--------
17,867
Health Care Products - 4.6%
Abbott Laboratories ........................... 44,500 2,156
106
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Health Care Products - Continued
American Home Products Corp. .................. 63,500 $ 4,035
Becton, Dickinson & Co. ....................... 23,600 817
Bristol-Myers Squibb Co. ...................... 15,900 1,176
Pharmacia Corp. ............................... 20,875 1,273
--------
9,457
Insurance - 5.9%
American General Corp. ........................ 36,400 2,967
Aon Corp. ..................................... 32,600 1,116
Chubb Corp. ................................... 29,500 2,552
Lincoln National Corp. ........................ 31,800 1,504
Safeco Corp. .................................. 25,700 845
St. Paul Cos., Inc. ........................... 28,652 1,556
UnumProvident Corp. ........................... 60,200 1,618
--------
12,158
Leisure & Recreation - 2.9%
Eastman Kodak Co. ............................. 47,400 1,866
Hasbro, Inc. .................................. 88,400 939
Hilton Hotels Corp. ........................... 96,800 1,017
Starwood Hotels & Resorts Worldwide, Inc. ..... 61,900 2,182
--------
6,004
Media - Publishing - 1.8%
Dow Jones & Co., Inc. ......................... 18,200 1,031
Knight-Ridder, Inc. ........................... 35,700 2,030
Readers Digest Association, Inc. - Cl. A ...... 15,900 622
--------
3,683
Media - TV / Radio - 1.0%
The Walt Disney Co. ........................... 71,900 2,081
Metals & Mining - 0.5%
Phelps Dodge Corp. ............................ 17,100 954
Oil - 1.4%
Royal Dutch Petroleum Co. - NY Shares ......... 46,900 2,840
Oil & Natural Gas Exploration & Production - 9.4%
Amerada Hess Corp. ............................ 20,200 1,476
BP Amoco plc - ADR ............................ 77,232 3,697
Chevron Corp. ................................. 32,100 2,710
Exxon Mobil Corp. ............................. 51,067 4,440
Texaco, Inc. .................................. 49,200 3,057
Unocal Corp. .................................. 66,400 2,569
USX-Marathon Group ............................ 42,500 1,179
--------
19,128
Oil - Equipment & Service - 0.8%
Baker Hughes, Inc. ............................ 37,100 1,542
Paper & Forest Products - 3.1%
Georgia-Pacific Corp. ......................... 11,426 356
International Paper Co. ....................... 87,170 3,557
Kimberly-Clark Corp. .......................... 28,800 2,036
Mead Corp. .................................... 10,000 314
--------
6,263
Pollution Control - 1.4%
Waste Management, Inc. ........................ 101,290 2,811
Precious Metals/Gems/Stones - 0.2%
Newmont Mining Corp. .......................... 18,500 316
Real Estate Investment Trust - 0.6%
Simon Property Group, Inc. .................... 50,700 1,217
Real Estate Operations - 0.4%
Rouse Co. ..................................... 32,800 836
Retail - Department Stores - 1.8%
J.C. Penney Co., Inc. ......................... 12,800 139
May Department Stores Co. ..................... 57,650 1,888
Toys "R" Us, Inc. * ........................... 101,400 1,692
--------
3,719
Retail - Food - 0.8%
Albertson's, Inc. ............................. 33,900 898
McDonald's Corp. .............................. 22,900 779
--------
1,677
Telecommunication Equipment - 0.3%
Lucent Technologies, Inc. ..................... 46,900 633
Telecommunication Services - 1.7%
Verizon Communications ........................ 68,716 3,444
Telephone - 5.2%
Alltel Corp. .................................. 42,400 2,647
AT&T Corp. .................................... 70,700 1,224
BellSouth Corp. ............................... 40,300 1,650
SBC Communications, Inc. ...................... 73,355 3,503
Sprint Corp. .................................. 81,400 1,653
--------
10,677
Transportation Services - 2.0%
Norfolk Southern Corp. ........................ 72,800 969
Union Pacific Corp. ........................... 63,900 3,243
--------
4,212
U.S. Government Agencies - 1.8%
Federal National Mortgage Assoc ............... 41,400 3,592
--------
TOTAL COMMON STOCK- 95.5% 195,402
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Automobile - 0.6%
BMW US Capital Corp.
6.45% due 01/02/01 ............................ $ 1,202 1,202
Commercial Sevices - 1.5%
Yale University
107
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS - Continued
Commercial Sevices - Continued
6.52% due 02/21/01 ............................ $ 3,000 $ 2,972
Electric Power - 1.5%
Wisconsin Energy Corp.
6.52% due 02/08/01 ............................ 3,000 2,979
Financial Services - 0.6%
KFW International Finance
6.5% due 02/08/01 ............................. 1,275 1,266
Telecommunication Services - 0.9%
Verizon Global Funding Corp.
6.5% due 02/23/01 ............................. 2,000 1,982
--------
TOTAL SHORT-TERM INVESTMENTS- 5.1% 10,401
------- --------
TOTAL INVESTMENTS- 100.6% 205,803
Cash and Receivables, less payables- (0.6)% (1,268)
------- --------
NET ASSETS- 100.0% 204,535
======= ========
* Non-income producing security.
See notes to financial statements.
108
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 3.1%
Boeing Co. .................................... 2,100 $ 139
Honeywell International, Inc. ................. 1,700 80
Northrop Grumman Corp. ........................ 1,300 108
Raytheon Co. - Cl. B .......................... 700 22
United Technologies Corp. ..................... 2,700 212
--------
561
Auto & Truck Parts - 1.3%
B.F. Goodrich Co. ............................. 400 14
General Motors Corp. .......................... 3,000 153
General Motors Corp. - Cl. H .................. 1,200 28
Johnson Controls, Inc. ........................ 700 36
--------
231
Automobile - 0.5%
Delphi Automotive Systems Corp. ............... 2,100 23
Ford Motor Co. ................................ 2,971 70
--------
93
Bank - 7.7%
Bank of America Corp. ......................... 4,300 197
Bank of New York Co., Inc. .................... 1,300 72
Bank One Corp. ................................ 2,400 88
BB&T Corporation .............................. 300 11
City National Corp. ........................... 300 12
Comerica, Inc. ................................ 1,800 107
Fifth Third Bancorp ........................... 150 9
First Union Corp. ............................. 300 8
Firstar Corp. ................................. 900 21
FleetBoston Financial Corp. ................... 4,176 157
Golden West Financial Corp. ................... 1,600 108
J.P. Morgan & Co., Inc. ....................... 400 66
PNC Bank Corp. ................................ 1,300 95
Popular, Inc. ................................. 500 13
Silicon Valley Bancshares * ................... 700 24
SouthTrust Corp. .............................. 200 8
Suntrust Banks, Inc. .......................... 800 50
UnionBanCal Corp. ............................. 1,200 29
Washington Mutual, Inc. ....................... 500 27
Wells Fargo & Co. ............................. 5,300 295
--------
1,397
Brokerage & Investment Management - 2.5%
A.G. Edwards, Inc. ............................ 1,400 66
Merrill Lynch & Co., Inc. ..................... 2,400 164
Morgan Stanley, Dean Witter, Discover & Co. ... 2,900 230
--------
460
Business Services - 0.6%
Comdisco, Inc. ................................ 1,100 13
Internet Capital Group, Inc. * ................ 300 1
Manpower, Inc. ................................ 400 15
Robert Half International, Inc. ............... 1,400 37
United Parcel Service, Inc. - Cl. B * ......... 700 41
--------
107
Chemical - 2.0%
Air Products & Chemicals, Inc. ................ 1,700 70
Cabot Corp. ................................... 300 8
Cytec Industries, Inc. * ...................... 900 36
Dow Chemical Co. .............................. 3,600 132
E.I. du Pont de Nemours & Co. ................. 700 34
Praxair, Inc. ................................. 1,700 75
--------
355
Commercial Sevices - 0.2%
Quanta Services, Inc. * ....................... 500 16
TeleTech Holdings, Inc. * ..................... 700 13
--------
29
Computer Equipment - 0.9%
3Com Corp. * .................................. 700 6
Apple Computer, Inc. * ........................ 800 12
Compaq Computer Corp. ......................... 800 12
Hewlett-Packard Co. ........................... 2,400 76
International Business Machines Corp. ......... 400 34
Network Appliance, Inc. * ..................... 100 6
Tech Data Corp. * ............................. 400 11
VERITAS Software Corp. * ...................... 150 13
--------
170
Computer Software & Services - 1.4%
At Home Corp. - Ser. A ........................ 100 1
Computer Sciences Corp. * ..................... 300 18
Critical Path, Inc. * ......................... 100 3
DST Systems, Inc. * ........................... 700 47
Electronic Data Systems Corp. ................. 800 46
First Data Corp. .............................. 2,300 121
Intuit, Inc. * ................................ 100 4
SunGard Data Systems, Inc. .................... 400 19
--------
259
Construction - 0.1%
Dycom Industries, Inc. * ...................... 300 11
Lafarge Corp. ................................. 400 9
--------
20
Consumer Miscellaneous - 0.6%
Clorox Co. .................................... 400 14
Sherwin-Williams Co. .......................... 400 11
Unilever NV - NY Shares ....................... 1,200 75
--------
100
Container - 0.1%
Bemis Co., Inc. ............................... 300 10
Cosmetic & Personal Care - 1.8%
Alberto-Culver Co. - Cl. B .................... 300 13
Avon Products, Inc. ........................... 2,000 96
109
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Cosmetic & Personal Care - Continued
Colgate-Palmolive Co. ......................... 500 $ 32
Estee Lauder Cos., Inc. - Cl. A ............... 600 26
Procter & Gamble Co. .......................... 2,100 165
--------
332
Diversified Operations - 1.8%
Cendant Corp. * ............................... 400 4
Corning, Inc. ................................. 500 26
General Electric Co. .......................... 2,000 96
ITT Industries, Inc. .......................... 400 16
Minnesota Mining & Manufacturing Co. .......... 1,200 145
Textron, Inc. ................................. 500 23
Tyco International, Ltd. ...................... 350 19
--------
329
Electric Power - 3.6%
Calpine Corp. * ............................... 600 27
Consolidated Edison, Inc. ..................... 200 8
Constellation Energy Group .................... 1,600 72
Dominion Resources, Inc. ...................... 221 15
Energy East Corp. ............................. 1,200 23
Entergy Corp. ................................. 3,400 144
Exelon Corp. .................................. 750 53
Firstenergy Corp. ............................. 400 13
FPL Group, Inc. ............................... 900 64
PG & E Corp. .................................. 2,500 50
PPL Corp. ..................................... 1,300 59
Public Services Enterprise Group, Inc. ........ 1,600 78
Reliant Energy, Inc. .......................... 300 13
Southern Co. .................................. 1,100 36
--------
655
Electrical Equipment - 1.2%
Emerson Electric Co. .......................... 800 63
Molex, Inc. ................................... 2,900 103
TXU Corp. ..................................... 1,100 49
--------
215
Electronic Products & Services - 0.7%
Advanced Micro Devices, Inc. * ................ 800 11
Arrow Electronics, Inc. * ..................... 700 20
Avnet, Inc. ................................... 600 13
AVX Corp. ..................................... 900 15
Integrated Device Technology, Inc. * .......... 200 7
Kemet Corp. * ................................. 700 10
Motorola, Inc. ................................ 600 12
National Semiconductor Corp. * ................ 600 12
Vishay Intertechnology, Inc. * ................ 2,100 32
--------
132
Energy - Alternative Source - 0.3%
Dynegy, Inc. - Cl.A ........................... 1,100 62
Financial Services - 6.0%
American Express Co. .......................... 1,100 60
Citigroup, Inc. ............................... 13,600 695
Household International, Inc. ................. 200 11
Jersey Puerto MORGAN CHASE + Co. .............. 2,600 118
Lehman Brothers Holdings, Inc. ................ 2,000 135
Mellon Financial Corp. ........................ 200 10
Providian Financial Corp. * ................... 1,200 69
--------
1,098
Food, Beverage & Tobacco - 5.4%
Adolph Coors Co. - Cl. B ...................... 300 24
Brown-Forman Corp. - Cl. B .................... 1,200 80
ConAgra, Inc. ................................. 2,000 52
IBP, Inc. ..................................... 1,600 43
Pepsi Bottling Group, Inc. .................... 2,900 116
PepsiCo, Inc. ................................. 3,200 158
Philip Morris Cos., Inc. ...................... 3,000 132
R.J. Reynolds Tobacco Holdings, Inc. * ........ 2,000 97
Ralston-Ralston Purina Group .................. 2,500 65
Starbucks Corp. * ............................. 400 18
Suiza Foods Corp. * ........................... 200 10
Sysco Corp. ................................... 3,400 102
Tricon Global Restaurants, Inc. * ............. 2,200 73
Tyson Foods, Inc. - Cl. A ..................... 800 10
--------
980
Health Care Products - 7.8%
Abbott Laboratories ........................... 3,800 184
Allergan, Inc. ................................ 600 58
Alpharma, Inc. - Cl. A ........................ 700 31
Baxter International, Inc. .................... 200 17
Bristol-Myers Squibb Co. ...................... 1,100 81
Cardinal Health, Inc. ......................... 800 80
Celgene Corp. * ............................... 200 6
Chiron Corp. * ................................ 200 9
Forest Laboratories, Inc. * ................... 300 40
Genetech, Inc. * .............................. 400 32
IVAX Corp. .................................... 700 27
Johnson & Johnson ............................. 3,500 368
Merck & Co., Inc. ............................. 3,600 337
Sepracor, Inc. * .............................. 200 16
UnitedHealth Group, Inc. ...................... 2,000 123
Waters Corp. * ................................ 200 17
--------
1,426
Health Care Services - 0.5%
AmeriSource Health Corp. - Cl. A * ............ 300 15
HCA-The Healthcare Corporation ................ 600 26
PacifiCare Health Systems, Inc. * ............. 300 5
Quest Diagnostics, Inc. * ..................... 200 28
Trigon Healthcare, Inc. * ..................... 200 16
WebMD Corp. * ................................. 200 2
--------
92
110
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Housing - 0.6%
Centex Corp. .................................. 2,000 $ 75
Pulte Corp. ................................... 600 25
--------
100
Insurance - 8.5%
AFLAC, Inc. ................................... 400 29
Allstate Corp. ................................ 4,800 209
American General Corp. ........................ 1,000 82
American International Group, Inc. ............ 3,700 365
Cigna Corp. ................................... 1,300 172
Cincinnati Financial Corp. .................... 500 20
Everest Re Group, Ltd. ........................ 300 21
Hartford Financial Services Group, Inc. ....... 1,200 85
Jefferson-Pilot Corp. ......................... 100 7
Lincoln National Corp. ........................ 300 14
Loews Corp. ................................... 1,400 145
Marsh & McLennan Cos., Inc. ................... 600 70
MGIC Investment Corp. ......................... 900 61
Nationwide Financial Services - Cl. A ......... 300 14
Old Republic International Corp. .............. 1,300 42
Radian Group, Inc. ............................ 200 15
St. Paul Cos., Inc. ........................... 500 27
The MONY Group, Inc. .......................... 1,600 79
The PMI Group, Inc. ........................... 1,200 81
--------
1,538
Leisure & Recreation - 0.8%
Brunswick Corp. ............................... 3,700 61
Eastman Kodak Co. ............................. 1,300 51
SABRE Group Holdings, Inc. * .................. 300 13
Starwood Hotels & Resorts Worldwide, Inc. ..... 600 21
--------
146
Machinery - 0.4%
FMC Corp. * ................................... 500 36
Ingersoll-Rand Co. ............................ 700 29
--------
65
Media - Publishing - 0.7%
AT&T Corp. - Liberty Media Group - Cl. A * .... 1,800 25
Dow Jones & Co., Inc. ......................... 500 28
Gannett Co., Inc. ............................. 100 6
Knight-Ridder, Inc. ........................... 600 34
New York Times Co. - Cl. A .................... 1,000 40
--------
133
Media - TV / Radio - 2.4%
Clear Channel Communications, Inc. * .......... 300 15
Comcast Corp. - Cl. A ......................... 600 25
Fox Entertainment Group, Inc. - Cl. A * ....... 1,200 21
Infinity Broadcasting Corp. - Cl. A * ......... 2,800 78
McGraw-Hill Cos., Inc. ........................ 200 12
The Walt Disney Co. ........................... 7,600 220
Time Warner, Inc. ............................. 500 26
USA Networks, Inc. * .......................... 200 4
Viacom, Inc. - Cl. B * ........................ 917 43
--------
444
Metals & Mining - 0.7%
Alcan Aluminum, Ltd. .......................... 1,600 55
Alcoa, Inc. ................................... 612 20
Inco, Ltd. .................................... 2,100 35
Precision Castparts Corp. ..................... 400 17
--------
127
Natural Gas Distribution - 0.1%
KeySpan Corp. ................................. 400 17
Oil - 0.5%
Conoco, Inc. - Cl. B .......................... 3,300 96
Oil & Natural Gas Exploration & Production - 8.8%
Amerada Hess Corp. ............................ 1,300 95
Apache Corp. .................................. 900 63
Chevron Corp. ................................. 3,100 262
Exxon Mobil Corp. ............................. 7,252 630
Kerr-McGee Corp. .............................. 2,200 147
Murphy Oil Corp. .............................. 1,200 73
Noble Affiliates, Inc. ........................ 500 23
Noble Drilling Corp. * ........................ 300 13
Occidental Petroleum Corp. .................... 4,900 119
Phillips Petroleum Co. ........................ 300 17
Texaco, Inc. .................................. 1,300 81
USX-Marathon Group ............................ 2,700 75
--------
1,598
Paper & Forest Products - 0.9%
Georgia-Pacific Corp. ......................... 1,000 31
Kimberly-Clark Corp. .......................... 1,600 113
Westvaco Corp. ................................ 200 6
Weyerhaeuser Co. .............................. 300 15
--------
165
Personal & Commercial Lending - 0.3%
Countrywide Credit Industries, Inc. ........... 400 20
MBNA Corp. .................................... 500 18
Metris Cos., Inc. ............................. 300 8
--------
46
Pollution Control - 0.2%
Republic Services, Inc. - Cl. A ............... 2,000 34
Real Estate Development - 0.2%
Lennar Corp. .................................. 1,200 44
Real Estate Investment Trust - 0.8%
Equity Office Properties Trust ................ 1,400 46
Equity Residential Properties Trust ........... 1,300 72
Prologis Trust ................................ 700 15
Simon Property Group, Inc. .................... 400 10
--------
143
111
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Retail - Department Stores - 2.0%
Federated Department Stores, Inc. * ........... 500 $ 18
Harcourt General, Inc. ........................ 900 52
Kohl's Corp. .................................. 700 43
Limited, Inc. ................................. 600 10
Neiman Marcus Group, Inc. - Cl. A ............. 1,700 60
Sears, Roebuck & Co. .......................... 4,300 149
Tiffany & Co. ................................. 400 13
Zale Corp. * .................................. 700 20
--------
365
Retail - Food - 0.7%
Brinker International, Inc. * ................. 900 38
Darden Restaurants, Inc. ...................... 500 12
McDonald's Corp. .............................. 100 3
Safeway, Inc. * ............................... 1,200 75
--------
128
Shoe & Apparel Manufacturing - 0.2%
Intimate Brands, Inc. ......................... 400 6
Liz Claiborne, Inc. ........................... 300 13
Nike, Inc. - Cl. B ............................ 400 22
--------
41
Telecommunication Equipment - 0.2%
Aether Systems, Inc. * ........................ 100 4
Covad Communications Group, Inc. * ............ 100
JDS Uniphase Corp. * .......................... 800 34
Nortel Networks Corp. ......................... 128 4
--------
42
Telecommunication Services - 3.3%
BCE, Inc. ..................................... 3,200 93
Level 3 Communications, Inc. * ................ 300 10
Qwest Communications International, Inc. * .... 3,400 139
United States Cellular Corp. * ................ 100 6
Verizon Communications ........................ 6,274 314
WorldCom, Inc. * .............................. 1,900 27
XO Communications, Inc. ....................... 300 5
--------
594
Telephone - 4.2%
AT&T Corp. .................................... 8,160 141
AT&T Wireless Group * ......................... 500 9
BellSouth Corp. ............................... 4,700 193
SBC Communications, Inc. ...................... 8,237 393
Sprint Corp. .................................. 1,300 26
--------
762
Transportation Services - 1.0%
AMR Corp. * ................................... 700 28
Burlington Northern Santa Fe .................. 500 14
Canadian National Railway Co. ................. 2,600 77
Delta Air Lines, Inc. ......................... 1,100 55
--------
174
U.S. Government Agencies - 1.6%
Federal Home Loan Mortgage Corp. .............. 1,200 83
Federal National Mortgage Assoc ............... 2,400 208
--------
291
--------
TOTAL COMMON STOCK- 89.2% 16,206
Par
Value
(000's)
SHORT TERM INVESTMENTS - 9.4%
Investment in joint repurchase agreement with
Goldman Sachs & Co. dated 12/29/00,
6.481% due 01/02/01 (Secured by various
U.S. Treasury obligations and U.S.
Government Agency Bonds) $ 1,701 1,701
---------- --------
TOTAL INVESTMENTS- 98.6% 17,907
Cash and Receivables, less payables- 1.4% 257
---------- --------
NET ASSETS- 100.0% 18,164
========== ========
* Non-income producing security.
See notes to financial statements.
112
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
AMERICAN LEADERS LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.2%
Honeywell International, Inc. ................. 1,400 $ 66
Northrop Grumman Corp. ........................ 800 67
--------
133
Auto & Truck Parts - 2.0%
General Motors Corp. .......................... 700 36
General Motors Corp. - Cl. H .................. 200 5
Johnson Controls, Inc. ........................ 1,100 57
TRW, Inc. ..................................... 600 23
--------
121
Automobile - 0.9%
Ford Motor Co. ................................ 2,372 56
Bank - 6.2%
Bank of America Corp. ......................... 1,800 82
First Union Corp. ............................. 2,400 67
PNC Bank Corp. ................................ 1,600 117
Washington Mutual, Inc. ....................... 2,000 106
--------
372
Brokerage & Investment Management - 3.1%
Bear Stearns Cos., Inc. ....................... 1,600 81
Morgan Stanley, Dean Witter, Discover &
Co .......................................... 1,300 103
--------
184
Business Services - 0.9%
H & R Block, Inc. ............................. 1,300 54
Chemical - 2.2%
Ashland, Inc. ................................. 1,700 61
E.I. du Pont de Nemours & Co. ................. 1,400 68
--------
129
Computer Equipment - 3.8%
Compaq Computer Corp. ......................... 2,900 44
International Business Machines Corp. ......... 1,000 85
Lexmark International Group, Inc. - Cl. A * ... 1,000 44
VERITAS Software Corp. * ...................... 669 58
--------
231
Computer Software & Services - 5.2%
Computer Sciences Corp. * ..................... 1,100 66
Electronic Data Systems Corp. ................. 1,300 75
First Data Corp. .............................. 2,000 106
Novell, Inc. * ................................ 6,200 32
Sun Microsystems, Inc. * ...................... 1,100 31
--------
310
Consumer Miscellaneous - 0.6%
Parker-Hannifin Corp. ......................... 800 35
Diversified Operations - 4.0%
Cendant Corp. * ............................... 5,500 53
PPG Industries, Inc. .......................... 1,100 51
Textron, Inc. ................................. 800 37
Tyco International, Ltd. ...................... 1,800 100
--------
241
Electric Power - 6.0%
Edison International .......................... 2,900 45
Entergy Corp. ................................. 1,900 81
FPL Group, Inc. ............................... 1,200 86
Public Services Enterprise Group, Inc. ........ 1,600 78
Reliant Energy, Inc. .......................... 1,600 69
--------
359
Electronic Products & Services - 2.4%
Motorola, Inc. ................................ 2,400 48
Philips Electronics NV ........................ 2,643 96
--------
144
Financial Services - 1.0%
CIT Group, Inc. - Cl. A ....................... 3,100 62
Food, Beverage & Tobacco - 5.4%
General Mills, Inc. ........................... 1,400 63
Philip Morris Cos., Inc. ...................... 3,800 167
Sara Lee Corp. ................................ 3,800 93
--------
323
Health Care Products - 10.0%
Abbott Laboratories ........................... 1,900 92
Baxter International, Inc. .................... 1,100 97
Bristol-Myers Squibb Co. ...................... 1,800 133
Merck & Co., Inc. ............................. 1,000 94
Pharmacia Corp. ............................... 1,000 61
UnitedHealth Group, Inc. ...................... 2,000 123
--------
600
Health Care Services - 1.9%
HEALTHSOUTH Corp. * ........................... 7,100 116
Insurance - 11.8%
Allmerica Financial Corp. ..................... 1,100 80
Allstate Corp. ................................ 2,600 113
Cigna Corp. ................................... 700 92
Conseco, Inc. ................................. 7,100 94
Lincoln National Corp. ........................ 1,600 76
Loews Corp. ................................... 900 93
Marsh & McLennan Cos., Inc. ................... 600 70
MBIA, Inc. .................................... 1,200 89
--------
707
Machinery - 0.8%
Ingersoll-Rand Co. ............................ 1,200 50
Media - Publishing - 1.1%
Knight-Ridder, Inc. ........................... 1,100 63
113
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
AMERICAN LEADERS LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Media - TV / Radio - 3.6%
Charter Communications, Inc. - Cl. A * ........ 3,000 $ 68
The News Corp., Ltd. - ADR .................... 2,200 64
Viacom, Inc. .................................. 1,400 66
Viacom, Inc. - Cl. B * ........................ 500 23
--------
221
Oil - 2.2%
Royal Dutch Petroleum Co. - NY Shares ......... 1,200 73
Tosco Corp. ................................... 1,800 61
--------
134
Oil & Natural Gas Exploration & Production - 6.7%
Chevron Corp. ................................. 900 76
ENSCO International, Inc. ..................... 2,300 78
Exxon Mobil Corp. ............................. 1,600 139
Texaco, Inc. .................................. 900 56
USX-Marathon Group ............................ 2,000 56
--------
405
Paper & Forest Products - 3.0%
International Paper Co. ....................... 1,700 69
Kimberly-Clark Corp. .......................... 1,600 113
--------
182
Pollution Control - 1.8%
Waste Management, Inc. ........................ 4,000 111
Retail - Department Stores - 1.3%
Federated Department Stores, Inc. * ........... 1,300 46
Wal-Mart Stores, Inc. ......................... 700 37
--------
83
Telecommunication Equipment - 0.5%
Lucent Technologies, Inc. ..................... 2,500 34
Telecommunication Services - 2.4%
Verizon Communications ........................ 2,400 120
WorldCom, Inc. * .............................. 1,900 27
--------
147
Telephone - 1.4%
AT&T Corp. .................................... 2,000 34
Sprint Corp. .................................. 2,400 49
--------
83
Transportation Services - 1.1%
Union Pacific Corp. ........................... 1,300 66
--------
TOTAL COMMON STOCK- 95.5% 5,756
Par
Value
(000s)
SHORT-TERM INVESTMENTS - 4.1%
Investment in joint trading account
(Note B)
6.695% due 01/02/01 ........................... 246 $ 246
-------- --------
TOTAL INVESTMENTS- 99.6% 6,002
Cash and Receivables, less payables- 0.4% 27
-------- --------
NET ASSETS- 100.0% 6,029
======== ========
* Non-income producing security.
ADR-American Depositary Receipt
114
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE/MID CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.4%
Boeing Co. .................................... 2,200 $ 145
Honeywell International, Inc. ................. 2,300 109
United Technologies Corp. ..................... 1,500 118
--------
372
Auto & Truck Parts - 0.5%
General Motors Corp. - Cl. H .................. 3,596 83
Automobile - 0.9%
Ford Motor Co. ................................ 6,370 149
Bank - 10.5%
KeyCorp ....................................... 11,600 325
Mercantile Bankshares Corp. ................... 5,700 246
U.S. Bancorp .................................. 5,600 163
UnionBanCal Corp. ............................. 3,200 77
Wachovia Corp. ................................ 6,100 355
Washington Mutual, Inc. ....................... 9,300 493
--------
1,659
Brokerage & Investment Management - 4.4%
Goldman Sachs Group, Inc. ..................... 2,300 246
Merrill Lynch & Co., Inc. ..................... 3,600 246
Morgan Stanley, Dean Witter, Discover & Co .... 2,500 198
--------
690
Business Services - 0.2%
Manpower, Inc. ................................ 800 30
Chemical - 1.8%
Air Products & Chemicals, Inc. ................ 1,800 74
E.I. du Pont de Nemours & Co. ................. 3,000 145
Rohm & Haas Co. ............................... 1,800 65
--------
284
Computer Equipment - 1.6%
Compaq Computer Corp. ......................... 3,700 56
Hewlett-Packard Co. ........................... 2,000 63
International Business Machines Corp. ......... 1,500 128
Palm, Inc. .................................... 9 0
--------
247
Computer Software & Services - 1.5%
Affiliated Computer Services, Inc. - Cl. A * .. 1,500 91
Cabletron Systems, Inc. * ..................... 800 12
First Data Corp. .............................. 2,500 132
--------
235
Construction - 0.5%
Vulcan Materials Co. .......................... 1,600 77
Consumer Miscellaneous - 0.2%
Avery Dennison Corp. .......................... 700 38
Cosmetic & Personal Care - 1.7%
Procter & Gamble Co. .......................... 3,500 274
Diversified Operations - 3.9%
Eaton Corp. ................................... 2,200 165
El Paso Energy Corp. .......................... 2,400 172
General Electric Co. .......................... 1,600 77
Illinois Tool Works, Inc. ..................... 2,300 137
Minnesota Mining & Manufacturing Co. .......... 500 60
--------
611
Electric Power - 4.5%
Calpine Corp. * ............................... 3,400 153
Duke Energy Co. ............................... 1,200 102
Exelon Corp. .................................. 3,412 240
Montana Power Co. ............................. 3,500 73
Pinnacle West Capital Corp. ................... 2,900 138
--------
706
Electrical Equipment - 0.5%
Emerson Electric Co. .......................... 900 71
Electronic Products & Services - 0.0%
Advanced Micro Devices, Inc. * ................ 300 4
Financial Services - 5.7%
Citigroup, Inc. ............................... 11,766 601
Lehman Brothers Holdings, Inc. ................ 4,300 291
--------
892
Food, Beverage & Tobacco - 5.8%
PepsiCo, Inc. ................................. 4,200 208
Philip Morris Cos., Inc. ...................... 2,900 128
R.J. Reynolds Tobacco Holdings, Inc. * ........ 5,700 278
Sara Lee Corp. ................................ 12,400 304
--------
918
Health Care Products - 7.0%
Abbott Laboratories ........................... 2,800 136
American Home Products Corp. .................. 1,800 114
Baxter International, Inc. .................... 1,800 159
Gilead Sciences, Inc. * ....................... 800 66
Merck & Co., Inc. ............................. 1,500 140
Mylan Laboratories, Inc. ...................... 2,400 61
Pharmacia Corp. ............................... 4,547 277
Schering-Plough Corp. ......................... 2,500 142
--------
1,095
Health Care Services - 0.2%
McKesson HBOC, Inc. ........................... 1,000 36
Household Appliances / Furnishings - 0.0%
Leggett & Platt, Inc. ......................... 300 6
Insurance - 9.4%
Ambac Financial Group, Inc. ................... 700 41
American International Group, Inc. ............ 4,050 399
Cigna Corp. ................................... 2,700 357
Marsh & McLennan Cos., Inc. ................... 2,500 293
MBIA, Inc. .................................... 2,600 193
115
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE/MID CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Insurance - Continued
XL Capital, Ltd. - Cl. A ...................... 2,200 $ 192
--------
1,475
Leisure & Recreation - 0.2%
Eastman Kodak Co. ............................. 600 24
Machinery - 1.0%
Caterpillar, Inc. ............................. 1,800 85
Thermo Electron Corp. * ....................... 2,500 75
--------
160
Media - Publishing - 0.9%
AT&T Corp. - Liberty Media Group - Cl. A * .... 5,800 79
Gannett Co., Inc. ............................. 1,100 69
--------
148
Media - TV / Radio - 2.0%
Charter Communications, Inc. - Cl. A * ........ 4,700 107
E.W. Scripps Co. - Cl. A ...................... 1,400 88
Time Warner, Inc. ............................. 300 16
USA Networks, Inc. * .......................... 3,000 58
Viacom, Inc. - Cl. B * ........................ 1,100 51
--------
320
Metals & Mining - 0.8%
Alcoa, Inc. ................................... 3,700 124
Natural Gas Distribution - 0.6%
Enron Corp. ................................... 1,100 91
Oil - 1.7%
Conoco, Inc. - Cl. B .......................... 4,000 116
Suncor Energy, Inc. ........................... 5,900 151
--------
267
Oil & Natural Gas Exploration & Production - 6.2%
Chevron Corp. ................................. 2,000 169
Exxon Mobil Corp. ............................. 5,450 474
Ultramar Diamond Shamrock Corp. ............... 4,700 145
Unocal Corp. .................................. 4,700 182
--------
970
Oil - Equipment & Service - 0.2%
Weatherford International, Inc. * ............. 800 38
Paper & Forest Products - 2.0%
Bowater, Inc. ................................. 1,600 90
Kimberly-Clark Corp. .......................... 1,300 92
Smurfit-Stone Container Corp. * ............... 3,700 55
Weyerhaeuser Co. .............................. 1,300 66
--------
303
Real Estate Investment Trust - 1.1%
Archstone Communities Trust ................... 900 23
Equity Office Properties Trust ................ 2,200 72
Kimco Realty Corp. ............................ 1,700 75
--------
170
Retail - Department Stores - 2.0%
Family Dollar Stores, Inc. .................... 7,300 156
Target Corp. .................................. 4,700 152
--------
308
Retail - Food - 2.0%
McDonald's Corp. .............................. 2,700 92
Safeway, Inc. * ............................... 3,600 225
--------
317
Telecommunication Equipment - 0.5%
Sonus Networks, Inc. * ........................ 3,100 78
Telecommunication Services - 5.4%
Broadwing, Inc. ............................... 2,300 53
Qwest Communications International, Inc. * .... 4,437 182
Verizon Communications ........................ 10,700 536
WorldCom, Inc. * .............................. 5,200 73
--------
844
Telephone - 2.2%
AT&T Corp. .................................... 3,600 63
SBC Communications, Inc. ...................... 5,995 286
--------
349
Transportation Services - 1.0%
Canadian National Railway Co. ................. 1,100 33
Continental Airlines, Inc. - Cl. B * .......... 600 31
Delta Air Lines, Inc. ......................... 400 20
Southwest Airlines Co. ........................ 2,300 77
--------
161
U.S. Government Agencies - 2.8%
Federal National Mortgage Assoc ............... 5,100 442
--------
TOTAL COMMON STOCK- 95.8% 15,066
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 2.9%
Investment in joint trading account (Note B)
6.695% due 01/02/01 ........................... $ 461 461
--------- --------
TOTAL INVESTMENTS- 98.7% 15,527
Cash and Receivables, less payables- 1.3% 201
--------- --------
NET ASSETS- 100.0% 15,728
========= ========
* Non-income producing security.
See notes to financial statements.
116
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Bank - 8.4%
Bank America NA Charlotte
6.826% due 09/06/01 ........................... $ 5,000 $ 5,002
Bank of New York
7.22% due 05/09/01 ............................ 4,005 4,007
Bankers Trust Corp.
6.627% due 03/16/01 ........................... 1,000 1,000
Credit Suisse First Boston, Inc.
6.727% due 08/09/01 ........................... 5,000 5,000
Fleet National Bank - Sr. Notes
6.727% due 09/07/01 ........................... 3,000 3,001
Fleet National Bank of Rhode Island
6.83% due 01/29/01 ............................ 1,000 1,000
FleetBoston Financial Corp. - Sr. Notes
6.81% due 05/11/01 ............................ 10,000 10,003
Key Bank
6.731% due 03/01/01 ........................... 5,000 4,999
Merrill Lynch & Co., Inc. - Notes
6.776% due 03/05/01 ........................... 3,000 3,001
National City Bank
6.78% due 04/23/01 ............................ 5,000 5,001
--------
42,014
Brokerage & Investment Management - 2.0%
Lehman Brothers Holdings, Inc. - Notes
6.375% due 03/15/01 ........................... 5,000 4,996
Morgan Stanley Dean Witter
5.875% due 02/28/01 ........................... 5,000 4,992
--------
9,988
Cosmetic & Personal Care - 0.5%
Unilever Capital Corp. - 144A (a)
6.707% due 09/07/01 ........................... 2,500 2,500
Financial Services - 3.7%
Associates Corp. NA - Sr. Notes
6.598% due 03/16/01 ........................... 2,000 2,000
Goldman Sach Group, Inc. Mountain
6.89% due 11/26/01 ............................ 2,000 2,002
Lehman Brothers Holdings - Notes
6.9% due 03/30/01 ............................. 6,000 6,002
Lehman Brothers Holdings, Inc. - Notes
6.9% due 01/29/01 ............................. 3,000 3,000
Merrill Lynch & Co., Inc. - Notes
7.101% due 01/12/01 ........................... 5,000 5,001
--------
18,005
Personal & Commercial Lending - 4.7%
American Honda Finance Corp. - Notes
6.788% due 01/16/01 ........................... 5,000 5,000
American Honda Finance Corp. Mountain
6.688% due 02/16/01 ........................... 5,000 5,000
General Motors Acceptance Corp.
6.528% due 03/30/01 ........................... 4,125 4,126
Household Finance Corp.
6.908% due 08/01/01 ........................... 4,000 4,002
7.261% due 04/24/01 ........................... 5,000 5,007
--------
23,135
Telecommunication Services - 1.3%
SBC Communications Capital Corp.
6.752% due 05/01/01 ........................... 5,000 5,000
TCI Communications, Inc. - Sr. Notes
7.136% due 03/12/01 ........................... 1,500 1,502
--------
6,502
--------
TOTAL PUBLICLY-TRADED BONDS- 20.6% 102,144
COMMERCIAL PAPER
Bank - 11.1%
Abbey National
6.51% due 02/20/01 ............................ 4,198 4,160
Abbey National America
6.52% due 01/24/01 ............................ 8,000 7,967
Credit Suisse
6.51% due 02/26/01 ............................ 3,000 2,970
6.55% due 01/05/01 ............................ 5,000 4,996
CSN Overseas Barclays Bank
6.5% due 02/08/01 ............................. 4,000 3,973
Den Denske Corp.
6.56% due 01/05/01 ............................ 3,000 2,998
Deutsche Bank AG
6.25% due 03/05/01 ............................ 5,000 4,945
Deutsche Bank Fina
6.53% due 01/19/01 ............................ 8,000 7,973
Fleet National Bank
6.56% due 01/16/01 ............................ 1,500 1,496
Royal Bank of Canada
6.52% due 02/13/01 ............................ 8,900 8,830
Svenska Handelsbanken NY
6.75% due 02/14/01 ............................ 5,000 4,999
--------
55,307
Brokerage & Investment Management - 4.6%
Merrill Lynch & Co., Inc.
6.53% due 02/09/01 ............................ 8,000 7,943
Prudential Funding Corp.
6.54% due 01/04/01 ............................ 5,000 4,997
Salomon Smith Barney Holdings, Inc.
6.6% due 01/04/01 ............................. 10,000 9,995
--------
22,935
Chemical - 0.4%
Sinochem American CP, Inc.
6.52% due 02/06/01 ............................ 2,000 1,987
117
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
COMMERCIAL PAPER - Continued
Diversified Operations - 1.6%
Ciesco L.P.
6.5% due 01/22/01 ............................. $ 3,587 $ 3,573
Diageo Capital plc
6.52% due 01/23/01 ............................ 4,650 4,632
--------
8,205
Electric Power - 1.4%
General Electric Credit Capital of Puerto Rico
6.56% due 01/05/01 ............................ 3,961 3,958
National Rural Utilities
Cooperative Finance Corp.
6.55% due 01/12/01 ............................ 3,000 2,994
--------
6,952
Financial Services - 41.5%
Asset Securitization Cooperative Corp.
6.55% due 01/08/01 ............................ 2,354 2,351
6.55% due 01/09/01 ............................ 4,536 4,529
AWB Finance, Ltd.
6.4% due 02/20/01 ............................. 3,000 2,973
CBA Delaware Finance
6.44% due 02/08/01 ............................ 4,360 4,330
Centric Capital Corp.
6.28% due 03/29/01 ............................ 4,000 3,939
6.47% due 02/16/01 ............................ 4,000 3,967
6.55% due 01/25/01 ............................ 3,000 2,987
6.6% due 01/08/01 ............................. 5,850 5,842
6.6% due 01/10/01 ............................. 4,600 4,592
Clipper Receivables Corp.
6.62% due 01/02/01 ............................ 1,511 1,511
6.62% due 01/30/01 ............................ 4,000 3,979
Delaware Funding Corp.
6.43% due 02/26/01 ............................ 3,475 3,440
6.53% due 01/17/01 ............................ 2,000 1,994
6.53% due 01/18/01 ............................ 2,182 2,175
6.53% due 01/23/01 ............................ 4,000 3,984
Eagle Funding Capital Corp.
6.31% due 03/20/01 ............................ 1,391 1,372
6.56% due 02/12/01 ............................ 4,000 3,969
6.57% due 02/12/01 ............................ 3,750 3,721
6.59% due 01/04/01 ............................ 2,306 2,305
6.6% due 01/04/01 ............................. 1,057 1,056
Enterprise Funding Corp.
6.25% due 03/28/01 ............................ 7,142 7,035
6.53% due 02/23/01 ............................ 6,257 6,197
Falcon Asset Securitization Corp.
6.4% due 02/27/01 ............................. 6,000 5,939
6.6% due 01/02/01 ............................. 9,985 9,983
6.6% due 01/03/01 ............................. 2,000 1,999
Fleet Funding Corp.
6.53% due 01/03/01 ............................ 6,000 5,998
International Lease Finance Corp.
6.53% due 01/30/01 ............................ 6,210 6,177
Lexington Parker Capital Corp.
6.42% due 03/02/01 ............................ 7,767 7,685
Lexignton Parker Capital Corp. CP
6.38% due 03/02/01 ............................ 1,000 989
6.55% due 02/20/01 ............................ 2,000 1,982
Monte Rosa Capital Corp.
6.5% due 02/05/01 ............................. 4,844 4,813
6.56% due 02/01/01 ............................ 5,000 4,972
6.57% due 01/16/01 ............................ 2,883 2,875
Monte Rosa Capital Corp.
6.56% due 01/11/01 ............................ 8,000 7,986
Old Line Funding Corp.
6.61% due 01/02/01 ............................ 4,000 3,999
Old Line Funding, Corp.
6.6% due 01/05/01 ............................. 4,897 4,893
Philip Morris Capital Corp.
6.42% due 02/21/01 ............................ 4,000 3,964
Preferred Receivables Corp.
6.55% due 01/23/01 ............................ 2,112 2,104
6.63% due 01/25/01 ............................ 5,000 4,979
Receivables Capital Corp.
6.61% due 01/02/01 ............................ 1,138 1,138
Sheffield Receivables Corp.
6.43% due 02/23/01 ............................ 4,000 3,962
6.47% due 02/06/01 ............................ 6,000 5,961
6.6% due 01/02/01 ............................. 2,382 2,382
6.6% due 01/12/01 ............................. 3,780 3,772
Sigma Finance, Inc.
6.43% due 02/28/01 ............................ 3,750 3,711
6.53% due 01/22/01 ............................ 1,870 1,863
6.53% due 02/23/01 ............................ 1,150 1,139
6.54% due 02/14/01 ............................ 4,221 4,187
6.57% due 01/08/01 ............................ 6,747 6,739
Windmill Funding Corp.
6.42% due 02/07/01 ............................ 3,560 3,537
6.48% due 02/15/01 ............................ 5,000 4,960
6.65% due 01/03/01 ............................ 3,345 3,344
--------
206,280
Food, Beverage & Tobacco - 1.8%
Coca-Cola Co.
6.5% due 01/29/01 ............................. 4,000 3,980
Philip Morris Companies, Inc.
6.7% due 01/12/01 ............................. 5,000 4,990
--------
8,970
Leisure & Recreation - 2.6%
K2 USA LLC
6.3% due 03/28/01 ............................. 1,000 985
6.57% due 01/10/01 ............................ 5,000 4,992
6.57% due 02/01/01 ............................ 3,000 2,983
118
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
COMMERCIAL PAPER - Continued
Leisure & Recreation - Continued
6.57% due 02/05/01 ............................ $ 4,000 $ 3,974
--------
12,934
Machinery - 4.0%
Dover Corp.
6.4% due 02/22/01 ............................. 4,000 3,963
6.5% due 02/15/01 ............................. 4,000 3,968
6.55% due 01/26/01 ............................ 4,000 3,982
6.56% due 01/31/01 ............................ 8,000 7,956
--------
19,869
Media - Publishing - 0.8%
Reed Elsevier, Inc.
6.52% due 01/26/01 ............................ 4,000 3,982
Personal & Commercial Lending - 6.7%
American General Finance Corp.
6.52% due 01/22/01 ............................ 6,000 5,977
Ford Motor Credit Co.
6.46% due 02/07/01 ............................ 4,000 3,973
6.48% due 02/02/01 ............................ 8,000 7,955
6.53% due 01/17/01 ............................ 6,028 6,011
6.54% due 01/09/01 ............................ 2,000 1,997
General Motors Acceptance Corp.
6.54% due 01/10/01 ............................ 3,000 2,995
Toyota Motor Credit Co.
6.35% due 02/22/01 ............................ 4,000 3,963
--------
32,871
Telephone - 1.4%
AT & T Corp.
6.52% due 01/09/01 ............................ 1,872 1,869
6.53% due 01/18/01 ............................ 5,156 5,140
--------
7,009
--------
TOTAL COMMERCIAL PAPER- 77.9% 387,301
-------- --------
TOTAL INVESTMENTS- 98.5% 489,445
Cash and Receivables, less payables- 1.5% 7,408
-------- --------
NET ASSETS- 100.0% 496,853
See notes to financial statements.
(a) Pursuant to Rule 144A (a) under the Securities Act of 1993, these
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At December 31, 2000, securities
aggregated $2,500 or 0.51% of net assets of the Portfolio.
119
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MID CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.3%
General Dynamics Corp. ........................ 26,100 $ 2,036
Raytheon Co. - Cl. A .......................... 32,000 928
--------
2,964
Auto & Truck Parts - 1.4%
Lear Corp. * .................................. 74,400 1,846
Bank - 8.2%
Astoria Financial Corp. ....................... 14,300 777
Dime Bancorp, Inc. ............................ 76,200 2,253
Golden State Bancorp, Inc. .................... 40,700 1,279
Golden West Financial Corp. ................... 29,500 1,991
M & T Bank Corp. .............................. 31,200 2,122
Mercantile Bankshares Corp. ................... 12,900 557
SouthTrust Corp. .............................. 21,800 887
Valley National Bancorp ....................... 20,900 696
--------
10,562
Brokerage & Investment Management - 0.5%
A.G. Edwards, Inc. ............................ 12,900 612
Business Services - 1.6%
Dun & Bradstreet Corp. ........................ 58,200 1,506
H & R Block, Inc. ............................. 13,500 558
--------
2,064
Chemical - 4.2%
Air Products & Chemicals, Inc. ................ 16,500 676
Cabot Corp. ................................... 43,400 1,145
Cytec Industries, Inc. * ...................... 16,800 671
Engelhard Corp. ............................... 60,400 1,231
Lyondell Chemical Co. ......................... 43,300 663
Sigma-Aldrich Corp. ........................... 26,100 1,026
--------
5,412
Commercial Sevices - 4.4%
Choicepoint, Inc. ............................. 44,200 2,898
Iron Mountain, Inc. * ......................... 19,400 720
Moody's Corp. * ............................... 78,100 2,006
--------
5,624
Computer Equipment - 0.9%
Mentor Graphics Corp. * ....................... 42,200 1,158
Computer Software & Services - 4.2%
Cadence Design Systems, Inc. * ................ 31,900 877
Citrix Systems, Inc. * ........................ 39,400 887
DST Systems, Inc. * ........................... 18,700 1,253
NCR Corp. * ................................... 25,600 1,258
SunGard Data Systems, Inc. .................... 25,600 1,206
--------
5,481
Consumer Miscellaneous - 0.6%
Harman International Industries, Inc. ......... 21,300 777
Diversified Operations - 3.7%
Cooper Industries, Inc. ....................... 25,700 1,181
Crane Co. ..................................... 41,700 1,186
Danaher Corp. ................................. 17,900 1,224
Pall Corp. .................................... 59,100 1,259
--------
4,850
Electric Power - 7.7%
American Electric Power Co. ................... 16,600 772
Dominion Resources, Inc. ...................... 21,300 1,427
DPL, Inc. ..................................... 53,400 1,772
Edison International .......................... 50,800 794
Entergy Corp. ................................. 7,700 326
Exelon Corp. .................................. 39,175 2,750
Teco Energy, Inc. ............................. 24,300 787
UtiliCorp United, Inc. ........................ 43,500 1,348
--------
9,976
Electronic Products & Services - 2.2%
Arrow Electronics, Inc. * ..................... 21,200 607
KLA-Tencor Corp. * ............................ 17,300 583
Sensormatic Electronics Corp. * ............... 38,400 770
Teradyne, Inc. * .............................. 24,300 905
--------
2,865
Financial Services - 1.4%
Federated Investors, Inc. Cl. B ............... 35,400 1,031
GreenPoint Financial Corp. .................... 17,500 716
--------
1,747
Food, Beverage & Tobacco - 1.5%
Hershey Foods Corp. ........................... 15,000 966
Wm. Wrigley Jr. Co. ........................... 9,500 910
--------
1,876
Health Care Products - 3.9%
Beckman Coulter, Inc. ......................... 17,600 738
Bergen Brunswig Corp. - Cl. A ................. 92,200 1,460
Carter Wallace, Inc. .......................... 46,600 1,555
Charles River Laboratories * .................. 29,200 799
Genzyme Corp. (General Division) * ............ 5,500 495
--------
5,047
Health Care Services - 2.5%
Health Management Associates, Inc. -
Cl. A * ..................................... 52,900 1,098
Omnicare, Inc. ................................ 63,400 1,371
Wellpoint Health Networks, Inc. * ............. 6,200 714
--------
3,183
Housing - 0.9%
Centex Corp. .................................. 31,300 1,176
Insurance - 8.3%
Ace, Ltd. * ................................... 48,700 2,067
Allmerica Financial Corp. ..................... 22,200 1,610
Ambac Financial Group, Inc. ................... 19,650 1,146
Aon Corp. ..................................... 24,300 832
120
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MID CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Insurance - Continued
Loews Corp. ....................................... 18,900 $ 1,957
MBIA, Inc. ........................................ 12,900 956
XL Capital, Ltd. - Cl. A .......................... 24,900 2,176
-------
10,744
Leisure & Recreation - 0.7%
Carnival Corp. .................................... 29,800 918
Machinery - 4.0%
FMC Corp. * ....................................... 33,900 2,430
SPX Corp. ......................................... 5,500 595
Thermo Electron Corp. * ........................... 72,000 2,142
-------
5,167
Media - TV / Radio - 3.4%
A.H. Belo Corp. ...................................101,800 1,629
Cablevision Systems Corp. - Cl. A * ............... 13,300 1,130
E.W. Scripps Co. - Cl. A .......................... 26,800 1,685
-------
4,444
Oil & Natural Gas Exploration & Production - 6.8%
Apache Corp. ...................................... 25,700 1,801
Burlington Resources, Inc. ........................ 20,700 1,045
Cross Timbers Oil Company ......................... 46,900 1,301
EOG Resources, Inc. ............................... 37,400 2,045
Kinder Morgan, Inc. ............................... 13,000 678
Louis Dreyfus Natural Gas Corp. * ................. 21,600 990
USX-Marathon Group ................................ 34,800 966
-------
8,826
Oil - Equipment & Service - 1.6%
Gulf Canada Resources, Ltd. * .....................161,200 816
Tidewater, Inc. ................................... 12,600 559
Weatherford International, Inc. * ................. 14,400 681
-------
2,056
Paper & Forest Products - 0.5%
Bowater, Inc. ..................................... 10,600 598
Personal & Commercial Lending - 2.4%
Countrywide Credit Industries, Inc. ............... 43,000 2,161
USA Education, Inc. ............................... 14,700 999
-------
3,160
Pollution Control - 2.5%
Allied Waste Industries, Inc. * ...................108,600 1,582
Waste Management, Inc. ............................ 61,300 1,701
-------
3,283
Real Estate Development - 1.4%
Lennar Corp. ...................................... 48,300 1,751
Real Estate Investment Trust - 2.5%
Boston Properties, Inc. ........................... 27,100 1,179
Equity Office Properties Trust .................... 42,400 1,383
Spieker Properties, Inc. .......................... 14,400 722
-------
3,284
Real Estate Operations - 1.2%
IndyMac Mortgage Holdings, Inc.................... 53,600 1,581
Retail - Department Stores - 2.1%
Barnes & Noble, Inc. * ............................ 38,600 1,023
Federated Department Stores, Inc. * ............... 24,200 847
Staples, Inc. * ................................... 68,500 809
-------
2,679
Retail - Drug Stores - 0.5%
TJX Cos., Inc. .................................... 22,600 627
Telecommunication Services - 1.0%
Broadwing, Inc. ................................... 54,300 1,239
Telephone - 0.4%
Telephone and Data Systems, Inc. .................. 5,200 468
Transportation Services - 3.4%
Burlington Northern Santa Fe ...................... 32,800 929
Continental Airlines, Inc. - Cl. B * .............. 24,600 1,270
GATX Corp. ........................................ 45,000 2,244
-------
4,443
-------
TOTAL COMMON STOCK- 94.8% 122,488
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 5.0%
Investment in joint trading account (Note B)
6.695% due 01/02/01 $ 6,504 6,504
------- -------
TOTAL INVESTMENTS- 99.8% 128,992
Cash and Receivables, less payables- 0.2% 241
------- -------
NET ASSETS- 100.0% 129,233
======= =======
* Non-income producing security.
See notes to financial statements.
121
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Automobile - 2.0%
United Rentals, Inc. * ............................279,500 $ 3,756
Bank - 2.2%
Mercantile Bankshares Corp. ....................... 36,700 1,585
Westamerica Bancorporation ........................ 35,600 1,531
Wilmington Trust Trust Corp. ...................... 16,900 1,049
-------
4,165
Brokerage & Investment Management - 1.3%
Investment Technology Group, Inc. ................. 60,000 2,505
Business Services - 1.3%
American Management Systems, Inc. * ...............121,700 2,411
Chemical - 0.7%
MacDermid, Inc. ................................... 75,000 1,425
Commercial Sevices - 7.5%
ACNielson Corp. * ................................. 46,200 1,675
DeVry, Inc. * ..................................... 67,700 2,556
G & K Services, Inc. - Cl. A ......................141,400 3,977
NOVA Corp. - Georgia * ............................145,000 2,891
TMP Worldwide, Inc. * ............................. 58,500 3,217
-------
14,316
Computer Equipment - 0.4%
CDW Computer Centers, Inc. * ...................... 15,000 418
Extreme Networks, Inc. * .......................... 11,200 438
-------
856
Computer Software & Services - 21.9%
Acxiom Corp. * ................................... 123,300 4,801
Affiliated Computer Services, Inc. - Cl. A * ..... 36,000 2,185
Agile Software Corp. * ........................... 10,000 494
Black Box Corp. * ................................ 43,300 2,092
CheckFree Corp. .................................. 14,000 595
DST Systems, Inc. * .............................. 34,700 2,325
E.piphany, Inc. * ................................ 8,000 431
Fiserv, Inc. ..................................... 54,900 2,604
IMS Health, Inc. ................................. 167,800 4,531
Intuit, Inc. * ................................... 53,600 2,114
Macromedia, Inc. * ............................... 43,000 2,612
Mercury Interactive Corp. * ...................... 6,900 623
National Instruments Corp. * ..................... 33,000 1,602
Openwave Systems, Inc. * ......................... 4,000 192
Peoplesoft, Inc. ................................. 20,000 744
Radiant Systems, Inc. * .......................... 22,000 451
Rational Software Corp. * ........................ 110,700 4,310
Research in Motion, Ltd. * ....................... 10,000 800
SunGard Data Systems, Inc. ....................... 37,900 1,786
Systems & Computer Technology Corp. * ............ 183,900 2,264
Trizetto Group, Inc. * ........................... 46,000 768
Verity, Inc. * ................................... 104,600 2,517
Vignette Corp. * ................................. 39,500 711
-------
41,552
Consumer Miscellaneous - 2.2%
Catalina Marketing Corp. * ....................... 110,100 4,287
Container - 2.0%
Bemis Co., Inc. ................................... 79,000 2,652
Sealed Air Corp. * ................................ 36,200 1,104
-------
3,756
Cosmetic & Personal Care - 0.8%
AptarGroup, Inc. .................................. 50,000 1,469
Diversified Operations - 1.4%
Ionics, Inc. * .................................... 92,400 2,622
Electric Power - 4.5%
Calpine Corp. * ................................... 67,000 3,019
Montana Power Co. .................................180,400 3,743
Pinnacle West Capital Corp. ....................... 36,500 1,739
-------
8,501
Electrical Equipment - 2.1%
Littelfuse, Inc. * ............................... 138,400 3,962
Electronic Products & Services - 3.6%
Cymer, Inc. * ..................................... 37,900 975
Dallas Semiconductor Corp. ........................ 96,500 2,473
Novellus Systems, Inc. * .......................... 10,900 392
QLogic Corp. * .................................... 8,000 616
TranSwitch Corp. * ................................ 6,000 235
Veeco Instruments Inc. * .......................... 52,000 2,086
-------
6,777
Food, Beverage & Tobacco - 2.1%
Pepsi Bottling Group, Inc. ........................ 98,100 3,918
Health Care Products - 8.4%
ALZA Corp. * ...................................... 44,400 1,887
Becton, Dickinson & Co. ........................... 72,100 2,496
Biomet, Inc. ...................................... 73,250 2,907
Cephalon, Inc. * .................................. 19,000 1,203
COR Therapeutics, Inc. * .......................... 15,200 535
CV Therapeutics, Inc. * ........................... 11,500 813
Gene Logic, Inc. * ................................ 37,000 680
Genzyme Corp. (General Division) * ................ 30,500 2,743
Gilead Sciences, Inc. * ........................... 11,500 954
Haemonetics Corp. * ............................... 27,100 837
NPS Pharmaceuticals, Inc. * ....................... 17,500 840
-------
15,895
Health Care Services - 0.7%
Regeneron Pharmaceuticals * ....................... 17,000 599
Trigon Healthcare, Inc. * ......................... 10,100 786
-------
1,385
Household Appliances / Furnishings - 2.6%
Herman Miller, Inc. ...............................171,400 4,928
Insurance - 2.3%
Reinsurance Group of America ......................121,900 4,327
122
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Leisure & Recreation - 2.0%
Speedway Motorsports, Inc. * ...................... 162,000 $ 3,888
Oil - 1.9%
Petro-Canada ...................................... 145,900 3,711
Oil & Natural Gas Exploration & Production - 4.5%
Atwood Oceanics, Inc. * ........................... 30,400 1,332
Helmerich & Payne, Inc. ........................... 97,700 4,286
Murphy Oil Corp. .................................. 47,200 2,853
--------
8,471
Oil - Equipment & Service - 1.8%
Hanover Compressor Co. * .......................... 78,300 3,489
Retail - Department Stores - 5.4%
Bed Bath & Beyond, Inc. * ......................... 116,500 2,607
Family Dollar Stores, Inc. ........................ 214,000 4,587
Staples, Inc. * ................................... 261,400 3,088
--------
10,282
Retail - Food - 0.8%
Whole Foods Market, Inc. * ........................ 24,800 1,516
Telecommunication Equipment - 5.8%
CommScope, Inc. * ................................. 137,700 2,281
DMC Stratex Networks, Inc. - Notes * .............. 136,100 2,041
Symbol Technologies, Inc. ......................... 113,600 4,089
Tekelec, Inc. ..................................... 69,900 2,097
TriQuint Semiconductor, Inc. * .................... 9,400 411
Westell Technologies, Inc. Cl. A * ................ 49,200 151
--------
11,070
Telecommunication Services - 1.3%
Allegiance Telecom, Inc. * ........................ 40,500 902
Broadwing, Inc. ................................... 25,500 582
McLeodUSA, Inc. - Cl. A * ......................... 72,100 1,018
--------
2,502
Transportation Services - 1.3%
EGL, Inc. * ...................................... 101,000 2,418
--------
TOTAL COMMON STOCK- 94.8% 180,160
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 5.5%
Investment in joint trading account (Note B)
6.695% due 01/02/01 ............................. $ 10,456 10,456
-------- --------
TOTAL INVESTMENTS- 100.3% 190,616
Payables, less cash and receivables- (0.3)% (606)
-------- --------
NET ASSETS- 100.0% 190,010
======== ========
* Non-income producing security.
See notes to financial statements.
123
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.3%
Lockheed Martin Corp.
7.25% due 05/15/06 .................................$ 300 $ 311
Northrop-Grumman Corp. - Debs.
7.75% due 03/01/16 ................................... 75 76
Raytheon Co. - Notes
6.75% due 08/15/07 ................................... 200 199
United Technologies Corp. - Debs.
8.875% due 11/15/19 .................................. 50 58
United Technology Corp.
6.625% due 11/15/04 .................................. 200 204
------
848
Auto & Truck Parts - 0.7%
Dana Corp. - Notes
7.0% due 03/15/28 .................................... 75 39
TRW, Inc.
7.125% due 06/01/09 .................................. 150 136
Visteon Corp.
7.95% due 08/01/05 ................................... 250 251
------
426
Automobile - 1.0%
DaimlerChrysler NA Holding Co.
6.9% due 09/01/04 .................................... 450 446
Delphi Automotive Systems Corp. - Debs.
7.125% due 05/01/29 .................................. 50 42
Hertz Corp. - Sr. Notes
8.25% due 06/01/05 ................................... 125 131
------
619
Bank - 4.4%
Abbey National plc - Debs.
7.95% due 10/26/29 ................................... 100 106
African Development Bank - Sub. Notes
6.875% due 10/15/15 .................................. 35 36
Asian Development Bank - Bonds
5.5% due 04/23/04 .................................... 270 267
Bank of America Corp. - Sub. Notes
7.8% due 02/15/10 .................................... 250 260
Bank One Corp. - Sr. Notes
5.625% due 02/17/04 .................................. 150 146
BankAmerica Corp. - Sub. Notes
6.5% due 03/15/06 .................................... 150 149
Chase Manhattan Corp. - Sub. Notes
7.125% due 02/01/07 .................................. 225 229
First Union Corp. - Sub. Notes
8.125% due 06/24/02 .................................. 230 235
Fleet Boston Corp. - Sub. Notes
7.375% due 12/01/09 .................................. 100 103
Fleet Financial Group - Sub. Debs.
6.7% due 07/15/28 .................................... 75 66
Golden West Financial Corp. - Sub. Notes
6.7% due 07/01/02 ................................... 150 150
HSBC Holdings plc
7.5% due 07/15/09 ................................... 150 156
InterAmerican Development Bank - Debs.
8.5% due 03/15/11 ................................... 200 236
Korea Development Bank - Bonds
7.375% due 09/17/04 ................................. 120 120
National City Bank of Pennsylvania - Sub.
Notes
7.25% due 10/21/11 .................................. 50 50
Royal Bank of Scotland plc - Sub.
Notes
6.4% due 04/01/09 ................................... 150 145
Wachovia Corp. - Sub. Notes
5.625% due 12/15/08 ................................. 75 68
Wells Fargo & Co. - Sub. Notes
6.875% due 04/01/06 ................................. 150 153
Wells Fargo Co. - notes
6.625% due 07/15/04 ................................. 175 177
------
2,852
Brokerage & Investment Management - 1.0%
Bear Stearns Co., Inc.
7.625% due 02/01/05 ................................. 250 256
Lehman Brothers Holdings, Inc. - Notes
8.5% due 05/01/07 ................................... 100 106
Merrill Lynch & Co., Inc. - Notes
8.0% due 06/01/07 ................................... 200 212
Morgan Stanley, Discover & Co.
6.875% due 03/01/07 ................................. 100 101
------
675
Business Services - 0.2%
Electronic Data Systems Corp.
7.125% due 10/15/09 ................................. 100 104
Chemical - 0.9%
Eastman Chemical - Debs.
7.6% due 02/01/27 ................................... 150 136
ICI Wilmington, Inc. - Debs.
8.75% due 05/01/01 .................................. 300 301
Morton International, Inc. - Debs.
9.25% due 06/01/20 .................................. 40 46
Rohm & Haas Co. - Notes
7.4% due 07/15/09 ................................... 80 82
------
565
Computer Equipment - 0.5%
Hewlett - Packard Co. - Notes
7.15% due 06/15/05 .................................. 200 207
International Business Machines Corp. - Debs.
7.0% due 10/30/25 ................................... 100 98
------
305
124
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Consumer Miscellaneous - 0.3%
Fortune Brands, Inc. - Debs.
7.875% due 01/15/23 ................................$ 100 $ 99
United Utilities plc - Notes
6.875% due 08/15/28 .................................. 100 84
------
183
Cosmetic & Personal Care - 0.0%
Procter & Gamble Co. - Debs.
6.45% due 01/15/26 ................................... 100 96
Diversified Operations - 0.6%
Diageo Capital plc
6.125% due 08/15/05 .................................. 200 199
Honeywell International, Inc. - Notes
7.5% due 03/01/10 .................................... 75 81
John Deere Capital Corp. - Notes
6.0% due 02/15/09 .................................... 60 56
Tyco International Group SA
6.375% due 06/15/05 .................................. 80 80
------
416
Electric Power - 1.4%
CalEnergy Co., Inc. - Bonds
8.48% due 09/15/28 ................................... 60 65
Duke Energy Co. - 1st Ref. Mtg.
6.75% due 08/01/25 ................................... 100 89
Enersis SA - Notes
6.9% due 12/01/06 .................................... 30 28
Florida Power & Light Co.
7.75% due 02/01/23 ................................... 50 49
Niagara Mohawk Power Corp.
7.75% due 10/01/08 ................................... 200 209
Ontario Hydro - Local Govt. Gtd.
6.1% due 01/30/08 .................................... 100 100
Philadelphia Electric Co. - 1st Ref. Mtg.
7.125% due 09/01/02 .................................. 100 101
Tennessee Valley Authority
6.75% due 11/01/25 ................................... 100 105
Virginia Electric Power Co. - 1st Mtge.
7.625% due 07/01/07 .................................. 150 156
------
902
Financial Services - 3.1%
Ameritech Capital Funding Corp.
6.875% due 10/15/27 .................................. 60 56
Associates Corp. of North America
5.5% due 02/15/04 .................................... 175 171
Citicorp Capital II
8.015% due 02/15/27 .................................. 100 96
Ford Capital B.V. - Debs.
9.5% due 06/01/10 .................................... 150 169
Financial Services - Continued
GATX Capital Corp. - Notes
6.875% due 12/15/06 .................................. 100 94
General Electric Capital Corp. - Debs.
8.75% due 05/21/07 ................................... 250 282
Goldman Sachs Group, Inc. - Notes
7.35% due 10/01/09 ................................... 100 102
Hartford Financial Services Group - Sr. Notes
7.75% due 06/15/05 ................................... 150 158
KFW International Finance - Debs.
9.125% due 05/15/01 .................................. 300 303
Morgan Stanley, Dean Witter, Discover & Co. -
Notes
6.875% due 03/01/03 .................................. 200 202
Newcourt Credit Group, Inc. Ser. B
6.875% due 02/16/05 .................................. 100 99
Qwest Capital Funding - 144A (a)
7.9% due 08/15/10 .................................... 90 92
Sumitomo Bank International Finance NV -
Notes
8.5% due 06/15/09 .................................... 100 107
Washington Mutual Capital I
8.375% due 06/01/27 .................................. 60 56
------
1,987
Food, Beverage & Tobacco - 1.3%
Archer Daniels Midland Co. - Notes
6.25% due 05/15/03 ................................... 275 275
Coca-Cola Enterprises, Inc. - Debs.
8.5% due 02/01/22 .................................... 100 115
Conagra, Inc. - Debs.
9.75% due 03/01/21 ................................... 75 91
Pepsi Bottling Group, Inc. - Sr.
Notes Ser. B
7.0% due 03/01/29 .................................... 100 99
Philip Morris Cos., Inc. - Debs.
8.25% due 10/15/03 ................................... 100 103
SUPERVALU, Inc. - Notes
7.625% due 09/15/04 .................................. 150 153
------
836
Foreign Governmental - 2.5%
Government of New Zealand - Debs.
8.75% due 12/15/06 ................................... 120 135
Hydro-Quebec
8.4% due 01/15/22 .................................... 100 115
Kingdom of Sweden - Debs.
12.0% due 02/01/10 ................................... 75 103
Malaysia - Bonds
8.75% due 06/01/09 ................................... 50 54
Province of Manitoba - Debs.
6.875% due 09/15/02 .................................. 200 203
Province of Newfoundland - Debs.
9.0% due 10/15/21 .................................... 60 71
125
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Foreign Governmental - Continued
Province of Ontario
8.0% due 10/17/01 ................................. $ 200 $ 203
Province of Quebec - Debs.
7.5% due 07/15/23 ................................. 100 106
Republic of Greece - Notes
6.95% due 03/04/08 ................................ 150 156
Republic of Korea
8.75% due 04/15/03 ................................ 85 88
8.875% due 04/15/08 ............................... 100 108
Spain Kingdom
7.0% due 07/19/05 ................................. 250 261
--------
1,603
Health Care Products - 0.1%
Eli Lilly & Co. - Notes
7.125% due 06/01/25 ............................... 80 82
Insurance - 0.7%
Aetna Inc.
7.625% due 08/15/26 ............................... 100 98
ALL STATE Corp.
7.2% due 12/01/09 ................................. 150 154
Hartford Life, Inc. Debs.
7.65% due 06/15/27 ................................ 50 51
Torchmark, Inc. - Debs.
8.25% due 08/15/09 ................................ 100 106
Travelers Property Casualty Corp. -
Sr. Notes
7.75% due 04/15/26 ................................ 50 51
--------
460
Machinery - 0.4%
Caterpillar, Inc. - Debs.
8.0% due 02/15/23 ................................. 50 53
Reliance Electric Co. - Notes
6.8% due 04/15/03 ................................. 200 205
--------
258
Media - TV / Radio - 0.8%
News America Holdings, Inc. - Debs.
7.7% due 10/30/25 ................................. 100 91
TCI Communciations, Inc. - Sr. Notes
7.125% due 02/15/28 ............................... 70 62
The Walt Disney Co. - Sr. Notes
6.75% due 03/30/06 ................................ 200 206
Time Warner Entertainment, Inc. - Sr.
Notes
8.375% due 07/15/33 ............................... 100 109
Viacom, Inc.
7.875% due 07/30/30 ............................... 50 51
--------
519
Metals & Mining - 0.3%
Noranda, Inc. - Debs.
7.0% due 07/15/05 ................................. 200 195
Natural Gas Distribution - 0.4%
Enron Corp. - Notes
6.75% due 09/15/04 ................................ 100 101
Pacific Gas & Electric Co.
6.75% due 10/01/23 ................................ 50 34
Tennessee Gas Pipeline - Bonds
7.5% due 04/01/17 ................................. 100 100
--------
235
Oil - 0.5%
Atlantic Richfield Co. (ARCO) - Notes
5.55% due 04/15/03 ................................ 75 75
Conoco, Inc. - Sr. Notes
6.95% due 04/15/29 ................................ 90 88
Occidental Petroleum Corp. - Debs.
7.2% due 04/01/28 ................................. 40 38
Tosco Corp. - Notes
7.625% due 05/15/06 ............................... 115 120
--------
321
Oil & Natural Gas Exploration & Production - 0.6%
Burlington Resources, Inc - Debs.
9.125% due 10/01/21 ............................... 90 106
Norsk Hydro A/S
7.25% due 09/23/27 ................................ 75 72
Phillips Petroleum Co. - Debs.
6.65% due 07/15/18 ................................ 50 47
Trans-Canada Pipelines
7.7% due 06/15/29 ................................. 100 100
Union Oil Co. of California
7.5% due 02/15/29 ................................. 60 60
--------
385
Oil - Equipment & Service - 0.4%
Coastal Corp. - Debs.
6.5% due 06/01/08 ................................. 100 97
Petroleum-Geo Services ASA - Sr. Notes
6.625% due 03/30/08 ............................... 175 163
--------
260
Paper & Forest Products - 0.3%
Bowater, Inc. - Debs.
9.0% due 08/01/09 ................................. 100 106
Champion International Corp. - Debs.
7.35% due 11/01/25 ................................ 50 47
Westvaco Corp. - Notes
7.1% due 11/15/09 ................................. 35 34
--------
187
Personal & Commercial Lending - 3.9%
Aristar, Inc. - Sr. Notes
6.5% due 11/15/03 ................................. 200 199
126
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Personal & Commercial Lending - Continued
CitiFinacial Credit Co. - Notes
5.9% due 09/01/03 ................................. $ 150 $ 149
Ford Motor Co. - Bonds
6.625% due 02/15/28 ............................... 50 42
Ford Motor Credit Co.
6.125% due 01/09/06 ............................... 300 289
Ford Motor Credit Co. - Sr. Notes
5.75% due 02/23/04 ................................ 800 774
General Motors Acceptance Corp.
5.85% due 01/14/09 ................................ 250 229
General Motors Acceptance Corp. - Notes
9.625% due 12/15/01 ............................... 350 361
Household Finance Corp. - Notes
6.5% due 11/15/08 ................................. 280 269
Toyota Motor Credit Corp. - Notes
5.5% due 12/15/08 ................................. 60 56
U.S. West Capital Funding , Inc.
6.5% due 11/15/18 ................................. 150 130
--------
2,498
Real Estate Investment Trust - 0.0%
Spieker Properties, Inc. - Debs.
7.5% due 10/01/27 ................................. 40 36
Retail - Department Stores - 0.5%
Dayton Hudson Corp. - Debs.
6.75% due 01/01/28 ................................ 25 23
Gap, Inc. - Notes
6.9% due 09/15/07 ................................. 100 96
Wal Mart Stores, Inc.
6.875% due 08/10/09 ............................... 100 104
Wal-Mart Stores, Inc. - Debs.
6.75% due 10/15/23 ................................ 100 101
--------
324
Retail - Food - 0.4%
Albertson's, Inc. - Notes
6.625% due 06/01/28 ............................... 50 41
McDonald's Corp. - Sub. Debs.
7.31% due 09/15/27 ................................ 60 58
Safeway, Inc.
7.25% due 09/15/04 ................................ 150 154
--------
253
Telecommunication Equipment - 0.3%
GTE Corp. - Debs.
6.94% due 04/15/28 ................................ 100 93
Lucent Technologies, Inc. - Debs.
6.5% due 01/15/28 ................................. 50 34
Lucent Technologies, Inc. - Notes
7.25% due 07/15/06 ................................ 100 93
--------
220
Telecommunication Services - 0.9%
AT&T Canada, Inc. - Sr. Notes
7.65% due 09/15/06 ................................ 150 147
Bell Canada
7.75% due 04/01/06 ................................ 125 130
BellSouth Telecommunications, Inc. - Debs.
7.0% due 10/01/25 ................................. 100 95
Deutsche Telekom International Finance
8.25% due 06/15/30 ................................ 100 99
Vodafone Group plc
7.75% due 02/15/10 ................................ 100 104
--------
575
Telephone - 1.6%
ALLTEL Corp. - Sr. Notes
7.6% due 04/01/09 ................................. 100 101
AT&T Corp. - Notes
6.0% due 03/15/09 ................................. 200 178
6.5% due 03/15/29 ................................. 60 48
Comcast Cable Communications - Notes
8.875% due 05/01/17 ............................... 75 83
MCI Worldcom, Inc. - Sr. Notes
6.4% due 08/15/05 ................................. 200 192
New York Telephone Co. - Debs.
7.25% due 02/15/24 ................................ 100 93
SBC Communications Capital Corp. - Debs.
5.875% due 06/01/03 ............................... 100 99
South Carolina Electric & Gas - 1st Mtge.
7.5% due 06/15/23 ................................. 100 97
Sprint Capital Corp.
6.875% due 11/15/28 ............................... 150 120
--------
1,011
Transportation Services - 1.0%
American Airlines, Inc. - Pass Through
Certificates
7.024% due 04/15/11 ................................ 60 61
Burlington Northern Railroad Company
6.125% due 03/15/09 ................................ 150 144
CSX Corp. - Debs.
7.45% due 05/01/07 ................................. 125 128
Delta Air Lines, Inc. - Debs.
10.375% due 12/15/22 ............................... 100 107
Norfolk Southern Corp. - Notes
7.35% due 05/15/07 ................................. 125 128
Union Pacific Corp. - Debs.
6.625% due 02/01/29 ................................ 85 77
--------
645
U.S. Government Agencies - 23.2%
Federal Home Loan Bank - Bonds
5.58% due 08/17/01 ................................. 300 299
6.75% due 02/15/02 ................................. 1,600 1,627
7.1% due 04/10/07 .................................. 500 532
127
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
Federal Home Loan Bank Disc. Corp. - Sr.
Notes
5.8% due 09/02/08 ................................ $ 225 $ 223
Federal Home Loan Mortgage Corp.
5.125% due 10/15/08 .............................. 400 379
6.625% due 09/15/09 .............................. 1,000 1,042
7.0% due 07/15/05 ................................ 500 525
Federal Home Loan Mortgage Corp. - Notes
5.75% due 04/15/08 ............................... 750 742
5.75% due 07/15/03 ............................... 800 802
6.3% due 06/01/04 ................................ 300 299
6.875% due 01/15/05 .............................. 150 156
Federal National Mortgage Assoc.
5.125% due 02/13/04 .............................. 230 227
6.375% due 06/15/09 .............................. 600 615
Federal National Mortgage Assoc. - Bonds
6.25% due 05/15/29 ............................... 465 467
Federal National Mortgage Assoc. - Notes
4.75% due 11/14/03 ............................... 175 171
5.375% due 03/15/02 .............................. 450 448
5.625% due 05/14/04 .............................. 1,100 1,098
5.875% due 04/23/04 .............................. 300 296
6.0% due 05/15/08 ................................ 340 341
6.19% due 02/19/09 ............................... 120 117
6.5% due 04/29/09 ................................ 200 199
7.125% due 03/15/07 .............................. 525 560
7.125% due 01/15/30 .............................. 359 402
Financing Corp. - Bonds
8.6% due 09/26/19 ................................ 150 188
U.S. Treasury - Bonds
9.0% due 11/15/18 ................................ 1,000 1,387
9.125% due 05/15/09 .............................. 750 834
U.S. Treasury - Notes
5.75% due 10/31/02 ............................... 1,000 1,009
--------
14,985
U.S. Governmental - 41.0%
U.S. Treasury - Notes
6.625% due 04/30/02 .............................. 750 761
U.S. Treasury - Bonds
5.5% due 08/15/28 ................................ 2,175 2,157
6.5% due 11/15/26 ................................ 185 208
6.75% due 08/15/26 ............................... 775 897
8.125% due 08/15/21 .............................. 1,100 1,438
8.75% due 05/15/17 ............................... 1,265 1,699
8.75% due 08/15/20 ............................... 2,000 2,747
9.25% due 02/15/16 ............................... 550 760
10.75% due 08/15/05............................... 600 736
11.125% due 08/15/03.............................. 2,000 2,285
11.25% due 02/15/15............................... 260 406
11.75% due 02/15/10............................... 250 308
11.75% due 11/15/14............................... 465 674
U.S. Treasury - Notes
5.625% due 05/15/08............................... 1,200 1,231
5.75% due 04/30/03................................ 2,000 2,027
5.875% due 11/15/05............................... 1,400 1,448
6.375% due 08/15/02............................... 960 976
6.5% due 05/31/02................................. 1,600 1,624
6.75% due 05/15/05................................ 300 320
7.5% due 11/15/01................................. 1,000 1,016
7.5% due 05/15/02................................. 450 462
7.875% due 11/15/04............................... 2,000 2,190
United Mexican States - Notes
9.875% due 02/01/10............................... 220 237
--------
26,607
--------
TOTAL PUBLICLY-TRADED BONDS- 96.5% 62,473
SHORT-TERM INVESTMENTS - 1.8%
Investment in joint trading account (Note B)
6.695% due 01/02/01............................... 1,166 1,167
------- --------
TOTAL INVESTMENTS- 98.3% 63,640
Cash and Receivables, less payables- 1.7% 1,128
------- --------
NET ASSETS- 100.0% 64,768
See notes to financial statements.
(a) Pursuant to Rule 144A (a) under the Securities Act of 1993, these
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At December 31, 2000, securities
aggregated $92 or 0.14% of net assets of the Portfolio.
128
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
LARGE CAP AGGRESSIVE GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 4.6%
Honeywell International, Inc. .................... 25,800 $ 1,221
Brokerage & Investment Management - 2.6%
Goldman Sachs Group, Inc. ........................ 100 11
Merrill Lynch & Co., Inc. ........................ 4,200 287
Morgan Stanley, Dean Witter, Discover & Co. ...... 4,900 388
-------
686
Business Services - 0.4%
i2 Technologies, Inc. * .......................... 2,000 109
Computer Equipment - 3.2%
Intel Corp. ...................................... 11,100 334
Juniper Networks, Inc. * ......................... 1,400 176
VERITAS Software Corp. * ......................... 3,600 315
-------
825
Computer Software & Services - 9.0%
BEA Systems, Inc. ................................ 2,100 141
EMC Corp. * ...................................... 18,300 1,217
Microsoft Corp. .................................. 4,900 213
Oracle Corp. * ................................... 17,900 520
Sun Microsystems, Inc. * ......................... 9,800 273
-------
2,364
Cosmetic & Personal Care - 1.6%
Colgate-Palmolive Co. ............................ 6,200 400
Diversified Operations - 6.9%
Corning, Inc. .................................... 3,300 174
General Electric Co. ............................. 3,800 182
Tyco International, Ltd. ......................... 25,900 1,438
-------
1,794
Electronic Products & Services - 10.4%
Applied Materials, Inc. * ........................ 9,700 371
Applied Micro Circuits Corp. * ................... 2,394 180
Cisco Systems, Inc. * ............................ 38,700 1,480
Micron Technology, Inc. * ........................ 5,800 206
PMC-Sierra, Inc. * ............................... 2,000 157
SDL, Inc. * ...................................... 900 133
Solectron Corp. * ................................ 5,600 190
-------
2,717
Financial Services - 9.3%
Citigroup, Inc. .................................. 31,308 1,599
Household International, Inc. .................... 7,200 396
Jersey Puerto Morgan Chase & Co. ................. 9,600 436
-------
2,431
Health Care Products - 13.7%
Human Genome Sciences, Inc. * .................... 4,800 333
Medtronic, Inc. .................................. 5,900 356
Pfizer, Inc. ..................................... 33,200 1,527
Pharmacia Corp. .................................. 6,900 421
Schering-Plough Corp. ............................ 16,500 936
-------
3,573
Insurance - 0.9%
American International Group, Inc. ............... 2,600 256
Media - Publishing - 2.8%
AT&T Corp. - Liberty Media Group - Cl. A * ....... 54,100 734
Media - TV / Radio - 7.1%
Time Warner, Inc. ................................ 25,900 1,353
Viacom, Inc. - Cl. B * ........................... 11,299 528
-------
1,881
Personal & Commercial Lending - 4.1%
MBNA Corp. ....................................... 29,300 1,082
Retail - Department Stores - 5.2%
Home Depot, Inc. ................................. 17,200 786
Kohl's Corp. ..................................... 9,500 579
-------
1,365
Retail - Drug Stores - 1.2%
Walgreen Co. ..................................... 7,600 318
Telecommunication Equipment - 7.8%
Nokia Oyj - ADR .................................. 33,200 1,444
Nortel Networks Corp. ............................ 17,100 548
TyCom, Ltd. ...................................... 2,700 61
-------
2,053
Telecommunication Services - 3.0%
Vodafone Group plc .............................. 22,500 806
Telephone - 1.4%
AT&T Wireless Group * ........................... 22,600 391
U.S. Government Agencies - 2.3%
Federal Home Loan Mortgage Corp. ................ 8,700 599
-------
TOTAL COMMON STOCK- 97.5% 25,605
Par
Value
(000's)
COMMERCIAL PAPER - 4.3%
Prudential Funding Corp. ..........................
6.54% due 01/04/01 ............................. $1,122 1,122
------- -------
TOTAL INVESTMENTS- 101.8% 26,727
Payables, less cash and receivables- (1.8)% (483)
------- -------
NET ASSETS- 100.0% 26,244
======= =======
* Non-income producing security.
ADR-American Depository Receipt
See notes to financial statements.
129
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 0.5%
GenCorp, Inc. ..................................... 2,600 $ 25
HEICO Corp. ....................................... 1,200 19
Kaman Corp. - Cl. A ............................... 1,600 27
Teledyne Technologies, Inc. * ..................... 1,000 24
The Titan Corp. * ................................. 1,000 16
------
111
Agricultural Operations - 0.1%
Agribrands International, Inc. * .................. 600 32
Auto & Truck Parts - 1.5%
Autoliv, Inc. ..................................... 1,400 22
AutoZone, Inc. * .................................. 1,300 37
B.F. Goodrich Co. ................................. 1,300 47
Bandag, Inc. ...................................... 800 33
Cummins Engine Company, Inc. ...................... 1,300 49
Lear Corp. * ...................................... 1,600 40
Navistar International Corp., Inc. - Cl. B ........ 1,800 47
Superior Industries International, Inc. ........... 1,000 32
Visteon Corp. * ................................... 1,500 17
------
324
Automobile - 0.2%
Oshkosh Truck Corp. ............................... 900 40
Bank - 6.0%
BancorpSouth, Inc. ................................ 675 8
Bancwest Corp. .................................... 4,500 118
Banknorth Group, Inc. ............................. 1,725 34
Capitol Federal Financial ......................... 2,000 34
Cathay Bancorp, Inc. .............................. 1,000 59
City National Corp. ............................... 1,900 74
Commerce Bancshares, Inc. ......................... 1,680 72
CORUS Bankshares, Inc. ............................ 1,500 74
Cullen/Frost Bankers, Inc. ........................ 2,800 117
Dime Bancorp, Inc. ................................ 2,200 65
Downey Financial Corp. ............................ 1,800 99
F & M National Corp. .............................. 1,000 26
First Citizens BancShares, Inc. - Cl. A ........... 300 24
First Sentinel Bancorp, Inc. ...................... 1,400 16
First Virginia Banks, Inc. ........................ 1,300 62
GBC Bancorp. ...................................... 800 31
Hancock Holding Co. ............................... 1,300 50
Hibernia Corp. - Cl. A ............................ 1,800 23
Imperial Bancorp * ................................ 2,700 71
Mercantile Bankshares Corp. ....................... 2,400 104
Net.B@nk, Inc. * .................................. 500 3
North Fork Bancorporation, Inc. ................... 1,100 27
OceanFirst Financial Corp. ........................ 1,300 32
Omega Financial Corp. ............................. 600 16
Silicon Valley Bancshares * ....................... 1,400 48
United Community Financial Corp. .................. 1,900 13
------
1,300
Brokerage & Investment Management - 1.6%
A.G. Edwards, Inc. ................................ 1,800 85
Affiliated Managers Group, Inc. * ................. 1,200 66
Jefferies Group, Inc. ............................. 1,800 56
John Nuveen Co. - Cl. A ........................... 1,300 75
Raymond James Financial, Inc. ..................... 1,500 52
Southwest Securities Group, Inc. .................. 760 20
------
354
Business Services - 1.2%
Comdisco, Inc. .................................... 2,200 25
DiamondCluster, Inc. * ............................ 900 28
Express Scripts, Inc. - Cl. A * ................... 500 51
Forrester Research, Inc. * ........................ 500 25
Harris Corp. ...................................... 1,100 34
Heidrick & Struggles International, Inc. ......... 900 38
Manpower, Inc. .................................... 1,300 49
------
250
Chemical - 2.2%
Albemarle Corp. ................................... 2,200 54
Arch Chemicals, Inc. .............................. 1,300 23
Ashland, Inc. ..................................... 2,800 100
Cabot Corp. ....................................... 1,600 42
ChemFirst, Inc. ................................... 1,200 26
Crompton Corp. .................................... 1,300 14
Cytec Industries, Inc. * .......................... 1,100 44
Eastman Chemical Co. .............................. 1,600 78
IMC Global, Inc. .................................. 1,200 19
Lubrizol Corp. .................................... 1,500 39
Millennium Chemicals, Inc. ........................ 1,300 24
W.R. Grace & Co. .................................. 2,900 9
------
472
Commercial Services - 3.4%
ACNielson Corp. * ................................. 1,100 40
ADVO, Inc. ........................................ 1,300 58
Brady Corp. - Cl. A ............................... 900 30
CSG Systems International, Inc. * ................. 600 28
Data Broadcasting Corp. * ......................... 900 3
F.Y.I., Inc. * .................................... 800 30
Fair Issac & Co., Inc. ............................ 900 46
Identix, Inc. * ................................... 400 3
Informix Corp. * .................................. 3,150 9
Lamar Advertising Co. * ........................... 800 31
Macrovision Corp. * ............................... 400 30
MarchFirst, Inc. * ................................ 2,732 4
Paxar Corp. * ..................................... 1,500 15
Plexus Corp. * .................................... 600 18
Power One, Inc. * ................................. 500 20
Quanta Services, Inc. * ........................... 1,350 44
R.R. Donnelley & Sons Co. ......................... 1,700 46
RENT A CAR * ...................................... 2,000 69
Standard Register Co. ............................. 1,500 21
Steelcase, Inc. - Cl. A ........................... 3,700 51
130
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Commercial Sevices - Continued
Sybase, Inc. * ........................ 2,100 $ 42
Sylvan Learning Systems, Inc. * ....... 1,300 19
TeleTech Holdings, Inc. * ............. 1,700 31
True North Communications ............. 1,000 43
Wackenhut Corp. - Cl. A ............... 600 8
--------
739
Computer Equipment - 1.3%
Cerner Corp. * ........................ 800 37
Diebold, Inc. ......................... 1,400 47
Extreme Networks, Inc. * .............. 600 23
InFocus Corp. * ....................... 800 12
Intergraph Corp. ...................... 600 4
Mentor Graphics Corp. * ............... 1,700 47
Predictive Systems, Inc. * ............ 1,900 13
Quantum Corp. - DLT & Storage * ....... 1,400 19
SanDisk Corp. * ....................... 900 25
Silicon Storage Technology, Inc. * .... 1,100 13
Tech Data Corp. * ..................... 1,600 43
--------
283
Computer Software & Services - 7.1%
About.com, Inc. * ..................... 100 3
Actuate Software Corp ................. 700 13
Acxiom Corp. * ........................ 1,400 55
Advent Software, Inc. * ............... 400 16
Affiliated Computer Services, Inc. -
Cl. A ................................ *800 49
Agile Software Corp. * ................ 300 15
Art Technology Group, Inc. * .......... 600 18
Aspen Technologies, Inc. * ............ 400 13
Autodesk, Inc ......................... 700 19
Avant! Corp. * ........................ 1,600 29
Avocent Corporation * ................. 700 19
Barra, Inc. * ......................... 1,050 49
Black Box Corp. * ..................... 400 19
Broadbase Software, Inc. * ............ 600 4
CacheFlow, Inc. * ..................... 200 3
Cadence Design Systems, Inc. * ........ 2,600 71
Ceridian Corp. * ...................... 1,300 26
CheckFree Corp ........................ 600 26
Clarent Corp. * ....................... 400 5
CNET Networks, Inc .................... 1,100 18
Cognizant Technology Solutions Corp ... 500 18
Critical Path, Inc. * ................. 600 18
Digex, Inc. * ......................... 400 9
Digital Insight Corp. * ............... 400 7
Digital Island, Inc. * ................ 800 3
Documentum, Inc. * .................... 500 25
E.piphany, Inc. * ..................... 800 43
EarthLink, Inc. * ..................... 761 4
Echelon Corp. * ....................... 300 5
F5 Networks, Inc. * ................... 100 1
FileNet Corp. * ....................... 1,000 27
Frontline Capital Group ............... 100 1
go.com * .............................. 530 2
GTECH Holdings Corporation ............ 1,800 37
IGATE Capital Corp. ................... 900 3
Informatica Corporation * ............. 600 24
Interliant, Inc ....................... 300 1
Internap Network Services Corp. * ..... 1,000 7
Internet Security System, Inc ......... 300 24
Internet.com Corp. * .................. 200 1
Intertrust Technologies Corp. * ....... 800 3
Interwoven, Inc. * .................... 400 26
Intranet Solutions, Inc. * ............ 200 10
Kana Communications, Inc. * ........... 1,000 12
Keynote Systems, Inc. * ............... 400 6
Liberate Technologies, Inc. * ......... 700 10
LookSmart, Ltd. * ..................... 500 1
Macromedia, Inc. * .................... 600 36
Manugistics Group, Inc. * ............. 400 23
Micromuse, Inc. * ..................... 600 36
Multex.com, Inc. * .................... 300 4
National Data Corp. ................... 1,100 40
NCR Corp. * ........................... 1,600 79
Netegrity, Inc. * ..................... 300 16
NetIQ Corp. * ......................... 500 44
Network Associates, Inc. .............. 1,700 7
NorthPoint Communications Group, Inc. * 700 0
Nuance Communications ................. 100 4
NVIDIA Corp. * ........................ 600 20
Packeteer, Inc. * ..................... 400 5
Parametric Technology Corp. * ......... 2,000 27
PC-Tel, Inc. * ........................ 200 2
Peoplesoft, Inc ....................... 2,000 74
Peregrine Systems, Inc. * ............. 2,000 39
Proxicom, Inc. * ...................... 400 2
PurchasePro.com, Inc. * ............... 300 5
Quest Software, Inc. * ................ 400 11
Radiant Systems, Inc. * ............... 1,100 23
Rainbow Technologies, Inc. * .......... 1,500 24
Red Hat, Inc. * ....................... 800 5
Retek, Inc. * ......................... 545 13
Rhythms NetConnections, Inc. * ........ 600 1
RSA Security, Inc. * .................. 400 21
Safeguard Scientifics, Inc. * ......... 1,300 9
Scient Corp. * ........................ 500 2
SCM Microsystems, Inc. * .............. 200 7
Secure Computing Corp. * .............. 300 3
SonicWall, Inc. * ..................... 300 5
Symantec Corp. * ...................... 1,200 40
Synopsys, Inc. * ...................... 400 19
THQ, Inc. * ........................... 1,200 29
Trizetto Group, Inc. * ................ 100 2
Unigraphics Solutions, Inc. * ......... 1,100 18
Verity, Inc. * ........................ 400 10
VerticalNet, Inc. * ................... 1,200 8
Viant Corp. * ......................... 600 2
131
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Computer Software & Services - Continued
WatchGuard Technologies, Inc. .......... 200 $ 6
webMethods, Inc. * ..................... 205 18
WebTrends Corp. * ...................... 500 14
--------
1,551
Construction - 1.1%
Centex Construction Products, Inc. ..... 1,300 36
Dain Rauscher Corp. .................... 400 38
Dycom Industries, Inc. * ............... 700 25
EMCOR Group, Inc. * .................... 800 20
Hughes Supply, Inc. .................... 1,600 29
NVR, Inc. * ............................ 600 74
USG Corp. * ............................ 1,300 29
--------
251
Consumer Miscellaneous - 1.5%
Briggs & Stratton Corp. ................ 1,200 53
Concord Camera Corp. * ................. 900 15
GoTo.com, Inc. * ....................... 300 2
Harman International Industries, Inc. .. 800 29
Herbalife International, Inc. - Cl. A .. 1,100 8
Ingram Micro, Inc. - Cl. A * ........... 2,200 25
JAKKS Pacific , Inc .................... 2,300 21
Learning Tree International, Inc. * .... 400 20
Nu Skin Enterprises, Inc. - Cl. A * .... 2,800 15
SCP Pool Corp. * ....................... 800 24
Sherwin-Williams Co. ................... 2,000 53
Toro Co. ............................... 1,600 59
--------
324
Container - 0.3%
Bemis Co., Inc. ........................ 1,600 54
Cosmetic & Personal Care - 0.3%
Alberto-Culver Co. - Cl. B ............. 1,500 64
Diversified Operations - 1.9%
A.O. Smith Corp. ....................... 1,300 22
Actuant Corp. - Cl. A * ................ 900 3
Chemed Corp. ........................... 600 20
Coherent, Inc. * ....................... 1,100 36
GenTek, Inc. ........................... 1,300 22
Harsco Corp. ........................... 1,500 37
Henry Schein, Inc. * ................... 1,900 66
Intermune Pharmaceuticals * ............ 500 22
ITT Industries, Inc. ................... 2,300 89
Pall Corp. ............................. 1,400 30
Reynolds & Reynolds Co. - Cl. A ........ 1,500 30
Trinity Industries, Inc. ............... 1,400 35
--------
412
Electric Power - 4.9%
Allegheny Energy, Inc. ................. 2,700 130
CMS Energy Corp. ....................... 2,000 63
El Paso Electric Company ............... 2,500 33
Energy East Corp. ...................... 5,900 116
NiSource, Inc .......................... 1,800 55
NRG Energy, Inc. * ..................... 3,200 89
Pinnacle West Capital Corp. ............ 2,500 119
PPL Corp ............................... 3,200 145
Public Service Co. of New Mexico ....... 2,700 73
Puget Sound Energy, Inc. ............... 3,200 89
RGS Energy Group, Inc. ................. 3,500 114
UtiliCorp United, Inc. ................. 1,100 34
--------
1,060
Electrical Equipment - 0.6%
Anixter International, Inc. ............ 2,000 43
C&D Technologies, Inc. ................. 700 30
Genlyte Corp. (The) * .................. 1,300 31
Littelfuse, Inc. * ..................... 900 26
---------
130
Electronic Products & Services - 6.6%
Actel Corp. * .......................... 700 17
Aeroflex, Inc. * ....................... 800 23
Alliance Semiconductor Corp. * ......... 800 9
Alliant Energy Corp. ................... 1,700 54
Alpha Industries, Inc. ................. 500 19
Amphenol Corp. - Cl. A * ............... 800 31
Anadigics, Inc. * ...................... 650 11
Anaren Micro Circuits, Inc. ............ 400 27
Arrow Electronics, Inc. * .............. 2,100 60
Asyst Technologies, Inc. * ............. 1,000 13
Audiovox Corp. - Cl. A * ............... 1,200 11
Avnet, Inc. ............................ 2,000 43
Ball Corp. ............................. 1,700 78
Benchmark Electronics, Inc. * .......... 600 14
Brooks Automation, Inc. * .............. 700 20
Cabot Microelectronics Corp. ........... 364 19
Checkpoint Systems, Inc. * ............. 600 5
Cirrus Logic, Inc. * ................... 1,300 24
Cognex Corp. * ......................... 600 13
Credence Systems Corp. * ............... 1,300 30
Cree, Inc. * ........................... 800 28
CyberOptics Corp. ...................... 900 15
Cymer, Inc. * .......................... 900 23
Cytyc Corp. * .......................... 600 38
Dallas Semiconductor Corp. ............. 1,300 33
DSP Group, Inc. * ...................... 500 11
Elantec Semiconductor, Inc. * .......... 500 14
Electro Scientific Industries, Inc. * .. 600 17
Emulex Corp. * ......................... 600 48
Entrust Technologies, Inc. ............. 600 8
Exar, Corp. * .......................... 800 25
FEI Company * .......................... 600 14
General Semiconductor, Inc. ............ 600 4
II-VI, Inc. * .......................... 1,000 15
Intersil Holding Corp. * ............... 900 21
Kemet Corp. * .......................... 2,400 36
132
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Electronic Products & Services - Continued
Kent Electronics Corp. * .............. 1,100 $ 18
Lam Research Corp. * .................. 1,600 23
Lattice Semiconductor Corp. * ......... 1,500 28
LTX Corp. * ........................... 800 10
Mattson Technology, Inc. * ............ 1,200 12
MIPS Technologies, Inc. - Cl.A * ...... 600 16
Molecular Devices, Corp. * ............ 300 21
Moog, Inc. - Cl. A * .................. 1,000 29
Newport Corp. ......................... 400 31
PerkinElmer, Inc. ..................... 500 53
QLogic Corp. * ........................ 900 69
Sawtek, Inc. * ........................ 300 14
Sensormatic Electronics Corp. * ....... 1,200 24
Silicon Valley Group, Inc. * .......... 1,700 49
Technitrol, Inc. ...................... 400 16
Tektronix, Inc. ....................... 1,400 47
Three-Five Systems, Inc. * ............ 500 9
TranSwitch Corp. * .................... 900 35
Trimble Navigation, Ltd. * ............ 300 7
Ultimate Electronics, Inc. ............ 600 13
Vicor Corp. * ......................... 600 18
Virata, Corp. * ....................... 400 4
Woodhead Industries, Inc. ............. 1,300 26
---------
1,443
Financial Services - 2.0%
Advanta Corp. - Cl. A ................. 1,600 14
AmeriCredit Corp. * ................... 1,800 49
Ameritrade Holding Corporation * ...... 800 6
BlackRock, Inc. * ..................... 1,100 46
First Tennessee National Corp. ........ 1,700 49
Frontier Financial Corp. .............. 1,000 25
GreenPoint Financial Corp. ............ 3,200 131
Heller Financial, Inc. ................ 1,600 49
Rollins Truck Leasing Corp. ........... 1,500 12
S1 Corp. * ............................ 400 2
UIL Holding Corp. ..................... 1,300 65
---------
448
Food, Beverage & Tobacco - 3.3%
Brown-Forman Corp. - Cl. B ............ 2,400 160
Constellation Brands, Inc. - Cl. A * .. 900 53
Corn Products International, Inc. ..... 1,200 35
Fleming Cos., Inc. .................... 1,300 15
IBP, Inc. ............................. 1,000 27
J.M. Smucker Co. ...................... 1,300 36
NBTY, Inc. * .......................... 1,400 7
Pepsi Bottling Group, Inc. ............ 2,100 84
Pilgrims Pride Corp. - Cl. B .......... 1,300 10
R.J. Reynolds Tobacco Holdings,
Inc. * .............................. 2,800 136
Robert Mondavi Corp. - Cl. A * ........ 800 43
Sensient Technologies Corp. ........... 1,600 36
Suiza Foods Corp. * ................... 1,000 48
SUPERVALU, Inc. ....................... 1,700 24
---------
714
Foreign Governmental - 0.1%
Interface, Inc. ....................... 2,100 18
Health Care Products - 7.0%
Abgenix, Inc. * ....................... 1,100 65
Alpharma, Inc. - Cl. A ................ 900 39
Andrx Corp - Andrx Group * ............ 700 41
Apogent Technologies, Inc. * .......... 700 14
Applera Corporation - Celera
Genomics Group * .................... 700 25
Aurora Biosciences Corp. * ............ 500 16
Beckman Coulter, Inc. ................. 1,200 50
Bergen Brunswig Corp. - Cl. A ......... 2,900 46
C.R. Bard, Inc. ....................... 800 37
Celgene Corp. * ....................... 1,000 33
Cell Genesys, Inc. * .................. 1,300 30
CuraGen Corp. * ....................... 500 14
DENTSPLY International, Inc. .......... 1,300 51
Diagnostic Products Corporation ....... 1,100 60
Elan Corp. plc - ADR * ................ 1
ENZON, Inc. ........................... 300 19
Gilead Sciences, Inc. * ............... 300 25
Haemonetics Corp. * ................... 900 28
ICN Pharmaceuticals, Inc. ............. 2,600 80
Immunogen, Inc. ....................... 600 13
Incyte Pharmaceuticals, Inc. * ........ 1,100 27
Invitrogen Corp. * .................... 400 35
King Pharmaceuticals, Inc. * .......... 1,650 85
Laboratory Corporation of America
Holdings ............................ 300 53
Maxim Pharmaceuticals, Inc. * ......... 700 4
Maxygen, Inc. * ....................... 500 12
Medarex, Inc. * ....................... 1,000 41
Medicis Pharmaceutical Corp. - Cl. A .. 700 41
MiniMed, Inc. * ....................... 500 21
Mylan Laboratories, Inc. .............. 3,400 86
Myriad Genetics, Inc. * ............... 300 25
Noven Pharmaceuticals, Inc. * ......... 600 22
Owens and Minor, Inc. ................. 2,600 46
Pharmacopeia, Inc. * .................. 800 17
PolyMedica Corporation * .............. 800 27
Praecis Pharmeceuticals, Inc. * ....... 900 26
Priority Healthcare Corp. - Cl. B * ... 800 33
Protein Design Labs, Inc. * ........... 600 52
Respironics, Inc. * ................... 1,300 37
Sybron Dental Specialties * ........... 233 4
Techne Corp. * ........................ 1,000 36
Tularik, Inc. * ....................... 900 26
Vertex Pharmaceuticals, Inc. * ........ 500 36
Vical Incorporated * .................. 1,300 24
Zoll Medical Corporation * ............ 600 21
---------
1,523
133
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Health Care Services - 3.9%
AmeriPath, Inc. * ..................... 700 $ 18
AmeriSource Health Corp. - Cl. A * .... 1,000 51
Apria Healthcare Group, Inc. * ........ 1,300 39
Beverly Enterprises, Inc. * ........... 1,700 14
Bindley Western Industries, Inc. ...... 1,521 63
Health Management Associates, Inc. -
Cl. A * ............................. 2,100 44
HEALTH NET, Inc. ...................... 1,800 47
HEALTHSOUTH Corp. * ................... 4,400 72
Idec Pharmaceuticals Corp. ............ 400 76
Oxford Health Plans, Inc. * ........... 1,100 43
PacifiCare Health Systems, Inc. * ..... 2,900 44
Quest Diagnostics, Inc. * ............. 400 57
St. Jude Medical, Inc. * .............. 1,000 61
Syncor International Corporation * .... 800 29
Triad Hospitals, Inc. * ............... 800 26
Trigon Healthcare, Inc. * ............. 700 54
Universal Health Services, Inc. - Cl. B * 700 78
WebMD Corp. * ......................... 2,700 21
---------
837
Household Appliances / Furnishings - 0.6%
Aaron Rents, Inc. ..................... 1,000 14
CompX International, Inc. * ........... 1,000 9
Mohawk Industries, Inc. * ............. 1,300 35
Rent-Way, Inc. * ...................... 1,100 5
Salton, Inc. * ........................ 900 19
Springs Industries, Inc. - Cl. A ...... 1,500 49
---------
131
Housing - 1.1%
American Standard Cos., Inc. ........... 1,100 54
Centex Corp. ........................... 1,700 64
D.R. Horton, Inc. ...................... 1,317 32
Kaufman & Broad Home Corp. ............. 1,200 41
Pulte Corp. ............................ 900 38
---------
229
Insurance - 3.9%
Allmerica Financial Corp. .............. 700 51
Ambac Financial Group, Inc. ............ 750 44
Fidelity National Financial, Inc. ...... 1,310 48
LandAmerica Financial Group, Inc. ...... 1,300 53
National Western Life Insurance Co. .... 500 52
Nationwide Financial Services - Cl. A .. 1,600 76
Old Republic International Corp. ....... 3,100 99
Presidential Life Corp. ................ 1,300 19
Radian Group, Inc. ..................... 1,100 83
Stancorp Financial Group, Inc. ......... 1,200 57
The Midland Co. ........................ 900 25
The MONY Group, Inc. ................... 2,600 128
The PMI Group, Inc. .................... 1,200 81
Triad Guaranty, Inc. *.................. 900 30
---------
846
Leisure & Recreation - 1.5%
Anchor Gaming *......................... 800 $ 31
Arctic Cat, Inc. ....................... 1,900 22
Argosy Gaming Co. *..................... 1,300 25
Aztar Corp. *........................... 1,900 25
Brunswick Corp. ........................ 2,600 43
Dover Downs Entertainment *............. 1,300 14
Lodgenet Entertainment Corp. ........... 1,200 21
Park Place Entertainment Corp. *........ 2,600 31
SABRE Group Holdings, Inc. *............ 1,400 60
Ticketmaster Online-CitySearch, Inc. -
Cl. B *................................. 400 3
Trendwest Resorts, Inc. *............... 800 22
World Wrestling Federation
Entertainment, Inc. .................... 1,300 21
---------
318
Machinery - 2.0%
Applied Industrial Technologies, Inc. .. 1,700 35
FMC Corp. *............................. 1,100 79
Imation Corp. *......................... 1,000 16
JLG Industries, Inc. ................... 2,300 24
Nordson Corporation..................... 1,000 26
SPX Corp. .............................. 300 32
Stewart & Stevenson Services, Inc. ..... 900 20
Tecumseh Products Co. - Cl. A........... 900 38
Thermo Electron Corp. *................. 4,400 131
Zebra Technologies Corp. - Cl. A *...... 500 20
---------
421
Media - Publishing - 0.6%
McClatchy Newspapers, Inc. - Cl. A...... 1,300 55
Penton Media, Inc. ..................... 700 19
Pulitzer, Inc. ......................... 1,000 47
---------
121
Media - TV / Radio - 2.0%
A.H. Belo Corp. ........................ 2,600 42
BHC Communications, Inc. - Cl. A *...... 300 39
Chris-Craft Industries , Inc. .......... 800 53
Cox Radio, Inc. - Cl. A *............... 1,500 34
Emmis Communications Corp. ............. 1,200 34
Entercom Communications Corp. *......... 1,100 38
Getty Images, Inc. ..................... 900 29
Hearst-Argyle Television, Inc. *........ 1,500 31
Insight Communications Company, Inc. *.. 1,400 33
Primedia, Inc. ......................... 1,200 14
Radio One, Inc. *....................... 2,300 24
Westwood One, Inc. *.................... 2,600 50
---------
421
Metal Production & Fabrication - 0.3%
Commercial Metals Co.................... 1,300 29
Timken Co. ............................. 1,300 19
Worthington Industries, Inc. ........... 1,600 13
---------
61
134
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Metals & Mining - 0.3%
Precision Castparts Corp. .............. 1,500 $ 63
Natural Gas Distribution - 1.2%
Nicor, Inc. ............................ 1,600 69
Peoples Energy Corp. ................... 3,300 148
UGI Corp. .............................. 1,500 38
---------
255
Oil - 0.2%
ONEOK, Inc. ............................ 1,000 48
Oil & Natural Gas Exploration &
Production - 4.1% ......................
EOG Resources, Inc. .................... 800 44
Equitable Resources, Inc. .............. 1,100 73
Helmerich & Payne, Inc. ................ 2,400 105
Kinder Morgan, Inc. .................... 1,200 63
Murphy Oil Corp. ....................... 1,100 66
Noble Affiliates, Inc. ................. 1,300 60
Ocean Energy, Inc. * ................... 2,700 47
Patina Oil & Gas Corporation ........... 1,300 31
Patterson Energy, Inc. * ............... 700 26
Pride International, Inc. * ............ 1,200 30
Rowan Cos., Inc. * ..................... 1,100 30
Sunoco, Inc. ........................... 1,300 44
Tom Brown, Inc. ........................ 1,300 43
Ultramar Diamond Shamrock Corp. ........ 3,800 117
Valero Energy Corp. .................... 1,700 63
Vintage Petroleum, Inc. ................ 1,600 34
---------
876
Oil - Equipment & Service - 0.7%
Hanover Compressor Co. * ............... 700 31
Marine Drilling Companies, Inc. * ...... 1,400 38
Smith International, Inc. .............. 700 52
Tidewater, Inc. ........................ 900 40
---------
161
Paper & Forest Products - 1.7%
Boise Cascade Corp. .................... 1,200 40
Bowater, Inc. .......................... 1,600 90
Louisiana-Pacific Corp. ................ 3,500 36
Pope & Talbot, Inc. .................... 2,100 35
Rayonier, Inc. ......................... 1,000 40
United Stationers, Inc. * .............. 1,800 43
Westvaco Corp. ......................... 2,700 79
---------
363
Personal & Commercial Lending - 0.4%
Countrywide Credit Industries, Inc. .... 1,100 55
Metris Cos., Inc. ...................... 1,277 34
---------
89
Pollution Control - 0.2%
Republic Services, Inc. - Cl. A ........ 2,300 39
Precious Metals/Gems/Stones - 0.3%
Freeport-McMoRan Copper & Gold, Inc. -
Cl. B ................................ 2,300 20
Homestake Mining Co. ................... 3,800 16
Newmont Mining Corp. ................... 1,900 32
---------
68
Real Estate Development - 0.5%
Lennar Corp. ........................... 1,900 69
Standard Pacific Corp. ................. 1,300 30
---------
99
Real Estate Investment Trust - 5.0%
AMLI Residential Properties Trust ...... 2,000 49
Arden Realty Group, Inc. ............... 2,200 55
Avalonbay Communities, Inc. ............ 2,300 115
Boston Properties, Inc. ................ 1,600 70
CarrAmerica Realty Corp. ............... 2,700 85
Duke Realty Investments, Inc. .......... 3,100 76
First Industrial LP * .................. 1,300 44
General Growth Properties .............. 1,600 58
Highwoods Properties, Inc. ............. 2,600 65
International Rectifier Corp. * ........ 600 18
Kimco Realty Corp. ..................... 1,100 49
Liberty Property Trust ................. 2,300 66
Mack-Cali Realty Corp. ................. 2,000 57
Public Storage, Inc. ................... 2,000 49
Spieker Properties, Inc. ............... 3,200 160
Vornado Realty Trust ................... 1,700 65
---------
1,081
Real Estate Operations - 0.6%
HomeStore.com, Inc. * .................. 600 12
M.D.C. Holdings, Inc. .................. 1,700 56
Security Capital Group, Inc. - Cl. B * . 2,600 52
---------
120
Retail - Department Stores - 3.0%
Abercrombie & Fitch Co. * .............. 1,000 20
AnnTaylor Stores Corp. * ............... 800 20
Barnes & Noble, Inc. * ................. 1,300 34
Borders Group, Inc. * .................. 2,200 26
Cato Corp. - Cl. A ..................... 1,300 18
Coldwater Creek, Inc. .................. 600 19
Dollar Thrifty Automotive Group,
Inc. * ............................... 2,400 45
eToys, Inc. * .......................... 800 0
Family Dollar Stores, Inc. ............. 1,100 24
FREDS , Inc. ........................... 1,000 21
Genesco, Inc. * ........................ 1,200 29
Handleman Co. .......................... 2,200 16
Harcourt General, Inc. ................. 700 40
Haverty Furniture Co., Inc. ............ 1,400 14
Hollywood Entertainment Corp. * ........ 600 1
Hot Topic, Inc. * ...................... 1,600 26
Insight Enterprises, Inc. * ............ 1,100 20
135
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Retail - Department Stores - Continued
InterTAN, Inc. * ........................... 1,250 $ 15
Michaels Stores, Inc. * .................... 1,000 26
MSC Industrial Direct Co., Inc. - Cl. A .... 1,600 29
Neiman Marcus Group, Inc. - Cl. A .......... 1,600 57
Pier 1 Imports, Inc. ....................... 2,600 27
Shopko Stores, Inc. ........................ 1,100 6
Spiegel, Inc. - Cl. A ...................... 1,600 7
Toys "R" Us, Inc. * ........................ 2,300 38
Tweeter Home Entertainment Group, Inc. ..... 600 7
Venator Group, Inc. ........................ 2,400 37
Zale Corp. * ............................... 1,200 35
---------
657
Retail - Food - 0.9%
Brinker International, Inc. * .............. 1,100 47
Charming Shoppes, Inc. * ................... 1,200 7
Darden Restaurants, Inc. ................... 1,400 32
Landry's Seafood Restaurants, Inc. * ....... 1,000 10
RARE Hospitality International, Inc. * ..... 1,350 30
Ryan's Family Steak Houses, Inc. * ......... 1,200 11
The Great Atlantic & Pacific Tea Co., Inc. . 1,200 8
Webvan Group, Inc. * ....................... 1,500 1
Whole Foods Market, Inc. * ................. 800 49
---------
195
Shoe & Apparel Manufacturing - 0.2%
Liz Claiborne, Inc. ........................ 800 33
Stein Mart, Inc. * ......................... 1,800 21
---------
54
Steel - 0.4%
AK Steel Holding Corp. ..................... 2,800 24
Nucor Corp. ................................ 1,300 52
Remec, Inc. * .............................. 850 8
---------
84
Telecommunication Equipment - 1.3%
Advanced Fibre Communications, Inc. * ...... 1,000 18
Andrew Corp. * ............................. 1,100 24
Cable Design Technologies Corp. ............ 1,650 28
Covad Communications Group, Inc. * ......... 1,600 3
DMC Stratex Networks, Inc. - Notes * ....... 1,200 18
Efficient Networks, Inc. * ................. 300 4
Finisar Corp. * ............................ 800 23
Glenayre Technologies, Inc. * .............. 1,700 6
Harmonic, Inc. * ........................... 517 3
International FiberCom, Inc. ............... 800 4
L-3 Communications Holdings, Corp. * ....... 500 38
Natural MicroSystems Corporation * ......... 700 7
Polycom, Inc. * ............................ 300 10
Powerwave Technologies, Inc. * ............. 400 23
Spectrasite Holdings, Inc. ................. 1,900 25
Tekelec, Inc. .............................. 600 18
Terayon Communication Systems, Inc. * ...... 700 3
TriQuint Semiconductor, Inc. * ............. 600 26
Tut Systems, Inc. .......................... 200 2
World Access, Inc. * ....................... 1,400 3
---------
286
Telecommunication Services - 1.1%
Centennial Cellular Corp. - A Shares * ..... 1,500 28
Citizens Communications Co. ................ 4,200 55
Focal Communications Corp. * ............... 800 6
Greif Bros. Corp. - Cl. A .................. 1,000 28
IDT Corp. * ................................ 300 6
Illuminet Holdings, Inc. * ................. 1,000 23
Leap Wireless International, Inc. * ........ 500 12
Netro Corp. * .............................. 400 3
NTELOS, Inc. * ............................. 900 16
Pac-West Telecomm, Inc. * .................. 1,300 4
RCN Corp. * ................................ 300 2
TALK.com, Inc. * ........................... 800 1
Tollgrade Communications, Inc. ............. 400 15
Travelocity.com * .......................... 300 4
West TeleServices Corp. * .................. 1,300 37
---------
240
Telephone - 0.5%
CenturyTel, Inc. ........................... 2,900 104
Transportation Services - 1.8%
America West Holdings Corp. - Cl. B * ...... 1,300 17
Arkansas Best Corp. * ...................... 1,300 24
Atlas Air, Inc. * .......................... 1,600 52
Continental Airlines, Inc. - Cl. B * ....... 1,200 62
Frontier Airlines, Inc. * .................. 1,600 49
Roadway Express, Inc. ...................... 1,700 36
Ryder System, Inc. ......................... 2,200 37
UAL Corp. .................................. 1,400 54
USFreightways Corp. ........................ 1,000 30
Yellow Corp. * ............................. 1,600 33
---------
394
---------
TOTAL COMMON STOCK- 95.0% 20,558
136
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS - 3.7%
Investment in joint repurchase agreement with
Goldman Sachs & Co. dated 12/29/00,
6.481% due 01/02/01 (Secured by various
U.S. Treasury obligations and U.S.
Government Agency Bonds) $ 800 $ 800
------- --------
TOTAL INVESTMENTS- 98.7% 21,358
Cash and Receivables, less payables- 1.3% 278
------- --------
NET ASSETS- 100.0% 21,636
======= ========
* Non-income producing security.
ADR-American Depository Receipt
See notes to financial statements.
137
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Auto & Truck Parts - 3.0%
Goodyear Tire & Rubber Co. .................. 18,000 $ 414
Navistar International Corp., Inc. - Cl. B .. 4,500 118
TRW, Inc. ................................... 9,100 352
--------
884
Automobile - 1.1%
Delphi Automotive Systems Corp .............. 28,900 325
Business Services - 0.0%
H & R Block, Inc. ........................... 200 8
Chemical - 6.7%
Agrium, Inc. ................................ 40,300 589
Air Products & Chemicals, Inc. .............. 4,700 193
Crompton Corp. .............................. 12,000 126
Eastman Chemical Co. ........................ 900 44
IMC Global, Inc. ............................ 28,500 443
PolyOne Corp. ............................... 38,900 229
Rohm & Haas Co. ............................. 6,000 218
Solutia, Inc. ............................... 4,900 59
Wellman, Inc. ............................... 4,400 62
--------
1,963
Coal - 0.0%
Massey Energy Co. ........................... 600 8
Commercial Sevices - 1.8%
Informix Corp. * ............................ 42,350 126
Profit Recovery Group International,
Inc. * .................................... 12,300 78
Valassis Communications, Inc. * ............. 10,300 325
--------
529
Computer Equipment - 6.1%
3Com Corp. * ................................ 47,900 407
Apple Computer, Inc. * ...................... 19,900 296
Foundry Networks, Inc. * .................... 18,200 273
Gateway, Inc. * ............................. 14,300 257
Maxtor Corp. * .............................. 600 4
PRI Automation, Inc. * ...................... 4,000 75
Quantum Corp. - DLT & Storage * ............. 21,400 285
Quantum Corp. - Hard Disk Drive * ........... 6,600 53
Silicon Graphics, Inc. * .................... 34,000 136
--------
1,786
Computer Software & Services - 2.5%
Computer Associates International, Inc. ..... 12,600 246
Keane, Inc. * ............................... 13,800 135
Legato Systems, Inc. * ...................... 10,800 80
Midway Games, Inc. * ........................ 23,700 168
Network Associates, Inc. .................... 22,300 93
--------
722
Consumer Miscellaneous - 2.7%
Black & Decker Corp. ........................ 5,200 204
Clorox Co. .................................. 5,000 178
Parker-Hannifin Corp. ....................... 9,250 408
--------
790
Cosmetic & Personal Care - 0.4%
International Flavors & Fragrances, Inc. 5,500 112
Diversified Operations - 2.6%
Cendant Corp. * ............................. 80,800 778
Electric Power - 0.1%
Fluor Corp. * ............................... 600 20
Electrical Equipment - 0.9%
Pentair, Inc. ............................... 10,300 249
UCAR International, Inc. * .................. 1,600 16
--------
265
Electronic Products & Services - 5.5%
Advanced Micro Devices, Inc. * .............. 21,800 301
Arrow Electronics, Inc. * ................... 4,000 115
Avnet, Inc. ................................. 13,700 295
Electronics for Imaging, Inc. * ............. 9,700 135
Lam Research Corp. * ........................ 23,000 333
National Semiconductor Corp. * .............. 13,300 268
Polaroid Corp. .............................. 14,000 81
Teradyne, Inc. * ............................ 2,500 93
--------
1,621
Financial Services - 2.8%
Knight Trading Group, Inc. * ................ 19,000 265
Stillwell Financial, Inc. ................... 14,200 560
--------
825
Food, Beverage & Tobacco - 2.9%
Archer-Daniels-Midland Co. .................. 20,000 300
Dean Foods Co. .............................. 7,200 221
SUPERVALU, Inc. ............................. 20,500 285
Tyson Foods, Inc. - Cl. A ................... 4,500 57
--------
863
Health Care Products - 2.3%
Bausch & Lomb, Inc. ......................... 9,300 376
Boston Scientific Corp. * ................... 22,300 305
--------
681
Health Care Services - 0.0%
HEALTHSOUTH Corp. * ......................... 500 8
Household Appliances / Furnishings - 0.3%
Leggett & Platt, Inc. ....................... 4,000 76
Insurance - 1.7%
Aon Corp. ................................... 10,500 360
Loews Corp. ................................. 1,500 155
--------
515
Leisure & Recreation - 2.4%
Mandalay Resort Group * ..................... 12,800 281
138
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL/MID CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Leisure & Recreation - Continued
Six Flags, Inc. ........................ 25,100 $ 431
---------
712
Machinery - 1.4%
Deere & Co. ............................ 4,300 197
Flowserve Corp. ........................ 1,500 32
Ingersoll-Rand Co. ..................... 4,400 184
---------
413
Media - TV / Radio - 4.1%
Emmis Communications Corp. ............. 23,000 660
Entercom Communications Corp. * ........ 16,300 561
---------
1,221
Metals & Mining - 0.3%
Cominco, Ltd. .......................... 4,600 77
Natural Gas Distribution - 0.6%
Wisconsin Energy Corp. ................. 7,100 160
Oil - 3.5%
Key Energy Services, Inc. * ............ 12,300 128
Tosco Corp. ............................ 10,900 370
Varco International, Inc. * ............ 25,000 544
---------
1,042
Oil & Natural Gas Exploration & Production - 5.5%
Devon Energy Corp. * ................... 9,970 608
Noble Affiliates, Inc. ................. 5,200 239
Ocean Energy, Inc. * ................... 500 9
R&B Falcon Corp. * ..................... 23,200 532
Santa Fe International Corp. ........... 7,500 240
---------
1,628
Oil - Equipment & Service - 4.9%
Petroleum Geo-Services ASA * ........... 37,500 499
Tidewater, Inc. ........................ 9,900 439
Weatherford International, Inc. * ...... 10,600 501
---------
1,439
Paper & Forest Products - 4.1%
Abitibi-Consolidated, Inc. ............. 53,800 494
Jefferson Smurfit Group plc - ADR ...... 18,100 353
Smurfit-Stone Container Corp. * ........ 24,800 371
---------
1,218
Pollution Control - 0.5%
Republic Services, Inc. - Cl. A ........ 8,800 151
Retail - Department Stores - 11.4%
AnnTaylor Stores Corp. * ............... 16,500 411
Best Buy Co., Inc. ..................... 14,000 414
Circuit City Stores, Inc. .............. 56,700 652
Consolidated Stores Corp. * ............ 7,300 78
Federated Department Stores, Inc. * .... 10,300 360
Gap, Inc. .............................. 18,100 462
OfficeMax, Inc. ........................ 4,200 12
Shopko Stores, Inc. .................... 5,100 25
Staples, Inc. * ........................ 15,500 183
Williams-Sonoma, Inc. .................. 17,000 340
Zale Corp. * ........................... 14,300 416
---------
3,353
Retail - Drug Stores - 1.5%
TJX Cos., Inc. ......................... 16,100 447
Retail - Food - 0.9%
Albertson's, Inc. ...................... 10,200 270
Shoe & Apparel Manufacturing - 4.0%
Intimate Brands, Inc. .................. 17,900 269
Jones Apparel Group, Inc. * ............ 4,200 135
Nordstrom, Inc. ........................ 6,500 118
Reebok International, Ltd. ............. 14,300 391
Tommy Hilfiger Corp. * ................. 27,200 267
---------
1,180
Steel - 2.2%
AK Steel Holding Corp. ................. 16,401 143
Nucor Corp. ............................ 7,500 298
USX-U.S. Steel Group, Inc. ............. 10,100 182
---------
623
Telecommunication Equipment - 1.3%
Allen Telecom, Inc. .................... 10,700 192
CommScope, Inc. * ...................... 11,500 191
---------
383
Telecommunication Services - 0.4%
Avaya , Inc. * ......................... 11,600 120
Transportation Services - 2.5%
AMR Corp. * ............................ 8,800 345
Delta Air Lines, Inc. .................. 6,500 326
Yellow Corp. * ......................... 2,900 59
---------
730
---------
TOTAL COMMON STOCK- 94.9% 27,946
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 3.3%
Investment in joint trading
account (Note B)
6.695% due 01/02/01 .................... $ 975 975
------ ---------
TOTAL INVESTMENTS- 98.2% 28,921
Cash and Receivables, less payables- 1.8% 515
------ ---------
NET ASSETS- 100.0% 29,436
====== =========
* Non-income producing security.
ADR-American Depository Receipt
See notes to financial statements.
139
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
REAL ESTATE EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Real Estate Development - 2.5%
Catellus Development Corp. * ................. 96,700 $ 1,692
Manufactured Home Communities, Inc. .......... 79,200 2,297
---------
3,989
Real Estate Investment Trust - 92.9%
AMB Property Corp. ........................... 118,800 3,067
AMLI Residential Properties Trust ............ 49,700 1,227
Apartment Investment & Management Co. ........ 40,600 2,028
Archstone Communities Trust .................. 209,400 5,392
Arden Realty Group, Inc. ..................... 152,400 3,829
Avalonbay Communities, Inc. .................. 168,545 8,448
Boston Properties, Inc. ...................... 153,900 6,695
Brandywine Realty Trust ...................... 53,300 1,103
BRE Properties, Inc. ......................... 56,200 1,781
Brookfield Properties Corporation ............ 203,600 3,588
Cabot Industrial Trust ....................... 28,300 543
Camden Property Trust ........................ 67,500 2,261
CarrAmerica Realty Corp. ..................... 211,900 6,635
CBL & Associates Properties, Inc. ............ 59,200 1,499
Centerpoint Properties Corp. ................. 19,450 919
Charles E. Smith Residential Realty, Inc. .... 75,200 3,534
Chateau Communities, Inc. .................... 112,000 3,409
Cousins Properties, Inc. ..................... 77,250 2,158
Duke Realty Investments, Inc. ................ 97,739 2,407
Equity Office Properties Trust ............... 350,793 11,445
Equity Residential Properties Trust .......... 139,300 7,705
Essex Property Trust, Inc. ................... 24,500 1,341
Federal Realty Investment Trust .............. 166,800 3,169
FelCor Lodging Trust, Inc. ................... 40,200 962
First Industrial LP * ........................ 33,800 1,149
Frontline Capital Group ...................... 13,700 182
General Growth Properties .................... 33,700 1,220
Hilton Hotels Corp. .......................... 18,000 189
Home Properties of New York, Inc. ............ 25,200 704
Host Marriott Corp. .......................... 234,500 3,034
Kilroy Realty Corp. .......................... 46,850 1,315
Kimco Realty Corp. ........................... 50,000 2,209
Koger Equity, Inc. ........................... 7,200 112
Liberty Property Trust ....................... 87,500 2,499
Mack-Cali Realty Corp. ....................... 75,900 2,168
MeriStar Hospitality Corp. ................... 93,050 1,832
Pacific Gulf Properties, Inc. ................ 54,600 334
Pinnacle Holdings, Inc. * .................... 51,700 469
Post Properties, Inc. ........................ 41,600 1,563
Prentiss Properties Trust .................... 79,150 2,132
Prologis Trust ............................... 224,859 5,003
PS Business Parks, Inc. ...................... 28,200 784
Public Storage, Inc. ......................... 229,100 5,570
Reckson Associates Realty Corp. .............. 29,300 734
Regency Realty Corp. ......................... 50,450 1,195
Simon Property Group, Inc. ................... 256,600 6,158
SL Green Realty Corp. ........................ 27,500 770
Spieker Properties, Inc. ..................... 128,300 6,431
Starwood Hotels & Resorts Worldwide, Inc. .... 106,900 3,768
Storage USA, Inc. ............................ 20,000 635
Summit Properties, Inc. ...................... 2,700 70
Sun Communities, Inc. ........................ 5,000 168
Taubman Centers, Inc. ........................ 35,000 383
The Macerich Co. ............................. 45,800 879
Trizec Hahn Corporation ...................... 186,800 2,825
United Dominion Realty Trust, Inc. ........... 1,800 19
Vornado Realty Trust ......................... 129,800 4,973
Washington Real Estate Investment Trust ...... 35,200 832
Wyndham International, Inc. .................. 24,200 42
---------
147,495
Real Estate Operations - 1.5%
Rouse Co. .................................... 78,800 2,009
Shurgard Storage Centers, Inc. ............... 15,200 372
---------
2,381
---------
TOTAL COMMON STOCK- 96.9% 153,865
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 2.6%
Investment in joint trading account (Note B)
6.695% due 01/02/01 .......................... $ 4,220 4,220
--------- ---------
TOTAL INVESTMENTS- 99.5% 158,085
Cash and Receivables, less payables- 0.5% 726
--------- ---------
NET ASSETS- 100.0% 158,811
========= =========
* Non-income producing security.
See notes to financial statements.
140
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.2%
Boeing Co. ........................... 100,000 $ 6,600
General Dynamics Corp. ............... 377,844 29,472
Honeywell International, Inc ......... 173,530 8,210
United Technologies Corp. ............ 361,414 28,416
---------
72,698
Auto & Truck Parts - 0.4%
General Motors Corp. - Cl. H ......... 130,658 3,005
Lear Corp. * ......................... 354,098 8,786
---------
11,791
Automobile - 0.4%
Ford Motor Co. ....................... 522,736 12,252
Bank - 5.4%
Bank of America Corp. ................ 744,070 34,134
Bank of New York Co., Inc. ........... 600,000 33,113
Comerica, Inc. ....................... 315,138 18,711
Fifth Third Bancorp. ................. 91,000 5,437
Firstar Corp. ........................ 886,600 20,614
FleetBoston Financial Corp ........... 1,024,464 38,482
J.P. Morgan & Co., Inc ............... 150,400 24,891
State Street Corp. ................... 44,500 5,527
---------
180,909
Brokerage & Investment Management - 0.4%
Goldman Sachs Group, Inc. ............ 57,800 6,181
Morgan Stanley, Dean Witter,
Discover & Co. ....................... 92,800 7,354
---------
13,535
Business Services - 0.6%
Automatic Data Processing, Inc ....... 203,214 12,866
i2 Technologies, Inc. * .............. 148,200 8,058
---------
20,924
Chemical - 1.2%
Air Products & Chemicals, Inc. ....... 367,694 15,076
Dow Chemical Co. ..................... 517,266 18,945
Praxair, Inc. ........................ 150,000 6,656
---------
40,677
Commercial Services - 1.1%
Interpublic Group Cos., Inc .......... 330,662 14,074
Omnicom Group, Inc ................... 254,238 21,070
---------
35,144
Computer Equipment - 6.9%
Brocade Communications Systems, Inc. * 153,100 14,057
Compaq Computer Corp. ................ 359,224 5,406
Comverse Technology, Inc. * .......... 245,910 26,712
Handspring, Inc. ..................... 69,500 2,706
Hewlett-Packard Co ................... 458,208 14,462
Intel Corp ........................... 2,296,228 69,030
Computer Equipment - Continued
International Business Machines
Corp. .............................. 408,036 34,683
Juniper Networks, Inc. * ............. 91,000 11,472
Network Appliance, Inc. * ............ 164,700 10,572
Redback Networks, Inc. * ............. 154,400 6,330
VeriSign, Inc. ....................... 76,900 5,705
VERITAS Software Corp. * ............. 323,962 28,347
---------
229,482
Computer Software & Services - 10.3%
Adobe Systems, Inc ................... 217,900 12,679
Agile Software Corp. * ............... 159,900 7,895
America Online, Inc. * ............... 896,272 31,190
BEA Systems, Inc. .................... 202,900 13,658
EMC Corp. * .......................... 919,304 61,134
First Data Corp ...................... 718,688 37,866
Micromuse, Inc. * .................... 113,700 6,863
Microsoft Corp ....................... 1,712,916 74,298
Oracle Corp. * ....................... 1,464,936 42,575
Siebel Systems, Inc. * ............... 311,702 21,079
Sun Microsystems, Inc. * ............. 1,106,420 30,841
Yahoo!, Inc. * ....................... 92,852 2,801
---------
342,879
Consumer Miscellaneous - 0.7%
Avery Dennison Corp. ................. 232,364 12,751
Black & Decker Corp. ................. 289,314 11,356
---------
24,107
Cosmetic & Personal Care - 0.8%
Avon Products, Inc ................... 135,000 6,463
Colgate-Palmolive Co ................. 180,000 11,619
Procter & Gamble Co. ................. 93,536 7,337
---------
25,419
Diversified Operations - 9.6%
Amgen, Inc. * ........................ 127,300 8,139
Corning, Inc. ........................ 393,900 20,803
El Paso Energy Corp. ................. 343,688 24,617
General Electric Co. ................. 3,451,044 165,435
Illinois Tool Works, Inc ............. 163,245 9,723
Minnesota Mining & Manufacturing Co. . 247,826 29,863
Tyco International, Ltd. ............. 1,107,066 61,442
---------
320,022
Electric Power - 2.3%
Calpine Corp. * ...................... 150,000 6,759
Duke Energy Co. ...................... 241,668 20,602
Exelon Corp. ......................... 300,000 21,063
Pinnacle West Capital Corp. .......... 144,892 6,901
Reliant Energy, Inc .................. 322,874 13,985
Southern Energy, Inc. * .............. 216,100 6,118
---------
75,428
141
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Electronic Products & Services - 6.5%
Altera Corp. * ...................... 228,288 $ 6,007
Analog Devices, Inc. * .............. 153,386 7,851
Applied Materials, Inc. * ........... 178,526 6,817
Applied Micro Circuits Corp. * ...... 260,700 19,565
Cisco Systems, Inc. * ............... 2,780,144 106,341
Emulex Corp. * ...................... 72,600 5,803
Linear Technology Corp. ............. 163,244 7,550
Maxim Integrated Products, Inc. * ... 104,932 5,017
Micron Technology, Inc. * ........... 123,600 4,388
Motorola, Inc. ...................... 444,000 8,991
PerkinElmer, Inc. ................... 62,100 6,521
PMC-Sierra, Inc. * .................. 96,500 7,587
SDL, Inc. * ......................... 16,600 2,460
Texas Instruments, Inc. ............. 420,506 19,922
Transmeta Corp. * ................... 98,300 2,310
---------
217,130
Financial Services - 4.4%
Charles Schwab Corp. ................ 153,700 4,361
Citigroup, Inc. ..................... 1,908,902 97,473
Mellon Financial Corp. .............. 391,978 19,280
Paychex, Inc. ....................... 158,000 7,683
Stillwell Financial, Inc. ........... 419,062 16,527
---------
145,324
Food, Beverage & Tobacco - 0.9%
Anheuser-Busch Cos., Inc. ........... 205,096 9,332
Philip Morris Cos., Inc. ............ 491,412 21,622
---------
30,954
Health Care Products - 17.4%
Abbott Laboratories ................. 300,000 14,531
Allergan, Inc. ...................... 249,643 24,169
ALZA Corp. * ........................ 281,692 11,972
American Home Products Corp. ........ 875,060 55,610
Andrx Corp - Andrx Group * .......... 55,300 3,200
Applera Corporation - Applied
Biosystems Group .................. 175,200 16,480
Bristol-Myers Squibb Co. ............ 723,248 53,475
Celgene Corp. * ..................... 116,800 3,796
Eli Lilly & Co. ..................... 388,600 36,164
Forest Laboratories, Inc. * ......... 54,300 7,215
Genetech, Inc. * .................... 151,900 12,380
Immunex Corp. * ..................... 94,100 3,823
IVAX Corp. .......................... 108,800 4,167
Johnson & Johnson ................... 517,556 54,376
Laboratory Corporation of America
Holdings .......................... 25,000 4,400
MedImmune, Inc. * ................... 237,300 11,316
Merck & Co., Inc. ................... 832,888 77,979
Millennium Pharmaceuticals, Inc. * .. 103,900 6,429
Pfizer, Inc. ........................ 2,592,251 119,243
Pharmacia Corp. ..................... 347,770 21,214
Schering-Plough Corp. ............... 408,570 23,186
UnitedHealth Group, Inc. ............ 196,100 $ 12,036
---------
577,161
Health Care Services - 0.2%
Quest Diagnostics, Inc. * ........... 57,100 8,108
Insurance - 4.2%
American International Group, Inc. .. 484,338 47,738
Chubb Corp. ......................... 100,000 8,650
Hartford Financial Services
Group, Inc. ....................... 398,762 28,163
Lincoln National Corp. .............. 369,024 17,459
Marsh & McLennan Cos., Inc. ......... 166,056 19,428
St. Paul Cos., Inc. ................. 350,774 19,051
---------
140,489
Machinery - 0.5%
Ingersoll-Rand Co. .................. 366,374 15,342
Media - Publishing - 0.4%
AT&T Corp. - Liberty Media Group -
Cl. A * .......................... 997,162 13,524
Media - TV / Radio - 2.9%
Clear Channel Communications,
Inc. * ............................ 478,944 23,199
Infinity Broadcasting Corp. -
Cl. A * ........................... 341,084 9,529
The Walt Disney Co. ................. 373,296 10,802
Time Warner, Inc. ................... 469,212 24,512
Viacom, Inc. - Cl. B * .............. 625,431 29,239
---------
97,281
Natural Gas Distribution - 0.6%
Enron Corp. ......................... 220,700 18,346
Oil - 1.2%
BJ Services Co. * ................... 122,400 8,430
Royal Dutch Petroleum Co. - NY
Shares ............................ 509,824 30,876
---------
39,306
Oil & Natural Gas Exploration & Production - 3.5%
Chevron Corp. ....................... 204,092 17,233
Exxon Mobil Corp. ................... 832,870 72,408
Kerr-McGee Corp. .................... 158,730 10,625
R&B Falcon Corp. * .................. 103,900 2,383
Transocean Sedco Forex, Inc. ........ 138,500 6,371
USX-Marathon Group .................. 322,936 8,961
---------
117,981
Oil - Equipment & Service - 0.7%
Baker Hughes, Inc. .................. 354,676 14,741
Nabors Industries, Inc. * ........... 152,500 9,021
---------
23,762
142
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Paper & Forest Products - 0.3%
Kimberly-Clark Corp ............... 146,040 $ 10,324
Retail - Department Stores - 4.7%
Home Depot, Inc. .................. 591,412 27,020
Kohl's Corp. ...................... 401,100 24,467
Limited, Inc. ..................... 464,518 7,926
Lowe's Cos., Inc. ................. 278,166 12,378
RadioShack Corp. .................. 375,378 16,071
Wal-Mart Stores, Inc. ............. 1,300,558 69,092
---------
156,954
Retail - Drug Stores - 0.8%
CVS Corp. ....................... 251,100 15,050
TJX Cos., Inc. .................. 378,746 10,510
---------
25,560
Telecommunication Equipment - 1.5%
CIENA Corp. * ..................... 45,500 3,697
JDS Uniphase Corp. * .............. 211,600 8,821
Nortel Networks Corp. ............. 700,538 22,461
QUALCOMM, Inc. * .................. 174,600 14,350
---------
49,329
Telecommunication Services - 2.3%
EchoStar Communications Corp. -
Cl. A * ......................... 287,100 6,532
Nextel Communications, Inc. -
Cl. A * ......................... 166,600 4,123
Qwest Communications
International, Inc. * ........... 602,042 24,684
Sprint PCS (PCS Group) * .......... 281,600 5,755
Verizon Communications ............ 583,788 29,262
XO Communications, Inc. ........... 344,900 6,144
---------
76,500
Telephone - 1.6%
Metromedia Fiber Network, Inc.
Cl. A * ......................... 388,000 3,928
SBC Communications, Inc. 844,460 40,323
Sprint Corp. ................. 432,234 8,780
---------
53,031
U.S. Government Agencies - 1.2%
Federal National Mortgage Assoc 451,870 39,200
---------
TOTAL COMMON STOCK- 98.1% 3,260,873
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS - 3.2%
Investment in joint trading
account
(Note B)
6.695% due 01/02/01 ............... $ 106,899 $ 106,957
----------- ----------
TOTAL INVESTMENTS- 101.3% 3,367,830
Payables, less cash and receivables- (1.3)% (42,842)
----------- ----------
NET ASSETS- 100.0% 3,324,988
=========== ==========
* Non-income producing security.
See notes to financial statements.
143
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 1.2%
General Dynamics Corp. (US) 72,744 $ 5,674
Honeywell International, Inc. (US) 97,104 4,594
Lockheed Martin Corp. (US) 52,200 1,772
Raytheon Co. - Cl. A (US) 149,900 4,347
United Technologies Corp. (US) 238,660 18,765
--------
35,152
Auto & Truck Parts - 0.3%
General Motors Corp. - Cl. H (US) 120,960 2,782
Lear Corp. (US) 144,600 3,588
Visteon Corp. (US) 210,500 2,421
--------
8,791
Automobile - 0.3%
AutoNation, Inc. * (US) 133,300 800
Ford Motor Co. (US) 331,300 7,765
--------
8,565
Bank - 3.1%
Bank of America Corp. (US) 561,700 25,768
Bank of New York Co., Inc. (US) 172,400 9,514
Comerica, Inc. (US) 162,372 9,641
FleetBoston Financial Corp. (US) 593,040 22,276
J.P. Morgan & Co., Inc. (US) 95,508 15,807
Washington Mutual, Inc. (US) 178,600 9,477
--------
92,483
Business Services - 0.3%
Automatic Data Processing, Inc. (US) 145,100 9,187
Chemical - 0.8%
Air Products & Chemicals, Inc. (US) 184,632 7,570
Dow Chemical Co. (US) 323,200 11,837
Praxair, Inc. (US) 88,284 3,918
--------
23,325
Commercial Services - 0.9%
Galileo International, Inc. (US) 54,300 1,086
Interpublic Group Cos., Inc. (US) 321,900 13,701
Omnicom Group, Inc. (US) 99,960 8,284
R.R. Donnelley & Sons Co. (US) 171,108 4,620
--------
27,691
Computer Equipment - 2.4%
Compaq Computer Corp. (US) 326,988 4,921
Comverse Technology, Inc. (US) 46,200 5,019
Dell Computer Corp. (US) 59,800 1,043
Hewlett-Packard Co. (US) 320,648 10,120
Intel Corp. (US) 885,528 26,621
International Business Machines
Corp. (US) 223,524 19,000
VERITAS Software Corp. (US) 70,400 6,160
--------
72,884
Computer Software & Services - 4.5%
America Online, Inc. (US) 360,696 $ 12,552
Cadence Design Systems, Inc. (US) 95,700 2,632
CheckFree Corp. (US) 58,900 2,503
DoubleClick, Inc. (US) 107,500 1,182
DST Systems, Inc. (US) 62,000 4,154
EMC Corp. (US) 284,088 18,892
First Data Corp. (US) 396,900 20,911
Genuity, Inc. (US) 197,900 1,002
Macromedia, Inc. (US) 21,100 1,282
Microsoft Corp. (US) 653,352 28,339
Oracle Corp. (US) 710,808 20,658
Peoplesoft, Inc. (US) 71,900 2,674
Siebel Systems, Inc. (US) 58,716 3,971
Sun Microsystems, Inc. (US) 390,600 10,888
Yahoo!, Inc. (US) 77,784 2,347
--------
133,987
Consumer Miscellaneous - 0.8%
Avery Dennison Corp. (US) 108,612 5,960
Black & Decker Corp. (US) 185,500 7,281
Clorox Co. (US) 111,200 3,947
Costco Wholesale Corp. (US) 100,200 4,002
Parker-Hannifin Corp. (US) 68,460 3,021
--------
24,211
Cosmetic & Personal Care - 0.6%
Avon Products, Inc. (US) 104,160 4,987
Colgate-Palmolive Co. (US) 120,000 7,746
Procter & Gamble Co. (US) 74,508 5,844
--------
18,577
Diversified Operations - 4.3%
Corning, Inc. (US) 139,300 7,357
El Paso Energy Corp. (US) 237,100 16,982
General Electric Co. (US) 1,333,800 63,939
Illinois Tool Works, Inc. (US) 131,975 7,861
Minnesota Mining &
Manufacturing Co. (US) 94,080 11,337
Reynolds & Reynolds Co. - Cl. A (US) 149,604 3,029
Textron, Inc. (US) 1,600 74
Tyco International, Ltd. (BM) 317,400 17,616
--------
128,195
Electric Power - 1.9%
AES Corp. (US) 139,900 7,747
Allegheny Energy, Inc. (US) 87,300 4,207
Calpine Corp. (US) 93,400 4,209
Dominion Resources, Inc. (US) 97,104 6,506
Duke Energy Co. (US) 48,900 4,169
Exelon Corp. (US) 86,300 6,059
Fluor Corp. (US) 94,300 3,118
NiSource, Inc. (US) 100,100 3,078
Northeast Utilities (US) 137,700 3,339
Pinnacle West Capital Corp. (US) 180,400 8,591
144
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Electric Power - Continued
Reliant Energy, Inc. (US) ................... 139,100 $ 6,025
--------
57,048
Electrical Equipment - 0.1%
Emerson Electric Co. (US) ................... 36,400 2,869
Electronic Products & Services - 3.4%
Altera Corp. (US) ........................... 138,768 3,651
Analog Devices, Inc. (US) ................... 62,500 3,199
Applied Materials, Inc. (US) ................ 180,276 6,884
Applied Micro Circuits Corp. (US) ........... 67,500 5,066
Bookham Technology plc (GB) ................. 54,900 721
Cisco Systems, Inc. (US) .................... 1,046,664 40,035
KLA-Tencor Corp. (US) ....................... 53,000 1,786
Linear Technology Corp. (US) ................ 79,800 3,691
Maxim Integrated Products, Inc. (US) ........ 73,752 3,526
Micron Technology, Inc. (US) ................ 26,100 927
MIPS Technologies, Inc. - Cl. B (US) ........ 36,100 920
Motorola, Inc. (US) ......................... 284,508 5,761
PMC-Sierra, Inc. (US) ....................... 25,300 1,989
Sanmina Corp. (US) .......................... 56,500 4,329
Teradyne, Inc. (US) ......................... 58,600 2,183
Texas Instruments, Inc. (US) ................ 287,288 13,610
Xilinx, Inc. (US) ........................... 70,100 3,233
--------
101,511
Energy - Alternative Source - 0.4%
Dynegy, Inc. - Cl.A (US) .................... 197,100 11,050
Financial Services - 2.5%
Citigroup, Inc. (US) ........................ 1,058,653 54,057
Household International, Inc. (US) .......... 50,100 2,755
Jersey Puerto Morgan Chase & Co. (US) ....... 69,804 3,172
Mellon Financial Corp. (US) ................. 139,524 6,863
Stillwell Financial, Inc. (US) .............. 193,284 7,623
--------
74,470
Food, Beverage & Tobacco - 1.9%
Anheuser-Busch Cos., Inc. (US) .............. 96,936 4,411
Campbell Soup Co. (US) ...................... 159,300 5,516
ConAgra, Inc. (US) .......................... 260,516 6,773
Kellogg Co. (US) ............................ 281,200 7,382
PepsiCo, Inc. (US) .......................... 266,884 13,227
Philip Morris Cos., Inc. (US) ............... 316,000 13,904
Williams Cos., Inc. (US) .................... 110,700 4,421
--------
55,634
Health Care Products - 10.2%
Abbott Laboratories (US) .................... 186,000 9,009
Allergan, Inc. (US) ......................... 97,100 9,401
ALZA Corp. (US) ............................. 153,400 6,520
American Home Products Corp. (US) ........... 193,704 12,310
AstraZeneca Group plc - ADR (GB) ............ 224,300 11,552
Baxter International, Inc. (US) ............. 117,100 10,341
Becton, Dickinson & Co. (US) ................ 42,400 1,468
Bristol-Myers Squibb Co. (US) ............... 346,668 25,632
Cardinal Health, Inc. (US) .................. 53,172 5,297
Eli Lilly & Co. (US) ........................ 35,400 3,294
ENZON, Inc. (US) ............................ 67,000 4,158
Forest Laboratories, Inc. (US) .............. 101,640 13,505
Genetech, Inc. (US) ......................... 22,200 1,809
Guidant Corp. (US) .......................... 63,400 3,420
Johnson & Johnson (US) ...................... 219,492 23,060
Laboratory Corporation of
America Holdings (US) ....................... 39,000 6,864
Medtronic, Inc. (US) ........................ 276,300 16,682
Merck & Co., Inc. (US) ...................... 372,540 34,879
Pfizer, Inc. (US) ........................... 1,737,600 79,930
Pharmacia Corp. (US) ........................ 265,200 16,177
Schering-Plough Corp. (US) .................. 166,152 9,429
--------
304,737
Health Care Services - 0.2%
Wellpoint Health Networks, Inc. (US) ........ 56,300 6,488
Insurance - 3.2%
Allstate Corp. (US) ......................... 100,000 4,356
American International Group, Inc. (US) ..... 194,600 19,180
Chubb Corp. (US) ............................ 75,000 6,488
Hartford Financial Services Group, Inc.
(US) ...................................... 282,500 19,952
Jefferson-Pilot Corp. (US) .................. 32,200 2,407
Lincoln National Corp. (US) ................. 270,100 12,779
Marsh & McLennan Cos., Inc. (US) ............ 44,856 5,248
St. Paul Cos., Inc. (US) .................... 202,100 10,977
Torchmark, Inc. (US) ........................ 145,200 5,581
XL Capital, Ltd. - Cl. A (BM) ............... 105,252 9,196
--------
96,164
Leisure & Recreation - 0.1%
Carnival Corp. (PA) ......................... 116,800 3,599
Machinery - 0.3%
Ingersoll-Rand Co. (US) ..................... 234,500 9,820
Media - Publishing - 0.5%
AT&T Corp. - Liberty Media Group - Cl
A (US) .................................... 1,026,900 13,927
Media - TV / Radio - 1.8%
Cablevision Systems Corp. - Cl. A (US) ...... 135,900 11,543
Charter Communications, Inc. - Cl. A
(US) ...................................... 90,700 2,058
Clear Channel Communications, Inc.
(US) ...................................... 140,448 6,803
Fox Entertainment Group, Inc. - Cl. A
(US) ...................................... 71,000 1,269
Infinity Broadcasting Corp. - Cl. A (US) .... 134,652 3,762
Time Warner, Inc. (US) ...................... 251,184 13,122
USA Networks, Inc. (US) ..................... 8,600 167
145
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Media - TV / Radio - Continued
Viacom, Inc. - Cl. B (US) ................... 308,953 $ 14,443
---------
53,167
Metals & Mining - 0.3%
Alcoa, Inc. (US) ............................ 291,500 9,765
Oil - 0.8%
Conoco, Inc. - Cl. A (US) ................... 151,032 4,323
Royal Dutch Petroleum Co. - NY Shares
(NL) ...................................... 327,180 19,815
---------
24,138
Oil & Natural Gas Exploration & Production - 1.8%
Chevron Corp. (US) .......................... 76,440 6,454
Exxon Mobil Corp. (US) ...................... 479,860 41,707
Kerr-McGee Corp. (US) ....................... 61,908 4,144
Texaco, Inc. (US) ........................... 48,400 3,007
---------
55,312
Oil - Equipment & Service - 0.5%
Baker Hughes, Inc. (US) ..................... 286,780 11,919
Weatherford International, Inc. (US) ........ 52,300 2,471
---------
14,390
Paper & Forest Products - 0.2%
Kimberly-Clark Corp. (US) ................... 86,016 6,080
Personal & Commercial Lending - 0.6%
USA Education, Inc. (US) .................... 271,100 18,435
Precious Metals/Gems/Stones - 0.0%
Newmont Mining Corp. (US) ................... 73,000 1,245
Retail - Department Stores - 2.9%
Circuit City Stores, Inc. (US) .............. 175,000 2,012
Dollar General Corp. (US) ................... 159,100 3,003
Gap, Inc. (US) .............................. 253,780 6,471
Home Depot, Inc. (US) ....................... 258,552 11,813
Kohl's Corp. (US) ........................... 179,200 10,931
Limited, Inc. (US) .......................... 168,588 2,876
Lowe's Cos., Inc. (US) ...................... 263,800 11,739
RadioShack Corp. (US) ....................... 200,100 8,567
Tiffany & Co. (US) .......................... 137,600 4,352
Wal-Mart Stores, Inc. (US) .................. 485,772 25,807
---------
87,571
Retail - Drug Stores - 0.5%
CVS Corp. (US) .............................. 63,000 3,776
TJX Cos., Inc. (US) ......................... 261,700 7,262
Walgreen Co. (US) ........................... 84,000 3,512
---------
14,550
Retail - Food - 0.1%
McDonald's Corp. (US) ....................... 93,900 3,193
Shoe & Apparel Manufacturing - 0.1%
Nike, Inc. - Cl. B (US) ..................... 53,800 3,003
Telecommunication Equipment - 0.8%
ADC Telecommunications, Inc. (US) ........... 140,700 2,550
JDS Uniphase Corp. (US) ..................... 98,000 4,085
Nokia Oyj - ADR (FI) ........................ 109,700 4,772
Nortel Networks Corp. (CA) .................. 399,672 12,815
---------
24,222
Telecommunication Services - 1.3%
Adelphia Communications Corp. - Cl. A
(US) ...................................... 53,800 2,777
CNF Transportation, Inc. (US) ............... 41,700 1,410
EchoStar Communications Corp. - Cl. A
(US) ...................................... 61,000 1,388
Qwest Communications International,
Inc. (US) ................................. 371,176 15,218
Sprint PCS (PCS Group) (US) ................. 271,700 5,553
Verizon Communications (US) ................. 181,944 9,120
WorldCom, Inc. (US) ......................... 189,300 2,662
---------
38,128
Telephone - 1.2%
AT&T Corp. (US) ............................. 107,100 1,854
BellSouth Corp. (US) ........................ 92,652 3,793
SBC Communications, Inc. (US) ............... 509,780 24,342
Sprint Corp. (US) ........................... 299,716 6,088
---------
36,077
Transportation Services - 0.4%
Canadian National Railway Co. (CA) .......... 113,300 3,364
Ryder System, Inc. (US) ..................... 169,260 2,814
Union Pacific Corp. (US) .................... 137,032 6,954
---------
13,132
U.S. Government Agencies - 0.9%
Federal National Mortgage Assoc. (US) ....... 299,500 25,982
---------
TOTAL COMMON STOCK- 58.4% 1,748,766
Par
Value
(000's)
CORPORATE BONDS
Personal & Commercial Lending - 0.6%
MBNA Master Credit Card Trust (US)
6.6% due 11/15/04 ........................... $ 10,231 10,339
MBNA Master Credit Card Trust II (US)
6.4% due 01/18/05 ........................... 7,147 7,211
Sears Credit Account Master Trust - Ser.
1998-2 Cl. A (US)
5.25% due 10/16/08 .......................... 1,000 986
---------
TOTAL CORPORATE BONDS- 0.6% 18,536
146
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 0.2%
Boeing Cap. Corp. - Sr. Notes (US)
7.1% due 09/27/05 ........................... $ 500 $ 521
Lockheed Martin Corp. - Bonds (US)
8.5% due 12/01/29 ........................... 3,443 3,907
Raytheon Co. - Notes (US)
6.45% due 08/15/02 .......................... 2,290 2,281
----------
6,709
Automobile - 0.5%
Ford Motor Co. - Bonds (US)
6.625% due 10/01/28 ......................... 13,024 11,024
General Motors (US)
1.25% due 12/20/04 .......................... 500,000 4,353
Hertz Corp. (US)
7.625% due 08/15/07 ......................... 500 515
----------
15,892
Bank - 3.3%
Bank of America Corp. - Sub. Notes (US)
7.8% due 02/15/10 ........................... 15,713 16,354
Banponce Financial Corp. Mountain Bank
Ent - Ser C. (US)
6.58% due 11/25/03 .......................... 8,900 8,946
Development Bank of JAPAN (JP)
1.75% due 06/21/10 .......................... 790,000 7,033
European Investment Bank - Notes (XU)
3.0% due 09/20/06 ........................... 620,000 6,048
European Investment Bank - Sr. Unsub
(LU)
6.0% due 11/26/04 ........................... 1,350 2,035
European Investment Bank (XU)
8.75% due 08/25/17 .......................... 960 1,957
European Investor Bank (LU)
8.0% due 06/10/03 ........................... 250 393
Federal Home Loan Bank - Notes (US)
5.125% due 09/15/03 ......................... 1,250 1,234
International Bank of Reconstruction &
Development - Notes (XU)
2.0% due 02/18/08 ........................... 1,170,000 10,698
International Bank of Reconstruction &
Development - Debs. (XU)
4.5% due 03/20/03 ........................... 1,080,000 10,251
International Bank of Reconstruction &
Development - Debs. (JP)
4.75% due 12/20/04 .......................... 650,000 6,563
International Bank of Reconstruction &
Development - Debs. (XU)
9.25% due 07/20/07 .......................... 2,710 4,811
J.P. Morgan & Co., Inc. - Sr Notes (US)
5.75% due 02/25/04 .......................... 2,000 1,964
Korea Development Bank - Bonds (US)
7.125% due 09/17/01 ......................... 4,600 4,608
Korea Development Bank - Notes (US)
7.125% due 04/22/04 ......................... 7,273 7,218
Wells Fargo Bank NA - Sub. (US)
7.55% due 06/21/10 .......................... 8,106 8,579
----------
98,692
Brokerage & Investment Management - 0.3%
Lehman Brothers Holdings, Inc. - Notes
(US)
6.5% due 10/01/02 ........................... 7,010 7,007
6.625% due 04/01/04 ......................... 2,000 1,993
Regional Diversified Funding, Ltd. (US)
9.25% due 03/15/30 .......................... 1,000 1,005
----------
10,005
Business Services - 0.1%
Comdisco, Inc. - Notes (US)
5.95% due 04/30/02 .......................... 4,200 3,444
Computer Equipment - 0.1%
International Business Machines
Corp. - Notes (US)
5.375% due 02/01/09 ......................... 500 463
5.625% due 04/12/04 ......................... 2,870 2,830
----------
3,293
Electric Power - 0.1%
Ontario-Hydro (CA)
9.0% due 06/24/02 ........................... 2,800 1,960
Financial Services - 5.4%
Associates Corp. of North America - Sr
Notes (US)
5.5% due 02/15/02 ........................... 4,000 3,978
6.25% due 11/01/08 .......................... 8,618 8,310
Capital One Financial Corp. - Notes (US)
7.25% due 12/01/03 .......................... 8,562 8,547
Chase Commercial Mortgage Securities
Corp. - Ser. 1997-1 Cl. A2 (US)
7.37% due 02/19/07 .......................... 10,722 11,269
Contimortgage Home Equity Loan Trust (US)
6.0% due 12/25/16 ........................... 12,093 11,927
Countrywide Funding Corp. (US)
7.0% due 10/25/23 ........................... 7,256 7,277
Credit Suisse First Boston Mortgage
Securities Corp. (US)
7.545% due 04/15/10 ......................... 4,533 4,842
First Union National Nank - Sub. Notes (US)
7.8% due 08/18/10 ........................... 7,739 7,983
General Motors Acceptance Corp. (US)
7.5% due 07/15/05 ........................... 8,118 8,312
Green Tree Financial Corp. (US)
6.68% due 01/15/29 .......................... 9,471 9,512
147
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Financial Services - Continued
Green Tree Financial Corp. - Ser. 1996-8
Cl. A6 (US)
7.6% due 10/15/27 ........................... $ 7,723 $ 8,010
Green Tree Financial Corporation - Ser
1997-6 Cl. A7 (US)
7.14% due 01/15/29 .......................... 500 511
Household Finance Corp. - Sr. Notes (US)
5.125% due 06/24/09 ......................... 6,300 5,496
Household Finance Corp. - Notes (US)
7.875% due 03/01/07 ......................... 7,369 7,670
KFW International Finance - Debs. (US)
10.625% due 09/03/01 ........................ 500 769
LB-UBS Commercial Mortgage Trust -
Ser. 2000-C4 Cl. A2 (US)
7.37% due 06/15/10 .......................... 15,318 16,242
Lehman Brothers Holdings - Notes (US)
7.75% due 01/15/05 .......................... 8,062 8,330
Mortgage Capital Funding, Inc. - Ser
1996 - MC2 Cl. A1 (US)
6.758% due 02/20/04 ......................... 9,997 10,114
NiSource Finance Corp. Ser. 144A (a)
(US)
7.5% due 11/15/03 ........................... 500 513
NiSource Finance Corp. - 144A (a) (US)
7.875% due 11/15/10 ......................... 1,375 1,445
PNC Funding Corp. - Sub. Notes (US)
7.5% due 11/01/09 ........................... 8,094 8,371
Residential Asset Securities Corp. (US)
6.11% due 05/25/24 .......................... 8,062 8,038
Salomon, Inc. - Sr. Notes (US)
7.2% due 02/01/04 ........................... 2,300 2,349
Southern Pacific Secured Assets Corp.
(US)
6.27% due 03/25/19 .......................... 1,392 1,387
----------
161,202
Food, Beverage & Tobacco - 0.2%
Conagra Inc. - Notes (US)
7.5% due 09/15/05 ........................... 1,000 1,045
7.875% due 09/15/10 ......................... 500 539
Nabisco, Inc. - Deb. (US)
7.55% due 06/15/15 .......................... 1,000 943
Philip Morris Cos., Inc. - Debs. (US)
8.25% due 10/15/03 .......................... 3,055 3,135
The Kroger Co. (US)
8.05% due 02/01/10 .......................... 500 538
Williams Cos., Inc. - Notes (US)
6.5% due 08/01/06 ........................... 500 494
----------
6,694
Foreign - 0.3%
Queensland Treasury Corp. - Bonds (AU)
6.5% due 06/14/05 ........................... 460 264
Queensland Treasury Corp. - Global
Notes (AU)
8.0% due 08/14/01 ........................... 400 225
Queensland Treasury Corp. (AU)
8.0% due 09/14/07 ........................... 1,395 875
Treuhandanstalt (DE)
7.75% due 10/01/02 .......................... 6,410 6,340
----------
7,704
Foreign Governmental - 4.4%
Government of Canada - Debs. (CA)
9.75% due 06/01/21 .......................... 2,470 2,435
11.0% due 06/01/09 .......................... 2,830 2,586
12.0% due 03/01/05 .......................... 1,785 1,477
Government of France - Bonds (FR)
8.5% due 04/25/03 ........................... 7,300 7,437
9.5% due 01/25/01 ........................... 6,860 6,456
Government of Japan - Bonds (JP)
2.2% due 09/21/20 ........................... 650,000 5,607
Government of Netherlands -
Bonds (NL)
6.5% due 04/15/03 ........................... 8,100 7,909
7.75% due 03/01/05 .......................... 10,700 11,221
Government of Sweden - Debs. (SE)
6.5% due 10/25/06 ........................... 9,200 1,070
6.75% due 05/05/14 .......................... 4,700 584
Government of Sweden - Bonds (SE)
10.25% due 05/05/03 ......................... 11,450 1,370
Republic of Greece (GR)
5.9% due 02/11/03 ........................... 200,000 563
6.0% due 05/19/10 ........................... 435,000 1,245
Hellenic Republic - Bonds (GR)
5.95% due 03/24/05 .......................... 243,000 693
Kingdom of Denmark - Bonds (DK)
7.0% due 11/15/07 ........................... 6,300 881
7.0% due 11/10/24 ........................... 3,000 449
8.0% due 05/15/03 ........................... 13,650 1,833
Kingdom of Spain - Notes (ES)
3.1% due 09/20/06 ........................... 1,260,000 12,297
Province of Ontario (CA)
7.75% due 06/04/02 .......................... 4,000 4,101
Province of Quebec - Debs (CA)
7.5% due 09/15/29 ........................... 9,780 10,529
Queensland Treasury Corp. (XU)
6.0% due 06/14/11 ........................... 280 158
Republic of Chile (US)
6.875% due 04/28/09 ......................... 3,795 3,686
Republic of Italy - Notes (IT)
3.5% due 06/20/01 ........................... 800,000 7,096
Republic of Italy - Bonds (IT)
4.5% due 05/01/09 ........................... 13,800 12,407
Republic of Italy (XU)
6.0% due 08/04/28 ........................... 1,600 2,637
Republic of Italy - Debs. (IT)
8.5% due 01/01/04 ........................... 6,600 6,854
148
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Foreign Governmental - Continued
9.0% due 11/01/23 ........................... $ 12,000 $ 15,982
10.5% due 04/28/14 .......................... 1,250 2,677
--------
132,240
Health Care Products - 0.2%
Beckman Instruments, Inc. - Sr. Notes
(US)
7.1% due 03/04/03 ........................... 4,837 4,771
Health Care Services - 0.1%
Tenet Healthcare Corp. - Sr. Notes (US)
8.0% due 01/15/05 ........................... 3,950 4,000
United Healthcare - Notes (US)
7.5% due 11/15/05 ........................... 500 517
--------
4,517
Leisure & Recreation - 0.0%
MGM Mirage, Inc. (US)
8.5% due 09/15/10 ........................... 500 515
Media - TV / Radio - 0.8%
Belo AH Corp. - Sr. Notes (US)
7.125% due 06/01/07 ......................... 500 479
CBS, Corp. - Sr. Notes (US)
7.15% due 05/20/05 .......................... 3,525 3,591
Chancellor Media Corp. (US)
8.0% due 11/01/08 ........................... 750 746
Charter Communication Holdings LLC -
Sr. Notes (US)
8.25% due 04/01/07 .......................... 1,000 915
Clear Channel Communications (US)
7.65% due 09/15/10 .......................... 500 511
Fox Sports Networks LLC - Sr. Disc
Notes (US)
0.0% due 08/15/07 ........................... 750 637
Fox/Liberty Networks LLC - Sr. Notes
(US)
8.875% due 08/15/07 ......................... 1,000 995
Liberty Media Corp. - Bonds (US)
7.875% due 07/15/09 ......................... 1,500 1,477
News America, Inc. - Debs. (US)
7.125% due 04/08/28 ......................... 3,483 2,839
Time Warner, Inc. (US)
6.625% due 05/15/29 ......................... 4,079 3,698
Time Warner, Inc. - Debs (US)
7.25% due 10/15/17 .......................... 500 490
Time Warner, Inc. - Notes (US)
8.18% due 08/15/07 .......................... 2,075 2,207
Viacom, Inc. (US)
7.7% due 07/30/10 ........................... 5,250 5,516
--------
24,101
Municipals - 0.2%
Tennessee Valley Authority - Bonds (US)
6.375% due 09/18/06 ......................... 11,000 5,622
Natural Gas Distribution - 0.2%
Florida Gas Transmission Co. (US)
7.875% due 12/01/10 ......................... 750 773
KN Energy, Inc. - Sr. Notes (US)
6.45% due 03/01/03 .......................... 4,590 4,579
Williams Gas Pipeline Center - Sr. Notes
144A (a) (US)
7.375% due 11/15/06 ......................... 1,300 1,336
--------
6,688
Oil - 0.1%
Coastal Corp. (US)
7.75% due 06/15/10 .......................... 500 527
Conoco, Inc. - Notes (US)
5.9% due 04/15/04 ........................... 500 495
Pennzoil - Quaker State - Notes (US)
8.65% due 12/01/02 .......................... 750 754
--------
1,776
Oil & Natural Gas Exploration & Production - 0.3%
Amerada Hess Corp. - Bonds (US)
7.875% due 10/01/29 ......................... 2,749 2,874
Gulf Canada Resources, Ltd. - Sr. Notes
(CA)
8.35% due 08/01/06 .......................... 4,460 4,527
--------
7,401
Oil - Equipment & Service - 0.1%
Petroleum Geo-Services ASA - Sr. Notes
(NO)
7.125% due 03/30/28 ......................... 4,519 3,642
Paper & Forest Products - 0.0%
Fort James Corp. - Sr. Notes (US)
6.875% due 09/15/07 ......................... 500 445
Personal & Commercial Lending - 3.2%
Asset Backed Securities Corp. - Series
2000-LB1 Cl. AF2 (US)
7.57% due 03/21/24 .......................... 6,795 6,918
Citibank Credit Card Issuance Trust - Ser
2000 Cl. C1 (US)
7.45% due 09/15/07 .......................... 500 523
Countrywide Alternative Loan Trust - Ser
1999-1 Cl. A4 (US)
6.75% due 06/25/29 .......................... 7,569 7,525
Credit Suisse First Boston, Inc. (US)
7.29% due 09/15/09 .......................... 8,062 8,496
CS First Boston Mortgage Securities
Corp. (US)
6.91% due 01/15/08 .......................... 5,953 6,119
EQCC Home Equity Loan Trust (US)
6.223% due 06/25/11 ......................... 7,498 7,476
Ford Motor Credit Co. (US)
1.2% due 02/07/05 ........................... 500,000 4,310
149
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Personal & Commercial Lending - Continued
Ford Motor Credit Co. (LU)
5.25% due 06/16/08 .......................... $10,250 $ 4,669
Ford Motor Credit Co. - Notes (US)
6.125% due 04/28/03 ......................... 3,000 2,973
Ford Motor Credit Co. (US)
7.875% due 06/15/10 ......................... 500 515
General Motors Acceptance Corp. (US)
4.0% due 02/09/06 ........................... 6,800 5,913
General Motors Acceptance Corp. -
Bonds (US)
5.5% due 01/14/02 ........................... 5,000 4,966
Goldman Sachs Group, Inc. (US)
7.8% due 01/28/10 ........................... 8,618 9,063
Household Finance Corp. - Notes (US)
6.0% due 05/01/04 ........................... 7,020 6,890
Money Store Home Equity Trust - Ser
1996-B A7 (US)
7.55% due 02/15/20 .......................... 4,977 4,990
Residential Asset Products (US)
7.21% due 11/25/19 .......................... 8,500 8,522
Residential Asset Securities Corp. (US)
7.18% due 01/25/25 .......................... 4,000 4,053
U.S. West Capital Funding, Inc. (US)
6.875% due 07/15/28 ......................... 2,709 2,369
-------
96,290
Pollution Control - 0.1%
Waste Management, Inc. - Notes (US)
7.7% due 10/01/02 ........................... 400 400
WMX Technologies, Inc. - Notes (US)
7.1% due 08/01/26 ........................... 1,000 988
7.125% due 06/15/01 ......................... 2,715 2,704
-------
4,092
Real Estate Investment Trust - 0.5%
Residential Asset Securitization Trust -
Ser. 1998-A8 Cl. A3 (US)
6.75% due 08/25/28 .......................... 14,765 14,698
Retail - Department Stores - 0.5%
Federated Department Stores, Inc. - Sr
Notes (US)
8.5% due 06/15/03 ........................... 6,502 6,691
Wal Mart Stores, Inc. (US)
7.55% due 02/15/30 .......................... 7,405 8,217
-------
14,908
Telecommunication Equipment - 0.0%
Crown Castle International Corp. - Sr
Notes (US)
10.75% due 08/01/11 ......................... 1,000 1,037
Spectrasite Holdings, Inc. - Sr. Notes
Ser. B (US)
10.75% due 03/15/10 ......................... 500 445
-------
1,482
Telecommunication Services - 0.2%
CSC Holdings, Inc. - Sr. Notes (US)
8.125% due 07/15/09 ......................... 5,000 5,111
Vodafone Group plc - Notes (US)
7.625% due 02/15/05 ......................... 500 515
-------
5,626
Telephone - 0.4%
AT&T Corp. - Notes (US)
5.625% due 03/15/04 ......................... 4,000 3,821
CenturyTel, Inc. - Sr. Notes Ser. H (US)
8.375% due 10/15/10 ......................... 2,000 2,083
MCI WorldCom, Inc. - Notes (US)
7.75% due 04/01/07 .......................... 5,289 5,298
-------
11,202
U.S. Government Agencies - 11.3%
Federal Home Loan Mortgage Corp. (XU)
0.0% due 09/15/10 ........................... 5,375 5,176
Federal National Mortgage Assoc. - Notes
(US)
4.75% due 11/14/03 .......................... 11,000 10,744
7.0% due 07/15/05 ........................... 5,200 5,458
Federal National Mortgage Assoc. (US)
6.0% due 01/25/30 ........................... 34,287 33,194
6.0% due 05/15/08 ........................... 13,000 13,049
6.375% due 06/15/09 ......................... 16,500 16,920
6.5% due 01/25/15 ........................... 17,244 17,239
6.5% due 01/25/30 ........................... 11,843 11,680
6.5% due 07/01/29 ........................... 2,994 2,953
6.5% due 08/01/13 ........................... 2,928 2,927
6.5% due 08/01/30 ........................... 1,990 1,963
6.75% due 08/15/02 .......................... 15,767 16,028
7.0% due 01/25/30 ........................... 38,208 38,268
7.0% due 04/01/29 ........................... 12,868 13,053
7.0% due 11/01/30 ........................... 3,993 3,999
7.0% due 12/01/30 ........................... 1,000 1,002
7.25% due 05/15/30 .......................... 13,608 15,487
7.5% due 01/25/15 ........................... 20,961 21,406
7.5% due 01/25/30 ........................... 29,230 29,659
7.5% due 11/01/30 ........................... 7,993 8,110
7.5% due 12/01/30 ........................... 3,000 3,044
8.0% due 01/25/30 ........................... 15,054 15,426
8.0% due 12/01/29 ........................... 3,000 3,074
150
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
Government National Mortgage Assoc.
(US)
6.0% due 12/15/28 ........................ $ 3,969 $ 3,851
7.0% due 08/15/29 ........................ 1,492 1,499
7.5% due 10/15/30 ........................ 3,997 4,066
7.5% due 11/15/30 ........................ 999 1,016
7.5% due 12/15/30 ........................ 10,892 11,079
8.0% due 11/15/30 ........................ 7,994 8,204
8.0% due 12/15/17 ........................ 17,829 18,425
---------
337,999
U.S. Governmental - 5.4%
U.S. Treasury - Notes (US)
5.25% due 08/15/03 ....................... 4,875 4,890
5.625% due 02/15/06 ...................... 4,500 4,605
5.625% due 05/15/08 ...................... 4,000 4,105
5.75% due 08/15/10 ....................... 2,500 2,620
5.875% due 11/15/05 ...................... 7,699 7,964
6.25% due 02/15/07 ....................... 13,500 14,251
6.375% due 08/15/02 ...................... 4,250 4,321
6.875% due 05/15/06 ...................... 2,000 2,163
U.S. Treasury - Bonds (US)
5.25% due 02/15/29 ....................... 10,658 10,210
5.875% due 11/15/04 ...................... 11,635 11,939
6.75% due 08/15/26 ....................... 14,010 16,212
8.875% due 08/15/17 ...................... 57,564 78,243
---------
161,523
---------
TOTAL PUBLICLY-TRADED BONDS- .................. 38.5% 1,155,133
SHORT-TERM INVESTMENTS - 8.1%
Investment in joint trading account
(Note B) (US)
6.695% due 01/02/01 ...................... 242,351 242,351
--------- ----------
TOTAL INVESTMENTS- ........................ 105.6% 3,164,786
Payables, less cash and receivables- .......... (5.6)% (168,992)
--------- ----------
NET ASSETS- ............................ 100.0% 2,995,794
========= ==========
ADR - American Depository Receipt
(a) Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 2000, securities aggregated
$3,294 or 0.01% of net assets of the Portfolio.
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY COUNTRY
% of
Market Long-Term
Country Value Invest-
Industry Abbreviation (000s) ments
Australia ......................... AU $ 1,365 0.1%
Greece ............................ GR 2,501 0.1%
Sweden ............................ SE 3,024 0.1%
Denmark ........................... DK 3,163 0.1%
Panama ............................ PA 3,599 0.1%
Norway ............................ NO 3,642 0.1%
Finland ........................... FI 4,772 0.2%
Germany ........................... DE 6,339 0.2%
Luxembourg ........................ LU 7,097 0.3%
United Kingdom .................... GB 12,272 0.4%
Spain ............................. ES 12,297 0.4%
France ............................ FR 13,893 0.5%
Japan ............................. JP 19,202 0.7%
Bermuda ........................... BM 26,812 0.9%
Netherlands ....................... NL 38,945 1.3%
Supra National .................... XU 41,735 1.4%
Canada ............................ CA 43,793 1.5%
Italy ............................. IT 45,017 1.5%
United States ..................... US 2,632,967 90.1%
---------- -----
$2,922,435 100.0%
========== =====
151
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
CORPORATE BONDS
Financial Services - 1.3%
Chase Credit Card Master Trust - Cl. A 1998-3
6.0% due 08/15/05 ............................. $1,075 $1,080
Personal & Commercial Lending - 1.2%
MBNA Master Credit Card Trust
6.6% due 11/15/04 ............................. 935 945
------
TOTAL CORPORATE BONDS- 2.5% 2,025
PUBLICLY-TRADED BONDS
Aerospace & Defense - 0.6%
Raytheon Co. - Notes
6.45% due 08/15/02 ............................ 500 498
Bank - 8.8%
BankBoston Corp. - Sr. Notes
6.125% due 03/15/02 ........................... 1,900 1,899
Banponce Corp. - Notes
6.54% due 11/06/01 ............................ 1,000 1,003
Capital One Bank - Notes
7.0% due 04/30/01 ............................. 1,000 1,002
First Union Corp. - Notes
6.95% due 11/01/04 ............................ 500 506
J.P. Morgan & Co., Inc. - Sr. Notes
5.75% due 02/25/04 ............................ 1,000 982
Star Banc Corp. - Notes
5.875% due 11/01/03 ........................... 600 593
Westpac Banking Corp. - Sub. Debs .............
9.125% due 08/15/01 ........................... 1,000 1,017
------
7,002
Brokerage & Investment Management - 3.6%
Donaldson, Lufkin & Jenrette, Inc. - Sr. Notes
5.875% due 04/01/02 ........................... 1,900 1,894
Lehman Brothers Holdings, Inc. - Notes
6.5% due 10/01/02 ............................. 470 470
Morgan Stanley, Dean Witter, Discover & Co. ...
5.625% due 01/20/04 ........................... 500 490
------
2,854
Business Services - 0.5%
Comdisco, Inc. - Notes
5.95% due 04/30/02 ............................ 500 410
Computer Equipment - 0.6%
International Business Machines Corp. - Notes
5.625% due 04/12/04 ........................... 500 493
Cosmetic & Personal Care - 2.5%
Dial Corp. - Notes
5.9% due 10/25/01 ............................. 2,000 1,982
Diversified Operations - 3.3%
CMS Panhandle Holding - Sr. Notes
6.125% due 03/15/04 ........................... 1,000 963
El Paso Energy Corp. - Sr. Notes
6.625% due 07/15/01 ........................... 500 500
Diversified Operations - Continued
Tyco International Group SA
6.125% due 06/15/01 ........................... $1,200 $1,195
------
2,658
Electric Power - 0.6%
Niagara Mohawk Power Corp. - Sr. Notes
7.25% due 10/01/02 ............................ 499 504
Financial Services - 11.6%
Associates Corp. of North America - Sr. Notes
5.75% due 11/01/03 ............................ 450 444
General Electric Capital Corp. ................
7.5% due 05/15/05 ............................. 3,150 3,327
General Motors Acceptance Corp. - Notes
7.48% due 02/28/03 ............................ 1,200 1,225
Green Tree Financial Corp. - Ser. 1996-8 Cl. A6
7.6% due 10/15/27 ............................. 680 705
Heller Financial, Inc. - Notes
6.25% due 03/01/01 ............................ 1,500 1,499
Lehman Brothers Holdings - Notes
6.625% due 02/05/06 ........................... 600 594
PNC Funding Corp. .............................
7.0% due 09/01/04 ............................. 500 509
Salomon, Inc. - Sr. Notes
7.2% due 02/01/04 ............................. 500 511
U.S. West Capital Funding, Inc. ...............
6.875% due 08/15/01 ........................... 500 501
------
9,315
Food, Beverage & Tobacco - 0.8%
Philip Morris Cos., Inc. - Debs ...............
8.25% due 10/15/03 ............................ 640 657
Health Care Products - 1.8%
Beckman Instruments, Inc. - Sr. Notes
7.1% due 03/04/03 ............................. 1,475 1,455
Health Care Services - 0.5%
Tenet Healthcare Corp. - Sr. Notes
8.625% due 12/01/03 ........................... 360 368
Media - TV / Radio - 1.3%
Continental Cablevision - Sr. Notes
8.5% due 09/15/01 ............................. 1,010 1,021
Natural Gas Distribution - 2.3%
Enron Corp. - Debs ............................
9.125% due 04/01/03 ........................... 500 527
KN Energy, Inc. - Sr. Notes
6.45% due 03/01/03 ............................ 1,300 1,297
------
1,824
Oil - 1.3%
Coastal Corp. - Sr. Notes
8.125% due 09/15/02 ........................... 500 517
152
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Oil - Continued
Conoco, Inc. - Notes
5.9% due 04/15/04 ................................. $ 550 $ 545
------
1,062
Oil & Natural Gas Exploration & Production - 1.5%
Gulf Canada Resources, Ltd. - Sr. Notes
8.35% due 08/01/06 ................................ 170 179
Occidental Petroleum Corp. - Notes
8.5% due 11/09/01 ................................. 1,000 1,012
------
1,191
Oil - Equipment & Service - 1.2%
Petroleum-Geo Services ASA - Bonds
6.25% due 11/19/03 ................................ 1,000 979
Personal & Commercial Lending - 7.6%
American General Finance Corp. - Notes
5.75% due 11/23/01 ................................ 1,270 1,266
Asset Backed Securities Corp. - Series 2000-LB1
Cl. AF2
7.57% due 03/21/24 ................................ 177 180
Covenant Transport, Inc. - Cl. A
7.6% due 12/15/29 ................................. 252 259
Ford Motor Credit Co. - Sr. Notes
5.75% due 02/23/04 ................................ 1,500 1,452
Green Tree Financial Corp. - Ser. 1996-F
7.3% due 01/15/28 ................................. 131 132
Household Finance Corp. - Notes
6.0% due 05/01/04 ................................. 1,000 981
Money Store Home Equity Trust - Ser 1996-B A7 .....
7.55% due 02/15/20 ................................ 146 146
Money Store Home Equity Trust - Ser 1997-D AF3 ....
6.345% due 11/15/21 ............................... 227 227
Residential Asset and Mortgage Products
7.21% due 11/25/19 ................................ 1,500 1,504
------
6,147
Pollution Control - 0.7%
WMX Technologies, Inc. - Notes
7.125% due 06/15/01 ............................... 570 568
Real Estate Investment Trust - 0.4%
Residential Asset Securitization Trust - Ser. 1998-
A8 Cl. A3
6.75% due 08/25/28 ................................ 293 292
Retail - Department Stores - 2.5%
Dillard's, Inc. - Notes
5.79% due 11/15/01 ................................ 975 895
Federated Department Stores, Inc. - Sr. Notes
8.5% due 06/15/03 ................................. 1,090 1,122
------
2,017
Retail - Food - 0.6%
Safeway, Inc. - Notes
5.875% due 11/15/01 ............................ 500 498
Telecommunication Services - 1.9%
Cox Communications, Inc. - Notes
7.0% due 08/15/01 .............................. 1,500 1,496
Telephone - 1.9%
MCI Worldcom, Inc. - Sr. Notes
6.125% due 08/15/01 ............................ 1,500 1,495
Transportation Services - 2.5%
Norfolk Southern Corp. - Notes
6.875% due 05/01/01 ............................ 2,000 1,999
U.S. Government Agencies - 20.2%
Federal Home Loan Bank
8.0% due 06/01/10 .............................. 1,181 1,218
Federal Home Loan Mortgage Corp.
7.75% due 01/15/21 ............................. 292 292
Federal National Mortgage Assoc.
6.375% due 10/15/02 ............................ 3,500 3,546
6.5% due 09/01/02 .............................. 1,380 1,375
6.75% due 08/15/02 ............................. 3,750 3,812
7.0% due 01/01/03 .............................. 4,166 4,164
7.0% due 12/01/10 .............................. 1,692 1,715
------
16,122
U.S. Governmental - 13.2%
U.S. Treasury
4.25% due 11/15/03 ............................. 530 518
4.5% due 01/31/01 .............................. 910 909
5.875% due 02/15/04 ............................ 2,810 2,867
U.S. Treasury - Bonds
5.875% due 11/15/04 ............................ 6,190 6,351
------
10,645
------
TOTAL PUBLICLY-TRADED BONDS- 94.3% 75,552
SHORT-TERM INVESTMENTS - 1.6%
Investment in joint trading account (Note B)
6.695% due 01/02/01 ............................ 1,289 1,289
------ ------
TOTAL INVESTMENTS- 98.4% 78,866
Cash and Receivables, less payables- 1.6% 1,243
------ ------
NET ASSETS- 100.0% 80,109
====== ======
See notes to financial statements.
153
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
Market
Name of Issu Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 0.5%
Armor Holdings, Inc. * ......................... 20,400 $ 356
Automobile - 1.3%
ANC Rental Corporation * ....................... 58,400 204
Oshkosh Truck Corp. ............................ 16,200 713
------
917
Bank - 3.1%
Community Bankshares, Inc. ..................... 9,500 122
First Midwest Bancorp, Inc. .................... 2,100 60
Fulton Financial Corporation ................... 15,800 365
Net.B@nk, Inc. * ............................... 38,900 255
San Juan Basin Royalty Trust ................... 49,600 626
Silicon Valley Bancshares * .................... 14,700 508
Waypoint Financial Corp. * ..................... 25,800 284
------
2,220
Business Services - 0.0%
Digital Insight Corp. * ........................ 1,200 22
Chemical - 1.2%
OM Group, Inc. ................................. 9,900 541
Spartech Corp. ................................. 13,900 286
------
827
Commercial Sevices - 2.8%
HeadHunter.NET, Inc. * ......................... 48,300 344
Korn/Ferry International * ..................... 8,000 170
NetCreations, Inc. * ........................... 39,000 267
Niku Corporation * ............................. 26,100 191
Official Payments Corp. * ...................... 30,700 211
Quanta Services, Inc. * ........................ 7,600 244
RPM, Inc. ...................................... 36,400 312
Steiner Leisure, Ltd. * ........................ 15,000 210
------
1,949
Computer Equipment - 0.2%
Network Engines, Inc. .......................... 8,200 35
UNOVA, Inc. * .................................. 26,000 94
------
129
Computer Software & Services - 9.8%
About.com, Inc. * .............................. 31,200 840
Agency.Com Inc. * .............................. 14,400 56
Ask Jeeves, Inc. * ............................. 26,800 65
Blue Martini Software, Inc. .................... 7,700 102
Broadbase Software, Inc. * ..................... 31,600 198
Cambridge Technology Partners, Inc. * .......... 65,900 173
Click Commerce, Inc. * ......................... 14,000 292
click2learn.com, Inc. * ........................ 31,900 311
CNET Networks, Inc. ............................ 6,600 105
Corio, Inc. .................................... 48,600 100
Digex, Inc. * .................................. 14,300 322
Extensity, Inc. * .............................. 20,700 125
Harris Interactive, Inc. * ..................... 31,900 118
Informax, Inc. * ............................... 18,800 195
Ixia * ......................................... 10,900 249
MatrixOne, Inc. * .............................. 14,200 258
MicroStrategy, Inc. * .......................... 28,400 270
Moldflow Corp. * ............................... 7,100 162
National Information Consortium, Inc. * ....... 61,800 95
OpenTV Corp. * ................................. 28,500 296
Otg Software, Inc. * ........................... 11,600 187
PC-Tel, Inc. * ................................. 26,900 289
Pixar, Inc. * .................................. 4,600 138
Resonate, Inc. * ............................... 6,000 57
Riverdeep Group plc - ADR * .................... 9,700 194
RSA Security, Inc. * ........................... 7,500 397
Saba Software, Inc. ............................ 10,900 172
Selectica, Inc. * .............................. 12,900 312
SignalSoft Corp. * ............................. 11,900 117
VIA NET.WORKS, Inc. * .......................... 46,400 177
Websense, Inc. * ............................... 14,200 206
Witness Systems, Inc. * ........................ 14,100 190
WorldGate Communications, Inc. * ............... 17,900 68
------
6,836
Consumer Miscellaneous - 1.8%
Libbey, Inc. ................................... 21,700 659
NetRatings, Inc. * ............................. 15,900 234
The Scotts Company - Cl A * .................... 10,800 399
------
1,292
Diversified Operations - 1.9%
Donaldson Co., Inc. ............................ 24,400 679
Ionics, Inc. * ................................. 16,100 457
WESCO International, Inc. * .................... 23,600 171
------
1,307
Electric Power - 0.7%
MDU Resources Group, Inc. ...................... 14,900 484
Electrical Equipment - 1.9%
Advanced Energy Industries, Inc. * ............. 29,400 661
Integrated Electrical Services, Inc. * ........ 29,500 175
Pentair, Inc. .................................. 21,700 525
------
1,361
Electronic Products & Services - 18.7%
American Superconductor Corporation * ......... 15,400 440
Anadigics, Inc. * .............................. 34,300 562
Anaren Micro Circuits, Inc. .................... 18,800 1,263
ASM International N.V. * ....................... 26,500 247
AUGUST TECHNOLOGY Corp. ........................ 17,900 232
BE SEMICONDUCTOR INDUSTRIES .................... 7,000 64
Cymer, Inc. * .................................. 27,200 700
DSP Group, Inc. * .............................. 12,000 253
DuPont Photomasks, Inc. * ...................... 4,600 243
Electro Scientific Industries, Inc. * .......... 24,900 697
Electroglas, Inc. * ............................ 38,800 594
154
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Electronic Products & Services - Continued
EMCORE Corporation * ........................... 27,000 $ 1,269
Exar, Corp. * .................................. 19,000 589
Helix Technology Corp. ......................... 25,900 613
LTX Corp. * .................................... 63,500 822
MedQuist, Inc. * ............................... 21,600 346
Microtune, Inc. * .............................. 6,600 109
Nanometrics, Inc. * ............................ 19,700 272
OmniVision Technologies, Inc. .................. 12,400 40
ON Semiconductor corporation * ................. 59,100 310
Parthus Technologies plc - ADR * ............... 7,200 189
Power Integrations, Inc. * ..................... 25,300 291
Rudolph Technologies, Inc. * ................... 10,900 329
Sawtek, Inc. * ................................. 7,700 356
Silicon Valley Group, Inc. * ................... 25,800 742
SpeedFAm-IPEC, Inc. * .......................... 53,700 325
Therma-Wave, Inc. * ............................ 33,200 465
Veeco Instruments Inc. * ....................... 7,800 313
Zoran Corp. * .................................. 14,400 223
Zygo Corporation * ............................. 8,600 243
------
13,141
Energy - Alternative Source - 0.9%
Proton Energy Systems, Inc. * .................. 9,500 100
Rayovac Corporation * .......................... 19,100 271
Valence Technology, Inc. * ..................... 25,000 233
------
604
Engineering & Construction - 0.4%
York International Corp. ....................... 9,500 291
Financial Services - 2.3%
American Capital Strategies, Ltd. .............. 30,600 771
AmeriCredit Corp. * ............................ 29,000 790
LendingTree, Inc. * ............................ 32,500 67
------
1,628
Food, Beverage & Tobacco - 2.4%
Corn Products International, Inc. .............. 19,700 573
Flowers Industries, Inc. ....................... 22,600 356
Suiza Foods Corp. * ............................ 15,400 739
------
1,668
Health Care Products - 9.3%
3 Dimensional Pharmaceuticals, Inc. * .......... 14,200 210
Aclara Biosciences Inc. * ...................... 14,200 154
Antigenics, Inc. * ............................. 22,800 252
Aviron * ....................................... 10,800 722
Charles River Laboratories * ................... 9,600 263
ChromaVision Medical Systems, Inc. * ........... 35,600 93
Diversa Corp. .................................. 17,200 308
Durect Corp. * ................................. 17,100 205
Exelixis, Inc. * ............................... 41,000 600
Genaissance Pharmaceuticals, Inc. * ............ 14,800 266
Gene Logic, Inc. * ............................. 19,700 362
Heska Corporation * ............................ 89,900 62
ILEX Oncology, Inc. * .......................... 19,600 516
Illumina, Inc. ................................. 14,000 225
Lexicon Genetics Incorporated * ................ 18,500 308
Tanox, Inc. * .................................. 11,400 447
Trimeris, Inc. * ............................... 14,800 812
Vical Incorporated * ........................... 23,900 442
ViroPharma Incorporated * ...................... 14,700 213
------
6,460
Health Care Services - 1.7%
Kendle International, Inc. * ................... 24,200 240
LifePoint Hospitals, Inc. * .................... 12,000 602
Orthodontic Centers of America, Inc. * ........ 10,500 328
------
1,170
Insurance - 4.5%
Everest Re Group, Ltd. ......................... 17,100 1,225
Fidelity National Financial, Inc. .............. 29,800 1,101
First American Financial Corp. ................. 24,100 792
Zenith National Insurance Corp. ................ 400 12
------
3,130
Leisure & Recreation - 5.3%
Championship Auto Racing Teams, Inc. * ........ 14,500 304
Cheap Tickets, Inc. * .......................... 40,300 393
Hotel Reservations Network, Inc. - Cl. A * ..... 5,700 162
International Speedway Corp. - Cl. A ........... 11,200 426
Polaris Industries Inc. ........................ 29,500 1,173
Speedway Motorsports, Inc. * ................... 27,700 665
World Wrestling Federation Entertainment,
Inc ....................................... 33,100 529
------
3,652
Machinery - 0.5%
Columbus McKinnon Corp. ........................ 25,200 224
SonoSite, Inc. * ............................... 7,600 97
------
321
Media - Publishing - 1.1%
Banta Corporation .............................. 15,200 386
Radio One, Inc. - Cl. D * ...................... 34,900 384
------
770
Media - TV / Radio - 5.7%
24/7 Media, Inc. ............................... 41,000 22
ACTV, Inc. * ................................... 27,700 118
BHC Communications, Inc. - Cl. A * ............. 2,000 258
Citadel Communications Corp. * ................. 32,000 384
Crown Media Holdings , Inc. .................... 27,500 559
Entercom Communications Corp. * ................ 7,200 248
Entravision Communications - Cl. A * ........... 20,000 367
Insight Communications Company, Inc. * ........ 25,800 606
Martha Stewart Living Omnimedia, Inc. -
Cl. A * ................................... 16,000 321
Mediacom Communications Corp. * ............... 22,800 392
155
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Media - TV / Radio - Continued
Sirius Satellite Radio Inc. * ................. 14,600 $ 437
Tivo, Inc. * .................................. 17,000 91
Westwood One, Inc. * .......................... 9,000 174
------
3,977
Metals & Mining - 0.4%
Kaiser Aluminum Corporation ................... 78,100 288
Natural Gas Distribution - 2.4%
Energen Corp. ................................. 14,600 470
Midcoast Energy Resources, Inc. ............... 3,900 85
New Jersey Resources Corporation .............. 9,800 424
WGL Holdings , Inc. ........................... 24,000 730
------
1,709
Oil - Equipment & Service - 0.9%
Hydril Co. * .................................. 10,000 176
SEACOR SMIT, Inc. ............................. 9,200 484
------
660
Paper & Forest Products - 0.2%
Caraustar Industries, Inc. .................... 18,100 170
Real Estate Development - 0.5%
Trammell Crow Company * ....................... 25,400 343
Real Estate Investment Trust - 0.4%
MeriStar Hospitality Corp. .................... 12,400 244
Real Estate Operations - 1.2%
CB Richard Ellis Services, Inc. * ............. 27,200 398
Insignia Financial Group, Inc. * .............. 39,700 471
------
869
Retail - Department Stores - 2.9%
American Eagle Outfitters, Inc. * ............. 11,700 494
Dollar Thrifty Automotive Group, Inc. * ....... 15,700 294
Dollar Tree Stores, Inc. * .................... 18,500 453
Factory 2-U Stores Inc. * ..................... 14,900 494
Williams-Sonoma, Inc. ......................... 14,300 286
------
2,021
Retail - Food - 1.2%
Buca, Inc. * .................................. 20,300 298
Ruby Tuesday, Inc. ............................ 33,700 514
------
812
Shoe & Apparel Manufacturing - 1.6%
Kellwood Co. .................................. 20,900 442
Novel Denim Holdings Limited * ................ 16,000 140
Stride Rite Corp. ............................. 39,300 275
Tommy Hilfiger Corp. * ........................ 25,500 250
------
1,107
Steel - 0.4%
Remec, Inc. * ................................. 30,600 294
Telecommunication Equipment - 1.1%
Advanced Fibre Communications, Inc. * ........ 6,700 121
Advanced Switching Communications, Inc. * ..... 16,200 79
Carrier Access Corp. .......................... 39,900 359
Superior Telecom, Inc. ........................ 43,500 84
WebEx Communications, Inc. * .................. 7,500 157
------
800
Telecommunication Services - 1.7%
Allied Riser Communications Corp. * ........... 74,400 151
Aspect Communications Corp. * ................. 46,400 373
Focal Communications Corp. * .................. 30,900 216
Intermedia Communications, Inc. * ............. 19,000 137
interWave Communications Int., Ltd. * ........ 46,900 73
OmniSky Corp. * ............................... 30,900 257
------
1,207
Transportation Services - 3.4%
Alaska Air Group, Inc. * ...................... 10,900 324
America West Holdings Corp. - Cl. B * ........ 22,400 287
Landstar Systems, Inc. ........................ 9,700 538
USFreightways Corp. ........................... 10,700 322
Werner Enterprises, Inc. ...................... 56,000 952
------
2,423
------
TOTAL COMMON STOCK- ................................ 96.3% 67,459
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 4.6%
Investment in joint trading account (Note B)
6.695% due 01/02/01 ...................... $ 3,191 3,191
--------- ------
TOTAL INVESTMENTS- 100.9% 70,650
Payables, less cash and receivables- (0.9)% (619)
--------- ------
NET ASSETS- 100.0% 70,031
========= ======
* Non-income producing security.
ADR-American Depository Receipt
See notes to financial statements.
156
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Australia - 0.8%
Brambles Industries, Ltd. (DIOP) .............. 13,553 $ 317
Publishing & Broadcasting, Ltd. (MEDP) ........ 48,083 349
Telstra Corp., Ltd. (TELS) .................... 89,907 321
------
987
Belgium - 0.8%
Dexia (BANK) .................................. 2,078 376
Fortis (B) (INSU) ............................. 16,540 537
UCB SA (HEAL) ................................. 1,180 44
------
957
Bermuda - 0.1%
Dao Heng Bank Group, Ltd. (BANK) ............. 17,000 97
Brazil - 0.7%
Petroleo Brasileiro SA * (OILX) ............... 7,000 177
Telecomunicacoes Brasileiras SA - ADR
(UTIT) ........................................ 7,014 511
Unibanco - Uniao de Bancos Brasileiros SA
- GDR (BANK) .................................. 4,985 147
------
835
Canada - 1.2%
Alcan Aluminum, Ltd. (META) ................... 9,632 330
Celestica, Inc. * (COMM) ...................... 12,952 702
Nortel Networks Corp. (TELE) .................. 6,833 220
Royal Bank of Canada (BANK) ................... 5,280 179
------
1,431
Denmark - 0.0%
Tele Danmark AS (TELS) ........................ 1,530 62
Finland - 2.4%
Nokia Oyj (HEAL) .............................. 66,035 2,945
France - 13.3%
Alcatel (TELE) ................................ 18,930 1,075
Altran Technologies, Inc. SA (AERO) .......... 950 215
Aventis SA * (HEAL) ........................... 2,706 236
AXA SA (INSU) ................................. 11,455 1,657
Banque Nationale de Paris (BANK) .............. 15,370 1,349
Bouygues SA (CONT) ............................ 4,390 199
Canal Plus (MEDI) ............................. 643 2
Cap Gemini SA (COMM) .......................... 2,050 331
Compagnie de St. Gobain (CONS) ................ 3,400 534
Groupe Danone (FOOD) .......................... 930 140
Hermes International (RETS) ................... 1,430 203
L'Oreal SA (HNBA) ............................. 2,030 174
Lafarge SA (CONS) ............................. 606 51
Legrand SA (ELEQ) ............................. 2,464 498
Louis Vuitton Moet Hennessy (FOOD) ............ 1,910 126
Rhone-Poulenc SA (BANK) ....................... 19,509 1,713
Sanofi-Synthelabo SA * (HEAL) ................. 16,518 1,101
Schneider SA (MACH) ........................... 2,621 191
Societe Generale - Cl. A (BANK) ............... 3,882 241
Societe Television Francaise 1 (MEDI) ......... 16,520 892
Sodexho Alliance SA (LEIS) .................... 784 145
STMICROELECTRONICS (ETRN) .................... 11,303 494
Total Fina SA - Cl. B (OILX) .................. 17,158 2,552
Vivendi Universal SA (DIOP) ................... 28,343 1,866
------
15,985
Germany - 4.0%
Allianz AG - Reg. (INSU) ...................... 2,315 866
Bayer AG (CHEM) ............................... 4,705 247
Bayerische Vereinsbank AG (BANK) .............. 12,991 736
Deutsche Bank AG (BANK) ....................... 13,634 1,146
Deutsche Telekom AG (UTIT) .................... 2,945 89
E.On AG (DIOP) ................................ 9,935 605
Gehe AG (HEAL) ................................ 7,078 267
Rhoen-Klinikum AG (HEAL) ...................... 1,720 97
SAP AG (SOFT) ................................. 5,000 581
Siemens AG (DIOP) ............................. 1,318 172
------
4,806
Hong Kong - 2.2%
Cheung Kong (Holdings), Ltd. (READ) .......... 52,000 665
China Telecom (Hong Kong), Ltd. (TELS) ........ 151,000 825
Henderson Land Development Co., Ltd. (READ).... 21,000 107
Hutchison Whampoa, Ltd. (COMM) ............... 67,900 846
Pacific Century Cyberworks, Ltd. * (TELE) ..... 263,914 169
------
2,612
India - 0.7%
Global Tele-Systems, Ltd. (TELE) .............. 14,000 240
Hindustan Lever Ltd. (CNSU) ................... 72,000 318
ICICI, Ltd. (FINL) ............................ 71,484 259
------
817
Ireland - 0.2%
SmartForce Public Limited Co. - ADR (SOFT) .... 6,166 232
Italy - 6.0%
Alleanza Assicurazioni (INSU) ................. 43,000 685
Assicurazioni Generali (INSU) ................. 8,400 334
Banca Intesa SpA (BANK) ....................... 353,353 1,699
Bipop-Carire SpA (BANK) ....................... 51,000 333
ENI SpA (OILS) ................................ 128,784 822
Mediaset SpA (MEDI) ........................... 10,000 119
Mediolanum SpA (INSU) ......................... 28,655 365
Olivetti SpA (COMM) ........................... 182,496 436
San Paolo-IMI SpA (BANK) ...................... 4,858 79
Tecnost SpA (COMP) ............................ 73,800 196
Telecom Italia Mobile SpA (TELS) .............. 111,000 886
Telecom Italia SpA (TELS) ..................... 29,900 331
UniCredito Italiano SpA (BANK) ............... 180,393 943
------
7,228
157
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Japan - 16.5%
Canon, Inc. (COMM) ............................ 42,000 $ 1,469
DDI Corp. (UTIT) .............................. 19 92
East Japan Railway Co. (TRAN) ................. 31 182
Fanuc, Ltd. (ELEQ) ............................ 6,000 408
Fuji Television Network, Inc. (MEDI) .......... 42 292
Fujitsu, Ltd. (ELEQ) .......................... 20,000 295
Furukawa Electric Co. (TELE) .................. 15,000 262
Hitachi, Ltd. (ETRN) .......................... 16,000 142
Ito-Yokado Co., Ltd. (RETS) ................... 4,000 199
KAO Corp. (HNBA) .............................. 9,000 261
Kokuyo Co. (COMM) ............................. 8,000 119
Kyocera Corp. (ETRN) .......................... 9,200 1,003
Makita Corp. (CNSU) ........................... 10,000 70
Marui Co., Ltd. (RETS) ........................ 30,000 453
Matsushita Communication Industries (TELS) .... 2,500 314
Matsushita Electric Industrial Co. (ETRN) ..... 43,000 1,027
Mitsui Fudosan Co., Ltd. (REAL) ............... 83,000 824
Mizuho Holdings, Inc. * (FINL) ................ 159 985
Murata Manufacturing Co., Ltd. (ETRN) ......... 10,100 1,184
NEC Corp. (COMP) .............................. 63,000 1,152
Nippon Telegraph & Telephone Corp. (UTIT) ..... 139 1,001
Nomura Securities Co., Ltd. (FUND) ........... 50,000 899
NTT Mobile Communications Network, Inc. (TELS). 32 551
Sankyo Co., Ltd. (HEAL) ....................... 16,000 383
Seven-Eleven Japan (RETF) ..................... 9,000 512
Shin-Etsu Chemical Co. (CHEM) ................. 10,000 385
Shiseido Co., Ltd. (CHEM) ..................... 18,000 201
Softbank Corp. (SOFT) ......................... 700 24
Sony Corp. (ETRN) ............................. 25,500 1,762
Sumitomo Bank (BANK) .......................... 75,000 770
Sumitomo Corp. (DIOP) ......................... 36,000 259
TDK Corp. (COMP) .............................. 3,700 360
Tokyo Electric Power (UTIE) ................... 100 2
Tokyo Electron, Ltd. (ETRN) ................... 6,200 341
Toshiba Corp. (ETRN) .......................... 120,000 802
Toyota Motor Corp. (AUTO) ..................... 100 3
Yamanouchi Pharmaceutical Co., Ltd. (HEAL) .... 19,000 821
------
19,809
Luxembourg - 0.1%
Society Europeenne des Satellites (MEDI) ...... 567 85
Mexico - 1.7%
Fomento Economico Mexicano SA de CV (FOOD) .... 103,000 307
Grupo Iusacell SA de CV - ADR V * (TELS) ...... 9,000 88
Grupo Televisa SA - GDR * (MEDI) ............. 21,407 962
Telefonos de Mexico SA - ADR (UTIT) .......... 15,580 703
------
2,060
Netherlands - 6.9%
ABN Amro Holding NV (BANK) .................... 5,076 115
Akzo Nobel NV (CHEM) .......................... 1,390 75
ASM Lithography Holding NV (COMP) ............. 24,180 549
Elsevier NV (MEDP) ............................ 13,140 193
Equant (COMP) ................................. 1,905 50
Fortis (NL) NV (INSU) ......................... 21,010 683
ING Groep NV (BANK) ........................... 26,500 2,117
Koninklije KPN NV (TELS) ...................... 2,821 32
Koninklijke (Royal) Philips Electronics NV
(ETRN) ....................................... 40,739 1,493
Royal Dutch Petroleum Co. (OILE) .............. 16,580 1,016
United Pan Europe (TELS) ...................... 2,446 25
VNU NV (MEDP) ................................. 30,790 1,514
Wolters Kluwer NV - CVA (MEDP) ................ 15,605 425
------
8,287
Norway - 0.3%
Orkla ASA (DIOP) .............................. 15,750 312
Portugal - 0.3%
Jeronimo Martins, SGPS, SA (RETF) ............. 7,183 74
Portugal Telecom, SA (TELS) ................... 29,560 271
------
345
Singapore - 0.7%
DBS Group Holdings, Ltd. (BANK) ............... 11,000 124
Singapore Telecommunications, Ltd. (TELS) ..... 83,000 129
United Overseas Bank, Ltd. (BANK) ............ 84,072 631
------
884
South Korea - 0.7%
Korea Telecom Corp. - ADR * (TELS) ............ 10,600 329
Pohang Iron & Steel Co., Ltd. - ADR (STEE) .... 7,053 110
Samsung Electronics (ETRN) .................... 3,180 397
------
836
Spain - 2.9%
Banco Bilbao Vizcaya SA (BANK) ................ 65,010 968
Banco Santander Central Hispano SA (BANK) ..... 76,399 818
Endesa SA (UTIE) .............................. 34,398 586
Repsol SA (OILX) .............................. 21,512 344
Telefonica SA (UTIT) .......................... 38,156 790
------
3,506
Sweden - 3.6%
Atlas Copco AB (MACH) ......................... 2,930 61
Electrolux AB - Ser. B (APPL) ................. 11,910 155
Hennes & Mauritz AB - B Shares (RETS) ......... 23,220 359
Nordic Baltic Holding AB (BANK) ............... 128,620 974
SANDVIK AB (MACH) ............................. 3,220 78
Securitas AB - B Shares (COMM) ................ 62,328 1,156
158
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Sweden - Continued
Telefonaktiebolaget LM Ericsson AB *
(TELS) ................................... 130,750 $ 1,489
-------
4,272
Switzerland - 4.5%
ABB, Ltd. (ENGI) .............................. 6,237 665
Adecco SA - Reg. (COMM) ....................... 865 544
Credit Suisse Group - Reg. (BANK) ............. 2,950 560
Nestle SA (FOOD) .............................. 746 1,740
Roche Holding AG (HEAL) ....................... 55 560
UBS AG (BANK) ................................. 7,922 1,293
-------
5,362
Taiwan - 0.4%
Taiwan Semiconductor (ETRN) ................... 183,000 439
United Kingdom - 23.9%
Abbey National First Capital BV (BANK) ........ 11,000 200
AstraZeneca Group plc (HEAL) .................. 25,701 1,297
Autonomy Corporation plc * (SOFT) ............ 1,500 43
Baltimore Technologies plc * (COMP) .......... 3,000 15
BG Group plc (UTIG) ........................... 13,522 53
BP Amoco plc (OILE) ........................... 68,000 549
British Telecommunications plc (TELS) ........ 41,000 351
Cable & Wireless plc (TELS) ................... 112,095 1,514
Cadbury Schweppes plc (FOOD) .................. 54,200 375
Celltech Group plc * (HEAL) ................... 19,000 336
Centrica plc * (UTIG) ......................... 30,900 120
David S. Smith Holdings plc (PAPR) ........... 18,000 45
Diageo plc (FOOD) ............................. 84,512 948
Dimension Data Holdings plc (SOFT) ........... 12,500 84
Electrocomponents plc (ETRN) .................. 16,000 158
GKN plc (AUTO) ................................ 5,000 53
GlaxoSmithKline plc * (HEAL) .................. 146,982 4,154
Granada Compass plc (LEIS) .................... 163,730 1,784
Granada Media plc (MEDI) ...................... 9,797 62
Hays plc (DIOP) ............................... 69,200 399
Hilton Group plc (LEIS) ....................... 20,000 63
HSBC Holdings plc (BANK) ...................... 28,800 428
Kingfisher plc (RETS) ......................... 53,000 394
Lattice Group * (ETRN) ........................ 13,522 31
Marconi plc (TELE) ............................ 57,600 619
Reckitt Benckiser plc (HNBA) .................. 2,000 28
Reed International plc (MEDP) ................. 196,000 2,052
Rio Tinto plc - Reg. (DIOP) ................... 49,381 870
Royal Bank of Scotland Group (BANK) .......... 144,570 3,420
Shell Transport & Trading Co. plc (OILX) ...... 268,934 2,208
Standard Chartered (BANK) ..................... 47,000 678
Tesco plc (FOOD) .............................. 125,400 511
Tomkins plc (DIOP) ............................ 132,496 291
Unilever plc (CNSU) ........................... 54,928 471
United News & Media plc (MEDP) ............... 18,500 235
Vodafone AirTouch plc (TELS) .................. 735,404 2,700
United Kingdom - Continued
WPP Group plc (COMM) .......................... 89,000 1,160
-------
28,699
United States - 0.2%
Flextronics International Ltd. (ETRN) ........ 7,800 222
-------
TOTAL COMMON STOCK- 95.1% 114,112
PREFERRED STOCK
Australia - 0.5%
News Corp., Ltd. (MEDI) ....................... 84,247 600
Brazil - 0.5%
Petroleo Brasileiro SA - Petrobras (OILS) ..... 27,192 638
-------
TOTAL PREFERRED STOCK- 1.0% 1,238
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 3.3%
Investment in joint trading account (Note B)
6.695% due 01/02/01 ......................... $2,229 2,229
Euro Time Deposit
4.6% due 01/02/01 ........................... 1,800 1,690
------ -------
TOTAL SHORT-TERM INVESTMENTS- 4,029 3,919
------ -------
TOTAL INVESTMENTS- 99.4% 119,269
Cash and Receivables, less payables- 0.6% 765
------ -------
NET ASSETS- 100.0% 120,034
====== =======
* Non-income producing security.
ADR - American Depository Receipts
GDR - Global Depository Receipts
See notes to financial statements.
159
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
UMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Bank ....................................... BANK 22,134 19.2%
Health Care Products ....................... HEAL 12,242 10.6%
Telecommunication Services ................. TELS 10,456 9.1%
Electronic Products & Services ............. ETRN 9,495 8.2%
Commercial Sevices ......................... COMM 6,765 5.9%
Oil & Natural Gas Exploration &
Production ............................. OILX 5,280 4.6%
Insurance .................................. INSU 5,127 4.4%
Diversified Operations ..................... DIOP 5,090 4.4%
Media - Publishing ......................... MEDP 4,767 4.1%
Food, Beverage & Tobacco ................... FOOD 4,148 3.6%
Media - TV / Radio ......................... MEDI 3,015 2.6%
Telephone .................................. UTIT 2,947 2.6%
Telecommunication Equipment ................ TELE 2,586 2.2%
Computer Equipment ......................... COMP 2,322 2.0%
Leisure & Recreation ....................... LEIS 1,991 1.7%
Retail - Department Stores ................. RETS 1,608 1.4%
Oil - Equipment & Service .................. OILE 1,565 1.4%
Oil ........................................ OILS 1,461 1.3%
Financial Services ......................... FINL 1,243 1.1%
Electrical Equipment ....................... ELEQ 1,200 1.0%
Computer Software & Services ............... SOFT 965 0.8%
Chemical ................................... CHEM 907 0.8%
Brokerage & Investment
Management ............................. FUND 899 0.8%
Consumer Miscellaneous ..................... CNSU 859 0.7%
Real Estate Operations ..................... REAL 824 0.7%
Real Estate Development .................... READ 772 0.7%
Engineering & Construction ................. ENGI 665 0.6%
Electric Power ............................. UTIE 589 0.5%
Retail - Food .............................. RETF 586 0.5%
Construction ............................... CONS 585 0.5%
Cosmetic & Personal Care ................... HNBA 463 0.4%
Machinery .................................. MACH 330 0.3%
Metals & Mining ............................ META 330 0.3%
Aerospace & Defense ........................ AERO 215 0.2%
Container .................................. CONT 199 0.2%
Transportation Services .................... TRAN 182 0.2%
Natural Gas Distribution ................... UTIG 173 0.2%
Household Appliances /
Furnishings ............................ APPL 154 0.1%
Steel ...................................... STEE 110 0.1%
Automobile ................................. AUTO 56 0.0%
Paper & Forest Products .................... PAPR 45 0.0%
-------- -------
$115,350 100.0%
======== ======
160
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 1.5%
Boeing Co. .................................... 38,468 $ 2,539
General Dynamics Corp. ........................ 8,600 671
Honeywell International, Inc. ................. 34,262 1,621
Lockheed Martin Corp. ......................... 18,400 625
Northrop Grumman Corp. ........................ 3,000 249
Raytheon Co. - Cl. B .......................... 14,600 453
United Technologies Corp. ..................... 20,200 1,588
--------
7,746
Auto & Truck Parts - 0.5%
AutoZone, Inc. * .............................. 5,800 165
B.F. Goodrich Co. ............................. 4,500 164
Cooper Tire & Rubber Co. ...................... 3,200 34
Cummins Engine Company, Inc. .................. 1,700 64
Dana Corp. .................................... 6,515 100
General Motors Corp. .......................... 24,400 1,243
Genuine Parts Co. ............................. 7,550 198
Goodyear Tire & Rubber Co. .................... 6,700 154
Johnson Controls, Inc. ........................ 3,700 192
Navistar International Corp., Inc. - Cl. B .... 2,700 71
PACCAR, Inc. .................................. 3,300 163
TRW, Inc. ..................................... 5,200 201
Visteon Corp. * ............................... 6,166 71
--------
2,820
Automobile - 0.4%
Delphi Automotive Systems Corp. ............... 24,169 272
Ford Motor Co. ................................ 81,136 1,901
--------
2,173
Bank - 5.3%
AmSouth Bancorporation ........................ 16,900 258
Bank of America Corp. ......................... 70,368 3,228
Bank of New York Co., Inc. .................... 31,700 1,749
Bank One Corp. ................................ 49,650 1,818
BB&T Corporation .............................. 17,200 642
Charter One Financial, Inc. ................... 9,450 273
Comerica, Inc. ................................ 6,700 398
Fifth Third Bancorp ........................... 20,225 1,208
First Union Corp. ............................. 42,846 1,192
Firstar Corp. ................................. 41,064 955
FleetBoston Financial Corp. ................... 38,870 1,460
Golden West Financial Corp. ................... 6,800 459
Huntington Bancshares, Inc. ................... 10,431 169
J.P. Morgan & Co., Inc. ....................... 7,000 1,159
KeyCorp ....................................... 18,700 524
National City Corp. ........................... 25,700 739
Northern Trust Corp. .......................... 9,700 791
Old Kent Financial Corp. ...................... 5,850 256
PNC Bank Corp. ................................ 12,300 899
Regions Financial Corp. ....................... 9,500 259
SouthTrust Corp. .............................. 7,200 293
State Street Corp. ............................ 7,000 870
Summit Bancorp ................................ 7,500 286
Suntrust Banks, Inc. .......................... 13,000 819
Synovus Financial Corp. ....................... 11,650 314
U.S. Bancorp .................................. 32,218 940
Union Planters Corp. .......................... 5,800 207
Wachovia Corp. ................................ 9,000 523
Washington Mutual, Inc. ....................... 23,418 1,243
Wells Fargo & Co. ............................. 73,900 4,115
--------
28,046
Brokerage & Investment Management - 1.3%
Bear Stearns Cos., Inc. ....................... 4,632 235
Franklin Resources, Inc. ...................... 10,400 396
Merrill Lynch & Co., Inc. ..................... 35,000 2,387
Morgan Stanley, Dean Witter, Discover &
Co. ......................................... 48,600 3,851
T. Rowe Price Group, Inc. ..................... 5,200 220
--------
7,089
Business Services - 0.4%
Automatic Data Processing, Inc. ............... 26,900 1,703
H & R Block, Inc. ............................. 4,200 174
Robert Half International, Inc. ............... 7,800 207
--------
2,084
Chemical - 1.0%
Air Products & Chemicals, Inc. ................ 9,800 402
Ashland, Inc. ................................. 3,000 108
Dow Chemical Co. .............................. 29,500 1,080
E.I. du Pont de Nemours & Co. ................. 44,782 2,163
Eastman Chemical Co. .......................... 3,300 161
Engelhard Corp. ............................... 5,300 108
Great Lakes Chemical Corp. .................... 2,300 86
Hercules, Inc. ................................ 4,600 88
Praxair, Inc. ................................. 6,700 297
Rohm & Haas Co. ............................... 9,327 339
Sigma-Aldrich Corp. ........................... 3,700 145
Union Carbide Corp. ........................... 5,800 312
--------
5,289
Commercial Services - 0.5%
American Greetings Corp. - Cl. A .............. 2,800 27
Convergys Corp. * ............................. 6,600 299
Deluxe Corp. .................................. 3,100 78
Ecolab, Inc. .................................. 5,600 242
Equifax, Inc. ................................. 6,100 175
Interpublic Group Cos., Inc. .................. 13,800 587
Omnicom Group, Inc. ........................... 7,900 655
Power One, Inc. * ............................. 3,300 130
Quintiles Transnational Corp. * ............... 4,600 96
R.R. Donnelley & Sons Co. ..................... 5,200 140
The Dun & Bradstreet Corp. * .................. 6,900 177
--------
2,606
Computer Equipment - 4.9%
Apple Computer, Inc. * ........................ 14,600 217
161
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Computer Equipment - Continued
Compaq Computer Corp. ......................... 72,511 $ 1,091
Comverse Technology, Inc. * ................... 7,100 771
Dell Computer Corp. * ......................... 112,600 1,964
Gateway, Inc. * ............................... 13,300 239
Hewlett-Packard Co. ........................... 85,500 2,699
Intel Corp. ................................... 290,300 8,727
International Business Machines Corp. ......... 75,900 6,452
Lexmark International Group, Inc. -
Cl. A * ..................................... 5,500 244
Network Appliance, Inc. * ..................... 13,600 873
Palm, Inc. .................................... 24,561 695
VERITAS Software Corp. * ...................... 16,900 1,479
Xerox Corp. ................................... 28,600 132
--------
25,583
Computer Software & Services - 7.5%
Adobe Systems, Inc. ........................... 10,400 605
America Online, Inc. * ........................ 100,300 3,490
Autodesk, Inc. ................................ 2,400 65
BMC Software, Inc. * .......................... 10,500 147
BroadVision, Inc. * ........................... 11,100 131
Cabletron Systems, Inc. * ..................... 7,800 117
Ceridian Corp. * .............................. 6,000 120
Citrix Systems, Inc. * ........................ 7,900 178
Computer Associates International, Inc......... 25,125 490
Computer Sciences Corp. * ..................... 7,100 427
Compuware Corp. * ............................. 15,500 97
Electronic Data Systems Corp. ................. 20,300 1,172
EMC Corp. * ................................... 94,312 6,272
First Data Corp. .............................. 17,100 901
IMS Health, Inc. .............................. 12,800 346
Intuit, Inc. * ................................ 8,700 343
Mercury Interactive Corp. * ................... 3,600 325
Microsoft Corp. ............................... 230,600 10,002
NCR Corp. * ................................... 4,000 196
Novell, Inc. * ................................ 14,100 74
Oracle Corp. * ................................ 242,100 7,036
Parametric Technology Corp. * ................. 11,800 158
Peoplesoft, Inc. .............................. 11,800 439
Sapient Corp. ................................. 5,000 60
Siebel Systems, Inc. * ........................ 18,200 1,231
Sun Microsystems, Inc. * ...................... 137,800 3,841
Unisys Corp. * ................................ 13,400 196
Yahoo!, Inc. * ................................ 23,600 712
--------
39,171
Construction - 0.0%
Vulcan Materials Co. .......................... 4,300 206
Consumer Miscellaneous - 0.7%
Avery Dennison Corp. .......................... 4,800 263
Black & Decker Corp. .......................... 3,500 137
Briggs & Stratton Corp. ....................... 800 35
Clorox Co. .................................... 10,100 359
Fortune Brands, Inc. .......................... 6,600 198
Newell Rubbermaid, Inc. ....................... 11,416 260
Parker-Hannifin Corp. ......................... 4,850 214
Sherwin-Williams Co. .......................... 7,000 184
Snap-On, Inc. ................................. 2,500 70
Stanley Works ................................. 3,800 119
Tupperware Corp. .............................. 2,500 51
Unilever NV - NY Shares ....................... 24,682 1,553
--------
3,443
Container - 0.1%
Bemis Co., Inc. ............................... 2,400 81
Pactiv Corp. * ................................ 7,400 92
Sealed Air Corp. * ............................ 3,589 109
--------
282
Cosmetic & Personal Care - 1.6%
Alberto-Culver Co. - Cl. B .................... 2,200 94
Avon Products, Inc. ........................... 10,200 488
Colgate-Palmolive Co. ......................... 24,700 1,595
Gillette Co. .................................. 45,300 1,637
International Flavors & Fragrances, Inc. ...... 4,400 89
Procter & Gamble Co. .......................... 56,400 4,424
--------
8,327
Diversified Operations - 6.8%
Amgen, Inc. * ................................. 44,400 2,839
Cendant Corp. * ............................... 30,899 297
Cooper Industries, Inc. ....................... 4,000 184
Corning, Inc. ................................. 39,800 2,102
Crane Co. ..................................... 2,950 84
Danaher Corp. ................................. 6,100 417
Eaton Corp. ................................... 3,100 233
El Paso Energy Corp. .......................... 10,200 731
General Electric Co. .......................... 428,500 20,541
Illinois Tool Works, Inc. ..................... 12,800 762
ITT Industries, Inc. .......................... 3,700 143
Minnesota Mining & Manufacturing Co. .......... 17,000 2,049
National Service Industries, Inc. ............. 1,700 44
Pall Corp. .................................... 5,300 113
PPG Industries, Inc. .......................... 7,500 347
Textron, Inc. ................................. 6,200 288
Tyco International, Ltd. ...................... 75,673 4,200
W.W. Grainger, Inc. ........................... 4,000 146
--------
35,520
Electric Power - 2.5%
AES Corp. * ................................... 19,800 1,096
Allegheny Energy, Inc. ........................ 4,700 227
Ameren Corp. .................................. 5,900 273
American Electric Power Co. ................... 14,360 668
Calpine Corp. * ............................... 11,700 527
Cinergy Corp. ................................. 6,800 239
CMS Energy Corp. .............................. 4,700 149
Consolidated Edison, Inc. ..................... 9,100 350
162
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Electric Power - Continued
Constellation Energy Group .................... 6,400 $ 288
Dominion Resources, Inc. ...................... 10,494 703
DTE Energy Co. ................................ 6,100 238
Duke Energy Co. ............................... 15,844 1,351
Edison International .......................... 14,300 223
Entergy Corp. ................................. 9,900 419
Exelon Corp. .................................. 13,950 979
Firstenergy Corp. ............................. 9,900 313
Fluor Corp. * ................................. 3,300 109
FPL Group, Inc. ............................... 7,900 567
GPU, Inc. ..................................... 5,200 191
Niagara Mohawk Holdings, Inc. ................. 7,800 130
NiSource, Inc. ................................ 9,149 281
PG & E Corp. .................................. 16,500 330
Pinnacle West Capital Corp. ................... 3,600 172
PPL Corp. ..................................... 6,200 280
Progress Energy, Inc. ......................... 8,857 436
Public Services Enterprise Group, Inc. ........ 9,300 452
Reliant Energy, Inc. .......................... 12,724 551
Southern Co. .................................. 28,600 951
Xcel Energy, Inc. ............................. 14,450 420
--------
12,913
Electrical Equipment - 0.4%
American Power Conversion ..................... 8,300 103
Emerson Electric Co. .......................... 18,400 1,450
Molex, Inc. ................................... 8,450 300
TXU Corp. ..................................... 11,312 501
--------
2,354
Electronic Products & Services - 5.7%
Adaptec, Inc. * ............................... 4,500 46
Advanced Micro Devices, Inc. * ................ 13,200 182
Agilent Technologies, Inc. * .................. 19,674 1,077
Altera Corp. * ................................ 17,700 466
Analog Devices, Inc. * ........................ 15,700 804
Applied Materials, Inc. * ..................... 34,700 1,325
Ball Corp. .................................... 1,400 64
Broadcom Corp. - Cl. A * ...................... 10,200 857
Cisco Systems, Inc. * ......................... 311,300 11,907
Conexant Systems, Inc. * ...................... 10,500 161
KLA-Tencor Corp. * ............................ 8,000 270
Linear Technology Corp. ....................... 13,200 610
LSI Logic Corp. * ............................. 14,100 241
Maxim Integrated Products, Inc. * ............. 12,400 593
Micron Technology, Inc. * ..................... 24,600 873
Millipore Corp. ............................... 1,900 120
Motorola, Inc. ................................ 94,995 1,924
National Semiconductor Corp. * ................ 7,600 153
Novellus Systems, Inc. * ...................... 5,600 201
PerkinElmer, Inc. ............................. 2,100 221
Pitney Bowes, Inc. ............................ 11,100 368
QLogic Corp. * ................................ 4,000 308
Rockwell International Corp. * ................ 8,100 386
Sanmina Corp. * ............................... 6,400 490
Solectron Corp. * ............................. 27,700 939
Tektronix, Inc. ............................... 4,000 135
Teradyne, Inc. * .............................. 7,400 276
Texas Instruments, Inc. ....................... 75,100 3,558
Thomas & Betts Corp. .......................... 2,500 40
Vitesse Semiconductor Corp. * ................. 8,100 448
Xilinx, Inc. * ................................ 14,500 669
--------
29,712
Energy - Alternative Source - 0.1%
Dynegy, Inc. - Cl.A ........................... 13,700 768
Financial Services - 4.5%
American Express Co. .......................... 57,700 3,170
Charles Schwab Corp. .......................... 59,275 1,682
CIT Group, Inc. - Cl. A * ..................... 11,300 227
Citigroup, Inc. ............................... 217,390 11,100
Household International, Inc. ................. 20,666 1,137
Jersey Puerto Morgan Chase & Co. .............. 56,750 2,579
Lehman Brothers Holdings, Inc. ................ 10,300 696
Mellon Financial Corp. ........................ 21,400 1,053
Paychex, Inc. ................................. 16,150 785
Providian Financial Corp. * ................... 12,000 690
Stillwell Financial, Inc. ..................... 9,600 379
--------
23,498
Food, Beverage & Tobacco - 4.7%
Adolph Coors Co. - Cl. B ...................... 1,600 128
Anheuser-Busch Cos., Inc. ..................... 38,900 1,770
Archer-Daniels-Midland Co. .................... 27,166 407
Brown-Forman Corp. - Cl. B .................... 2,800 186
Campbell Soup Co. ............................. 18,100 627
Coca-Cola Co. ................................. 107,500 6,551
Coca-Cola Enterprises, Inc. ................... 18,000 342
ConAgra, Inc. ................................. 23,700 616
General Mills, Inc. ........................... 12,500 557
H.J. Heinz Co. ................................ 15,100 716
Hershey Foods Corp. ........................... 5,900 380
Kellogg Co. ................................... 17,400 457
PepsiCo, Inc. ................................. 62,600 3,103
Philip Morris Cos., Inc. ...................... 96,200 4,233
Quaker Oats Co. ............................... 5,600 545
Ralston-Ralston Purina Group .................. 13,000 340
Sara Lee Corp. ................................ 36,100 887
Starbucks Corp. * ............................. 7,900 350
SUPERVALU, Inc. ............................... 5,600 78
Sysco Corp. ................................... 29,200 876
Tricon Global Restaurants, Inc. * ............. 6,150 203
UST, Inc. ..................................... 7,000 196
Williams Cos., Inc. ........................... 19,600 783
Wm. Wrigley Jr. Co. ........................... 4,900 469
--------
24,800
163
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Health Care Products - 12.4%
Abbott Laboratories ........................... 66,900 $ 3,240
Allergan, Inc. ................................ 5,900 571
ALZA Corp. * .................................. 9,400 400
American Home Products Corp. .................. 56,300 3,578
Applera Corporation - Applied Biosystems
Group ....................................... 9,100 856
Bausch & Lomb, Inc. ........................... 2,200 89
Baxter International, Inc. .................... 12,700 1,122
Becton, Dickinson & Co. ....................... 10,700 370
Biomet, Inc. .................................. 7,650 304
Boston Scientific Corp. * ..................... 17,500 240
Bristol-Myers Squibb Co. ...................... 84,600 6,255
C.R. Bard, Inc. ............................... 2,200 102
Cardinal Health, Inc. ......................... 12,000 1,195
Chiron Corp. * ................................ 7,700 343
Eli Lilly & Co. ............................... 48,800 4,541
Forest Laboratories, Inc. * ................... 3,700 492
Guidant Corp. * ............................... 13,600 734
Johnson & Johnson ............................. 60,100 6,314
King Pharmaceuticals, Inc. * .................. 7,500 388
MedImmune, Inc. * ............................. 9,300 443
Medtronic, Inc. ............................... 52,000 3,139
Merck & Co., Inc. ............................. 99,500 9,316
Pfizer, Inc. .................................. 272,875 12,552
Pharmacia Corp. ............................... 55,805 3,404
Schering-Plough Corp. ......................... 63,200 3,587
Stryker Corp. ................................. 8,500 430
UnitedHealth Group, Inc. ...................... 14,000 859
Watson Pharmaceuticals, Inc. * ................ 4,800 246
--------
65,110
Health Care Services - 0.7%
Biogen, Inc. * ................................ 6,400 384
HCA-The Healthcare Corporation ................ 24,250 1,067
HEALTHSOUTH Corp. * ........................... 16,500 269
Humana, Inc. * ................................ 7,200 110
Manor Care, Inc. * ............................ 4,400 91
McKesson HBOC, Inc. ........................... 12,133 436
St. Jude Medical, Inc. * ...................... 3,600 221
Tenet Healthcare Corp. * ...................... 13,900 618
Wellpoint Health Networks, Inc. * ............. 2,700 311
--------
3,507
Household Appliances / Furnishings - 0.1%
Leggett & Platt, Inc. ......................... 8,400 159
Maytag Corp. .................................. 3,500 113
Whirlpool Corp. ............................... 3,100 148
--------
420
Housing - 0.1%
Centex Corp. .................................. 2,800 105
Kaufman & Broad Home Corp. .................... 2,100 71
Masco Corp. ................................... 19,100 490
Pulte Corp. ................................... 2,200 93
--------
759
Insurance - 4.3%
Aetna US Healthcare, Inc. * ................... 6,000 246
AFLAC, Inc. ................................... 11,700 845
Allstate Corp. ................................ 31,800 1,385
Ambac Financial Group, Inc. ................... 4,500 263
American General Corp. ........................ 11,121 906
American International Group, Inc. ............ 100,629 9,918
Aon Corp. ..................................... 11,000 377
Chubb Corp. ................................... 7,700 666
Cigna Corp. ................................... 6,600 873
Cincinnati Financial Corp. .................... 6,900 273
Conseco, Inc. ................................. 13,991 185
Hartford Financial Services Group, Inc. ....... 9,900 699
Jefferson-Pilot Corp. ......................... 4,450 333
Lincoln National Corp. ........................ 8,200 388
Loews Corp. ................................... 4,200 435
Marsh & McLennan Cos., Inc. ................... 11,700 1,369
MBIA, Inc. .................................... 4,200 311
Metlife, Inc. ................................. 33,100 1,159
MGIC Investment Corp. ......................... 4,500 304
Progressive Corp. ............................. 3,100 321
Safeco Corp. .................................. 5,300 174
St. Paul Cos., Inc. ........................... 9,414 511
Torchmark, Inc. ............................... 5,500 211
UnumProvident Corp. ........................... 10,320 277
--------
22,429
Leisure & Recreation - 0.6%
Brunswick Corp. ............................... 3,800 63
Carnival Corp. ................................ 25,900 798
Eastman Kodak Co. ............................. 13,300 524
Harrah's Entertainment, Inc. * ................ 5,200 137
Hasbro, Inc. .................................. 7,125 76
Hilton Hotels Corp. ........................... 15,800 166
Marriott International, Inc. - Cl. A .......... 10,300 435
Mattel, Inc. .................................. 18,300 264
SABRE Group Holdings, Inc. * .................. 5,574 240
Starwood Hotels & Resorts Worldwide, Inc. ..... 8,000 282
--------
2,985
Machinery - 0.4%
Caterpillar, Inc. ............................. 15,000 710
Deere & Co. ................................... 10,000 458
Dover Corp. ................................... 8,700 353
FMC Corp. * ................................... 1,400 100
Ingersoll-Rand Co. ............................ 6,900 289
McDermott International, Inc. ................. 2,100 23
Thermo Electron Corp. * ....................... 7,400 220
--------
2,153
164
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Media - Publishing - 0.4%
Dow Jones & Co., Inc. ......................... 3,800 $ 215
Gannett Co., Inc. ............................. 11,400 719
Knight-Ridder, Inc. ........................... 3,300 188
Meredith Corp. ................................ 2,200 71
New York Times Co. - Cl. A .................... 7,300 292
Tribune Co. ................................... 13,265 560
--------
2,045
Media - TV / Radio - 2.3%
Clear Channel Communications, Inc. * .......... 25,300 1,226
Comcast Corp. - Cl. A ......................... 39,000 1,628
McGraw-Hill Cos., Inc. ........................ 8,600 504
The Walt Disney Co. ........................... 90,500 2,619
Time Warner, Inc. ............................. 57,500 3,004
Viacom, Inc. - Cl. B * ........................ 65,462 3,060
--------
12,041
Metal Production & Fabrication - 0.0%
Timken Co. .................................... 2,900 44
Worthington Industries, Inc. .................. 3,700 30
--------
74
Metals & Mining - 0.4%
Alcan Aluminum, Ltd. .......................... 14,000 479
Alcoa, Inc. ................................... 37,588 1,259
Inco, Ltd. .................................... 7,300 122
Phelps Dodge Corp. ............................ 3,396 190
--------
2,050
Natural Gas Distribution - 0.6%
Enron Corp. ................................... 32,200 2,676
KeySpan Corp. ................................. 5,800 246
Nicor, Inc. ................................... 2,000 86
Peoples Energy Corp. .......................... 1,200 54
Sempra Energy ................................. 8,804 205
--------
3,267
Oil - 1.3%
Conoco, Inc. - Cl. B .......................... 26,345 762
ONEOK, Inc. ................................... 1,200 58
Royal Dutch Petroleum Co. - NY Shares ......... 93,100 5,638
Tosco Corp. ................................... 6,200 211
--------
6,669
Oil & Natural Gas Exploration & Production - 4.4%
Amerada Hess Corp. ............................ 3,900 285
Anadarko Petroleum Corp. ...................... 10,662 758
Apache Corp. .................................. 5,200 364
Burlington Resources, Inc. .................... 9,210 465
Chevron Corp. ................................. 28,000 2,364
Coastal Corp. ................................. 9,400 830
Devon Energy Corp. * .......................... 5,600 342
EOG Resources, Inc. ........................... 4,900 268
Exxon Mobil Corp. ............................. 150,355 13,072
Kerr-McGee Corp. .............................. 4,070 272
Kinder Morgan, Inc. ........................... 5,000 261
Occidental Petroleum Corp. .................... 15,800 383
Phillips Petroleum Co. ........................ 11,400 648
Rowan Cos., Inc. * ............................ 4,000 108
Sunoco, Inc. .................................. 3,800 128
Texaco, Inc. .................................. 23,800 1,479
Transocean Sedco Forex, Inc. .................. 9,036 416
Unocal Corp. .................................. 10,400 402
USX-Marathon Group ............................ 13,400 372
--------
23,217
Oil - Equipment & Service - 0.7%
Baker Hughes, Inc. ............................ 14,200 590
Halliburton Co. ............................... 19,500 707
Nabors Industries, Inc. * ..................... 6,400 379
Schlumberger, Ltd. ............................ 24,400 1,950
--------
3,626
Paper & Forest Products - 0.8%
Boise Cascade Corp. ........................... 2,500 84
Georgia-Pacific Corp. ......................... 9,626 300
International Paper Co. ....................... 21,367 872
Kimberly-Clark Corp. .......................... 23,200 1,640
Louisiana-Pacific Corp. ....................... 4,600 47
Mead Corp. .................................... 4,400 138
Potlatch Corp. ................................ 1,200 40
Temple-Inland, Inc. ........................... 2,200 118
Westvaco Corp. ................................ 4,300 125
Weyerhaeuser Co. .............................. 9,200 467
Willamette Industries, Inc. ................... 4,800 225
--------
4,056
Personal & Commercial Lending - 0.5%
Capital One Financial Corp. ................... 8,700 573
Countrywide Credit Industries, Inc. ........... 4,900 246
MBNA Corp. .................................... 36,775 1,358
USA Education, Inc. ........................... 6,700 456
--------
2,633
Pollution Control - 0.2%
Allied Waste Industries, Inc. * ............... 8,600 125
Waste Management, Inc. ........................ 26,657 740
--------
865
Precious Metals/Gems/Stones - 0.1%
Barrick Gold Corp. ............................ 17,000 278
Freeport-McMoRan Copper & Gold, Inc. -
Cl. B ....................................... 6,300 54
Homestake Mining Co. .......................... 11,100 46
Newmont Mining Corp. .......................... 6,901 118
Placer Dome, Inc. ............................. 14,100 136
--------
632
165
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Retail - 0.1%
Costco Wholesale Corp. * ...................... 19,900 $ 795
Retail - Department Stores - 4.3%
Bed Bath & Beyond, Inc. * ..................... 12,000 269
Best Buy Co., Inc. ............................ 9,300 275
Circuit City Stores, Inc. ..................... 8,700 100
Consolidated Stores Corp. * ................... 5,300 56
Dillard's, Inc. - Cl. A ....................... 3,600 43
Dollar General Corp. .......................... 14,146 267
Federated Department Stores, Inc. * ........... 9,200 322
Gap, Inc. ..................................... 37,075 945
Harcourt General, Inc. ........................ 3,000 172
Home Depot, Inc. .............................. 100,550 4,594
J.C. Penney Co., Inc. ......................... 11,200 122
Kmart Corp. * ................................. 20,600 109
Kohl's Corp. .................................. 14,000 854
Limited, Inc. ................................. 18,452 315
Lowe's Cos., Inc. ............................. 17,000 756
May Department Stores Co. ..................... 13,150 431
Office Depot, Inc. ............................ 12,900 92
RadioShack Corp. .............................. 8,000 342
Sears, Roebuck & Co. .......................... 15,100 525
Staples, Inc. * ............................... 20,750 245
Target Corp. .................................. 39,400 1,271
Tiffany & Co. ................................. 6,200 196
Toys "R" Us, Inc. * ........................... 9,300 155
Wal-Mart Stores, Inc. ......................... 193,100 10,258
--------
22,714
Retail - Drug Stores - 0.6%
CVS Corp. ..................................... 17,000 1,019
Longs Drug Stores Corp. ....................... 1,900 46
TJX Cos., Inc. ................................ 12,900 358
Walgreen Co. .................................. 43,300 1,810
--------
3,233
Retail - Food - 1.0%
Albertson's, Inc. ............................. 18,177 482
Darden Restaurants, Inc. ...................... 5,300 121
McDonald's Corp. .............................. 56,700 1,928
Safeway, Inc. * ............................... 21,500 1,344
The Kroger Co. * .............................. 35,800 969
Wendy's International, Inc. ................... 4,900 128
Winn-Dixie Stores, Inc. ....................... 5,700 110
--------
5,082
Shoe & Apparel Manufacturing - 0.2%
Liz Claiborne, Inc. ........................... 2,300 96
Nike, Inc. - Cl. B ............................ 11,700 653
Nordstrom, Inc. ............................... 5,400 98
Reebok International, Ltd. .................... 2,400 66
V.F. Corp. .................................... 4,900 177
--------
1,090
Steel - 0.0%
Allegheny Technologies, Inc. .................. 3,750 60
Nucor Corp. ................................... 3,600 143
USX-U.S. Steel Group, Inc. .................... 3,800 68
--------
271
Telecommunication Equipment - 2.4%
ADC Telecommunications, Inc. * ................ 33,800 613
Andrew Corp. * ................................ 3,450 75
JDS Uniphase Corp. * .......................... 41,600 1,734
Lucent Technologies, Inc. ..................... 145,225 1,961
Nortel Networks Corp. ......................... 134,000 4,296
QUALCOMM, Inc. * .............................. 32,400 2,663
Scientific-Atlanta, Inc. ...................... 6,800 221
Symbol Technologies, Inc. ..................... 6,200 223
Tellabs, Inc. * ............................... 17,800 1,006
--------
12,792
Telecommunication Services - 2.5%
Avaya, Inc. * ................................. 12,302 127
Global Crossing, Ltd. * ....................... 38,590 552
Nextel Communications, Inc. - Cl. A * ......... 32,900 814
Qwest Communications International,
Inc. * ...................................... 72,062 2,955
Sprint PCS (PCS Group) * ...................... 40,600 830
Verizon Communications ........................ 116,774 5,853
WorldCom, Inc. * .............................. 125,077 1,759
--------
12,890
Telephone - 2.8%
Alltel Corp. .................................. 13,800 862
AT&T Corp. .................................... 163,207 2,826
BellSouth Corp. ............................... 80,900 3,312
CenturyTel, Inc. .............................. 6,000 214
SBC Communications, Inc. ...................... 146,397 6,990
Sprint Corp. .................................. 38,700 786
--------
14,990
Transportation Services - 0.7%
AMR Corp. * ................................... 6,400 251
Burlington Northern Santa Fe .................. 16,900 478
CSX Corp. ..................................... 8,900 231
Delta Air Lines, Inc. ......................... 5,300 266
Fedex Corp. * ................................. 12,400 495
Harley-Davidson, Inc. ......................... 13,500 537
Norfolk Southern Corp. ........................ 16,400 218
Ryder System, Inc. ............................ 2,600 43
Southwest Airlines Co. ........................ 22,100 741
U.S. Airways Group, Inc. * .................... 2,900 118
Union Pacific Corp. ........................... 10,600 538
--------
3,916
U.S. Government Agencies - 1.1%
Federal Home Loan Mortgage Corp. # ............ 29,900 2,060
166
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
U.S. Government Agencies - Continued
Federal National Mortgage Assoc. # ............ 43,600 $ 3,782
--------
5,842
--------
TOTAL COMMON STOCK- 96.4% 506,583
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 3.5%
Investment in joint trading account
(Note B)
6.695% due 01/02/01 ........................... $ 17,460 17,460
U.S. Treasury Bill
5.88% due 03/15/01 ............................ 1,245 1,239
--------
18,699
-------- --------
TOTAL INVESTMENTS- 99.9% 525,282
Cash and Receivables, less payables- 0.1% 377
-------- --------
NET ASSETS- 100.0% 525,659
======== ========
* Non-income producing security.
# Securities, or a portion thereof, with an aggregate market value of $1,230
have been segregated to collateralize financial futures contracts.
See notes to financial statements.
167
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 0.9%
Argo-Tech Corp.
8.625% due 10/01/07 ........................... $ 15 $ 12
K & F Industries, Inc. - Sr. Sub. Notes
9.25% due 10/15/07 ............................ 225 218
--------
230
Auto & Truck Parts - 4.0%
Accuride Corp. - Sr. Sub. Notes
9.25% due 02/01/08 ............................ 125 77
Delco Remy International, Inc.
10.625% due 08/01/06 .......................... 195 158
Delco Remy International, Inc. - Sr. Notes
8.625% due 12/15/07 ........................... 50 41
Dura Operating Corp.
9.0% due 05/01/09 ............................. 185 154
Federal Mogul Corp.
7.5% due 01/15/09 ............................. 750 120
Federal-Mogul Corp. - Sr. Notes
8.8% due 04/15/07 ............................. 100 16
Hayes Lemmerz International, Inc.
9.125% due 07/15/07 ........................... 100 67
Hayes Lemmerz International, Inc. - Ser. B
9.125% due 07/15/07 ........................... 5 3
LDM Technologies, Inc.
10.75% due 01/15/07 ........................... 135 68
Lear Corp. - Ser. B
8.11% due 05/15/09 ............................ 200 181
Lear Corp. - Sub. Notes
9.5% due 07/15/06 ............................. 100 96
Numatics, Inc. - Ser. B
9.625% due 04/01/08 ........................... 100 62
--------
1,043
Automobile - 0.7%
Lear Corp. - Ser B
7.96% due 05/15/05 ............................ 140 132
Navistar International - Sr. Sub Notes Ser. B
8.0% due 02/01/08 ............................. 50 37
--------
169
Bank - 0.4%
Western Financial Bank - Sub.
8.875% due 08/01/07 ........................... 125 113
Business Services - 0.6%
Express Scripts, Inc. - Sr. Notes
9.625% due 06/15/09 ........................... 155 160
Chemical - 4.5%
Acetex Corp. - Sr. Notes
9.75% due 10/01/03 ............................ 120 109
Avecia Group plc
11.0% due 07/01/09 ............................ 200 198
Georgia Gulf Corp.
10.375% due 11/01/07 .......................... 200 185
Lyondell Chemical Co. - Debs
9.8% due 02/01/20 ............................. 110 97
Lyondell Chemical Co.
9.875% due 05/01/07 ........................... 345 335
Lyondell Chemical Co. - Notes Ser. A
9.625% due 05/01/07 ........................... 100 97
PCI Chemicals Canada, Inc.
9.25% due 10/15/07 ............................ 90 25
Texas Petrochemical Corp. - Sr Sub. Notes
11.125% due 07/01/06 .......................... 150 113
--------
1,159
Coal - 1.2%
P&L Coal Holdings Corp.
9.625% due 05/15/08 ........................... 300 299
Commercial Sevices - 2.9%
American Color Graphics, Inc.
12.75% due 08/01/05 ........................... 125 118
Iron Mountain, Inc.
8.75% due 09/30/09 ............................ 150 147
Pierce Leahy Command Co.
8.125% due 05/15/08 ........................... 75 70
Pierce Leahy Corp. - Sr. Sub. Notes
9.125% due 07/15/07 ........................... 220 218
Waste Management, Inc.
6.875% due 05/15/09 ........................... 200 188
--------
741
Computer Equipment - 0.4%
Seagate Technology, Intl. - 144A (a)
12.5% due 11/15/07 ............................ 110 104
Computer Software & Services - 2.2%
Concentric Network Corp. - Sr. Notes
12.75% due 12/15/07 ........................... 150 127
Covad Communications Group, Inc.
12.0% due 02/15/10 ............................ 115 29
Exodus Communications - Sr. Notes 144A (a)
11.625% due 07/15/10 .......................... 250 222
PSINet, Inc. - Sr. Notes
10.0% due 02/15/05 ............................ 200 56
11.0% due 08/01/09 ............................ 50 14
11.5% due 11/01/08 ............................ 375 113
--------
561
Consumer Miscellaneous - 2.1%
Lin Holdings Corp. - Sr. Disc. Notes
1.0% due 03/01/08 ............................. 650 465
Resolution Performance Products - Sr. Sub
Notes 144A (a)
13.5% due 11/15/10 ............................ 65 67
--------
532
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Container - 2.8%
BWAY Corp. - Ser. B
10.25% due 04/15/07 ............................ $ 175 $ 158
Crown Cork & Seal - Notes
8.375% due 01/15/05 ............................ 350 199
Gaylord Container Corp. - Sr. Notes Ser. B
9.375% due 06/15/07 ............................ 350 217
Owens-Ilinois, Inc. - Debs
7.5% due 05/15/10 .............................. 85 45
Packaging Corp. of America
9.625% due 04/01/09 ............................ 125 129
--------
748
Diversified Operations - 1.8%
Consumers International - Sr. Notes
10.25% due 04/01/05 ............................ 350 35
Fisher Scientific International, Inc. - Sr. Sub.
Notes
9.0% due 02/01/08 .............................. 125 114
Kansas City Southern - Sr. Notes 144A (a)
9.5% due 10/01/08 .............................. 25 26
Prestolite Electric, Inc.
9.625% due 02/01/08 ............................ 225 101
Roller Bearing Co. America, Inc. - Ser. B
9.625% due 06/15/07 ............................ 30 26
SCG Holdings Corp.
12.0% due 08/01/09 ............................. 129 110
Westinghouse Air Brake Co. - Sr. Notes
9.375% due 06/15/05 ............................ 45 42
--------
454
Electric Power - 1.3%
Calpine Corp. - Sr. Notes
8.625% due 08/15/10 ............................ 100 98
Western Resources, Inc.
7.125% due 08/01/09 ............................ 65 60
Western Resources, Inc. - Sr. Notes
6.875% due 08/01/04 ............................ 180 173
--------
331
Electrical Equipment - 0.3%
Wesco Distribution, Inc. - Ser. B
9.125% due 06/01/08 ............................ 100 88
Financial Services - 1.8%
AMSC Acquisition Co., Inc. - Ser. B
12.25% due 03/31/08 ............................ 50 17
RBF Finance Co.
11.375% due 03/15/09 ........................... 220 254
Tembec Finance Corp. - Sr. Notes
9.875% due 09/30/05 ............................ 195 199
--------
470
Food, Beverage & Tobacco - 3.4%
Aurora Foods, Inc. - Sr. Sub. Notes
8.75% due 07/01/08 ............................. 75 51
9.875% due 02/15/07 ............................ 50 36
Azurix Corp.
10.75% due 02/15/10 ............................ 195 189
B&G Foods, Inc.
9.625% due 08/01/07 ............................ 125 81
Chiquita Brands International, Inc. - Sr. Notes
10.0% due 06/15/09 ............................. 290 101
Del Monte Foods Co. - Sr. Disc. Notes Ser. B
12.5% due 12/15/07 ............................. 172 127
Nash-Finch Co. - Ser. B
8.5% due 05/01/08 .............................. 275 201
New World Pasta Co.
9.25% due 02/15/09 ............................. 225 95
--------
881
Foreign - 0.3%
Satelites Mexicanos SA - Sr. Notes
10.125% due 11/01/04 ........................... 125 81
Health Care Products - 4.7%
ALARIS Medical Systems, Inc.
9.75% due 12/01/06 ............................. 550 203
ALARIS Medical, Inc. - Sr. Disc. Notes
1.0% due 08/01/08 .............................. 150 12
Beckman Coulter, Inc.
7.45% due 03/04/08 ............................. 50 48
Bergen Brunswig Corp.
7.375% due 01/15/03 ............................ 250 235
Conmed Corp.
9.0% due 03/15/08 .............................. 340 272
MEDIQ, Inc.
11.0% due 06/01/08 ............................. 125 1
Owens & Minor, Inc.
10.875% due 06/01/06 ........................... 131 135
Owens Illinois , Inc.
7.15% due 05/15/05 ............................. 165 96
Packard Bioscience, Co. - Sr. Sub Notes
9.375% due 03/01/07 ............................ 125 110
Warner Chilcott, Inc. - Ser. 144A (a)
12.625% due 02/15/08 ........................... 125 128
--------
1,240
Health Care Services - 3.7%
Beverly Enterprises, Inc.
9.0% due 02/15/06 .............................. 310 286
Bio-Rad Labs, Inc.
11.625% due 02/15/07 ........................... 107 110
Columbia/HCA Healthcare Corp.
7.25% due 05/20/08 ............................. 50 48
HCA - The Healthcare Co. - Notes
8.75% due 09/01/10 ............................. 65 69
Tenet Healthcare Corp. - Sr. Sub Notes
8.125% due 12/01/08 ............................ 175 177
8.625% due 01/15/07 ............................ 50 51
169
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Health Care Services - Continued
Triad Hospitals Holdings, Inc.
11.0% due 05/15/09 ............................. $ 200 $ 212
--------
953
Household Appliances / Furnishings - 0.8%
Mattress Discounters Co.
12.625% due 07/15/07 ........................... 75 67
Sealy Mattress Co. - Ser. B
0.0% due 12/15/07 .............................. 175 131
--------
198
Housing - 1.4%
American Standard Cos., Inc.
7.625% due 02/15/10 ............................ 85 82
Grove Worldwide Llc - Sr. Sub. Notes
9.25% due 05/01/08 ............................. 85 8
Standard Pacific Corp. - Sr. Notes
8.5% due 06/15/07 .............................. 110 101
8.5% due 04/01/09 .............................. 185 164
--------
355
Leisure & Recreation - 4.5%
AMC Entertainment, Inc. - Sr. Sub. Notes
9.5% due 03/15/09 .............................. 125 71
9.5% due 02/01/11 .............................. 375 214
John Q. Hammons Hotels
8.875% due 02/15/04 ............................ 425 384
Station Casinos, Inc. - Sr. Sub Notes
9.875% due 07/01/10 ............................ 100 103
Station Casinos, Inc. - Sr. Sub. Notes
8.875% due 12/01/08 ............................ 225 221
True Temper Sports, Inc. - Sr. Sub. Notes
10.875% due 12/01/08 ........................... 175 169
--------
1,162
Media - Publishing - 0.7%
Adelphia Communications Corp.
9.875% due 03/01/07 ............................ 50 47
Sun Media Corp. - Sr. Sub. Notes
9.5% due 05/15/07 .............................. 150 145
--------
192
Media - TV / Radio - 10.2%
Adelphia Communications Corp.
9.375% due 11/15/09 ............................ 150 132
Allbritton Communications Co. - Sr. Sub.
Debs. Ser. B
9.75% due 11/30/07 ............................. 250 244
Allbritton Communications Co. - Sr. Sub.
Notes
8.875% due 02/01/08 ............................ 50 46
Benedek Communications Corp. - Sr. Disc
Notes
0.0% due 05/15/06 .............................. 325 211
Cablevision SA - Bonds
13.75% due 05/01/09 ............................ 60 44
Century Communications Corp. - Cl. A
8.875% due 01/15/07 ............................ 75 66
Century Communications Corp. - Sr. Disc
Notes
0.0% due 01/15/08 .............................. 500 200
Charter Communications Holdings, LLC - Sr
Notes
8.625% due 04/01/09 ............................ 575 522
Classic Cable, Inc.
10.5% due 03/01/10 ............................. 510 204
Classic Cable, Inc. - Ser. B
9.375% due 08/01/09 ............................ 20 8
EchoStar DBS Corp. - Sr. Notes
9.375% due 02/01/09 ............................ 625 609
Frontiervision Holding L.P. - Sr. Disc. Notes
1.0% due 09/15/07 .............................. 200 168
Granite Broadcassting Corp. - Sr. Sub. Notes
8.875% due 05/15/08 ............................ 175 93
United Pan-Europe Comm - Sr. Notes Ser. B
11.5% due 02/01/10 ............................. 125 81
Young Broadcasting, Inc.
8.75% due 06/15/07 ............................. 50 46
--------
2,674
Metals & Mining - 0.1%
Neenah Corp. - Ser. F
11.125% due 05/01/07 ........................... 40 30
Neenah Corp. - Sr. Sub. Notes
11.125% due 05/01/07 ........................... 10 7
--------
37
Natural Gas Distribution - 0.6%
Energy Corp. of America - Sr. Sub. Notes
9.5% due 05/15/07 .............................. 200 160
Oil & Natural Gas Exploration & Production - 2.7%
Costilla Energy, Inc. - Sr. Notes
10.25% due 10/01/06 ............................ 71 0
Plains Resources, Inc.
10.25% due 03/15/06 ............................ 200 199
Plains Resources, Inc. - Sr. Sub. Notes
10.25% due 03/15/06 ............................ 175 174
Pride International, Inc. - Sr.Notes
9.375% due 05/01/07 ............................ 100 103
10.0% due 06/01/09 ............................. 100 105
Texas Petrochemical Corp. - Sr. Sub. Notes
11.125% due 07/01/06 ........................... 175 131
--------
712
Oil - Equipment & Service - 1.0%
ICO, Inc. - Sr. Notes
10.375% due 06/01/07 ........................... 50 47
170
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Oil - Equipment & Service - Continued
Key Energy Services, Inc.
14.0% due 01/15/09 .............................. $ 65 $ 74
Pioneer Natural Resources Co.
9.625% due 04/01/10 ............................. 45 48
Tuboscope, Inc.
7.5% due 02/15/08 ............................... 100 95
------
264
Paper & Forest Products - 1.2%
Doman Industries, Ltd.
12.0% due 07/01/04 .............................. 75 73
Doman Industries, Ltd. - Sr. Notes
8.75% due 03/15/04 .............................. 275 124
Paperboard Industries International, Inc. - Sr.
Notes
8.375% due 09/15/07 ............................. 40 30
Repap New Brunswick, Inc. - Sr. Notes
10.625% due 04/15/05 ............................ 75 77
Tembec Industries, Inc.
8.625% due 06/30/09 ............................. 15 15
------
319
Pollution Control - 0.9%
Allied Waste North America
7.625% due 01/01/06 ............................. 250 237
Real Estate Development - 0.5%
D.R. Horton, Inc.
8.0% due 02/01/09 ............................... 60 54
Del Webb Corp. - Sr. Sub. Debs.
10.25% due 02/15/10 ............................. 75 68
------
122
Retail - Drug Stores - 1.7%
Duane Reade, Inc. - Sr. Sub. Notes
9.25% due 02/15/08 .............................. 500 430
Retail - Food - 0.8%
Stater Bros. Holdings, Inc. - Senior Notes
10.75% due 08/15/06 ............................. 250 209
Shoe & Apparel Manufacturing - 2.0%
Levi Strauss & Co. - Notes
6.8% due 11/01/03 ............................... 100 81
7.0% due 11/01/06 ............................... 260 195
WestPoint Stevens, Inc. - Sr. Notes
7.875% due 06/15/08 ............................. 350 248
------
524
Steel - 3.0%
AK Steel Corp.
7.875% due 02/15/09 ............................. 250 222
AK Steel Corp. - Sr. Notes
9.125% due 12/15/06 ............................. 100 95
Algoma Steel, Inc.
12.375% due 07/15/05 ............................ 300 102
Steel - Continued
Armco, Inc. - Sr. Notes
9.0% due 09/15/07 ............................... 75 67
LTV Corp.
11.75% due 11/15/09 ............................. 433 9
National Steel Corp.
9.875% due 03/01/09 ............................. 320 128
Weirton Steel Corp. - Sr. Notes
11.375% due 07/01/04 ............................ 375 154
------
777
Telecommunication Equipment - 3.3%
Alestra SA de CV - Sr. Notes
12.125% due 05/15/06 ............................ 175 142
Covad Communications Group, Inc. - Sr. Notes
12.5% due 02/15/09 .............................. 50 13
Crown Castle International Corp. - Sr. Disc.
Notes
1.0% due 11/15/07 ............................... 250 200
Fairchild Semiconductor Corp.
10.375% due 10/01/07 ............................ 35 33
Fairchild Semiconductor Corp. - Sr. Sub. Notes
10.125% due 03/15/07 ............................ 250 230
Intermedia Communications, Inc. - Sr. Notes
Ser. B
9.5% due 03/01/09 ............................... 300 216
L-3 Communications Corp. - Sr. Sub. Notes
8.5% due 05/15/08 ............................... 35 33
------
867
Telecommunication Services - 14.8%
BTI Telecom Corp. - Sr. Notes
10.5% due 09/15/07 .............................. 100 25
Fonda Group, Inc. - Sr. Sub. Notes
9.5% due 03/01/07 ............................... 125 98
GCI, Inc. - Sr. Notes
9.75% due 08/01/07 .............................. 400 368
Global Crossing Holdings, Ltd.
9.125% due 11/15/06 ............................. 100 96
GST Telecommunications, Inc. - Sr. Sub. Notes
12.75% due 11/15/07 ............................. 50 1
GT Group Telecom - Sr. discount notes
0.0% due 02/01/10 ............................... 180 61
Hyperion Telecommunications, Inc. - Sr. Disc.
Notes
13.0% due 04/15/03 .............................. 250 180
Hyperion Telecommunications, Inc. - Sr. Notes
12.25% due 09/01/04 ............................. 165 132
Insight Midwest
9.75% due 10/01/09 .............................. 235 233
Insight Midwest LP - Sr. Notes 144A (a)
10.5% due 11/01/10 .............................. 40 41
Intermedia Communications, Inc. - Sr. Notes
8.875% due 11/01/07 ............................. 275 192
171
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Telecommunication Services - Continued
KMC Telecom Holdings, Inc. - Sr. Disc. Notes
1.0% due 02/15/08 ............................... $ 275 $ 33
Level 3 Communications, Inc.
11.25% due 03/15/10 ............................. 200 175
Level 3 Communications, Inc. - Sr. Notes
9.125% due 05/01/08 ............................. 30 24
McleodUSA, Inc.
8.125% due 02/15/09 ............................. 175 150
McLeodUSA, Inc. - Sr. Notes
8.375% due 03/15/08 ............................. 230 201
9.5% due 11/01/08 ............................... 55 50
Nextel Communications - Sr. Notes
9.375% due 11/15/09 ............................. 150 141
Nextel Communications, Inc. - Sr. Disc. Notes
1.0% due 10/31/07 ............................... 650 483
NEXTLINK Communications, Inc. - Sr. Disc.
Notes
1.0% due 04/15/08 ............................... 300 155
NTL Communications Corp. - Sr. Notes
1.0% due 10/01/08 ............................... 615 344
RCN Corp.
0.0% due 10/15/07 ............................... 50 18
10.0% due 10/15/07 .............................. 200 112
RCN Corp. - Sr. Disc. Notes
1.0% due 07/01/08 ............................... 425 132
RSL Communications plc
9.125% due 03/01/08 ............................. 100 4
Telecommunications Techniques Co.
9.75% due 05/15/08 .............................. 140 123
Time Warner Telecom Llc - Sr. Notes
9.75% due 07/15/08 .............................. 290 270
------
3,842
Telephone - 0.9%
e.spire Communications, Inc. - Sr. Disc. Notes
1.0% due 04/01/06 ............................... 75 26
ITC DeltaCom, Inc. - Sr. Notes
8.875% due 03/01/08 ............................. 125 82
9.75% due 11/15/08 .............................. 75 53
Viatel, Inc. - Sr. Notes
11.25% due 04/15/08 ............................. 125 39
11.5% due 03/15/09 .............................. 150 46
------
246
Transportation Services - 0.6%
Dunlop Standard Aero Holdings - Sr. Notes
11.875% due 05/15/09 ............................ 150 150
------
TOTAL PUBLICLY-TRADED BONDS- ............... 91.7% 23,834
PREFERRED STOCK
Food, Beverage & Tobacco - 0.0%
Aurora Foods, Inc. .............................. 2,214 $ 5
Media - Publishing - 0.4%
Primedia, Inc. .................................. 1,250 100
Telecommunication Services - 0.2%
XO Communications, Inc. ......................... 128 58
------
TOTAL PREFERRED STOCK- ..................... 0.6% 163
WARRANTS
Household Appliances / Furnishings - 0.0%
Mattress Discounters Corp.
expires 07/07/15 (Cost $1) ...................... 75 1
Telecommunication Services - 0.0%
GT Group Telecom, Inc.
expires 02/01/10 (Cost $9) ...................... 180 7
KMC Telecom Holdings, Inc. - WT 144A (a)
expires 01/31/08 (Cost $0) ...................... 250 1
------
8
------
TOTAL WARRANTS- ............................ 0.0% 9
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 4.4%
Investment in joint trading account (Note B)
6.695% due 01/02/01 ........................... 1,127 1,127
------ ------
TOTAL INVESTMENTS- 96.7% 25,133
Cash and Receivables, less payables- 3.3% 845
------ ------
NET ASSETS- 100.0% 25,978
====== ======
(a) Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 2000, securities aggregated
$589 or 2.27% of net assets of the Portfolio.
See notes to financial statements.
172
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Australia - 0.9%
Commonwealth of Australia - Bonds
(GOVF)
7.5% due 07/15/05 .............................. $ 1,000 $ 604
Canada - 2.0%
Government of Canada - Bonds (GOVF)
7.0% due 12/01/06 .............................. 1,100 793
Government of Canada (GOVF)
7.25% due 06/01/07 ............................. 750 550
------
1,343
Denmark - 2.1%
Danske Kredit (LEND)
6.0% due 10/01/29 .............................. 5,975 721
Kingdom of Denmark - Bullet Bond
(GOVF)
8.0% due 03/15/06 .............................. 5,080 726
------
1,447
Finland - 4.4%
Republic of Finland - Bonds (GOVF)
5.75% due 02/23/11 ............................. 3,050 3,015
France - 4.4%
Government of France - Bonds (GOVF)
5.25% due 04/25/08 ............................. 1,580 1,529
Government of France - O.A.T. (GOVF)
5.5% due 04/25/07 .............................. 1,490 1,466
------
2,995
Germany - 16.7%
Allgemeine Hypothekenbank (BANK)
5.0% due 09/02/09 .............................. 500 454
Bayer Hypo Veriens (BANK)
5.0% due 04/02/08 .............................. 1,000 922
Bundesrepublic Deutschland - Bonds
(GOVF)
6.75% due 04/22/03 ............................. 3,000 2,953
Federal Republic of Germany - Bonds
(GOVF)
5.25% due 01/04/08 ............................. 3,750 3,631
6.875% due 05/12/05 ............................ 2,750 2,813
Mannesman Finance BV (MACH)
4.75% due 05/27/09 ............................. 750 639
------
11,412
Greece - 1.5%
Hellenic Republic - Bonds (GOVF)
8.6% due 03/26/08 .............................. 220,000 721
8.8% due 06/19/07 .............................. 100,000 327
------
1,048
Ireland - 0.9%
Republic of Ireland - Debs. (GOVF)
4.0% due 04/18/10 .............................. 750 649
Japan - 2.2%
International Bank of Reconstruction &
Development - Debs. (BANK)
4.75% due 12/20/04 .............................. $150,000 $ 1,514
Luxembourg - 1.4%
Ford Motor Credit Co. (LEND)
5.25% due 06/16/08 .............................. 2,100 957
Netherlands - 8.6%
Deutsche Telekom International Finance
(TELS)
6.625% due 07/06/10 ............................. 1,000 956
Government of Netherlands - Bonds
(GOVF)
5.5% due 07/15/10 ............................... 1,780 1,735
5.75% due 09/15/02 .............................. 1,200 1,148
6.5% due 04/15/03 ............................... 1,500 1,465
Government of Netherlands - Bonds Series
1 & 2 (GOVF)
6.0% due 01/15/06 ............................... 600 595
------
5,899
New Zealand - 0.7%
Government of New Zealand - Bonds
(GOVF)
8.0% due 11/15/06 ............................... 1,000 485
Norway - 0.8%
Norwegian Government - Bonds (GOVF)
6.75% due 01/15/07 .............................. 5,000 587
Spain - 3.8%
Kingdom of Spain - Notes (GOVF)
3.1% due 09/20/06 ............................... 120,000 1,171
4.0% due 01/31/10 ............................... 1,650 1,426
------
2,597
Supra National - 12.3%
Asian Development Bank (BANK)
5.625% due 02/18/02 ............................. 150,000 1,391
Bank Of Ireland (BANK)
6.45% due 02/10/10 .............................. 1,000 965
BAT International Finance (FOOD)
4.875% due 02/25/09 ............................. 600 490
European Investment Bank - Notes (BANK)
3.0% due 09/20/06 ............................... 230,000 2,243
International Bank of Reconstruction &
Development - Debs. (BANK)
4.5% due 03/20/03 ............................... 160,000 1,519
International-American Development Bank -
Bonds (BANK)
1.9% due 07/08/09 ............................... 100,000 909
Royal Bank of Scotland plc (BANK)
8.375% due 01/29/07 ............................. 300 492
173
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Supra National - Continued
Standard Charter Bank (BANK)
5.375% due 05/06/09 ........................... $ 450 $ 401
--------
8,410
Sweden - 0.8%
Swedish Government (GOVF)
5.0% due 01/28/09 ............................. 5,200 561
United Kingdom - 4.0%
U.K. Treasury (GOVF)
7.25% due 12/07/07 ............................ 805 1,351
U.K. Treasury - Bonds (GOVF)
8.5% due 12/07/05 ............................. 800 1,368
--------
2,719
United States - 28.0%
Belo AH Corp. - Sr. Notes (CONS)
7.125% due 06/01/07 ........................... 100 96
CenturyTel, Inc. - Sr. Notes Ser. H (TELS)
8.375% due 10/15/10 ........................... 175 182
Chancellor Media Corp. (MEDI)
8.0% due 11/01/08 ............................. 125 126
Charter Communication Holdings LLC - Sr.
Notes (MEDI)
8.25% due 04/01/07 ............................ 375 339
Clear Channel Communications (MEDI)
7.65% due 09/15/10 ............................ 250 255
Crown Castle International Corp. - Sr. Notes
(MEDI)
10.75% due 08/01/11 ........................... 75 78
Federal National Mortgage Assoc. - Sr.
Notes (GOVA)
2.125% due 10/09/07 ........................... 100,000 923
Federal National Mortgage Assoc. (GOVA)
5.125% due 02/13/04 ........................... 1,500 1,478
6.0% due 05/15/08 ............................. 350 351
6.25% due 05/15/29 ............................ 500 502
6.5% due 07/01/29 ............................. 499 492
6.5% due 08/01/13 ............................. 488 488
7.0% due 11/01/30 ............................. 749 750
7.0% due 12/01/30 ............................. 400 400
7.5% due 12/01/30 ............................. 500 507
8.0% due 12/01/30 ............................. 500 512
Fox Sports Networks LLC - Sr. Disc. Notes
(MEDI)
0.0% due 08/15/07 ............................. 125 110
KFW International Finance, Inc. (GOVF)
1.75% due 03/23/10 ............................ 220,000 1,958
Liberty Media Corp. - Bonds (MEDI)
7.875% due 07/15/09 ........................... 100 98
NiSource Finance Corp. - 144A (a) (FINL)
7.875% due 11/15/10 ........................... 125 131
Spectrasite Holdings, Inc. - Sr. Notes Ser. B
(TELE)
10.75% due 03/15/10 ........................... 75 70
United States - Continued
Time Warner, Inc. - Notes (MEDI)
8.18% due 08/15/07 ............................ 150 160
U.S. Treasury - Bonds
(GOVE)
5.25% due 02/15/29 ............................ 250 240
U.S. Treasury - Notes
(GOVE)
5.75% due 08/15/03 ............................ 2,000 2,029
6.25% due 02/15/07 ............................ 2,500 2,639
6.875% due 05/15/06 ........................... 1,000 1,082
U.S. Treasury - Bonds
(GOVE)
7.25% due 05/15/16 ............................ 1,750 2,058
8.875% due 08/15/17 ........................... 625 850
Viacom, Inc. (MEDI)
7.7% due 07/30/10 ............................. 150 158
Vodafone Group plc - Notes (TELS)
7.625% due 02/15/05 ........................... 100 103
--------
19,165
--------
TOTAL PUBLICLY-TRADED BONDS- 95.5% 65,407
SHORT-TERM INVESTMENTS - 2.5%
United States - 2.5%
Investment in joint trading account (Note B)
6.695% due 01/02/01 ........................... 1,616 1,616
U.S. Treasury Bill (GOVE) .......................
5.955% due 03/22/01 ........................... 100 99
--------
1,716
-------- --------
TOTAL INVESTMENTS- 98.0% 67,123
Cash and Receivables, less payables- 2.0% 1,350
-------- --------
NET ASSETS- 100.0% $68,473
======== ========
(a) Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At December 31, 2000, securities aggregated
$131 or .19% of net assets of the Portfolio.
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Foreign Governmental............. GOVF 33,626 51.4%
Bank ....... .................... BANK 10,810 16.5%
U.S. Governmental................ GOVE 8,897 13.4%
U.S. Government Agencies......... GOVA 6,405 9.7%
Personal & Commercial Lending.... LEND 1,678 2.6%
Media - TV / Radio............... MEDI 1232 1.9%
Telecommunication Services....... TELS 1138 1.8%
Machinery........................ MACH 639 1.0%
Food, Beverage & Tobacco......... FOOD 490 0.7%
Telecommunication Equipment...... TELE 251 0.4%
Financial Services............... FINL 131 0.2%
Media - Publishing............... MEDP 110 0.2%
-------- --------
$65,407 100.0%
======== ========
174
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
The John Hancock Variable Series Trust I (the "Trust") is a diversified
open-end management investment company registered under the Investment Company
Act of 1940, as amended. The Trust is organized as a Massachusetts business
trust. The Trust consists of thirty-two funds: Large Cap Growth, Fundamental
Growth (formerly, Fundamental Mid Cap Growth), Aggressive Balanced, Active Bond
(formerly, Sovereign Bond), CORE Bond, Emerging Markets Equity, International
Equity Index, International Equity, Small Cap Growth, Global Balanced (formerly,
International Balanced), Mid Cap Growth, Mid Cap Blend, Large Cap Value, Large
Cap Value CORE, American Leaders Large Cap Value, Large/Mid Cap Value, Money
Market, Mid Cap Value, Small/Mid Cap Growth, Bond Index, Large Cap Aggressive
Growth, Small/Mid Cap CORE, Small/Mid Cap Value, Real Estate Equity, Growth &
Income, Managed, Short-Term Bond, Small Cap Equity (formerly, Small Cap Value),
International Opportunities, Equity Index, High Yield Bond and Global Bond Funds
(collectively, the "Funds"). The Trust may add or delete Funds in the future to
accommodate various investment objectives. The Trust has issued shares of
beneficial interest exclusively to John Hancock Variable Life Account U
("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock
Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I
("JHVAAI") to fund policies and contracts issued by the John Hancock Variable
Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account
U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock
Variable Life Insurance Account UV ("JHVLAUV"), John Hancock Variable Annuity
Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF")
to fund contracts and policies issued by John Hancock Life Insurance Company
("John Hancock" or "JHLICO") to Investors Partner Life Account L ("IPLL") to
fund contracts and policies issued by Investors Partner Life ("IPL"), and to
John Hancock Variable Life Account PPM-1 ("PPM-1").
NOTE B--ACCOUNTING POLICIES
Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principles 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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Valuation of Investments: For the Large Cap Growth, Fundamental Growth,
Aggressive Balanced, Emerging Markets Equity, Small Cap Growth, Mid Cap
Growth, Mid Cap Blend, Large Cap Value, Large Cap Value CORE, American Leaders
Large Cap Value, Large/Mid Cap Value, Mid Cap Value, Small/Mid Cap Growth, Large
Cap Aggressive Growth, Small/Mid Cap CORE, Small/Mid Cap Value, Real Estate
Equity, Growth & Income, Managed, Small Cap Equity, and Equity Index Funds:
Common stocks and other such securities traded on national exchanges are
normally valued on the basis of closing prices. Securities traded in the
over-the-counter market and securities with no sales on the day of valuation are
normally valued at their last available bid price.
For the Active Bond, CORE Bond, Bond Index, Managed, Short-Term Bond,
High Yield Bond and Global Bond Funds: Debt investment securities having a
primary market over-the-counter are valued on the basis of valuations furnished
by a pricing service which determines valuations for normal institutional size
trading units of debt securities, without exclusive reliance upon quoted prices.
For the Money Market Fund: The Board of Trustees has determined that
the appropriate method for valuing Fund securities is amortized cost, so long as
the average weighted maturity of money market instruments comprising the Fund
does not exceed 90 days. Accordingly, Fund securities are valued at amortized
cost, which approximates market value. The amortized cost method involves
valuing a security at its cost on the date of purchase and thereafter assuming a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the security to the Fund.
175
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
For each of the Funds, short-term investments, with a maturity not to
exceed 60 days, are valued at amortized cost, which approximates market value.
For the International Equity Index, International Equity, Global
Balanced and International Opportunities Funds: Investments in securities traded
on national securities exchanges in the United States or on equivalent foreign
exchanges are normally valued at the last quoted sales price on such exchanges
as of the close of business on the date of which assets are valued. Securities
traded in the over-the-counter market and securities traded with no sales on the
day of valuation are normally valued at their last available bid price. All Fund
securities initially expressed in terms of foreign currencies have been
translated into U.S. Dollars as described in "Currency Translation".
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Funds, are
valued at fair value as determined in good faith by the Board of Trustees.
Investment security transactions are recorded on the date of purchase or sale.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Dividend income for the Large Cap Growth,
Emerging Markets Equity, International Equity Index, International Equity,
Global Balanced, Large Cap Value, Large Cap Value CORE, Small/Mid Cap Growth,
Large Cap Aggressive Growth, Small/Mid Cap Value, Real Estate Equity, Growth &
Income, Managed, Small Cap Equity, International Opportunities and Equity Index
Funds are shown net of foreign taxes withheld of $4, $30, $444, $25, $28, $28,
$1, $4, $1, $1, $9, $182, $102, $1, $163, and $26, respectively. Realized gains
and losses from security transactions are determined on the basis of identified
cost.
Bank Borrowings: The Funds (except for Money Market and International
Equity Index Funds) are permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that other-
wise might require the untimely disposition of securities. The Funds have
entered into a syndicated line of credit agreement with State Street Bank and
Trust Company ("SSBT"). This agreement enables the Funds to participate in an
unsecured line of credit, which permits borrowings up to $75 million,
collectively. Interest is charged to each Fund, based on its borrowing. In
addition, a commitment fee is charged to each Fund based on the average daily
unused portion of the line of credit and is allocated among the participating
Funds. Interest expense paid under the line of credit, net of the portion paid
by the Adviser amounting to $22 for Bond Index Fund, is included under the
caption "Other fees" in the Statement of Operations. The following funds had
borrowings under the line of credit during the year ended December 31, 2000:
Average Daily Loan Balance During the Weighted Average
Fund Period for which Loans Were Outstanding Interest Rate Interest Expense
- ---- --------------------------------------- ------------- ----------------
Fundamental Growth $1,475 7.14% $2
Mid Cap Growth 1,641 6.42 --
Mid Cap Value 1,478 7.12 1
Bond Index 4,678 7.10 --
Real Estate Equity 1,095 7.15 1
Small Cap Equity 3,393 6.44 2
176
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Securities Lending: Certain Funds (Large Cap Growth, Active Bond,
International Equity Index, Small Cap Growth, Mid Cap Growth, Large Cap Value,
Mid Cap Value, Small/Mid Cap Growth, Growth & Income, Managed, Short-Term Bond,
International Opportunities and Global Bond Funds) have entered into an
agreement with SSBT to lend their securities to certain qualified brokers who
pay these Funds negotiated lender fees. These loans are collateralized at all
times with cash or securities with a market value at least equal to the market
value of the securities on loan. As with other extensions of credit, these Funds
may bear the risk of delay of the loaned securities in recovery or even loss of
rights in the collateral should the borrower of the securities fail financially.
At December 31, 2000, the market value of the securities loaned and the market
value of the collateral were as follows:
Fund Value of Securities Loaned Value of Collateral
- ---- -------------------------- -------------------
Large Cap Growth $ 80,209 $ 84,124
Active Bond 99,103 112,135
International Equity Index 29,739 31,240
Small Cap Growth 52,037 55,446
Mid Cap Growth 52,885 54,779
Large Cap Value 8,059 8,453
Small/Mid Cap Growth 32,919 34,457
Growth & Income 92,325 97,450
Managed 177,099 184,244
Short-Term Bond 13,542 13,740
International Opportunities 9,494 9,839
Global Bond 7,083 7,131
Repurchase Agreements: The Funds may enter into repurchase agreements which
are contracts under which a Fund would acquire a security for a relatively short
period (usually not more than 7 days) subject to the obligation of the seller to
repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). A Fund will enter into repurchase
agreements only with member banks of the Federal Reserve System and with
"primary dealers" in United States government securities. The underlying
securities, which represent the collateral of the agreement, must be marked to
market daily to ensure that each repurchase agreement is fully collateralized at
all times. A Fund will not invest more than 10% of its net assets in repurchase
agreements maturing in more than 7 days.
Joint Repurchase Agreements: The Active Bond and Small Cap Growth Funds,
along with other registered investment companies having a management contract
with John Hancock Advisers, Inc. (the "Sub-Adviser"), an indirect wholly-owned
subsidiary of John Hancock, may participate in a joint repurchase agreement
pursuant to an exemptive order issued by the Securities and Exchange Commission.
Aggregate cash balances are invested in one or more repurchase agreements,
whose underlying securities are obligations of the U.S. Government and/or its
agencies. The Trust's custodian bank receives delivery of the underlying
securities for the joint repurchase agreement on the Trust's behalf. The
Sub-Adviser is responsible for ensuring that the agreement is fully
collateralized at all times. The International Equity, Large Cap Value CORE and
Small/Mid Cap CORE Funds of the Trust, along with other registered investment
companies having a management contract with Goldman Sachs Asset Management (the
"Sub-Adviser"), may participate in a joint repurchase agreement pursuant to an
exemptive order issued by the Securities and Exchange Commission. Aggregate cash
balances are invested in one or more repurchase agreements, whose underlying
securities are obligations of the U.S. Government and/or its agencies. The
Trust's custodian bank receives delivery of the underlying securities for the
joint repurchase agreement on the Funds' behalf. The Sub-Adviser is responsible
for ensuring that the agreement is fully collateralized at all times.
177
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Joint Trading Account: Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the order permits the existing Funds of the
Trust to pool daily uninvested cash balances, together with the balances of any
future Funds of the Trust, into a joint account for the purpose of investing the
cash balances in short-term repurchase agreements, commercial paper and other
short-term investments which in no event will have a maturity in excess of seven
days. Joint Account holdings as of December 31, 2000:
Name of Issuer Par Value Market Value
- -------------- --------- ------------
Alpine Securitization Corp. 6.67% due 01/02/01 $ 40,000 $ 40,000
Cargill Global FDG 6.61% due 01/04/01 49,232 49,214
Chase Manhattan Bank 6.53% due 01/02/01 47,000 47,000
Clipper Receivables Corp. 6.65% due 01/02/01 15,000 15,000
Eagle Funding Capital Corp. 6.75% due 01/04/01 40,000 39,985
Exxon Mobil 6.55% due 01/03/01 12,700 12,698
Falcon Asset Securitization 6.70% due 01/02/01 6,009 6,009
Ford Credit Europe PLC 6.55% due 01/02/01 50,000 50,000
General Electric Credit Capital 6.57.% due 01/02/01 50,000 50,000
Greenwich FDG Corp. 6.68% 01/04/01 10,000 9,996
Lexington Parker Capital Corp. 6.50% due 01/02/01 9,100 9,100
National Australia FDG 6.62% due 01/03/01 50,000 49,991
Nestle Capital Corp. 6.40% due 01/02/01 4,462 4,462
Philip Morris Cos., Inc. 6.50% due 01/02/01 23,200 23,200
Philip Morris Capital Corp. 6.56% due 01/03/01 24,542 24,538
Philip Morris Capital Corp. 6.57% due 01/05/01 1,730 1,729
Sony Capital Corp. 6.63% due 01/02/01 8,181 8,181
Sony Capital Corp. 6.60% due 01/03/01 25,000 24,995
Toyota Motor Credit Co. 6.54% due 01/02/01 7,453 7,453
-------- --------
Joint Trading Account Totals $473,609 $473,551
======== ========
Financial Futures Contracts: The Large Cap Growth, Active Bond, Emerging
Markets Equity, International Equity Index, International Equity, Small Cap
Growth, Global Balanced, Mid Cap Growth, Large Cap Value CORE, Small/Mid Cap
Growth, Small/Mid Cap CORE, Real Estate Equity, Growth & Income, Managed,
Short-Term Bond, Equity Index, High Yield Bond and Global Bond Funds may buy and
sell financial futures contracts to hedge against the effects of fluctuations in
interest rates and other market conditions. At the time the Fund enters into a
financial futures contract, it will be required to deposit with its custodian a
specified amount of cash or U.S. government securities, known as "initial
margin". Each day, the futures contract is valued at the official settlement
price of the board of trade or U.S. commodities exchange. Daily variation
margin adjustments, arising from this "mark to market", are recorded by the
Funds as unrealized gains or losses.
178
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
When the contracts are closed, the Fund recognizes a gain or a loss. Risk
of entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange. At December 31, 2000, open positions in
financial futures contracts were as follows:
International Equity Index Face Amount Unrealized
Purchased Expiration Date at Value Gain (Loss)
- --------- --------------- -------- -----------
18 contracts CAC-40 10 Euro Index Futures March 2001 $ 1,014 $ 22
6 contracts DAX Index Futures March 2001 916 (42)
13 contracts FTSE 100 Index Futures March 2001 1,205 (36)
20 contracts Nikkei 225 Index Futures March 2001 1,373 (114)
------- ------
$ 4,508 $ (170)
======= ======
International Equity
Purchased
- ---------
9 contracts DJ Euro STOXX 50 Index Futures March 2001 $ 407 $ (19)
2 contracts FTSE 100 Index Futures March 2001 185 (4)
------- ------
$ 592 $ (23)
======= ======
Small Mid/Cap CORE
Purchased
- ---------
3 contracts Russell 2000 Index Futures March 2001 $ 733 $ 32
======= ======
Managed Fund
Purchased
- ---------
219 contracts Germany 10 Year Treasury Bonds March 2001 $22,302 $ 400
Futures
13 contracts Japan 10 Year Treasury Bonds Futures March 2001 15,340 (9)
17 contracts United Kingdom Treasury Bonds Futures March 2001 2,935 4
430 contracts U.S. 10 Year Treasury Note Futures March 2001 45,090 1,250
------- ------
$85,667 $1,645
======= ======
Equity Index
Purchased
- ---------
53 contracts S&P 500 Index Futures March 2001 $17,689 $ (573)
======= ======
At December 31, 2000, the International Equity and Small/Mid Cap CORE Funds
had deposited $89 and $120, respectively, in segregated accounts to cover margin
requirements on open financial futures contracts.
Forward Foreign Currency Contracts: The Funds may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage Funds' currency exposure. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell are used to hedge the
Funds' investments against currency fluctuations. Neither type of foreign
currency transaction will eliminate fluctuations in the prices of the Funds'
securities or prevent loss if the price of such securities should decline. The
U.S. dollar value of a forward foreign currency contract is determined using
forward exchange rates supplied by a quotation service. Realized gain (loss) on
the purchases and sales of forward foreign currency contracts is recognized on
settlement date.
179
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Currency Translation: For Funds that trade in international securities: all
assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars based on London currency exchange quotations as of
5:00 p.m., London time, on the date of any determination of the net asset value
of the Funds. Unrealized exchange adjustments are included in unrealized
appreciation (depreciation) of investments. Transactions affecting statement of
operations accounts and net realized gain (loss) on investments are translated
at the rates prevailing at the dates of transactions.
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of forward foreign
currency contracts, disposition of foreign currencies, currency gains and losses
realized between trade and settlement dates of security transactions, and the
difference between the amounts of net investment income accrued and the U.S.
dollar amount actually received.
Dividends: A dividend of its net investment income is declared and
distributed daily by the Money Market Fund. Dividends of net investment income
are declared and distributed monthly by all other Funds. Each Fund distributes
all of its net realized capital gains annually, at the end of its fiscal year.
Federal Income Taxes: Each of the Funds of the Trust intends to comply with
the requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income to shareholders. Therefore, no federal income tax provision is
required.
As of December 31, 2000, the Trust had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: Small Cap Growth had $8,256, which expires in 2008; Money Market had
$14 and $78, which expire in 2007 and 2008, respectively; Bond Index had $158
and $557, which expire in 2007 and 2008, respectively; Short-Term Bond had $131,
$1,304 and $679, which expire in 2006, 2007 and 2008, respectively; High Yield
Bond had $276 and $513, which expire in 2007 and 2008, respectively; and Global
Bond had $1,204 and $1,947, which expire in 2007 and 2008, respectively.
NOTE C -- INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Expenses: Expenses directly attributable to a Fund are charged to that Fund.
Expenses not directly attributed to a Fund are allocated on the basis of
relative net assets.
On February 16, 2000, September 28, 2000 and October 20, 2000, the Board of
Trustees of the Trust renewed its Investment Advisory Agreement with John
Hancock. For its services, John Hancock receives monthly compensation at the
following rates:
For the Large Cap Growth Fund, 0.40% on an annual basis of the first
$500,000 of the net assets of the Fund; 0.35% for net assets between
$500,000 and $1,000,000; and 0.30% for net assets in excess of $1,000,000;
For the Fundamental Growth Fund, 0.90% on an annual basis of the first
$250,000 of the Fund's net assets; and 0.85% for net assets in excess of
$250,000;
For the Aggressive Balanced Fund, 0.675% on an annual basis of the
first $250,000 of the Fund's net assets; 0.625% for net assets between
$250,000 and $500,000; and 0.60% for net assets in excess of $500,000;
For the Active Bond Fund, 0.70% on an annual basis of the first
$100,000 of the net assets of the Fund; 0.65% for net assets between
$100,000 and $250,000; 0.61% for net assets between $250,000 and $500,000;
0.58% for net assets between $500,000 and $1,000,000; and 0.55% for net
assets in excess of $1,000,000;
For the CORE Bond Fund, 0.70% on an annual basis of the first $25,000
of the Fund's net assets; 0.65% for net assets between $25,000 and $50,000;
0.60% for net assets between $50,000 and $150,000; and 0.55% for the net
assets in excess of $150,000;
For the Emerging Markets Equity Fund, 1.30% on an annual basis of the
first $10,000 of the Fund's net assets; 1.20% for net assets between
$10,000 and $150,000; and 1.10% for net assets in excess of $150,000;
180
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
For the International Equity Index Fund, 0.18% on an annual basis of the
first $100,000 of the Fund's net assets; 0.15% for net assets between $100,000
and $200,000; and 0.11% for net assets in excess of $200,000;
For the International Equity Fund, 1.00% on an annual basis of the first
$50,000 of the Fund's net assets; 0.95% for net assets between $50,000 and
$200,000; and 0.90% for net assets in excess of $200,000;
For the Small Cap Growth Fund, 0.75% on an annual basis of its net
assets;
For the Global Balanced Fund, 1.05% on an annual basis of the first
$150,000 of the Fund's net assets; 0.95% for net assets between $150,000 and
$300,000; 0.80% for net assets between $300,000 and $ 500,000; and 0.75% for net
assets in excess of $500,000;
For the Mid Cap Growth Fund, 0.85% on an annual basis of the first
$100,000 of the Fund's net assets; and 0.80% on an annual basis for net assets
in excess of $100,000;
For the Mid Cap Blend Fund, 0.75% on an annual basis of the first
$250,000 of the net assets of each Fund; 0.70% for net assets between $250,000
and $500,000; and 0.65% for net assets in excess of $500,000;
For the Large Cap Value Fund, 0.75% on an annual basis of the first
$100,000 of the Fund's net assets; 0.70% for net assets between $100,000 and
$250,000; and 0.65% for net assets in excess of $250,000;
For the Large Cap Value CORE Fund, 0.75% on an annual basis for the first
$50,000 of the Fund's net assets; 0.65% for net assets between $50,000 and
$200,000; and 0.60% in excess of $200,000;
For the American Leaders Large Cap Value Fund, 0.80% on an annual basis
of the first $50,000 of the net assets of the Fund; 0.65% for net assets between
$50,000 and $250,000; 0.60% for net assets between $250,000 and $500,000; and
0.55% for net assets in excess of $500,000;
For the Large/Mid Cap Value Fund, 0.95% on an annual basis for the first
$25,000 of the Fund's net assets; 0.85% for net assets between $25,000 and
$50,000; 0.75% for net assets between $50,000 and $ 100,000; and 0.65% for net
assets in excess of $100,000;
For the Money Market Funds, 0.25% on an annual basis of the net assets of
the Fund;
For the Mid Cap Value Fund, 0.80% on an annual basis of the first
$100,000 of the Fund's net assets; 0.775% for net assets between $100,000 and
$250,000; and 0.75% for net assets between $250,000 and $500,000; 0.725% for
net assets between $500,000 and $750,000; and 0.70% for all its net assets once
its net assets exceed $750,000;
For the Small/Mid Cap Growth Fund, 0.75% on an annual basis of the first
$250,000 of the net assets of each Fund; 0.70% for net assets between $250,000
and $500,000; and 0.65% for net assets in excess of $500,000;
For the Bond Index Fund, 0.15% on an annual basis of the first $100,000
of the Fund's net assets; 0.13% for net assets between $100,000 and $250,000;
and 0.11% for net assets in excess of $250,000;
For the Large Cap Aggressive Growth Fund, 1.00% on an annual basis for
the first $10,000 of the Fund's net assets; 0.875% for net assets between
$10,000 and $20,000; 0.75% for net assets in excess of $20,000;
For the Small/Mid Cap CORE Fund, 0.80% on an annual basis of the first
$50,000 of the Fund's net assets; and 0.70% for net assets in excess of $50,000;
For the Small/Mid Cap Value Fund, 0.95% on an annual basis for the first
$100,000 of the Fund's net assets; 0.90% for net assets between $100,000 and
$250,000; 0.85% for net assets in excess of $250,000.
For the Real Estate Equity Fund, 1.10% on an annual basis of the first
$50,000 of the Fund's net assets, 1.00% for net assets between $50,000 and
$100,000; 0.90% for net assets between $100,000 and $200,000 and 0.80% for net
assets in excess of $200,000;
For the Growth & Income Fund, 0.71% on an annual basis of the first
$150,000 of the net assets of the Fund; 0.69% for net assets between $150,000
and $300,000; and 0.67% for net assets in excess of $300,000;
For the Managed Fund, 0.74% on an annual basis of the first $500,000 of
the net assets of the Fund; 0.68% for net assets between $500,000 and
$1,000,000; and 0.65% for net assets in excess of $1,000,000;
For the Short-Term Bond Fund, 0.30% on an annual basis of its net assets;
181
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
For the Small Cap Equity Fund, 0.90% on an annual basis of the first
$150,000 of the Fund's net assets; 0.75% for net assets between $150,000
and $300,000; 0.65% for net assets between $300,000 and $500,000, and 0.60%
for net assets in excess of $500,000;
For the International Opportunities Fund, 1.00% on an annual basis of
the first $20,000 of the Fund's net assets; 0.85% for net assets between
$20,000 and $50,000; and 0.75% for net assets in excess of $50,000;
For the Equity Index Fund, 0.15% on an annual basis of the first
$75,000 of the Fund's net assets; 0.14% for net assets between $75,000 and
$125,000; and 0.13% for the net assets in excess of $125,000;
For the High Yield Bond Fund, 0.65% on an annual basis of the first
$100,000 of the Fund's net assets; 0.60% for net assets between $100,000
and $200,000; and 0.50% for net assets in excess of $200,000;
For the Global Bond Fund, 0.85% on an annual basis of the first
$150,000 of the Fund's net assets; 0.80% for net assets between $150,000
and $300,000; 0.75% for net assets between $300,000 and 500,000; and 0.70%
for the net assets in excess of $500,000.
During the year ended December 31, 2000, the Investment Adviser voluntarily
contributed approximately $284 to the Money Market Fund. John Hancock received
no shares of beneficial interest or other consideration in exchange for the
contribution, which increased the Funds' net asset values. During the year ended
December 31, 1999, the Investment Adviser voluntarily contributed approximately
$445 to the Emerging Markets Equity Fund. John Hancock received no shares of
beneficial interest or other consideration in exchange for the contribution,
which increased the Funds' net asset values.
John Hancock has entered into Sub-Advisory Agreements with Independence
Investment Associates, Inc., with respect to the Large Cap Growth, Aggressive
Balanced, Mid Cap Blend, Real Estate Equity, Growth & Income, Managed and
Short-Term Bond Funds; with John Hancock Advisers, Inc., with respect to the
Active Bond and Small Cap Growth Funds; with Independence International
Associates, Inc., with respect to the International Equity Index Fund, each of
whom is an affiliate of John Hancock, and, under the supervision of John
Hancock, is responsible for the day-to-day investment management of each of the
Funds. John Hancock maintains responsibility for the day-to-day management of
the Money Market Fund. John Hancock has also entered into the Sub-Advisory
Agreements with the following Sub-Advisers, each of whom under the supervision
of John Hancock, is responsible for the day-to-day investment management of
each of the Funds:
Fund Sub-Adviser
- ---- -----------
Fundamental Growth Putnam Investment Management, Inc.
Emerging Markets Equity Morgan Stanley Investment Management, Inc.
International Equity Goldman Sachs Asset Management
Global Balanced Capital Guardian Trust Company
Mid Cap Growth Janus Capital Corporation
Large Cap Value T. Rowe Price Associates, Inc.
Large Cap Value CORE Goldman Sachs Asset Management
Large/Mid Cap Value Wellington Management Company, LLP
Mid Cap Value Neuberger Berman, LLC
Small/Mid Cap Growth Wellington Management Company, LLP
Bond Index Mellon Bond Associates, LLP
Large Cap Aggressive Growth Alliance Capital Management, LLP
Small/Mid Cap CORE Goldman Sachs Asset Management
182
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Fund Sub-Adviser
- ---- -----------
Small/Mid Cap Value The Boston Company Asset Management, LLC
Real Estate Equity Morgan Stanley Investment Management, Inc.
Growth & Income Putnam Investment Management, Inc.
Managed Capital Guardian Trust Company
Small Cap Equity Capital Guardian Trust Company
International Opportunities T. Rowe Price International, Inc.
Equity Index State Street Global Bank & Trust N.A.
High Yield Bond Wellington Management Company, LLP
Global Bond Capital Guardian Trust Company
In the event that normal operating expenses of each Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of each Fund's daily net asset value,
John Hancock and JHVLICO will reimburse each Fund for such excess. Accordingly,
for the year ended December 31, 2000, the reimbursements paid from John
Hancock and JHVLICO were $10 to Fundamental Growth, $18 to Aggressive Balanced,
$202 to Active Bond, $500 to Emerging Markets Equity, $196 to International
Equity Index, $92 to International Equity, $86 to Global Balanced, $21 to Mid
Cap Blend, $27 to Large Cap Value CORE, $29 to Large/Mid Cap Value, $11 to Bond
Index, $11 to Large Cap Aggressive Growth, $54 to Small/Mid Cap CORE, $32
Small/Mid Cap Value, $23 to Small Cap Equity, $154 to International
Opportunities, $30 to High Yield Bond and $64 to Global Bond.
Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the
principal underwriter and transfer agent of the Trust. Certain officers and
trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV,
JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, IPL and PPM-1, and
some are also officers of John Hancock. Fees for independent trustees are paid
by the Trust.
183
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D -- INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities and obligations of the U.S. government, for each Fund for
the year ended December 31, 2000 were as follows:
Fund Purchases Sales and Maturities
- ---- --------- --------------------
Large Cap Growth $ 1,250,545 $ 1,228,862
Fundamental Growth 107,451 66,744
Aggressive Balanced 31,654 23,208
Active Bond 1,265,780 1,276,929
CORE Bond 11,443 6,405
Emerging Markets Equity 60,393 41,178
International Equity Index 31,951 34,493
International Equity 14,742 9,759
Small Cap Growth 374,852 247,034
Global Balanced 48,726 50,546
Mid Cap Growth 856,814 697,807
Mid Cap Blend 29,115 15,454
Large Cap Value 94,362 68,034
Large Cap Value CORE 15,762 6,074
American Leaders Large Cap Value 6,170 743
Large/Mid Cap Value 15,713 7,948
Mid Cap Value 245,227 239,321
Small/Mid Cap Growth 182,973 192,814
Bond Index 15,735 1,943
Large Cap Aggressive Growth 34,162 17,320
Small/Mid Cap CORE 26,850 14,704
Small/Mid Cap Value 48,496 29,457
Real Estate Equity 34,480 34,557
Growth & Income 3,521,406 3,934,343
Managed 5,113,157 5,689,315
Short-Term Bond 31,265 28,003
Small Cap Equity 144,792 135,804
International Opportunities 95,161 35,668
Equity Index 278,231 171,884
High Yield Bond 15,419 4,992
Global Bond 128,638 125,815
184
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
The identified cost of investments owned by each Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation at December 31, 2000,
for federal income tax purposes were as follows:
Net Unrealized
Identified Unrealized Unrealized Appreciation
Fund Cost Appreciation Depreciation (Depreciation)
- ---- ---- ------------ ------------ --------------
Large Cap Growth $ 1,130,115 $ 157,238 $ (145,172) $ 12,066
Fundamental Growth 50,109 1,657 (8,211) (6,554)
Aggressive Balanced 20,345 1,593 (1,428) 165
Active Bond 769,274 18,809 (7,244) 11,565
CORE Bond 5,100 175 (9) 166
Emerging Markets Equity 42,106 722 (14,268) (13,546)
International Equity Index 184,080 29,734 (25,365) 4,369
International Equity 15,419 958 (1,670) (712)
Small Cap Growth 238,639 38,819 (48,754) (9,935)
Global Balanced 28,039 1,513 (2,156) (643)
Mid Cap Growth 427,933 47,294 (108,275) (60,981)
Mid Cap Blend 19,467 2,758 (1,498) 1,260
Large Cap Value 179,578 27,985 (12,161) 15,824
Large Cap Value CORE 15,514 2,032 (1,340) 692
American Leaders Large Cap Value 5,413 846 (503) 343
Large/Mid Cap Value 13,633 2,009 (576) 1,433
Mid Cap Value 104,638 19,231 (1,381) 17,850
Small/Mid Cap Growth 177,500 27,661 (25,001) 2,660
Bond Index 61,783 1,543 (853) 690
Large Cap Aggressive Growth 28,843 1,995 (5,233) (3,238)
Small/Mid Cap CORE 20,297 3,308 (3,047) 261
Small/Mid Cap Value 28,304 2,543 (2,901) (358)
Real Estate Equity 131,915 23,510 (1,560) 21,950
Growth & Income 3,120,255 520,107 (379,489) 140,618
Managed 2,736,969 354,480 (169,015) 185,465
Short-Term Bond 77,269 907 (599) 308
Small Cap Equity 81,274 4,897 (18,712) (13,815)
International Opportunities 119,850 9,362 (13,862) (4,500)
Equity Index 492,664 77,606 (63,687) 13,919
High Yield Bond 29,400 435 (5,829) (5,394)
Global Bond 62,666 3,610 (869) 2,741
During the year ended December 31, 2000, reclassifications have been made
in each Fund's capital accounts to report these balances on a tax basis,
excluding certain temporary differences, as of December 31, 2000. These
permanent reclassifications are primarily attributable to differences in the
treatment of foreign currency gains and losses, net operating losses and
return of capital under federal tax rules versus generally accepted accounting
principles. Net assets were not affected by these reclassifications.
185
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE E - FORWARD FOREIGN CURRENCY CONTRACTS
As of December 31, 2000 the International Equity Index, Managed and Global
Bond Funds had open forward foreign currency contracts which contractually
obligate the Funds to deliver or receive currencies at a specified date, as
follows:
Net Unrealized
Appreciation
International Equity Index Maturity Date Cost Value (Depreciation)
- -------------------------- ------------- ---- ----- --------------
Currency Sold
- -------------
Japanese Yen 29,900 03/08/01 $ 270 $ 264 $ 5
Euro 99 03/16/01 92 93 (1)
Pound Sterling 40 03/16/01 58 59 (1)
-------
$ 3
=======
Currency Purchased
- ------------------
Japanese Yen 113,800 03/01/01 $ 1,040 $ 1,005 $ (35)
Japanese Yen 74,870 03/08/01 684 662 (22)
Euro 1,028 03/16/01 909 968 59
Pound Sterling 836 03/16/01 1,209 1,252 43
Euro 1,037 03/30/01 963 978 15
-------
$ 60
=======
Managed
Currency Sold
- -------------
Australian Dollar 2,961 02/05/01 $ 1,558 $ 1,648 $ (90)
Canadian Dollar 12,987 02/05/01 8,474 8,663 (189)
Euro 110,744 02/05/01 96,464 104,171 (7,707)
Euro 16,006 02/06/01 14,118 15,056 (938)
Greek Drachma 932,723 02/05/01 2,385 2,575 (190)
Japanese Yen 8,635,727 02/05/01 78,722 76,007 2,715
Japanese Yen 46,663 02/07/01 426 411 15
Pound Sterling 10,950 02/05/01 15,559 16,386 (827)
Pound Sterling 1,950 02/06/01 2,801 2,918 (117)
Pound Sterling 3,920 02/07/01 5,602 5,866 (264)
Danish Krone 27,752 02/05/01 3,238 3,499 (261)
Swedish Krona 28,605 02/05/01 2,862 3,038 (176)
Swiss Franc 24,285 02/06/01 14,232 15,034 (802)
-------
$(8,831)
=======
186
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
Managed - continued
Net Unrealized
Appreciation
Currency Purchased Maturity Date Cost Value (Depreciation)
- ------------------ ------------- ---- ----- --------------
Australian Dollar 189 02/05/01 $ 103 $ 105 $ 2
Danish Krone 1,862 02/05/01 223 235 12
Pound Sterling 352 02/05/01 510 527 17
Pound Sterling 5,709 02/06/01 8,311 8,543 232
Pound Sterling 7,764 02/07/01 11,203 11,618 415
Euro 23,428 02/06/01 20,892 22,039 1,147
Swiss Franc 59,526 02/06/01 34,896 36,851 1,955
-------
$ 3,780
=======
Global Bond
Currency Sold
- -------------
Euro 2,000 02/12/01 $ 1,718 $ 1,882 $ (164)
Euro 2,645 04/24/01 2,225 2,495 (270)
-------
$ (434)
=======
Currency Purchased
- ------------------
Euro 2,000 02/12/01 $ 1,766 $ 1,882 $ 116
Japanese Yen 239,062 04/24/01 2,225 2,130 (95)
-------
$ 21
=======
NOTE F-COMBINATION
On December 22, 2000, the shareholders of John Hancock International
Opportunities II Fund ("International Opportunities II") approved the
combination between International Opportunities II and International
Opportunities, Funds, providing for the transfer of substantially all of the
assets and liabilities of the International Opportunities II Fund to the
International Opportunities Fund in exchange solely for the trust shares of the
International Opportunities Fund. The acquisition was accounted for as a
tax-free exchange of 1,947 trust shares of the International Opportunities Fund
for the net assets of International Opportunities II Fund, which amounted to
$22,528, including $(2,878) of unrealized depreciation, after the close of
business on December 29, 2000. The net assets of the International Opportunities
Fund prior to the combination on December 29, 2000, were $94,169, and the
aggregate net assets of the International Opportunities Fund after the
combination amounted to $116,697.
NOTE G - CHANGE IN ACCOUNTING PRINCIPLE
The Funds will adopt the provisions of the AICPA Audit and Accounting Guide
for Investment Companies, as revised, effective for fiscal years beginning after
December 15, 2000. As required, the Funds will begin amortizing premiums on
debt securities effective January 1, 2001. Prior to this date, the Funds did not
amortize premiums on debt securities. The cumulative effect of this accounting
change will have no impact on the total net assets of the Funds. The impact of
this accounting change has not been determined but will result in a
reclassification between the cost of securities and a corresponding
reclassification in net unrealized appreciation/depreciation, based on
securities held as of December 31, 2000.
187
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Contractowners, Policyholders,
and Board of Trustees of
John Hancock Variable Series Trust I
We have audited the accompanying statement of assets and liabilities,
including the schedules of investments, of John Hancock Variable Series Trust I
(the Trust) (comprising, respectively, the Large Cap Growth, Active Bond (for-
merly, Sovereign Bond), Emerging Markets Equity, International Equity Index,
Small Cap Growth, Global Balanced (formerly, International Balanced), Mid Cap
Growth, Large Cap Value, Money Market, Mid Cap Value, Small/Mid Cap Growth, Bond
Index, Small/Mid Cap Core, Real Estate Equity, Growth & Income, Managed,
Short-Term Bond, Small Cap (formerly, Small Cap Value), International
Opportunities, Equity Index, High Yield Bond, Global Bond, Large Cap Aggressive
Growth, Small/Mid Cap Value, Large Cap Value CORE, International Equity, Mid Cap
Blend, Aggressive Balanced, Fundamental Growth (formerly, Fundamental Mid Cap
growth), Large/Mid Cap Value, Core Bond and American Leaders Large Cap Value
Funds) as of December 31, 2000, and the related statements of operations for the
period then ended, and the statement of changes in net assets and financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial state-
ments and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2000, by correspondence with the custodian
or brokers, or by other appropriate auditing procedures where replies from
brokers were not received. 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, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting John Hancock Variable
Series Trust I at December 31, 2000, the results of their operations for the
period then ended, and the changes in their net assets and the financial
highlights for each of the periods indicated, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 13, 2001
188
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
OTHER MATTERS (UNAUDITED)
Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as
amended, requires registered management investment companies to furnish
information relating to any matter submitted during the reporting period to a
vote of Shareholders of the Trust. John Hancock Variable Series Trust I
solicited a vote at special meetings of Contract owners/Policyholders held on
September 28, October 20, and December 22, 2000 on the following matters:
For the Large Cap Growth Fund 9/28/00: For Against Abstain
--- ------- -------
6. To change the Fund's classification from "diversified" to "non-diversified". 77% 13% 10%
8. To modify the fundamental restrictions applicable to the Fund to permit it 77% 14% 9%
to invest in securities that are subject to legal restrictions on resale.
10. To modify the fundamental restrictions applicable to the Fund to permit it 77% 14% 9%
to invest in financial futures.
For the Fundamental Growth Fund 9/28/00:
4A. To approve a new Sub-Investment Management Agreement among the 87% 8% 5%
Trust, John Hancock, and Putnam Investment Management, Inc.
4B. To approve an amendment to the March 14, 1996 Investment Management 76% 19% 5%
Agreement between the Trust and John Hancock, reflecting an increase in
the Investment Advisory fee.
For the Real Estate Equity Fund 9/28/00:
1A. To approve a new Sub-Investment Management Agreement among the 86% 6% 8%
Trust, John Hancock, and Morgan Stanley Investment Management, Inc.
1B. To approve a new Sub-Investment Management Agreement among the 85% 7% 8%
Trust, John Hancock, and Independence Investment Associates, Inc.
1C. To approve an amendment to the April 12, 1988 Investment Management 79% 13% 8%
Agreement between the Trust and John Hancock, reflecting an increase in
the Investment Advisory fee.
7. To change the Fund's classification from "diversified" to "non-diversified". 84% 8% 8%
9. To modify the fundamental restrictions applicable to the Fund to permit it 83% 9% 8%
to invest in securities that are subject to legal restrictions on resale.
11. To modify the fundamental restrictions applicable to the Fund to permit it 84% 8% 8%
to invest in financial futures.
For the International Opportunities Fund 9/28/00:
2. To approve a new Sub-Investment Management Agreement among the 94% 2% 4%
Trust, John Hancock, and T. Rowe Price International, Inc.
189
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
For the International Opportunities II Fund 9/28/00: For Against Abstain
--- ------- -------
3A. To approve an interim Sub-Investment Management Agreement among the 81% 9% 10%
Trust, John Hancock, and Rowe Price-Fleming International, Inc.
3B. To approve a new Sub-Investment Management Agreement among the 75% 14% 11%
Trust, John Hancock, and T. Rowe Price International, Inc., reflecting an
increase in the Sub-Investment Advisory fee.
3C. To approve an amendment to the April 14, 1998 Investment Management 75% 15% 10%
Agreement between the Trust and John Hancock, reflecting an increase in
the Investment Advisory fee.
For the Active Bond Fund 10/20/00:
3A. To approve an amendment to the May 1, 1995 Sub-Investment Manage- 72% 20% 8%
ment Agreement among the Trust, John Hancock and John Hancock Advis-
ers, Inc., reflecting an increase in Sub-Investment Advisory fee.
3B. To approve an amendment to the April 12, 1988 Investment Management 72% 20% 8%
Agreement between the Trust and John Hancock, reflecting an increase in
the Investment Advisory fee.
For the Global Balanced Fund 10/20/00:
4A. To approve a new Sub-Investment Management Agreement among the 88% 6% 6%
Trust, John Hancock, and Capital Guardian Trust Company.
4B. To approve an amendment to the March 14, 1996 Investment Management 74% 20% 6%
Agreement between the Trust and John Hancock, reflecting and increase in
the Investment Advisory fee.
For Growth & Income Fund 10/20/00:
2A. To approve a new Sub-Investment Management Agreement among the 83% 10% 7%
Trust, John Hancock, and Putnam Investment Management, Inc.
B. To approve a new Sub-Investment Management Agreement among the 82% 11% 7%
Trust, John Hancock, and Independence Investment Associates, Inc.
C. To approve an amendment to the April 12, 1988 Investment Management 75% 18% 7%
Agreement between the Trust and John Hancock, reflecting an increase in
the Investment Advisory fee.
2D. To change the Fund's classification from "diversified" to "non-diversified." 79% 13% 8%
2E. To modify the fundamental restrictions applicable to the Fund to permit it 79% 14% 7%
to invest in securities that are subject to legal restrictions on resale.
2F. To modify the fundamental restrictions applicable to the Fund to permit it 80% 13% 7%
to invest in financial futures.
190
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2000
- --------------------------------------------------------------------------------
(000's Omitted)
For Against Abstain
--- ------- -------
For the Managed Fund 10/20/00:
1A. To approve a new Sub-investment Management Agreement among the 84% 9% 7%
Trust, John Hancock, and Capital Guardian Trust Company.
B. To approve a new Sub-Investment Management Agreement among the 84% 9% 7%
Trust, John Hancock, and Independence Investment Associates, Inc.
C. To approve an amendment to the April 12, 1988 Investment Management 76% 16% 8%
Agreement between the Trust and John Hancock, reflecting an increase in
the Investment Advisory fee.
1D. To change the Fund's classification from "diversified" to 80% 11% 9%
"non-diversified".
For the Small Cap Equity Fund 10/20/00:
4A. To approve a new Sub-Investment Management Agreement among the 82% 12% 6%
Trust, John Hancock, and Capital Guardian Trust Company.
4B. To approve an amendment to the March 14, 1996 Investment Management 68% 27% 5%
Agreement between the Trust and John Hancock, reflecting an increase in
the Investment Advisory fee.
For the Global Bond Fund 10/20/00:
4A. To approve a new Sub-Investment Management Agreement among the 86% 8% 6%
Trust, John Hancock, and Capital Guardian Trust Company.
4B. To approve an amendment to the March 14, 1996 Investment Management 79% 15% 6%
Agreement between the Trust and John Hancock, reflecting an increase in
the Investment Advisory fee.
International Opportunities Fund II 12/22/00:
To approve combining the International Opportunities Fund II with the Interna- 93% 1% 6%
tional Opportunities Fund.
191
OFFICERS AND TRUSTEES
-----------------------------------------------
Michele G. Van Leer, Chairman
Thomas J. Lee, President and Vice Chairman
Karen Q. Visconti, Secretary
Arnold Bergman, Assistant Secretary
Raymond F. Skiba, Treasurer
Jude A. Curtis, Compliance Officer
Maryellen Carney, Assistant Compliance Officer
Patrick F. Smith, Controller
Paula M. Pashko, Assistant Controller
Elizabeth G. Cook
Reverend Diane C. Kessler
Hassel H. McClellan
Robert F. Verdonck
INVESTMENT ADVISER
-----------------------------
John Hancock Life Insurance
John Hancock Place
P.O. Box 111
Boston, MA 02117
INDEPENDENT AUDITORS
----------------------
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
SUB-INVESTMENT ADVISERS
- --------------------------------------------------------------------------------
Independence Investment Associates, Inc. and subsidiaries
53 State Street
Boston, MA 02109
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
The Boston Company Asset Management, LLC
One Boston Place
Boston, MA 02108
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, CA 90071
Federated Investment Management Company
1001 Liberty Avenue, 10th Floor
Pittsburgh, PA 15222
Goldman Sachs Asset Management
32 Old Slip
New York, NY 10005
Janus
100 Fillmore Street
Denver, CO 80206-4928
Mellon Bond Associates, LLP
One Mellon Bank Center, Suite 5400
Pittsburgh, PA 15258-0001
John Hancock Advisers Inc.
101 Huntington Avenue
Boston, MA 02199
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158-3698
Putnam Investments
One Post Office Square
Boston, MA 02109
State Street Global Advisors
Two International Place
Boston, MA 02110
T. Rowe Price Associate Inc.
100 East Pratt Street
Baltimore, MD 2120
T. Rowe Price International Inc.
100 East Pratt Street
Baltimore, MD 2120
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
[LOGO OF JOHN HANCOCK]
Variable Series Trust consists of funds used as investment options for various
John Hancock variable life annuity contracts. This report must be accompanied
by the required prospectus and the most current quarterly
Performance report for the contract offered. Investors are not able to invest
directly in the Variable Series Trust.
Not all of the funds described in this report are available on every
product. Please refer to the prospectus for additional information about
the investment options on your variable product.
Insurance Products are Issued by: John Hancock Life Insurance Company
John Hancock Variable Life Insurance Company* (*not licensed in New York),
Boston, MA 02117
Securities Products are Distributed by: John Hancock Funds, Inc., Member NASD
Signator Investors, Inc., Member NASD, SIPC
[LOGO OF IMSA]
[LOGO OF JOHN HANCOCK]
Semiannual Report
June 30, 2001
Investment Vision
The Variable Series Variable Series Trust
Insurance Products:
. Are NOT FDIC insured; NOT insured by the FDIC, NCUSIF, or any other federal
entity;
. Are NOT deposits or other obligations of any bank and are NOT guaranteed by
any bank; and
. Are subject to investment risk, including the possible loss of principal
investment.
[LOGO OF JOHN HANCOCK]
[LOGO OF INDEPENDENCE]
[LOGO OF ALLIANCE CAPITAL]
[LOGO OF THE BOSTON COMPANY]
[LOGO OF CAPITAL GUARDIAN TRUST COMPANY]
[LOGO OF GOLDMAN SACHS]
[LOGO OF JANUS]
[LOGO OF MELLON BOND]
[LOGO OF MORGAN STANLEY]
[LOGO OF PUTNAM INVESTMENTS]
[LOGO OF SSGA]
[LOGO OF T. ROWE PRICE]
[LOGO OF WELLINGTON MANAGEMENT]
Dear Shareholder,
Since our last report six months ago, the economic slowdown that began late last
year has continued. Economic growth remains slow, unemployment is up, and
corporations generally are reporting lower earnings. Through this period, the
Federal Reserve has steadily decreased interest rates in response, at an
unprecedented rate of change. It will take time to feel the impact of these
cuts, but consumer and investor confidence has already improved.
The securities markets have begun to show signs of improvement recently, but the
severe drop from a very buoyant economy a year ago to a very lackluster economic
climate today has taken its toll, especially in the area of corporate profits.
Profits have tended to drop sharply, leading to substantial equity losses in
many sectors amid significant volatility. For the rest of 2001, we expect the
economy to respond well to the Fed's rate actions. By the end of this year, we
anticipate that growth will be back to 3% or more. This may seem quite modest
relative to the recent past, but judged historically it is a very healthy rate.
We are hopeful that the markets, and many of the Variable Series Trust
portfolios, will respond positively in turn.
With a backdrop of bumps and bruises in the markets, and cautious optimism for
the near future, the importance of portfolio diversification once again comes to
the fore. A quick review of first-half results shows that virtually all equity
market measures were down, including blue chip companies, the high-tech sector,
and most overseas markets. The single bright spot in the equity markets was
domestic small companies, which overall showed a modest positive return. Fixed
income securities benefited from the Fed's interest rate actions, and showed
positive returns as well. As a result, while it may have been difficult to avoid
erosion in the value of your portfolio during the first half of this year,
diversification across the range of available asset classes may have eased some
of the pain. We continue to encourage you to work with an investment
professional or other resources to achieve an appropriate level of
diversification.
Finally, you may have noticed a new face on this page. After 25 years of loyal
service to John Hancock, and seven years serving the Variable Series Trust, Tom
Lee has decided to leave the company to pursue a new career in education. We are
fortunate to be able to call upon the talents of Kathleen Driscoll, who has a
rich background in marketing and distribution, as she assumes the
responsibilities of President and Vice Chairman of the Variable Series Trust.
As always, we thank you for being a John Hancock variable life and/or variable
annuity policyholder. We continue to work hard to earn your confidence and
trust.
[PHOTO OF MICHELE G. VAN LEER]
Chairman
[PHOTO OF KATHLEEN F. DRISCOLL]
President and Vice Chairman
Sincerely,
/s/ Michele G. Van Leer
Michele G. Van Leer
Chairman
/s/ Kathleen F. Driscoll
Kathleen F. Driscoll
President and Vice Chairman
Economic Overview
John Hancock Economic Research
The slowdown that hit the US economy towards the end of 2000 continued through
the first half of 2001. Real economic growth has now been around an anemic 1%
pace since last fall. At this growth rate, we experience rising unemployment,
sharp cutbacks in corporate spending, profit shortfalls and bond defaults. And
although the overall economy is still expanding, the manufacturing sector is
suffering its own recession, in particular the formerly high-flying technology
and telecommunications industries.
The Federal Reserve reacted to the slowdown with the most rapid series of
interest rate cuts in recent history, reducing the Federal Funds rate by 2.75
points between January and June. The impact of these rate cuts takes 6-12
months to filter through the economy, but they have already helped to bolster
the confidence of both consumers and investors, and kept mortgage rates low
enough to sustain the all-important housing sector.
Still a soft landing, despite some bumpy moments
A slowdown without a recession is by definition a "soft landing," and is a
testament to the judgement and luck of policy-makers. Nonetheless, the speed
of the slowdown, from over a 5% growth rate a year ago, has caused as much
pain as some past recessions. Profits dropped sharply, leading to substantial
equity losses and heightened market volatility.
The severity of the reversal for technology sectors has led some commentators
to argue that this cycle is more serious than the headline statistics suggest.
But while overcapacity in certain industries (especially telecommunications)
may lead to a brutal shake-out, the consequences for the wider economy should
not be overwhelming. The entire manufacturing sector is only about 15% of US
employment and about 20% of GDP, and most of that is not high-tech. Some
companies and their employees are suffering, but the main result of excess
capacity for the economy may be cheap bandwidth and improved technology
services.
Recovery just around the corner
The impact of the Fed's monetary easing should be felt over the next 6 months.
We expect lower rates to stimulate housing, auto sales, and other interest-
sensitive consumer purchases. As companies experience rising demand and work
off unwanted inventories, they will re-start postponed capital spending
projects. By the end of this year we anticipate that growth will be back to 3%
or more. This may feel unexciting by the standards of a year or two ago, but
in a longer perspective it is a very healthy rate.
There are, of course, risks:
. Energy prices and electricity supply represent a potential problem for
consumers and businesses.
. The US trade deficit leaves the dollar vulnerable to a crisis of
confidence, in which rising import prices inhibit the Fed's ability to
lower interest rates.
. Home-growth inflation pressures might also derail the recovery of business
investment and productivity growth.
. Finally, in a long-term perspective, today's high stock market valuations
may still be out of line with economic fundamentals.
Overall, however, we look forward to a pace of growth for the economy and
corporate profits that will be slower than we got used to in recent years, but
which is still better than what we have experienced for most of the past three
decades.
1
Inception: March 29, 1986
Growth & Income Fund
Independence Investment LLC Paul F. McManus
Putnam Investments C. Beth Cotner
The Growth & Income Fund is a multi-manager fund with two sub-advisers each
independently managing their own portion of the Fund. The two managers employ
a distinct and complementary investment strategy. This unique multi-manager
approach seeks to produce more consistent investment returns over market
cycles and to reduce the risk of any one manager or strategy being out of
favor in certain market environments.
II LLC selects stocks using a combination of fundamental equity research and
quantitative tools and focuses on large cap stocks that are undervalued
relative to the stock's history and have improving earnings growth prospects.
Putnam selects stocks using a systematic screening approach and fundamental
equity research and focuses on large and mid cap stocks with opportunities for
above average growth.
As of June 30, 2001, II LLC managed approximately 80.10% and Putnam managed
approximately 19.90% of the Fund's assets. For the first half of 2001, the
Fund performed -9.13%, just below the overall benchmark's performance of -
6.69%.
Independence Investment LLC
In the second quarter, the S&P 500 Index had its strongest quarterly
performance period since the fourth quarter of 1999, returning 5.85%. This
portion of your portfolio performed very well for the quarter, returning 7.28%
net; outperforming the S&P 500 Index by 143 basis points. All of the
outperformance of the Fund relative to the benchmark was from specific stock
selection. The sectors that added the most value this quarter were Retail and
Utilities. Conversely, Financial Services and Healthcare were the largest
detractors from performance.
The worldwide economies are clearly struggling. The U.S. will likely show
negative growth in the current quarter as businesses reign in spending and
investment. European economies slowed considerably this quarter and Japan
appears to have entered another recession. Investors are looking past the
slowdown and focusing instead on the potential rebound over the coming months.
The consumer has remained quite resilient during this slowdown. The Federal
Reserve has aggressively cut interest rates and consumers will be receiving
tax rebate checks in the third quarter. Inflation is clearly coming down as
energy prices have weakened. We believe investors must be patient, waiting to
see tangible signs of the economic recovery over the remainder of the year. We
continue to be overweight retailers, as we believe the consumer will once
again lead us on the road to recovery. We also own significant positions in
semiconductor companies. We believe their shares are attractively priced and
they will quickly benefit from a rebound in technology spending. Finally, many
software and data service companies are attractive because their businesses
should prove to be more predictable in this period of uncertain order patterns
in the technology industry.
Putnam Investments
Weak performance in the first quarter of the year dragged down the positive
results achieved later in the period. In the first quarter of 2001, the Fund
underperformed the index as strong relative stock performance in consumer
staples (Anheuser Busch, Clear Channel, and Echostar), coupled with
underweighting the lagging technology sector, was offset by weak stock
performance in both technology (Applied Micro Circuits, PMC-Sierra, Brocade
Communications, Juniper Networks, Agile Software, Siebel Systems) and health
care (Applera-Applied Biosystems, Genentech).
In the second quarter, the Fund outperformed the benchmark due to strong
stock selection in consumer staples (AOL Time Warner, Inc.) and overweighting
the robust conglomerates sector (Tyco International); which more than offset
an underweight position in the rallying technology sector.
We believe that the current environment of economic uncertainty will continue
to pressure rapidly growing, high-quality growth companies. While we do not
expect this condition to persist over the long term, we have taken steps to
focus on growth companies with a proven track record of growing profits even
during unsettled economic times.
Going forward, we are overweighting technology (software and communications
equipment) and consumer cyclicals (general merchandise retail and specialty
retail). While underweighting the health-care and energy sectors, within those
areas we will focus on pharmaceuticals, biotechnology, and specialty
pharmaceuticals, and oil services, respectively.
2
Inception: March 29, 1986
Growth & Income Fund
Independence Investment LLC Paul F. McManus
Putnam Investments C. Beth Cotner
[GRAPH]
Growth & Income
Date Fund S&P 500(R) Index
---- ---- ----------------
7/1/1991 10,000 10,000
7/31/1991 10,345 10,468
8/31/1991 10,567 10,714
9/30/1991 10,439 10,538
10/31/1991 10,592 10,680
11/30/1991 10,224 10,248
12/31/1991 11,181 11,419
1/31/1992 10,985 11,207
2/29/1992 11,115 11,350
3/31/1992 10,928 11,128
4/30/1992 11,275 11,452
5/31/1992 11,386 11,514
6/30/1992 11,302 11,347
7/31/1992 11,691 11,804
8/31/1992 11,460 11,566
9/30/1992 11,588 11,699
10/31/1992 11,569 11,741
11/30/1992 12,019 12,136
12/31/1992 12,175 12,295
1/31/1993 12,300 12,385
2/28/1993 12,472 12,552
3/31/1993 12,859 12,822
4/30/1993 12,516 12,508
5/31/1993 12,841 12,846
6/30/1993 12,967 12,888
7/31/1993 12,896 12,828
8/31/1993 13,416 13,316
9/30/1993 13,440 13,218
10/31/1993 13,669 13,486
11/30/1993 13,548 13,359
12/31/1993 13,798 13,524
1/31/1994 14,208 13,977
2/28/1994 13,794 13,599
3/31/1994 13,260 13,008
4/30/1994 13,490 13,177
5/31/1994 13,541 13,392
6/30/1994 13,296 13,061
7/31/1994 13,655 13,493
8/31/1994 14,164 14,042
9/30/1994 13,745 13,704
10/31/1994 13,965 14,018
11/30/1994 13,501 13,503
12/31/1994 13,722 13,700
1/31/1995 14,005 14,057
2/28/1995 14,557 14,602
3/31/1995 14,879 15,034
4/30/1995 15,313 15,472
5/31/1995 15,822 16,083
6/30/1995 16,182 16,461
7/31/1995 16,698 17,009
8/31/1995 16,808 17,055
9/30/1995 17,537 17,769
10/31/1995 17,422 17,707
11/30/1995 18,156 18,486
12/31/1995 18,416 18,828
1/31/1996 18,906 19,476
2/29/1996 19,150 19,663
3/31/1996 19,395 19,852
4/30/1996 19,614 20,144
5/31/1996 20,068 20,663
6/30/1996 20,177 20,748
7/31/1996 19,224 19,825
8/31/1996 19,682 20,245
9/30/1996 20,596 21,383
10/31/1996 21,100 21,969
11/30/1996 22,504 23,636
12/31/1996 22,117 23,173
1/31/1997 23,255 24,612
2/28/1997 23,383 24,811
3/31/1997 22,472 23,779
4/30/1997 23,561 25,199
5/31/1997 24,839 26,746
6/30/1997 25,818 27,939
7/31/1997 28,125 30,157
8/31/1997 26,701 28,480
9/30/1997 28,254 30,041
10/31/1997 27,191 29,038
11/30/1997 28,214 30,382
12/31/1997 28,717 30,905
1/31/1998 29,027 31,248
2/28/1998 31,396 33,501
3/31/1998 33,152 35,216
4/30/1998 33,244 35,572
5/31/1998 32,881 34,960
6/30/1998 34,276 36,379
7/31/1998 33,876 35,994
8/31/1998 28,675 30,789
9/30/1998 30,147 32,762
10/31/1998 32,834 35,426
11/30/1998 34,799 37,573
12/31/1998 37,402 39,737
1/31/1999 38,657 41,398
2/28/1999 37,457 40,111
3/31/1999 38,566 41,715
4/30/1999 40,191 43,329
5/31/1999 39,019 42,307
6/30/1999 41,709 44,655
7/31/1999 40,282 43,262
8/31/1999 39,805 43,045
9/30/1999 38,707 41,866
10/31/1999 40,971 44,516
11/30/1999 41,446 45,420
12/31/1999 43,471 48,095
1/31/2000 40,822 45,680
2/29/2000 39,797 44,817
3/31/2000 44,251 49,200
4/30/2000 43,169 47,719
5/31/2000 42,600 46,741
6/30/2000 43,282 47,891
7/31/2000 42,755 47,144
8/31/2000 45,401 50,071
9/30/2000 42,657 47,428
10/31/2000 42,761 47,228
11/30/2000 37,930 43,507
12/31/2000 37,775 43,720
1/31/2001 38,943 45,272
2/28/2001 34,857 41,143
3/31/2001 31,997 38,539
4/30/2001 35,072 41,533
5/31/2001 35,137 41,812
6/30/2001 34,325 40,796
Top Ten Holdings (as of June 30, 2001)
- -------------------------------------------------------------------------------
- -
% of six months ago
investments % of investments
General Electric Co. 6.0% 6.8%
Microsoft Corp. 4.8% 8.1%
Pfizer, Inc. 4.0% 1.0%
AOL Time Warner, Inc. 3.1% N/A
Citigroup, Inc. 3.0% 4.7%
Exxon Mobil Corp. 2.7% 1.6%
Wal-Mart Stores, Inc. 2.4% 1.8%
Intel Corp. 2.2% 3.6%
Johnson & Johnson 1.9% 1.3%
Verizon Communications 1.9% N/A
Average Annual Total Returns*
- -------------------------------------------------------------------------------
- -
Growth & Income S&P 500 MorningStar
Fund Index(1) Peer Group+
YTD** -9.13% -6.69% -8.13%
1 Year -20.69 -14.82 -15.74
3 Years 0.05 3.89 3.24
5 Years 11.21 14.48 12.82
10 Years 13.13 15.10 13.83
Top Ten Sectors (as of June 30, 2001)
- -------------------------------------------------------------------------------
- -
% of % of
investments investments
Technology 25.3% Consumer Cyclical 7.3%
Health Care 13.5% Energy 6.1%
Financial 13.4% Utility 5.3%
Capital Equipment 11.2% Consumer Staple 5.1%
Retail 8.3% Basic Material 3.0%
(1) "Standard & Poor's 500" is a trademark of the McGraw-Hill Companies,
Inc. and has been licensed for use by John Hancock Life Insurance
Company. The product is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the product.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the Fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary
to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Large Blend investment category.
3
Inception: May 1, 1996
Equity Index Fund
SSgA Funds Management, Inc. Management Team
The S&P 500 gained 5.85% in the second quarter, partially offsetting the
losses from the first quarter of the year. The index is still down 6.69% for
the first half of 2001. Information Technology jumped 12.44% in the second
quarter, but is still down over 16% year to date. This gives the sector the
odd titles of best performer in the second quarter, and worst performer in the
first half. Utilities was the worst performing sector in the quarter, falling
5.70%.
In the first half of the year there were some bright lights. Consumer
Discretionary stocks rose 8.82% and Materials rose 4.51%. The remaining
sectors all posted losses. There were 7 stocks that doubled in the first half,
led by JC Penney (147%), Compuware (124%), Kmart (116%) and Best Buy (115%.)
Of particular interest, Microsoft rose 68% in the first half, adding 1.3% to
the index return.(/3/)
On the downside 15 stocks lost more than half of their value, led by Network
Appliances (-79%) Palm (-79%) and Applied MicroCircuits (-77%.)(/3/)
The Equity Index Fund attempts to track the performance of the S&P 500 Index
by fully replicating the index. The fund attempts to match the index holdings
and weights for each security in order to provide returns close to the index
return.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Date Equity Index Fund S&P 500* Index
---- ----------------- --------------
5/1/1996 10,000 10,000
5/31/1996 10,210 10,258
6/30/1996 10,231 10,300
7/31/1996 9,825 9,842
8/31/1996 9,971 10,050
9/30/1996 10,509 10,615
10/31/1996 10,787 10,906
11/30/2001 11,561 11,734
12/31/1996 11,423 11,504
1/31/1997 12,133 12,218
2/28/1997 12,221 12,317
3/31/1997 11,736 11,805
4/30/1997 12,409 12,510
5/31/1997 13,119 13,278
6/30/1997 13,727 13,870
7/31/1997 14,821 14,971
8/31/1997 13,993 14,139
9/30/1997 14,756 14,913
10/31/1997 14,267 14,415
11/30/1997 14,887 15,083
12/31/1997 15,169 15,342
1/31/1998 15,336 15,513
2/28/1998 16,441 16,631
3/31/1998 17,280 17,482
4/30/1998 17,455 17,659
5/31/1998 17,151 17,355
6/30/1998 17,850 18,060
7/31/1998 17,664 17,868
8/31/1998 15,096 15,285
9/30/1998 16,067 16,264
10/31/1998 17,369 17,587
11/30/1998 18,419 18,653
12/31/1998 19,484 19,727
1/31/1999 20,296 20,551
2/28/1999 19,669 19,912
3/31/1999 20,464 20,709
4/30/1999 21,252 21,510
5/31/1999 20,743 21,003
6/30/1999 21,904 22,168
7/31/1999 21,220 21,477
8/31/1999 21,115 21,369
9/30/1999 20,541 20,784
10/31/1999 21,834 22,099
11/30/1999 22,275 22,548
12/31/1999 23,593 23,876
1/31/2000 22,400 22,677
2/29/2000 21,978 22,249
3/31/2000 24,120 24,425
4/30/2000 23,394 23,690
5/31/2000 22,910 23,204
6/30/2000 23,475 23,775
7/31/2000 23,108 23,404
8/31/2000 24,546 24,857
9/30/2000 23,245 23,545
10/31/2000 23,146 23,446
11/30/2000 21,326 21,598
12/31/2000 21,434 21,704
1/31/2001 22,191 22,475
2/28/2001 20,164 20,425
3/31/2001 18,884 19,132
4/30/2001 20,350 20,619
5/31/2001 20,490 20,757
6/30/2001 19,990 20,252
Top Ten holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
- -
% of six months ago
investments % of investments
General Electric Co. 4.4% 3.4%
Microsoft Corp. 3.6% 4.0%
Exxon Mobil Corp. 2.7% 1.9%
Citigroup, Inc. 2.4% 1.3%
Pfizer, Inc. 2.3% 0.8%
AOL Time Warner, Inc. 2.1% N/A
Wal-Mart Stores, Inc. 2.0% 2.1%
American International Group, Inc. 1.8% 1.1%
Intel Corp. 1.8% 1.8%
International Business Machines Corp. 1.8% 1.3%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
- -
Equity Index S&P 500 MorningStar
Fund(1) Index(2) Peer Group+
------------ ---------- ----------
- -
YTD** -6.74% -6.69% -8.13%
1 Year -14.85 -14.82 -15.74
3 Years 3.85 3.89 3.24
5 Years 14.33 14.48 12.82
Since Inception (5/1/96) 14.35 14.64 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Technology 21.0% Energy 7.1%
Financial 17.5% Utility 6.9%
Health Care 12.1% Retail 6.4%
Capital Equipment 10.2% Consumer Staple 6.3%
Consumer Cyclical 7.6% Basic Material 3.0%
(1) Returns reflect waiver of advisory fee, reimbursement of all non-
advisory fund expenses, and extra-ordinary capital contributions of
$84,000 in 1996 and $250,000 in 1997.
(2) "Standard & Poor's 500" is a trademark of McGraw-Hill Companies,
Inc. and has been licensed for use by John Hancock Life Insurance
Company. The product is not sponsored, endorsed, sold or promoted
by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the product.
(3) Source: Morgan Stanley Dean Witter.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the fund does not reflect expense
and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are
described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all the
variable annuity and life sub-accounts within the Morningstar
variable universe having a Large Blend investment category.
4
Inception: May 1, 1996
Large Cap Value Fund
T. Rowe Price Associates, Inc. Brian C. Rogers
The fund posted a respectable gain of 2.34% in a difficult environment during
the first half of the year. Results for the six months and year were well
ahead of the Russell 1000 Value Index which ended in negative territory for
the half.
We were pleased by the resiliency of a number of our holdings, including Bank
of America, American General, Microsoft, Fortune Brands, Toys "R' Us, and H&R
Block, all of which were prominent on a long list of positive contributors to
fund performance. On the negative side of the ledger, Honeywell International
and Rockwell International turned in disappointing results.
We made a number of sizable purchases in the first half of the year.
Schering-Plough, McDonald's, Bristol-Myers Squibb, Texas Instruments, and
Corning were all companies trading anywhere from 25% to 75% below their 12-
month highs and, in our opinion, provided attractive investment opportunities.
Accordingly, we either initiated positions in them or enhanced our existing
holdings.
Our transactions in GE and Honeywell International deserve special
commentary. Most of our buying in Honeywell occurred in late June when the
company's proposed acquisition by GE was coming unglued due to concerns raised
by European regulators. After Honeywell stock declined to an unrealistically
low price level, in our view, we believed it represented a favorable
combination of strong upside potential and little downside risk. Regarding GE,
we normally do not buy and sell a security in such a short period. However,
the stock sold off sharply in the first three months of the year, at which
point we initiated a position in it. Subsequently, GE appreciated fairly
quickly, and we decided to eliminate it from the portfolio.
In terms of other sales during the half, we eliminated or reduced positions
in several companies after their stocks appreciated in value--with the notable
exception of BMC Software. As we've stated before, we generally recycle out of
holdings that have increased in price to the point where the appeal of their
relative valuations is less compelling, and then reinvest the proceeds in more
undervalued opportunities.
While the economic and earnings news has been sluggish, the Federal Reserve's
aggressive program of cutting short-term interest rates, combined with some
boost from the administration's tax cut, auger well for improved economic and
earnings performance toward the end of the year or early 2002. While a rebound
is difficult to forecast with a high degree of certainty, we believe the
backdrop for stocks will improve over the intermediate term. In our view,
there are many appealing opportunities for investors with a reasonable time
horizon, and we will continue to seek them out in the months ahead.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Russel 1000 Large Cap
Date Value Index Value Fund
---- ----------- ----------
5/1/1996 10,000 10,000
5/31/1996 10,125 10,190
6/30/1996 10,133 10,255
7/31/1996 9,750 9,977
8/31/1996 10,029 10,186
9/30/1996 10,428 10,618
10/31/1996 10,832 10,860
11/30/1996 11,617 11,451
12/31/1996 11,468 11,391
1/31/1997 12,024 11,699
2/28/1997 12,201 11,979
3/31/1997 11,762 11,724
4/30/1997 12,256 12,016
5/31/1997 12,941 12,582
6/30/1997 13,496 13,059
7/31/1997 14,511 13,805
8/31/1997 13,995 13,447
9/30/1997 14,840 14,081
10/31/1997 14,426 13,703
11/30/1997 15,063 14,220
12/31/1997 15,503 14,644
1/31/1998 15,283 14,539
2/28/1998 16,312 15,250
3/31/1998 17,310 15,954
4/30/1998 17,426 15,869
5/31/1998 17,168 15,598
6/30/1998 17,388 15,561
7/31/1998 17,082 15,107
8/31/1998 14,540 13,634
9/30/1998 15,375 14,373
10/31/1998 16,566 15,261
11/30/1998 17,338 15,884
12/31/1998 17,928 15,999
1/31/1999 18,071 15,600
2/28/1999 17,816 15,470
3/31/1999 18,185 15,889
4/30/1999 19,883 17,601
5/31/1999 19,665 17,469
6/30/1999 20,235 17,932
7/31/1999 19,642 17,538
8/31/1999 18,913 17,003
9/30/1999 18,251 16,394
10/31/1999 19,303 16,974
11/30/1999 19,152 16,678
12/31/1999 19,244 16,524
1/31/2000 18,617 15,752
2/29/2000 17,234 14,461
3/31/2000 19,336 16,067
4/30/2000 19,112 16,209
5/31/2000 19,312 16,987
6/30/2000 18,430 16,141
7/31/2000 18,660 16,308
8/31/2000 19,698 17,100
9/30/2000 19,879 17,218
10/31/2000 20,368 18,044
11/30/2000 19,612 17,845
12/31/2000 20,595 18,667
1/31/2001 20,675 18,863
2/28/2001 20,100 18,597
3/31/2001 19,391 18,092
4/30/2001 20,341 18,861
5/31/2001 20,799 19,494
6/30/2001 20,337 19,104
Top Ten Holdings (as of June 20, 2001)
- ------------------------------------------------------------------------------
- --
six months ago
% of % of
investments investments
Exxon Mobil Corp. 2.6% 2.4%
Mellon Financial Corp. 2.3% 1.2%
Lockheed Martin Corp. 1.9% 0.8%
BP Amoco plc 1.9% 1.3%
Union Pacific Corp. 1.9% 0.7%
American Home Products Corp. 1.7% 1.2%
Verizon Communications 1.7% N/A
Texaco, Inc. 1.6% 0.9%
Federal National Mortgage Assoc. 1.6% 0.8%
Fleet Boston Financial Corp. 1.6% 0.9%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
- --
Large Cap Russell 1000 MorningStar
Value Fund Value Index Peer Group+
---------- ------------ -----------
YTD** 2.34% -1.25% -0.67%
1 Year 18.36 10.35 8.79
3 Years 7.08 5.36 4.84
5 Years 13.25 14.95 12.16
Since Inception (5/1/96) 13.35 14.73 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
- --
% of % of
investments investments
Financial 20.5% Technology 8.6%
Energy 12.0% Utility 8.3%
Consumer Staple 10.4% Basic Material 7.4%
Consumer Cyclical 10.3% Health Care 5.5%
Captial Equipment 9.0% Retail 3.6%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings, that
may not continue to occur in the future." Investment returns and
principal value of fund shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. The
performance of the fund on this page is reported net of Trust level
charges (i.e. investment management fees and operating expenses). It
does not reflect expense and charges of the applicable separate
accounts and variable products, all of which vary to a considerable
extent and are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Large Value investment category.
5
Inception: August 31, 1999
Large Cap Value CORE/SM/ Fund
Goldman Sachs Asset Management Brown/Jones/Pinter
During the second quarter of 2001, the John Hancock VST Large Cap Value CORE
Fund (the "Fund") generated a total cumulative return of 6.47%, versus the
4.88% total cumulative return of the Fund's benchmark, the Russell 1000 Value
Index (the "Index").
The Fund's strategy is a well-defined investment process that has historically
provided consistent, risk-managed performance. The diversification of our
models typically adds value because, when one theme doesn't work, others
usually do. For example, when Momentum stocks underperform, Value stocks
typically advance more than average.
Of the CORE themes, Momentum recovered after a very difficult first quarter to
drive positive performance in the second quarter. The theme benefited from the
market's more typical patterns of behavior, following a spate of panic selling
and frenzied buying that characterized the end of 2000 and beginning of 2001.
Value was a positive contributor overall, its fourth positive quarter in a row.
Profitability also boosted results for the second consecutive quarter, while
Earnings Quality and Research were down for the period.
The Fund's holdings in Energy and Consumer Non-cyclicals, in particular,
significantly outperformed benchmark peers, while holdings in Basic Materials
lagged the most. Individual stocks that had the greatest impact on the upside
were overweights in Ultramar Diamond Shamrock (0.1%), Fox Entertainment Group,
Inc. (0.1%) and Waste Management Inc. (0.9%). An overweight in CVS Corp. (0.4%)
and an underweight in Du Pont (0.1%) were the biggest detractors.
Looking ahead, we continue to believe that cheaper stocks should outpace more
expensive ones and good momentum stocks should do better than poor momentum
stocks. We also expect companies that are favored by fundamental research
analysts and that have strong profit margins and sustainable earnings to
outperform their peers. As such, we anticipate remaining fully invested and
expect that the value we add over time will be due to stock selection, as
opposed to sector or size allocations.
Footnotes
Total return figures represent past performance and do not indicate future
results which will vary. The Fund's performance reflects the reinvestment of
dividends and distributions. The Russell 1000 Value Index is unmanaged and does
not include any fees or expenses. CORESM is a service mark of Goldman, Sachs &
Co.
Performance returns for the VST Large Cap Value CORE Fund (the "Fund") are
estimated and supplied as a client accommodation for internal use only within
John Hancock Funds Group. The Fund is subadvised/managed by Goldman Sachs Asset
Management ("GSAM"). As a subadviser, we do not normally perform administration
functions, such as performance calculations. The NAV's, distributions and
expense ratios (which are calculated by the custodian--State Street Bank) used
to calculate total returns have not been independently validated and approved
by GSAM.
[GRAPH]
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Large Cap Value Russell 1000
Date CORE(SM) Fund Value Index
---- ------------- -----------
8/31/1999 10,000 10,000
9/30/1999 9,710 9,650
10/31/1999 10,330 10,206
11/30/1999 10,221 10,126
12/31/1999 10,357 10,175
1/31/2000 9,965 9,843
2/29/2000 9,305 9,112
3/31/2000 10,352 10,223
4/30/2000 10,234 10,105
5/31/2000 10,314 10,211
6/30/2000 9,924 9,744
7/31/2000 10,093 9,866
8/31/2000 10,734 10,415
9/30/2000 10,783 10,510
10/31/2000 10,932 10,769
11/30/2000 10,423 10,370
12/31/2000 10,887 10,889
1/31/2001 10,868 10,931
2/28/2001 10,563 10,628
3/31/2001 10,164 10,252
4/30/2001 10,773 10,755
5/31/2001 11,028 10,997
6/30/2001 10,819 10,753
Top Ten Holdings (as of June 30, 2001)
- -------------------------------------------------------------------------------
- -
% of six months ago
investments % of investments
Exxon Mobil Corp. 5.5% 0.9%
Citigroup, Inc. 4.7% 0.6%
Verizon Communications 3.0% N/A
American International Group, Inc. 2.3% 0.3%
Procter & Gamble Co. 2.0% 0.1%
Federal National Mortgage Assoc. 2.0% 0.1%
Bank of America Corp. 2.0% 0.4%
SBC Communications, Inc. 1.6% 0.4%
Johnson & Johnson 1.6% 0.1%
Minnesota Mining & Manufacturing Co. 1.5% 0.1%
Average Annual Total Returns*
- -------------------------------------------------------------------------------
- -
Large Cap Russell 1000 MorningStar
Value Core/SM/ Fund Value Index Peer Group+
------------------- ------------ -----------
YTD** -0.66% -1.25% -0.67%
1 Year 8.97 10.35 8.79
Since Inception (8/31/99) 4.36 4.04 N/A
Top Ten Sectors (as of June 30, 2001)
- -------------------------------------------------------------------------------
- -
% of % of
investments investments
Financial 27.8% Consumer Cyclical 7.9%
Energy 11.2% Consumer Staple 7.7%
Utility 9.8% Capital Equipment 6.0%
Technology 9.7% Basic Material 3.9%
Health Care 8.3% Retail 3.4%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary
to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all the
variable annuity and life sub-accounts within the Morningstar
variable universe having a Large Cap Value investment style.
6
Inception: June 30, 2000
Large Cap Value COREsm II (formerly American Leaders Large Cap Value Fund)
Goldman Sachs Asset Management Brown/Jones/Pinter
Effective January 1, 2001 Goldman Sachs Asset Management assumed management of
the Fund.
During the second quarter of 2001, the John Hancock VST Large Cap Value CORE
II Fund (the "Fund") generated a total cumulative return of 6.21%, versus the
4.88% total cumulative return of the Fund's benchmark, the Russell 1000 Value
Index (the "Index").
The Fund's strategy is a well-defined investment process that has
historically provided consistent, risk-managed performance. The
diversification of our models typically adds value because, when one theme
doesn't work, others usually do. For example, when Momentum stocks
underperform, Value stocks typically advance more than average.
Of the CORE themes, Momentum recovered after a very difficult first quarter
to drive positive performance in the second quarter. The theme benefited from
the market's more typical patterns of behavior, following a spate of panic
selling and frenzied buying that characterized the end of 2000 and beginning
of 2001. Value was a positive contributor overall, its fourth positive quarter
in a row. Profitability also boosted results for the second consecutive
quarter, while Earnings Quality and Research were down for the period.
The Fund's holdings in Energy and Consumer Non-cyclicals, in particular,
significantly outperformed benchmark peers, while holdings in Basic Materials
lagged the most. Individual stocks that had the greatest impact on the upside
were overweights in Ultramar Diamond Shamrock (0.1%), Fox Entertainment Group,
Inc. (0.1%) and Waste Management Inc. (0.9%). An overweight in CVS Corp.
(0.4%) and an underweight in Du Pont (0.1%) were the biggest detractors.
Looking ahead, we continue to believe that cheaper stocks should outpace more
expensive ones and good momentum stocks should do better than poor momentum
stocks. We also expect companies that are favored by fundamental research
analysts and that have strong profit margins and sustainable earnings to
outperform their peers. As such, we anticipate remaining fully invested and
expect that the value we add over time will be due to stock selection, as
opposed to sector or size allocations.
Footnotes
Total return figures represent past performance and do not indicate future
results which will vary. The Fund's performance reflects the reinvestment of
dividends and distributions. The Russell 1000 Value Index is unmanaged and
does not include any fees or expenses. CORESM is a service mark of Goldman,
Sachs & Co.
Performance returns for the VST Large Cap Value CORE II Fund (the "Fund") are
estimated and supplied as a client accommodation for internal use only within
John Hancock Funds Group. The Fund is subadvised/managed by Goldman Sachs
Asset Management ("GSAM"). As a subadviser, we do not normally perform
administration functions, such as performance calculations. The NAV's,
distributions and expense ratios (which are calculated by the custodian--State
Street Bank) used to calculate total returns have not been independently
validated and approved by GSAM.
(Fund investment information on next page.)
7
Inception: June 30, 2000
Large Cap Value COREsm II (formerly American Leaders Large Cap Value Fund)
Goldman Sachs Asset Management Brown/Jones/Pinter
[GRAPH]
Historical Fund Return
$10,000
Investment made 6/30/00
(Fund Inception Date)
Date Large Cap Value Core II Fund Russell 1000 Value Index
---- ---------------------------- ------------------------
6/30/2000 10,000 10,000
7/31/2000 9,842 10,125
8/31/2000 10,692 10,688
9/30/2000 10,499 10,786
10/31/2000 10,827 11,052
11/30/2000 10,283 10,642
12/31/2000 10,802 11,175
1/31/2001 10,800 11,218
2/28/2001 10,529 10,906
3/31/2001 10,139 10,521
4/30/2001 10,723 11,037
5/31/2001 11,002 11,285
6/30/2001 10,766 11,035
Top Ten Holdings (as of June 30, 2001)
- --------------------------------------
% of six months ago
investments % of investments
Exxon Mobil Corp. 5.1% 1.8%
Citigroup, Inc. 3.8% N/A
Verizon Communications 3.0% 1.3%
Bank of America Corp. 2.3% 1.0%
Federal National Mortgage Assoc. 2.0% N/A
Johnson & Johnson 1.9% N/A
American International Group, Inc. 1.9% N/A
SBC Communications, Inc. 1.8% N/A
Procter & Gamble Co. 1.6% N/A
General Motors Corp. 1.3% 0.7%
Average Annual Total Returns*
- -----------------------------
Large Cap Value Russell 1000 Morning Star
Core II Fund Value Index Peer Group+
--------------- ------------ ------------
YTD** -0.33% -1.25% -0.67%
1 Year 7.66 10.35 8.79%
Since Inception (6/30/00) 7.66 10.35 N/A
Top Ten Sectors (as of June 30, 2001)
- -------------------------------------
% of % of
investments investments
Financial 27.5% Health Care 8.4%
Energy 11.4% Consumer Staple 7.9%
Utility 9.9% Capital Equipment 6.6%
Technology 9.4% Governmental 3.1%
Consumer Cyclical 8.7% Basic Material 2.8%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings, that
may not continue to occur in the future." Investment returns and
principal value of fund shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Small-
company investing entails special risks as outlined in the
prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees ad operating
expenses). It does not reflect expense and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Large Value investment category.
8
Inception: March 29, 1986
Large Cap Growth Fund
Independence Investment LLC Mark Lapman
In the second quarter, the S&P 500 Index had its strongest quarterly
performance period since the fourth quarter of 1999, returning 5.85%. Your
portfolio performed very well for the quarter, returning 10.06% net,
outperforming both the S&P 500 Index and the Russell 1000 Growth Index. The
sectors that added the most value this quarter were Technology (Lexmark
International, Intuit and Sanmina), Telecommunications (PCS Sprint and
Verizon) and Consumer Non-Cyclicals (Phillip Morris). On the negative side,
stock selection within Retail (Radioshack, CVS and Walgreen) and Health Care
(Applera and Waters Corp.) trailed the benchmark.
The worldwide economies are clearly struggling. The U.S. will likely show
negative growth in the current quarter as businesses reign in spending and
investment. European economies slowed considerably this quarter and Japan
appears to have entered another recession. Investors are looking past the
slowdown and focusing instead on the potential rebound over the coming months.
The consumer has remained quite resilient during this slowdown. The Federal
Reserve has aggressively cut interest rates and consumers will be receiving
tax rebate checks in the third quarter. Inflation is clearly coming down as
energy prices have weakened. We believe investors must be patient, waiting to
see tangible signs of the economic recovery over the remainder of the year. We
continue to be overweight retailers, as we believe the consumer will once
again lead us on the road to recovery. We also own significant positions in
semiconductor companies. We believe their shares are attractively priced and
they will quickly benefit from a rebound in technology spending. Finally, many
software and data service companies are attractive because their businesses
should prove to be more predictable in this period of uncertain order patterns
in the technology industry.
[GRAPH]
Historical Fund Return
$10,000
Investment made 7/1/91
(10-Year Period)
Large Cap Growth
Date Large Cap Growth Fund Benchmark (1)
---- --------------------- -------------
7/1/1991 10,000 10,000
7/31/1991 10,323 10,468
8/31/1991 10,532 10,714
9/30/1991 10,356 10,538
10/31/1991 10,405 10,680
11/30/1991 10,041 10,248
12/31/1991 10,928 11,419
1/31/1992 10,761 11,207
2/29/1992 10,882 11,350
3/31/1992 10,688 11,128
4/30/1992 11,025 11,452
5/31/1992 11,152 11,514
6/30/1992 11,063 11,347
7/31/1992 11,459 11,804
8/31/1992 11,245 11,566
9/30/1992 11,356 11,699
10/31/1992 11,370 11,741
11/30/1992 11,792 12,136
12/31/1992 12,014 12,295
1/31/1993 12,127 12,385
2/28/1993 12,348 12,552
3/31/1993 12,723 12,822
4/30/1993 12,264 12,508
5/31/1993 12,631 12,846
6/30/1993 12,816 12,888
7/31/1993 12,717 12,828
8/31/1993 13,268 13,316
9/30/1993 13,434 13,218
10/31/1993 13,636 13,486
11/30/1993 13,487 13,359
12/31/1993 13,672 13,524
1/31/1994 14,088 13,977
2/28/1994 13,651 13,599
3/31/1994 13,209 13,008
4/30/1994 13,469 13,177
5/31/1994 13,426 13,392
6/30/1994 13,224 13,061
7/31/1994 13,555 13,493
8/31/1994 14,029 14,042
9/30/1994 13,609 13,704
10/31/1994 13,739 14,018
11/30/1994 13,338 13,503
12/31/1994 13,538 13,700
1/31/1995 13,792 14,057
2/28/1995 14,314 14,602
3/31/1995 14,638 15,034
4/30/1995 15,000 15,472
5/31/1995 15,510 16,083
6/30/1995 15,771 16,461
7/31/1995 16,281 17,009
8/31/1995 16,406 17,055
9/30/1995 17,072 17,769
10/31/1995 16,876 17,707
11/30/1995 17,577 18,486
12/31/1995 17,822 18,828
1/31/1996 18,239 19,476
2/29/1996 18,455 19,663
3/31/1996 18,688 19,852
4/30/1996 19,003 20,144
5/31/1996 19,423 20,847
6/30/1996 19,401 20,876
7/31/1996 18,111 19,652
8/31/1996 18,689 20,160
9/30/1996 19,833 21,627
10/31/1996 19,980 21,757
11/30/1996 21,430 23,391
12/31/1996 21,078 22,932
1/31/1997 22,284 24,540
2/28/1997 22,449 24,373
3/31/1997 21,392 23,054
4/30/1997 22,524 24,585
5/31/1997 23,820 26,360
6/30/1997 24,764 27,415
7/31/1997 27,153 29,838
8/31/1997 25,802 28,093
9/30/1997 27,409 29,475
10/31/1997 26,305 28,384
11/30/1997 27,282 29,591
11/30/1997 27,282 29,591
12/31/1997 27,602 29,922
1/31/1998 28,340 30,817
2/28/1998 31,021 33,134
3/31/1998 32,777 34,456
4/30/1998 33,025 34,932
5/31/1998 32,313 33,940
6/30/1998 33,917 36,017
7/31/1998 33,753 35,779
8/31/1998 28,467 30,409
9/30/1998 30,133 32,744
10/31/1998 32,403 35,377
11/30/1998 34,977 38,069
12/31/1998 38,508 41,502
1/31/1999 40,651 43,939
2/28/1999 38,694 41,931
3/31/1999 40,324 44,140
4/30/1999 40,918 44,198
5/31/1999 39,734 42,841
6/30/1999 42,693 45,840
7/31/1999 41,280 44,382
8/31/1999 41,516 45,106
9/30/1999 40,565 44,158
10/31/1999 42,943 47,492
11/30/1999 44,391 50,057
12/31/1999 47,776 55,263
1/31/2000 44,917 52,671
2/29/2000 46,337 55,247
3/31/2000 51,279 59,202
4/30/2000 49,537 56,384
5/31/2000 47,743 53,542
6/30/2000 50,505 57,601
7/31/2000 48,864 55,199
8/31/2000 53,633 60,194
9/30/2000 48,014 54,500
10/31/2000 46,587 51,922
11/30/2000 40,383 44,269
12/31/2000 39,231 42,870
1/31/2001 41,504 45,832
2/28/2001 34,864 38,050
3/31/2001 30,974 33,910
4/30/2001 35,233 38,200
5/31/2001 34,816 37,638
6/30/2001 34,089 36,765
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
General Electric 8.9% 6.7%
Microsoft Corp. 7.0% 9.4%
Pfizer, Inc. 6.4% 2.4%
AOL Time Warner, Inc. 4.9% N/A
Intel Corp. 4.4% 6.1%
International Business Machines Corp. 3.0% 2.7%
Home Depot, Inc. 2.1% 3.5%
Kohl's Corp. 2.1% N/A
Merck & Co., Inc. 1.9% 2.5%
Johnson & Johnson 1.8% 2.1%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Large Cap Large Cap Growth MorningStar
Growth Fund Benchmark (1) Peer Group+
----------- ---------------- -----------
YTD** -13.11% -14.24% -15.20%
1 Year -32.50 -36.17 -30.61
3 Years 0.17 0.69 4.84
5 Years 11.93 11.98 12.79
10 Years 13.05 13.91 14.65
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Technology 37.0% Utility 3.2%
Health Care 20.7% Consumer Staple 2.8%
Capital Equipment 11.8% Financial 2.7%
Retail 10.1% Energy 1.6%
Consumer Cyclical 8.6% Governmental 1.1%
(1) The benchmark is represented by the S&P 500 for the period April
1986 to April 1996 and the Russell Large Cap Growth Index for the
period May 1996 to present.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary
to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Large Cap Growth investment category.
Prior to May 1996 (concurrent with the Fund's strategy change), the
peer group represents the Large Cap Growth investment category.
9
Inception: August 31, 1999
Large Cap Aggressive Growth Fund
Alliance Capital Management L.P. J. Fogarty/A. Harrison
The Portfolio (+6.2%) underperformed the Russell 1000 Growth Index return of
8.4% due to unfavorable stock selection in the producer durables sector,
specifically Nokia. The Portfolio was also negatively impacted by our position
in Honeywell. The Portfolio was positively impacted by a mild overweight and
favorable stock selection in the consumer discretionary sector, specifically
AOL Time Warner.
We recognize the headwind the U.S. stock market has encountered in past
months is increasingly accompanied by problems overseas. We realize the
possibility that U.S. economic growth may remain stagnant short-term and that
any palpable evidence of a recovery may extend into later this year or early
2002. We are encouraged by the Federal Reserve's unparalleled record of
steering the U.S. economy and stock market through difficult stages, but we
believe that to gain sound traction may take longer than expected and may be
presented in the form of a "U" rather than "V" shaped recovery. Our cautious
positioning in the Portfolio, reflected by our low profile in the technology
sector, gives us some comfort in the current environment. We are guarded that
the second half will provide the upward thrust that so many companies are
depending upon.
Our strategy is to focus on companies with strong balance sheets and
carefully select those with the soundest fundamentals, particularly in the
technology sector, which we believe will emerge from this economic slump in
solid financial shape. We are utilizing the extensive resources that Alliance
Capital's worldwide presence has to offer and intensifying our efforts to
obtain the best information about each of the companies that we invest in,
including industry data that company managements may be missing. We fully
appreciate that even in the "safest" sectors elements of risk may exist and
will maintain our positions in individual companies in which we have the
highest confidence of earnings and fundamentals.
[GRAPH]
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Large Cap Aggressive Russell 1000
Date Growth Fund Growth Index
---- ---------------- ---------
8/31/1999 10,000 10,000
9/30/1999 9,946 9,790
10/31/1999 10,810 10,529
11/30/1999 11,046 11,098
12/31/1999 12,016 12,252
1/31/2000 11,463 11,677
2/29/2000 11,567 12,248
3/31/2000 12,831 13,125
4/30/2000 12,362 12,501
5/31/2000 11,691 11,870
6/30/2000 12,283 12,770
7/31/2000 12,149 12,238
8/31/2000 12,931 13,345
9/30/2000 11,512 12,083
10/31/2000 11,115 11,511
11/30/2000 9,840 9,815
12/31/2000 9,768 9,504
1/31/2000 10,397 10,161
2/28/2001 8,775 8,436
3/31/2001 8,022 7,518
4/30/2001 8,822 8,469
5/31/2001 8,857 8,344
6/30/2001 8,519 8,151
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
----------- ----------------
AOL Time Warner, Inc. 6.6% N/A
Pfizer, Inc. 5.8% 0.6%
Federal Home Loan Mortgage Corp. 4.9% 0.6%
Citigroup, Inc. 4.7% 1.4%
MBNA Corp. 4.7% 1.1%
Microsoft Corp. 4.3% 2.0%
General Electric Co. 4.2% 0.6%
American International Group, Inc. 3.8% 0.7%
Kohl's Corp. 3.5% 1.0%
Comcast Corp. 3.5% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Large Cap Aggressive Russell 1000 MorningStar
Growth Fund Growth Index Peer Group+
-------------------- ------------ -----------
YTD** -12.77% -14.24% -15.20%
1 Year -30.68 -36.17 -30.61
Since Inception (8/31/99) -8.40 -10.55 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Technology 17.1% Capital Equipment 9.8%
Financial 16.8% Governmental 6.9%
Health Care 15.5% Energy 5.1%
Consumer Cyclical 12.2% Utility 3.3%
Retail 10.5% Consumer Staple 2.6%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings, that
may not continue to occur in the future." Investment returns and
principal value of fund shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. The
performance of the fund on this page is reported net of Trust level
changes (i.e. investment management fees and operating expenses). It
does not reflect expenses and charges of the applicable separate
accounts and variable products, all of which vary to a considerable
extent and are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Large Growth investment category.
10
Inception: August 31, 1999
Large/Mid Cap Value Fund
Wellington Management Company, LLP D. Chu/L. Gabriel
During the second quarter, the John Hancock Large/Mid Cap Value Fund advanced
4.1%, slightly underperforming the Fund's benchmark, the Russell 1000 Value
Index, which increased by 4.9%. For the one-year period ending June 30, 2001
the Fund returned 13.66%, well ahead of its benchmark which only increased
10.35%.
While growth outperformed value for the quarter, value was the relative
winner for the one-year period ending June 30, 2001 as the Russell 1000 Value
Index (10%) outperformed the Russell 1000 Growth Index (-36%).
The Fund's top-performing sector during the quarter was the financials sector
due to strong stock selection. Citigroup posted strong returns as the banking
sector benefited from continued rate cuts and a steepening yield curve.
Conversely, the health care and utility sectors detracted from performance.
Some of the Fund's largest contributors through stock selection were Verizon,
which was a strong performer in the telecommunications sector, and AT&T
Liberty Media, which rebounded after a favorable tax ruling regarding AT&T's
divestiture was announced.
We anticipate improving conditions in the second half of this year, setting
the stage for a stronger economy in 2002. This recovery will begin as a result
of positive fiscal and monetary stimulus and will be fueled by lower than
expected inflation, a stronger consumer, and rising corporate profits. In this
environment our outlook for large cap value stocks remains favorable.
As we begin the second half of the year, we will continue to combine our
global industry analysts' "best ideas" from bottom-up stock selection within
the large-cap value universe. Going forward, we continue to believe that broad
diversification across sectors is a central tenet of the investment strategy.
By closely aligning sector weights to the index, sector risk is minimized,
while security selection is emphasized as the source of value added for
investors.
[GRAPH]
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Large/Mid Cap Russell 1000
Date Value Fund Value Index
---- ------------- ---------------
8/31/1999 10,000 10,000
9/30/1999 9,790 9,650
10/31/1999 10,355 10,206
11/30/1999 10,295 10,126
12/31/1999 10,477 10,175
1/31/2000 10,030 9,843
2/29/2000 9,618 9,112
3/31/2000 10,825 10,223
4/30/2000 10,443 10,105
5/31/2000 10,604 10,211
6/30/2000 10,213 9,744
7/31/2000 10,451 9,866
8/31/2000 11,183 10,415
9/30/2000 11,406 10,510
10/31/2000 11,710 10,769
11/30/2000 11,229 10,370
12/31/2000 11,880 10,889
1/31/2001 11,886 10,931
2/28/2001 11,481 10,628
3/31/2001 11,172 10,252
4/30/2001 11,719 10,755
5/31/2001 11,930 10,997
6/30/2001 11,624 10,753
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
- --
% of six months ago
investments % of investments
Exxon Mobil Corp. 5.8% N/A
Citigroup, Inc. 4.7% 1.1%
JP Morgan Chase & Co. 4.1% N/A
Verizon Communications 4.1% N/A
Washington Mutual, Inc. 3.6% N/A
Federal National Mortgage Assoc. 2.3% 0.5%
Chevron Corp. 2.2% 0.3%
MBIA, Inc. 2.1% N/A
US Bancorp 2.1% N/A
Proctor & Gamble Co. 1.8% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Large/Mid Cap Russell 1000 MorningStar
Value Fund Value Index Peer Group+
------------- --------------- -----------
YTD** -2.22% -1.25% 2.24%
1 Year 13.66 10.35 16.80
Since Inception (8/31/99) 8.50 4.04 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
- --
% of & of
investments investments
Financial 30.4% Consumer Cyclical 6.6%
Energy 10.6% Health Care 6.2%
Technology 9.9% Capitol Equipment 6.1%
Utility 9.7% Retail 4.8%
Consumer Staple 7.1% Basic Material 4.4%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings,
that may not continue to occur in the future." Investment returns
and principal value of fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Small-company investing entails special risks as outlined in the
prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a 50% weighting of the Large Cap Value
category and a 50% weighting of the Mid Cap Value category.
11
Inception: May 1, 1996
Large Mid Cap Value II (formerly Mid Cap Value Fund)
Wellington Management Company, LLP D. Chu/L. Gabriel
Effective January 1, 2001 Wellington Management Company, LLP assumed management
of the Fund.
During the second quarter, the John Hancock Large/Mid Cap Value Fund advanced
4.1%, slightly underperforming the Fund's benchmark, the Russell 1000 Value
Index, which increased by 4.9%.
While growth outperformed value for the quarter, value was the relative winner
for the one-year period ending June 30, 2001 as the Russell 1000 Value Index
(10%) outperformed the Russell 1000 Growth Index (-36%).
The Fund's top-performing sector during the quarter was the financials sector
due to strong stock selection. Citigroup posted strong returns as the banking
sector benefited from continued rate cuts and a steepening yield curve.
Conversely, the health care and utility sectors detracted from performance.
Some of the Fund's largest contributors through stock selection were Verizon,
which was a strong performer in the telecommunications sector, and AT&T Liberty
Media, which rebounded after a favorable tax ruling regarding AT&T's
divestiture was announced.
We anticipate improving conditions in the second half of this year, setting
the stage for a stronger economy in 2002. This recovery will begin as a result
of positive fiscal and monetary stimulus and will be fueled by lower than
expected inflation, a stronger consumer, and rising corporate profits. In this
environment our outlook for large cap value stocks remains favorable.
As we begin the second half of the year, we will continue to combine our
global industry analysts' "best ideas" from bottom-up stock selection within
the large-cap value universe. Going forward, we continue to believe that broad
diversification across sectors is a central tenet of the investment strategy.
By closely aligning sector weights to the index, sector risk is minimized,
while security selection is emphasized as the source of value added for
investors.
[GRAPH]
Historical Fund Return
Large Mid Cap Russell Mid Cap
Date Value II FUND Value Index
---- ------------- ---------------
5/1/1996 10,000 10,000
5/31/1996 10,000 10,095
6/30/1996 9,850 10,106
9,339 9,625
9,791 10,029
10,261 10,397
10,448 10,671
11,334 11,341
Dec-96 11,336 11,293
11,973 11,648
11,930 11,845
11,584 11,485
11,914 11,774
12,959 12,469
6/30/1997 13,097 12,931
14,335 13,891
14,543 13,728
15,331 14,580
14,682 14,136
14,879 14,613
Dec-97 14,993 15,172
14,889 14,878
15,940 15,872
16,546 16,689
16,441 16,596
15,666 16,207
6/30/1998 15,099 16,259
13,985 15,435
11,524 13,265
11,885 14,038
12,713 14,948
13,014 15,473
Dec-98 13,295 15,943
13,066 15,571
12,708 15,229
12,768 15,447
14,040 16,909
14,195 16,980
6/30/1999 14,758 17,174
14,302 16,745
13,403 16,165
12,771 15,347
12,843 15,800
12,841 15,511
Dec-99 14,029 15,927
13,437 14,974
13,786 14,348
15,210 16,087
14,541 16,152
14,839 16,429
6/30/2000 14,832 15,817
15,688 16,187
16,508 17,179
16,960 17,344
17,160 17,673
16,550 17,444
Dec-00 18,010 18,982
Jan-01 17,975 19,056
Feb-01 17,369 18,527
Mar-01 16,910 17,873
Apr-01 17,767 18,748
May-01 18,100 19,170
6/30/2001 17,640 18,745
Top Ten Holdings (as of June 30, 2001)
- -------------------------------------------------------------------------------
% of six months ago
investments % of investments
Exxon Mobil Corp. 5.7% N/A
Citigroup, Inc. 5.1% N/A
JP Morgan Chase & Co. 4.0% N/A
Washington Mutual, Inc. 4.0% N/A
Verizon Communications 3.9% N/A
Federal National Mortgage Assoc. 2.3% N/A
Chevron Corp. 2.1% N/A
US Bancorp 2.1% N/A
MBIA, Inc. 2.0% N/A
R.J. Reynolds Tobacco Holdings, Inc. 1.8% N/A
Average Annual Total Returns*
- -------------------------------------------------------------------------------
Large Mid Cap Russell Mid Cap MorningStar
Value II Fund Value Index Peer Group+
------------- --------------- -----------
YTD** -2.06% -1.25% 2.24%
1 Year 18.93 18.51 21.26
3 Years 5.32 4.86 6.03
5 Years 12.36 13.15 11.83
Since Inception (5/1/96) 12.15 10.49 N/A
Top Ten Sectors (as of June 30, 2001)
- -------------------------------------------------------------------------------
% of % of
investments investments
Financial 31.0% Consumer Cyclical 7.1%
Energy 10.4% Health Care 6.1%
Technology 9.7% Capitol Equipment 5.9%
Utility 9.0% Retail 4.7%
Consumer Staple 7.5% Basic Material 4.3%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings,
that may not continue to occur in the future." Investment returns
and principal value of fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
The performance of the fund on this page is reported net of Trust
level charges (i.e. investment management fees and operating
expenses). It does not reflect expense and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Mid Cap Value investment category.
12
Inception: August 31, 1999
Fundamental Growth Fund
Putnam Investments Eric M. Wetlaufer
The Fundamental Growth Fund underperformed the Russell Mid Cap Growth Index,
returning -21.20% (net) versus -12.97%, respectively, for the six-month
period.
In the first quarter of 2001, the Fund underperformed due to weak results in
technology, as dismal returns in software (Tibco, Webmethods), electronic
components (PMC Sierra, Qlogic, Finisar), and semiconductor capital equipment
(KLA Tencor, LAM Research) detracted significantly in this vital sector.
Health care also hindered performance due to weak holdings in biotech
(Immunex) and drug delivery (Inhale Therapeutic, Sepracor). Stronger returns
in utilities (Calpine, Mirant), financials (M&T Bank, Investment Technology
Group, Ace Limited, XL Capital), and energy (Devon Energy, Murphy Oil, Global
Marine, Transocean Sedco Forex) contributed modestly to performance.
In the second quarter, ongoing weakness in technology constrained
performance, especially in services (Convergys, Symbol Tech) and storage
devices (Network Appliance)--despite strong returns in health care (Gilead
Sciences, Protein Design Labs, IVAX, Andrx), communications services (Research
in Motion, Telephone and Data Systems), and consumer staples (Krispy Kreme).
We believe that the current environment of economic uncertainty will continue
to pressure rapidly growing, high-quality growth companies. While we do not
expect this condition to persist over the long term, we have taken steps to
focus on growth companies with a proven track record of growing profits even
during unsettled economic times.
Going forward, we are overweighting financial services (regional banks,
credit cards) that should benefit from Fed rate cuts and energy (energy
services, oil/gas producers), which should benefit from higher oil prices.
While underweighting the technology and consumer staples sectors, within those
areas we will focus on software and services, and restaurants and commercial
services, respectively.
[GRAPH]
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Fundamental Russell Mid Cap
Date Growth Fund Growth Index
---- --------------- ------------
8/31/1999 10,000 10,000
9/30/1999 10,000 9,915
10/31/1999 10,836 10,681
11/30/1999 12,529 11,788
12/31/1999 15,457 13,829
1/31/2000 15,972 13,826
2/29/2000 22,030 16,732
3/31/2000 18,801 16,749
4/30/2000 16,532 15,122
5/31/2000 14,461 14,020
6/30/2000 18,224 15,507
7/31/2000 17,402 14,526
8/31/2000 18,979 16,716
9/30/2000 18,947 15,899
10/31/2000 17,462 14,811
11/30/2000 13,820 11,593
12/31/2000 14,985 12,204
1/31/2001 15,128 12,901
2/28/2001 12,555 10,669
3/31/2001 10,434 9,142
4/30/2001 12,127 10,666
5/31/2001 12,012 10,616
6/30/2001 11,809 10,621
Top Ten Holdings (as of June 30,2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Peregrine Systems, Inc. 3.1% 1.8%
Medimmune, Inc. 2.7% 2.5%
Harley-Davidson, Inc. 2.4% 1.6%
Starbucks Corp. 2.3% 1.7%
Ivax Corp. 2.3% 1.6%
Qlogic Corp. 2.1% 0.3%
Allergan, Inc. 2.0% 3.5%
Symbol Technologies, Inc. 2.0% 2.0%
PerkinElmer, Inc. 1.8% 2.2%
Convergys Corp. 1.8% 1.7%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Fundamental Russell Mid Cap/TM/ MorningStar
Growth Fund Growth Index Peer Group+
----------- ------------------- -----------
YTD** -21.20% -12.97% -13.88%
1 Year -35.19 -31.51 -26.53
Since Inception (8/31/99) 9.51 3.34 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
Investments Investments
Technology 30.0% Consumer Cyclical 6.8%
Health Care 21.0% Retail 6.1%
Energy 10.4% Utility 4.0%
Financial 9.9% Consumer Staple 1.4%
Capital Equipment 6.9%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings,
that may not continue to occur in the future." Investment returns
and principal value of fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Small-company investing entails special risks as outlined in the
prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Mid Cap Growth investment category.
13
Inception: August 31, 1999
Mid Cap Blend Fund
Independence Investment LLC Coreen Kraysler
Mid cap stocks were strong during the second quarter, outperforming their
larger cap counterparts. The best performing industries were technology,
health care and financials, while energy and utility stocks declined. During
this period your portfolio slightly underperformed its benchmark due to
overweight positions in the poorly performing energy and utility sectors.
With the pace of earnings decline appearing to slow, interest in technology
stocks was rekindled, sparked by positive comments from Intel. As a result,
holdings in Qlogic, Intuit, Brocade Communications and Concord EFS
outperformed the market. After a strong showing early in the quarter, we
eliminated holdings in Sanmina and Brocade.
The news was also positive for financial stocks. Driven by lower interest
rates, increased consolidation activity and more clarity on the estate tax
issue, life insurance holdings such as Lincoln National were particularly
strong. St. Paul increased as property & casualty insurance pricing continued
to accelerate, and rebounding technology stocks helped shares of Stillwell
Financial, parent of Janus, to recover.
Health care stocks were another bright spot in the market. Trigon Healthcare,
for example, increased substantially after raising earnings guidance.
Laboratory Corp of America added value as investors reacted positively to the
company's mix shift toward higher margin products, and King Pharmaceuticals
performed well due to strong prescription growth in its hypertension drug.
However, biotech names, such as Waters, fell due to decelerating sales
momentum.
Utility stocks were also punished as Senator Jeffords' stunning shift in
allegiance away from the Republican party caused heightened concerns regarding
the potential for increased regulation and price caps. As a result, shares in
power producers and energy merchants such as Calpine, Reliant and Utilicorp
declined sharply. We believe that regulatory fears are overblown and that
these stocks are oversold, especially given President Bush's strong support of
free markets.
[GRAPH]
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Date Mid Cap Blend Fund Russell Mid Cap Index
---- ------------------ ---------------------
8/31/1999 10,000 10,000
9/30/1999 9,728 9,648
10/29/1999 10,180 10,105
11/30/1999 10,522 10,396
12/31/1999 11,152 11,311
1/31/2000 10,738 10,937
2/29/2000 11,483 11,778
3/31/2000 12,644 12,453
4/28/2000 12,618 11,864
5/31/2000 12,360 11,549
6/30/2000 12,609 11,891
7/31/2000 12,435 11,758
8/31/2000 13,787 12,884
9/30/2000 13,426 12,701
10/31/2000 13,610 12,506
11/30/2000 12,235 11,380
12/31/2000 13,224 12,246
1/31/2001 13,450 12,444
2/28/2001 12,825 11,686
3/31/2001 12,054 10,961
4/30/2001 13,210 11,898
5/31/2001 13,385 12,120
6/30/2001 13,158 12,006
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Allegheny Energy, Inc. 2.7% N/A
UtiliCorp United, Inc. 2.7% N/A
Trigon Healthcare, Inc. 2.7% N/A
Lexmark International Group, Inc. 2.2% N/A
BJ Services Co. 2.1% N/A
Lincoln National Corp. 1.8% N/A
St. Paul Cos., Inc. 1.7% 0.2%
Archer Daniels Midland Co. 1.7% N/A
Bed Bath & Beyond, Inc. 1.6% N/A
Mirant Corp. 1.5% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Mid Cap Russell Mid MorningStar
Blend Fund Cap Index Peer Group+
---------- ----------- ----------
- -
YTD** -0.50% -1.96% -2.83%
1 Year 4.35 0.96 -1.37
Since Inception (8/31/99) 16.15 10.49 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Technology 17.1% Energy 9.1%
Financial 16.3% Retail 6.9%
Consumer Cyclical 11.0% Basic Material 6.4%
Utility 9.8% Capital Equipment 6.2%
Health Care 9.2% Consumer Staple 4.2%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings,
that may not continue to occur in the future." Investment returns
and principal value of fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Small-company investing entails special risks as outlined in the
prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Mid Cap Blend investment category.
14
Inception: May 1, 1996
Mid Cap Growth Fund
Janus James Goff
The U.S. economy slowed substantially during the first half of 2001, sending
stocks lower after a year of lackluster performance. A sudden decrease in
capital investment after years of strong growth--particularly for high-
technology equipment--caused a sharp correction in some of the market's most
notable companies. Although a series of six interest rate cuts by the Federal
Reserve allowed markets to strengthen toward the end of the period,
disappointing earnings across the spectrum of companies proved too powerful,
and most major growth indices finished the period lower.
The Portfolio also gave ground against this difficult backdrop, and we
underperformed our benchmark, the Russell MidCap Growth Index. Our technology
and telecommunications positions, including Exodus Communications, Metromedia
Fiber and McLeod USA, declined as investors avoided firms with any degree of
exposure to the sectors hardest hit by the slowdown. We responded by
sharpening our focus within these areas to include mainly those companies that
can produce stable, recurring revenue; who are the beneficiaries of strong,
secular growth trends; and whose business models are predicated on creating
efficiencies for the customers they serve.
Meanwhile, several fast-growing firms defied the difficult environment to
trade higher, including TMP Worldwide, which extended its lead over other Web-
based job search firms during the period. The company continued to set new
records for site traffic and announced in June that it now had more than 11
million resumes in its database, while the average number of "hits" at its
flagship Monster.com job search site surpassed 860,000 per day. Other
standouts included cellular operator Western Wireless and biotech company
Andrx, both of which overcame a weakening economy to finish higher.
While we have been encouraged by the recent performance of some of our more
growth-oriented positions, significant economic uncertainty remains, and
market volatility seems likely to persist. Regardless, we will continue to
rely on our top-notch research to produce long-term results for our
shareholders.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Date Mid Cap Growth Fund Russell Mid Cap Growth Index
---- ------------------- ----------------------------
5/1/1996 10,000 10,000
5/31/1996 10,252 10,204
6/30/1996 10,020 9,896
7/31/1996 9,186 9,128
8/31/1996 9,881 9,622
9/30/1996 10,473 10,233
10/31/1996 10,325 10,113
11/30/1996 10,408 10,709
12/31/1996 10,269 10,529
1/31/1997 9,994 10,994
2/28/1997 9,827 10,752
3/31/1997 9,079 10,145
4/30/1997 9,186 10,393
5/31/1997 10,176 11,325
6/30/1997 10,693 11,638
7/31/1997 10,907 12,752
8/31/1997 10,950 12,627
9/30/1997 11,734 13,266
10/31/1997 11,371 12,601
11/30/1997 11,547 12,734
12/31/1997 11,980 12,900
1/31/1998 11,743 12,668
2/28/1998 12,728 13,859
3/31/1998 13,429 14,440
4/30/1998 13,656 14,636
5/31/1998 13,098 14,035
6/30/1998 14,211 14,432
7/31/1998 14,045 13,814
8/31/1998 11,448 11,177
9/30/1998 12,370 12,022
10/31/1998 13,332 12,907
11/30/1998 14,295 13,777
12/31/1998 16,660 15,204
1/31/1999 17,539 15,660
2/28/1999 16,892 14,894
3/31/1999 19,064 15,724
4/30/1999 20,313 16,441
5/31/1999 20,063 16,229
6/30/1999 21,164 17,362
7/31/1999 20,863 16,810
8/31/1999 21,977 16,635
9/30/1999 22,828 16,493
10/31/1999 26,427 17,768
11/30/1999 29,295 19,609
12/31/1999 36,370 23,003
1/31/2000 37,510 22,999
2/29/2000 44,729 27,833
3/31/2000 37,380 27,861
4/30/2000 32,525 25,156
5/31/2000 30,325 23,322
6/30/2000 34,862 25,796
7/31/2000 32,535 24,163
8/31/2000 36,543 27,807
9/30/2000 32,968 26,447
10/31/2000 30,025 24,638
11/30/2000 21,906 19,284
12/31/2000 23,328 20,301
1/31/2001 24,488 21,460
2/28/2001 18,721 17,747
3/31/2001 15,606 15,208
4/30/2001 18,495 17,743
5/31/2001 18,248 17,659
6/30/2001 14,552 17,668
Top Ten holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
- -
% of six months ago
investments % of investments
Western Wireless Corp. 3.2% 4.6%
Walgreen Co. 1.2% N/A
Vitesse Semiconductor Corp. 1.9% 4.5%
Valero Energy Corp. 0.9% N/A
University of Phoenix Online 1.7% N/A
Universal Compression Holdings 1.2% N/A
TriQuint Semiconductor, Inc. 1.1% 3.0%
TMP Worldwide, Inc. 3.2% 4.2%
Sonus Networks, Inc. 2.3% N/A
Sepracor, Inc. 1.9% 2.7%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
- -
Mid Cap Russell Mid Cap MorningStar
Growth Fund Growth(TM) Index Peer Group+
------------ ---------------- ----------
- -
YTD** -24.99% -12.97% -13.88%
1 Year -49.81 -31.51 -26.53
3 Years 7.18 6.98 7.76
5 Years 11.80 12.29 11.09
Since Inception (5/1/96) 11.44 11.65 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Technology 27.6% Financial 6.1%
Health Care 26.9% Utility 2.8%
Capital Equipment 13.6% Retail 2.6%
Energy 10.0% Transportation 2.5%
Consumer Cyclical 11.0%
* Total returns are for the period ended June 30, 2001. Returns
represents past performance, assume reinvestment of all
distributions and are not indicative of future performance. "Results
may have been achieved during market conditions or pursuing
performance opportunities, including investment in initial public
offerings, that may not continue to occur in the future." Investment
returns and principal value of fund shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original
cost. The performance of the fund on this page is reported net of
Trust level charges (i.e. investment management fees and operating
expenses). It does not reflect expense and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the MorningStar
variable universe having a Mid Cap Growth investment category.
15
Inception: August 31, 1999
Small Cap Value Fund (formerly Small/Mid Cap Value Fund)
T. Rowe Price Associates, Inc. Preston G. Atney
Effective January 1, 2001, T. Rowe Price Associates, Inc. has assumed
management of the Fund.
The broad stock market declined in the first half of 2001, but small-cap
value stocks continued to shine. Although small-cap growth stocks performed
slightly better than small-cap value stocks in the second quarter, both
generated positive returns. Your fund's 18.25% six-month return, outperformed
the benchmark Russell 2000 Value Index's 12.72% advance.
The Federal Reserve cut interest rates six times during the six-month period,
but the last move (in late June) was just a quarter point. The Fed's five
prior reductions in the federal funds target rate, beginning January 3, had
been in half-point increments. Economic news, including GDP growth, employment
data, and consumer confidence, continued to worsen during the period.
The portfolio's 10 largest stocks generated a mixed performance but were
mostly positive. Brown and Brown, the fund's largest individual holding (3.7%
of assets), climbed 20% over the last six months. Woodward Governor climbed
87%, and Bone Care International advanced 53%. The largest detractors among
our 10 top stocks were XTO Energy, down 22%, and Insituform Technologies, off
9%. We are 96% invested in equities and our three largest sector commitments,
building and real estate, business services, and insurance, account for almost
one-fourth of assets.
Small-cap stocks tend to provide better returns than large-caps as the
economy emerges from a recessionary period. That's in part because as investor
confidence recovers it leads to a willingness to take on the greater risk
associated with small-cap stock investments. Note: the U.S. economy has not
experienced two consecutive quarters of declining GDP, the technical
definition of a recession, but many recession-like conditions exist today.
We are pleased to see that the stock market has rediscovered that valuation
does matter. We will continue to employ our fundamentals-driven bottom-up
stock selection process and remain bullish on the environment for small-cap
value stock investing.
[GRAPH]
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Date Small Cap Value Fund Russell 2500 Value Index
---- -------------------- ------------------------
8/31/1999 10,000 10,000
9/30/1999 9,559 9,685
10/31/1999 9,441 9,695
11/30/1999 9,941 9,748
12/31/1999 10,507 10,080
1/31/2000 9,755 9,661
2/29/2000 9,774 9,828
3/31/2000 11,917 10,552
4/30/2000 12,264 10,547
5/31/2000 12,274 10,528
6/30/2000 12,413 10,488
7/31/2000 12,367 10,716
8/31/2000 13,855 11,277
9/30/2000 13,470 11,210
10/31/2000 13,913 11,203
11/30/2000 12,934 11,061
12/31/2000 14,100 12,176
1/31/2001 14,698 12,512
2/28/2001 14,806 12,494
3/31/2001 14,643 12,294
4/30/2001 16,012 12,864
5/31/2001 16,429 13,194
6/30/2001 16,673 13,725
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Brown & Brown 3.9% N/A
Insituform Technologies, Inc. 3.3% N/A
XTO Energy, Inc. 2.2% N/A
Ruby Tuesday, Inc. 2.2% N/A
Electro Rent Corp. 2.1% N/A
Matthews International Corp. 2.0% N/A
Woodward Governor Company 1.8% N/A
Bone Care International, Inc. 1.8% N/A
Texas Regional Bancshares, Inc. 1.8% N/A
Triad Guaranty, Inc. 1.7% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Small Cap Russell 2500 MorningStar
Value Fund Value Index Peer Group+
---------- ------------ -----------
YTD** 18.25% 12.72% 13.35%
1 Year 34.32 30.86 29.10
Since Inception (8/31/99) 32.17 18.85 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Financial 28.7% Technology 7.9%
Capital Equipment 18.7% Basic Material 4.1%
Energy 12.9% Health Care 4.0%
Consumer Cyclical 8.6% Utility 3.8%
Retail 8.0% Transportation 2.4%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings, that
may not continue to occur in the future." Investment returns and
principal value of fund shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Small-
company investing entails special risks as outlined in the
prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees and operating
expenses). It does not reflect expense and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a 50% weighting of the Mid Cap Value
investment category and a 50% weighting of the Small Cap Value
category prior to 1/01; and Small Cap Value investment style.
16
Inception: May 1, 1998
Small/Mid Cap CORESM Fund
Goldman Sachs Asset Management Jones/Brown/Pinter
During the second quarter of 2001 the Small/Mid Cap CORE Fund (the "Fund")
generated a total cumulative return of 12.20%, versus the 13.70% total
cumulative return of the Fund's benchmark, the Russell 2500 Index (the
"Index").
The Fund's strategy is a well-defined investment process that has
historically provided consistent, risk-managed performance. The
diversification of our models typically adds value because, when one theme
doesn't work, others usually do. For example, when Momentum stocks
underperform, Value stocks typically advance more than average.
Of the CORE themes, Momentum recovered after a very difficult first quarter
to drive positive performance in the second quarter. The theme benefited from
the market's more typical patterns of behavior, following a spate of panic
selling and frenzied buying that characterized the end of 2000 and beginning
of 2001. Value was a positive contributor overall, its fourth positive quarter
in a row. Profitability also boosted results for the second consecutive
quarter, while Earnings Quality and Research were down for the period.
Looking ahead, we continue to believe that cheaper stocks should outpace more
expensive ones and good momentum stocks should do better than poor momentum
stocks. We also expect companies that are favored by fundamental research
analysts and that have strong profit margins and sustainable earnings to
outperform their peers. As such, we anticipate remaining fully invested and
expect that the value we add over time will be due to stock selection, as
opposed to sector or size allocations.
Footnotes
Total return figures represent past performance and do not indicate future
results which will vary. The Fund's performance reflects the reinvestment of
dividends and distributions. The Russell 2500 Index is unmanaged and does not
include any fees or expenses. Stocks of smaller companies are often more
volatile and present greater risks than stocks of larger companies. At times
the Fund may be unable to sell the securities it holds without a substantial
drop in price, if at all. CORESM is a service mark of Goldman, Sachs & Co.
Performance returns for the VST Small/Mid Cap CORE Fund (the "Fund") are
estimated and supplied as a client accommodation for internal use only within
John Hancock Funds Group. The Fund is subadvised/managed by Goldman Sachs
Asset Management ("GSAM"). As a subadviser, we do not normally perform
administration functions, such as performance calculations. The NAV's,
distributions and expense ratios (which are calculated by the custodian--State
Street Bank) used to calculate total returns have not been independently
validated and approved by GSAM.
(Fund investment information on next page.)
17
Inception: May 1, 1998
Small/Mid Cap CORESM Fund
Goldman Sachs Asset Management Jones/Brown/Pinter
[GRAPH]
Historical Fund Return
$10,000
Investments made 5/1/98
(Fund Inception Date)
Date Small/Mid Cap Core (SM) Fund Russell 2500 Index
---- ---------------------------- ------------------
5/1/1998 10,000 10,000
5/31/1998 9,577 9,536
6/30/1998 9,721 9,547
7/31/1998 9,040 8,892
8/31/1998 7,377 7,215
9/30/1998 7,776 7,727
10/31/1998 7,960 8,149
11/30/1998 8,422 8,553
12/31/1998 9,019 9,071
1/31/1999 8,940 9,056
2/28/1999 8,305 8,461
3/31/1999 8,438 8,642
4/30/1999 9,172 9,415
5/31/1999 9,251 9,561
6/30/1999 9,810 10,058
7/31/1999 9,686 9,861
8/31/1999 9,347 9,553
9/30/1999 9,224 9,410
10/31/1999 9,430 9,616
11/30/1999 9,887 10,160
12/31/1999 10,871 11,262
1/31/2000 10,456 11,003
2/29/2000 11,807 12,592
3/31/2000 11,700 12,399
4/30/2000 11,257 11,732
5/31/2000 10,720 11,169
6/30/2000 11,414 11,903
7/31/2000 11,267 11,599
8/31/2000 12,208 12,598
9/30/2000 11,766 12,189
10/31/2000 11,467 11,855
11/30/2000 10,396 10,811
12/31/2000 11,375 11,742
1/31/2001 11,642 12,129
2/28/2001 10,940 11,347
3/31/2001 10,296 10,724
4/30/2001 11,153 11,671
5/31/2001 11,433 12,023
6/30/2001 11,546 12,193
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Affiliated Computer Services, Inc. 0.9% 0.1%
International Game Technology 0.9% N/A
Countrywide Credit Industries, Inc. 0.9% N/A
UtilCorp United, Inc. 0.8% 0.1%
Nationwide Financial Services 0.8% N/A
John Naveen Co. 0.8% 0.1%
Toro Co. 0.8% N/A
PPL Corp. 0.7% N/A
Bancwest Corp. 0.7% N/A
NVR, Inc. 0.7% 0.1%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Small/Mid Cap Russell 2500 MorningStar
Core(SM) Fund Index Peer Group+
------------- ------------ -----------
YTD** 1.51% 3.84% 1.25%
1 Year 1.16 2.44 1.02
3 Years 5.90 8.50 6.40
Since Inception (5/1/98) 4.65 6.46 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Financial 23.5% Energy 5.8%
Technology 16.4% Basic Material 5.4%
Capital Equipment 12.9% Utility 5.1%
Health Care 11.4% Consumer Staples 3.4%
Consumer Cyclical 11.0% Retail 3.3%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. Small-company investing entails special risks as
outlined in the prospectus. The performance of the fund on this page
is reported net of Trust level charges (i.e. investment management
fees and operating expenses). It does not reflect expense and charges
of the applicable separate accounts and variable products, all of
which vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for the sub-
accounts of all variable annuity and life products within the
Morningstar variable universe. The peer group represents a 50%
weighting of the Mid Cap Blend category and a 50% weighting of the
Small Cap Blend style for periods since May 1999.
18
Inception: May 1, 1994
Small/Mid Cap Growth Fund
Wellington Management Company, LLP J. Harrington/F. Boggan
During the quarter, the Fund increased by 14.1% compared to a 21.3% return of
the Russell 2500 Growth Index. For the one-year period ended June 30, 2001,
the Fund gained 2.41%, considerably ahead of the -23.98% return of the Russell
2500 Growth Index.
The Fund benefited from its underweight position in the financials area. We
typically underweight the utilities sector versus our benchmark, since we
typically cannot find companies with the minimal growth metrics that we
require in the Fund. This underweight contributed to our relative performance,
as utilities were an underperforming sector. Strong positive performances in
the health care and technology sectors also contributed to performance. On a
stock selection basis, we underperformed the index in the technology area, as
it was the more aggressive names that advanced the most in the quarter. We
continue to focus the Fund on the more consistent, predictable growers in the
technology area, and those companies underperformed for the quarter.
Some of the recent stock successes include United Rentals Inc, which was the
top performing stock in the industrial and commercial sector, Edward
Lifesciences which is a leader in global marketing research and analysis for
the healthcare industry, and Nova Corp, which was the strongest contributor to
performance in the information technology sector.
The U.S. stock market continued to struggle during the quarter. Yet
aggressive Federal Reserve easing, a tax cut, and declining energy prices
appear to be having a positive impact. We believe that by year-end, there
should be signs of improved economic conditions that should lead to better
performance by the U.S. equity markets. As economic growth picks up and the
various fiscal and monetary actions begin to have their intended effect, we
are confident that the Fund is well-positioned to benefit in the upcoming
environment.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/94
(Fund Inception Date)
Date Small/Mid-Cap Growth Small/Mid Cap
Fund Growth Benchmark (1)
---- -------------------- --------------------
5/1/1994 10,000 10,000
5/31/1994 10,019 10,015
6/30/1994 10,043 9,584
7/31/1994 10,066 9,850
8/31/1994 10,359 10,437
9/30/1994 10,094 10,265
10/31/1994 10,263 10,442
11/30/1994 9,992 9,982
12/31/1994 10,056 10,122
1/31/1995 9,934 10,243
2/28/1995 10,283 10,788
3/31/1995 10,798 11,216
4/30/1995 11,069 11,310
5/31/1995 11,087 11,589
6/30/1995 11,652 12,116
7/31/1995 12,564 12,878
8/31/1995 12,807 13,020
9/30/1995 12,807 13,310
10/31/1995 12,807 12,973
11/30/1995 13,635 13,553
12/31/1995 14,166 13,560
1/31/1996 14,661 13,800
2/29/1996 15,139 14,322
3/31/1996 15,478 14,435
4/30/1996 16,589 15,132
5/31/1996 17,049 15,441
6/30/1996 16,824 14,974
7/31/1996 15,143 13,812
8/31/1996 16,043 14,560
9/30/1996 17,003 15,484
10/31/1996 17,537 15,303
11/30/1996 18,068 16,204
12/31/1996 18,463 15,932
1/31/1997 18,489 16,636
2/28/1997 17,431 16,270
3/31/1997 16,396 15,351
4/30/1997 15,920 15,727
5/31/1997 17,082 17,136
6/30/1997 17,316 17,611
7/31/1997 18,679 19,296
8/31/1997 18,325 19,107
9/30/1997 19,712 20,074
10/31/1997 19,294 19,068
11/30/1997 18,845 19,268
12/31/1997 19,112 19,521
1/31/1998 18,774 19,169
2/28/1998 20,391 20,971
3/31/1998 21,403 21,850
4/30/1998 21,343 22,147
5/31/1998 20,372 21,237
6/30/1998 21,141 21,838
7/31/1998 19,979 20,903
8/31/1998 15,789 16,913
9/30/1998 16,600 18,192
10/31/1998 17,496 19,530
11/30/1998 18,251 20,847
12/31/1998 20,184 23,007
1/31/1999 20,333 23,697
2/28/1999 18,823 22,538
3/31/1999 20,070 23,793
4/30/1999 21,189 24,878
5/31/1999 21,364 25,135
6/30/1999 22,270 26,912
7/31/1999 21,743 26,363
8/31/1999 20,061 25,793
9/30/1999 19,419 25,979
10/31/1999 19,524 27,244
11/30/1999 19,720 30,461
12/31/1999 21,223 36,207
1/31/2000 20,478 36,004
2/29/2000 21,023 45,239
3/31/2000 22,727 41,687
4/30/2000 22,109 37,627
5/31/2000 21,679 34,278
6/30/2000 23,039 38,810
7/31/2000 22,862 35,628
8/31/2000 24,845 40,270
9/30/2000 24,232 37,664
10/31/2000 24,015 35,337
11/30/2000 21,835 28,601
12/31/2000 23,186 30,375
1/31/2001 24,182 32,343
2/28/2001 22,531 27,353
3/31/2001 20,679 24,327
4/30/2001 22,819 28,035
5/31/2001 23,182 28,848
6/30/2001 23,593 29,503
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Edwards Lifesciences Corp. 2.8% N/A
Trigon Healthcare, Inc. 2.5% N/A
Reinsurance Group of America 2.2% 2.4%
Legg Mason, Inc. 2.2% N/A
Legg Mason, Inc. 2.2% N/A
Investment Technology Group, Inc. 2.2% 0.6%
Herman Miller, Inc. 2.1% 2.0%
Health Management Associates, Inc. 2.1% N/A
Becton, Dickinson & Co. 2.1% N/A
Pepsi Bottling Group, Inc. 2.0% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Small/Mid Small/Mid Cap MorningStar
Cap Growth Fund Growth Benchmark (1) Peer Group+
--------------- -------------------- -----------
YTD** 1.76% -2.87% -10.42
1 Year 2.41 -23.98 -24.64
3 Years 3.73 10.55 10.94
5 Years 7.00 14.53 13.21
Since Inception (5/1/94) 12.17 16.30 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Technology 27.3% Energy 6.8%
Health Care 21.7% Capital Equipment 5.8%
Financial 12.1% Utility 2.7%
Retail 8.6% Basic Material 2.3%
Consumer Cyclical 8.5% Consumer Staple 2.0%
(1) The Small/Mid Cap Growth Fund benchmark is the Russell Mid Cap
Growth Index from May 1994 to April 1999 and the Russell 2500
Growth Index May 1999-present.
* Total returns are for the period ended June 30, 2001 returns
represent past performance, assume reinvestment of all
distributions, and are not indicative of future performance.
"Results may have been achieved during market conditions or pursuing
performance opportunities, including investment in initial public
offerings, that may not continue to occur in the future." Investment
returns and principal value of fund shares will fluctuate that
shares, when redeemed, may be worth more or less than their original
cost. Small company investing entails special risks as discussed in
the prospectus. The performance of the fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for the sub-
accounts of all variable annuity and life products within the
Morningstar variable universe having a Mid Cap Growth and a Small-
Cap Growth investment style. The peer group represents a 50%
weighting of the Mid Cap Growth category and a 50% weighting of the
Small Cap Growth category. Prior to May 1999, the peer group
represents the Mid Cap Growth investment category.
19
Inception: May 1, 1996
Small Cap Equity Fund
Capital Guardian Trust Company Management Team
For the quarter ended June 30, 2001, the VST Small Cap Equity Fund returned
17.65%, beating the Russell 2000 Index, which returned 14.41%
Given the portfolio's overweight in technology, the April bounceback was
helpful to returns, and we were able to trim some positions on strength. Stock
selection, especially in the areas of media, software, biotechnology, and
Internet, also contributed. As the market has become more discriminating we
have pared back the list of portfolio holdings significantly, concentrating on
higher conviction names within each sector with a focus on market-leading
companies attractively valued within the context of their industries.
The upcoming tax refunds and the Federal Reserve's easy monetary policy
should provide the U.S. economy with a shot in the arm, though timing a
recovery will be hard to call. Lower interest rates and increased liquidity
should benefit small-cap stocks as well as large caps, and relatively low
valuations should also help small-cap stocks to hold up. With recent economic
news still indicating some weakness, however, we may have opportunities to
purchase cyclical stocks at lower prices in the near future. With the Russell
2000 Index rebalancing effective as of July 2, the technology sector will
increase from 10.3% to 15.8%, and we may see heightened volatility in the
index.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Date Small Cap Equity Fund Small Cap Equity Benchmark(1)
---- --------------------- -----------------------------
5/1/1996 10,000 10,000
5/31/1996 10,232 10,324
6/30/1996 10,126 10,051
7/31/1996 9,630 9,346
8/31/1996 10,161 9,820
9/30/1996 10,450 10,146
10/31/1996 10,340 10,126
11/30/1996 10,678 10,607
12/31/1996 11,033 10,918
1/31/1997 11,115 11,111
2/28/1997 10,927 11,029
3/31/1997 10,594 10,621
4/30/1997 10,831 10,714
5/31/1997 11,818 11,736
6/30/1997 12,513 12,284
7/31/1997 13,256 12,828
8/31/1997 13,389 13,077
9/30/1997 14,242 13,989
10/31/1997 13,761 13,491
11/30/1997 13,863 13,521
12/31/1997 13,863 13,869
1/31/1998 13,521 13,634
2/28/1998 14,533 14,550
3/31/1998 15,138 15,146
4/30/1998 15,222 15,224
5/31/1998 14,459 14,545
6/30/1998 14,458 14,519
7/31/1998 13,270 13,363
8/31/1998 10,902 11,019
9/30/1998 11,414 11,762
10/31/1998 11,733 12,176
11/30/1998 12,320 12,660
12/31/1998 13,037 13,250
1/31/1999 12,716 13,187
2/28/1999 11,876 12,204
3/31/1999 11,826 12,249
4/30/1999 12,619 13,356
5/31/1999 12,798 13,659
6/30/1999 13,630 14,215
7/31/1999 13,444 13,851
8/31/1999 12,849 13,341
9/30/1999 12,620 13,075
10/31/1999 12,366 12,813
11/30/1999 12,267 12,880
12/31/1999 12,590 13,275
1/31/2000 11,854 12,927
2/29/2000 12,345 13,717
3/31/2000 12,574 13,782
4/30/2000 12,787 13,863
5/31/2000 12,670 13,651
6/30/2000 12,740 14,049
7/31/2000 13,003 14,517
8/31/2000 13,762 15,166
9/30/2000 13,774 15,080
10/31/2000 13,768 15,026
11/30/2000 10,732 13,484
12/31/2000 11,470 14,642
1/31/2001 13,023 15,405
2/28/2001 11,056 14,394
3/31/2001 10,142 13,691
4/30/2001 11,316 14,761
5/31/2001 11,655 15,124
6/30/2001 11,932 15,646
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Polaris Industries Inc. 1.8% N/A
Everest ReGroup, Ltd. 1.7% N/A
LTX Corp. 1.4% N/A
Dollar Tree Stores, Inc. 1.4% N/A
Advanced Energy Industries, Inc. 1.3% N/A
Electro Scientific Industries, Inc. 1.3% N/A
EMCORE Corp. 1.3% N/A
Werner Enterprises, Inc. 1.2% 0.2%
Pentair, Inc. 1.2% N/A
American Capital Strategies, Ltd. 1.1% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Small Cap Small Cap Equity MorningStar
Equity Fund Benchmark (1) Peer Group+
----------- ---------------- -----------
YTD** 4.02% 6.86% 5.33%
1 Year -6.34 11.36 10.39
3 Years -6.20 2.52 4.57
5 Years 3.34 9.25 9.75
Since Inception (5/1/96) 3.48 9.05 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Technology 29.2% Retail 5.1%
Consumer Cyclical 17.8% Consumer Staple 3.5%
Financial 12.6% Transportation 3.2%
Health Care 11.4% Energy 2.2%
Capital Equipment 11.2% Basic Material 2.2%
(1) The Small Cap Equity Benchmark is 50% Russell 2000 and 50% Russell
2000 Value Index, May 1996 thru August 1999, the Russell 2000
Value, September 1999 thru October 2000, and the Russell 2000 Index
October 2000 to present.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings,
that may not continue to occur in the future". Investment returns
and principal value of fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Small-company investing entails special risks as outlined in the
prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for the sub-
accounts of all variable annuity and life products within the
Morningstar variable universe having a Small Cap Blend investment
category. Prior to November 2000, the peer group represents the
Small Cap Value investment category.
20
Inception: May 1, 1996
Small Cap Growth Fund
John Hancock Advisers, Inc. Bernice Behar
For the second quarter, the Small Cap Growth Variable Series Trust portfolio
returned 16.25% (net) while the Russell 2000 Growth Index gained 18.12%.
Several areas of the portfolio that helped performance include retailers,
healthcare services, and radio broadcasters. Consumer companies benefited from
a perception that lower interest rates would help the earnings of these
companies later this year. In health care, our emphasis on services continued
to contribute to performance. We favor the services segment for its reliable
earnings growth in this uncertain environment.
Alternatively, areas that detracted from performance include biotechnology
and energy. Our lack of exposure to biotechnology stocks hurt performance as
this group advanced sharply over the quarter. In addition, our relative
overweighting in energy was detrimental to performance as supplies of crude
oil and natural gas swelled unexpectedly in the latter half of the quarter,
slowing exploration and causing commodity prices to decline. However, we
expect demand for energy products to increase during the summer months and
look for the supply bulge to work itself out.
Aggressive easing of interest rates by the Fed has made us more optimistic
about the long-term prospects for the economy and the stock market. While we
expect to see volatility among growth stocks this summer, we are optimistic
that economic growth will pick up by year-end.
However, the jury is still out on when the technology and telecommunications
sectors will make a meaningful recovery. We are currently watching companies
within these areas for some stabilization in order patterns. When we see such
stabilization, we will be reasonably confident that the inventory glut here
has run its course. Until then, we are inclined to adopt a slightly less
defensive position than in the recent past, increasing the portfolio's
technology and telecommunications exposure on a very selective basis.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Date Small Cap Growth Fund Russell 2000 Growth Index
---- --------------------- -------------------------
5/01/1996 10,000 10,000
10,599 10,513
10,294 9,830
9,480 8,629
10,298 9,268
11,151 9,745
10,170 9,325
9,976 9,585
Dec-96 9,950 9,771
10,302 10,016
9,638 9,411
8,962 8,746
8,763 8,645
9,781 9,944
10,514 10,281
11,205 10,808
11,571 11,132
12,817 12,020
11,834 11,298
11,387 11,029
Dec-97 11,370 11,036
11,170 10,889
12,062 11,850
12,788 12,348
12,730 12,423
11,856 11,521
12,366 11,639
11,537 10,667
8,966 8,205
9,701 9,037
10,230 9,509
11,424 10,247
Dec-98 13,017 11,174
13,456 11,677
12,384 10,609
13,341 10,986
13,873 11,956
13,626 11,975
14,903 12,606
15,022 12,217
14,920 11,760
15,236 11,987
16,337 12,294
18,479 13,593
Dec-99 22,179 15,988
21,633 15,840
27,928 19,526
25,551 17,474
21,939 15,709
19,338 14,333
23,398 16,184
21,153 14,797
23,673 16,354
22,478 15,541
20,010 14,279
16,003 11,686
Dec-00 17,425 12,401
17,633 13,405
15,433 11,567
13,803 10,515
15,699 11,803
15,756 12,076
6/30/2001 16,043 12,406
Top Ten Holding (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Corporate Executive Board Co. 1.4% 0.7%
Microsemi Corp. 1.4% N/A
Renal Care Group, Inc. 1.3% N/A
Education Management Corp. 1.3% N/A
Accredo Health, Inc. 1.2% N/A
NPS Pharmaceuticals, Inc. 1.2% N/A
Tweeter Home Entertainment Group, Inc. 1.2% N/A
Radio One, Inc. 1.2% 0.7%
Wilson Greatbatch Technologies, Inc. 1.2% N/A
Columbia Sportswear Co. 1.2% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Small Cap Russell 2000(R) MorningStar
Growth Fund Growth Index Peer Group+
----------- --------------- -----------
YTD** -7.94% 0.04% -6.95%
1 Year -31.44 -23.35 -22.74%
3 Years 9.06 2.15 10.66
5 Years 9.28 4.77 9.78
Since Inception (5/1/96) 9.58 4.26 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
Investments Investments
Technology 23.8% Energy 10.7%
Health Care 15.1% Capital Equipment 6.3%
Financial 13.9% Consumer Staple 2.6%
Consumer Cyclical 13.4% Utility 1.6%
Retail 11.8% Transportation 0.7%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings, that
may not continue to occur in the future. "Investment returns and
principal value of fund shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Small-
company investing entails special risks as outlined in the
prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees and operating
expenses). It does not reflect expense and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for the sub-
accounts of all variable annuity and life products within the
Morningstar variable universe having a Small Growth investment
category.
21
Inception: May 2, 1988
International Equity Index Fund
Independence Investment LLC B. Greenleaf/D. Nolan
During the second quarter of 2001, the International Equity Index Fund
returned -0.02%, outperforming its custom blended benchmark return of -0.98%
by 96 basis points. Fifty-four basis points of the outperformance came from
the month of April, leaving 18 basis points outperformance in May and 24 basis
points in June. Forty-six basis points of the outperformance during this
quarter were attributable to exchange rate differences between those used by
the fund administrator and those stated by the MSCI Index. The most noticeable
rate differences came from the Japanese yen, the British pound and the Euro.
Country selection was a slight negative contributor to performance, however
stock selection was a strong positive contributor. Ireland was the largest
negative contributor while Taiwan was the largest positive contributor to
country selection attribution. Ireland climbed 10.72% during the second
quarter of 2001 and the Fund held a slight underweight to the 90% EAFE GDP and
10% MSCI Emerging Markets Free Index custom benchmark. On the other hand,
Taiwan returned -15.98% during the second quarter and the Fund held an
underweight to the custom blended benchmark, therefore Taiwan was a positive
attributor to country selection. Stock selection attribution was very strong,
especially in Japan and Italy. Japan's Mizuho Holdings and Mitsubishi Tokyo
Financing along with Italy's Banca di Roma were among the best contributors.
Contribution to performance from industry-specific categories was fairly flat,
the largest positive contributor was that of leisure and tourism while the
largest negative contributor was business and public services.
Annually on July 1st, Morgan Stanley rebalances its EAFE GDP Index to reflect
the latest calendar year GDP value for each country. As a result of these
changes, at the beginning of the third quarter, we will rebalance your Fund
back to 90% EAFE GDP and 10% Morgan Stanley Emerging Markets Free Index
weights. Currently, the Fund owns 754 securities that represent exposure to
thirty-seven equity markets. The Custom Benchmark holds 1665 securities.
[GRAPH]
Historical Fund Return
$10,000
Investment made 7/1/91
(10-Year Period)
International International
Equity Equity Index
Date Index Fund Benchmark(1)
---- ------------- -------------
7/1/1991 10,000 10,000
7/31/1991 10,497 10,494
8/31/1991 10,601 10,283
9/30/1991 10,685 10,865
10/31/1991 10,868 11,022
11/30/1991 10,623 10,510
12/31/1991 11,638 11,056
1/31/1992 11,609 10,822
2/29/1992 11,588 10,438
3/31/1992 11,057 9,752
4/30/1992 11,026 9,801
5/31/1992 11,338 10,461
6/30/1992 11,123 9,968
7/31/1992 11,059 9,716
8/31/1992 10,937 10,329
9/30/1992 10,898 10,129
10/31/1992 10,840 9,600
11/30/1992 11,294 9,693
12/31/1992 11,446 9,746
1/31/1993 11,515 9,748
2/28/1993 11,457 10,046
3/31/1993 11,837 10,925
4/30/1993 11,910 11,965
5/31/1993 12,515 12,221
6/30/1993 12,405 12,032
7/31/1993 12,624 12,456
8/31/1993 13,331 13,131
9/30/1993 13,505 12,838
10/31/1993 14,375 13,236
11/30/1993 13,838 12,082
12/31/1993 15,143 12,957
1/31/1994 15,247 14,055
2/28/1994 15,069 14,019
3/31/1994 14,284 13,418
4/30/1994 14,552 13,990
5/31/1994 14,723 13,913
6/30/1994 14,344 14,114
7/31/1994 14,674 14,252
8/31/1994 15,352 14,593
9/30/1994 15,033 14,136
10/31/1994 15,334 14,610
11/30/1994 14,331 13,911
12/31/1994 14,195 14,002
1/31/1995 13,402 13,467
2/28/1995 13,631 13,432
3/31/1995 14,126 14,274
4/30/1995 14,551 14,815
5/31/1995 14,849 14,642
6/30/1995 14,706 14,388
7/31/1995 15,523 15,288
8/31/1995 15,082 14,708
9/30/1995 15,296 14,999
10/31/1995 15,030 14,600
11/30/1995 15,100 15,011
12/31/1995 15,333 15,619
1/31/1996 15,575 15,686
2/29/1996 15,751 15,742
3/31/1996 15,902 16,081
4/30/1996 16,491 16,552
5/31/1996 16,323 16,251
6/30/1996 16,360 16,347
7/31/1996 15,666 15,872
8/31/1996 15,789 15,911
9/30/1996 16,084 16,337
10/31/1996 15,984 16,174
11/30/1996 16,699 16,821
12/31/1996 16,742 16,609
1/31/1997 16,453 16,031
2/28/1997 16,514 16,297
3/31/1997 16,207 16,360
4/30/1997 16,322 16,450
5/31/1997 17,697 17,524
6/30/1997 18,614 18,495
7/31/1997 19,199 18,799
8/31/1997 17,107 17,398
9/30/1997 18,344 18,376
10/31/1997 15,858 16,968
11/30/1997 15,853 16,799
12/31/1997 15,902 16,950
1/31/1998 15,913 17,730
2/28/1998 17,135 18,871
3/31/1998 17,830 19,456
4/30/1998 18,306 19,614
5/31/1998 18,415 19,896
6/30/1998 18,639 20,087
7/31/1998 18,790 20,355
8/31/1998 16,400 17,678
9/30/1998 15,890 17,190
10/31/1998 17,610 19,108
11/30/1998 18,463 20,104
12/31/1998 19,212 20,918
1/31/1999 19,255 20,945
2/28/1999 18,603 20,292
3/31/1999 19,578 21,365
4/30/1999 20,328 22,228
5/31/1999 19,343 21,068
6/30/1999 20,340 22,132
7/31/1999 20,818 22,683
8/31/1999 21,008 22,842
9/30/1999 21,156 23,123
10/31/1999 21,865 23,893
11/30/1999 22,830 24,882
12/31/1999 25,143 27,378
1/31/2000 23,668 26,036
2/29/2000 24,474 26,940
3/31/2000 25,134 27,678
4/30/2000 23,519 25,893
5/31/2000 23,065 25,271
6/30/2000 23,875 26,355
7/31/2000 22,741 25,032
8/31/2000 22,960 25,298
9/30/2000 21,848 24,023
10/31/2000 21,127 23,235
11/30/2000 20,208 22,198
12/31/2000 20,764 22,744
1/31/2001 21,181 23,247
2/28/2001 19,711 21,666
3/31/2001 18,334 20,204
4/30/2001 19,590 21,509
5/31/2001 18,969 20,853
6/30/2001 18,318 20,113
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Toyota Motor Corp. 2.0% 3.0%
Allianz AG 1.5% 1.7%
Deutsche Telekom AG 1.3% 4.5%
Morgan Stanley Capital LLC 1.2% 1.4%
BP Amoco PLC 1.2% 1.4%
GlaxoSmithKline PLC 1.2% N/A
Siemens AG 1.1% 1.5%
ENI 1.1% N/A
Nippon Telegraph & Telephone Corp. 1.1% 1.3%
Total Fina SA 1.1% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
International International
Equity Equity Index MorningStar
Index Fund Benchmark(1) Peer Group+
------------- ------------- -----------
YTD** -11.77% -11.57% -13.81%
1 Year -23.27 -23.69 -24.30
3 Years -0.58 0.04 0.39
5 Years 2.29 4.23 4.80
10 Years 6.24 7.05 9.05
Top Ten Countries (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Japan 28.8% Spain 4.0%
Germany 13.0% Australia 3.1%
United Kingdom 10.8% Netherlands 2.9%
France 8.5% United States 2.7%
Italy 7.3% Switzerland 1.8%
(1) The International Equity Benchmark represents the MSCI EAFE from
May 1998 to April 1998 and then MSCI EAFE GDP weighted from May
1998 to June 1999 and now 90% MSCI EAFE GDP - weighted/10% MSCI
Emerging Markets Free from July 1999 to present.
* Total returns are for the period ended June 30, 2001, returns
represent past performance, assume reinvestment of all
distributions, and are not indicative of future performance.
"Results may have been achieved during market conditions or pursuing
performance opportunities that may not continue to occur in the
future." Investment returns and principal value of fund shares will
fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. The performance of the fund on this page
is reported net of Trust level charges (i.e. investment management
fees and operating expenses). It does not reflect expense and
charges of the applicable separate accounts and variable products,
all of which vary to a considerable extent and are described in your
product prospectus. There are special risks associated with
international investing, including currency fluctuations, political
and economic instability, foreign taxation and different accounting
standards, as outlined in the current prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for the sub-
accounts of all variable annuity and life products within the
MorningStar variable universe having a 90% weighting of the Foreign
Stock, Large Cap category and a 10% weighting of the Diversified
Emerging Markets category. Prior to July 1999, the peer group
represents the Foreign Stock, Large Cap category.
22
Inception: May 1, 1996
International Opportunities Fund
T. Rowe Price International, Inc. Warren/Ford/Seddan/Bickford-Smith
International stocks fell sharply during the six months ended June 30. Losses
were modest over the second quarter but followed steep declines during the
first three months of the year. The U.S. Federal Reserve cut rates
aggressively during the period, and a surprise Fed rate cut spurred a global
rally early in the second quarter, but the rebound fizzled on continued
earnings disappointments and renewed fears about weakening economies.
Technology, media, and telecommunications stocks led the April upswing, while
defensive, value-oriented stocks, which offer a measure of revenue and
earnings certainty, rallied as less positive economic news dominated in May
and June.
In Europe, economic indicators declined, while energy and food prices pushed
euro zone inflation up to 3.4%. The strong dollar continued to hurt returns
for U.S. investors. The euro appeared to stabilize after falling 6% during the
first quarter, then fell another 4% during the second quarter. Falling exports
drove Japan to the brink of recession. The yen was flat in the second quarter
after falling 9% during the first quarter. Most regional economies in the
Pacific ex-Japan slowed sharply as exports softened. In Latin America,
Mexico's economy weakened in line with U.S. demand, but the peso strengthened
and stocks remained strong. A domestic energy crisis and Argentina's turmoil
drove Brazil's currency down.
Overall, the T. Rowe Price International Stock Fund posted a sharp loss,
modestly underperforming the MSCI EAFE (Europe, Australasia, Far East) Index,
which fell 14.75%. The portfolio's bias toward growth sectors hindered returns
during a period when value sectors were the strongest performers. Both our
overweighting of technology and our underweighting of value and defensive
sectors, including automobiles and utilities, hurt returns. Country weightings
and stock selection within countries were generally neutral, although our
overweight position in the robust Mexican market has been a positive.
The ongoing correction in tech and telecom stocks hurt performance as
telecommunications provider Vodafone (U.K.) and communications equipment
makers Alcatel (France), Ericsson (Sweden), and Nokia (Finland) plunged. At
the same time, stock selection within sectors was positive. Within the
technology sector, for example, Celestica (Canada) and Canon (Japan) boosted
returns. In the telecom sector, China Mobile (Hong Kong) climbed as subscriber
growth surpassed expectations, and in Japan NTT DoCoMo's launch of Java
Internet-compatible handsets stimulated usage. Both stocks were significant
contributors to their sector. Telefonos de Mexico also rallied along with that
country's stock market. The period's top contributor was U.K. pharmaceutical
giant GlaxoSmithKline.
We added to holdings in caterer Sodexho (France), which acquired control of
its U.S. subsidiary; food retailer Sainsbury (U.K.), which is restructuring;
and Italian bank BNL, which is increasing its earnings and should benefit from
industry consolidation. After significant cuts to tech and telecom positions
in the first quarter, we made further reductions in Ericsson and Japan's
Kyocera and NTT during the second quarter in light of the difficult near-term
outlook. We also reduced our holdings of financial companies that are exposed
to the slowdown in mergers and acquisitions and other equity-market-related
business, including Credit Suisse and Deutsche Bank.
Near the end of June, the U.S. Federal Reserve cut interest rates for the
sixth time since the beginning of the year. The economic news remains
uninspiring, however, and the outlook uncertain. Optimism about falling
interest rates will likely be balanced by continued earnings pessimism over
the next few months, but news should turn more positive as rate cuts work
their way through the system. We are focusing on positioning the portfolio to
benefit from a rebound in growth over the medium term while avoiding the
negative impact of short-term earnings disappointments.
(Fund investment information on the next page.)
23
Inception: May 1, 1996
International Opportunities Fund
T. Rowe Price International, Inc. Warren/Ford/Seddan/Bickford-Smith
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
International
Opportunites
Date International Opportunities Fund Benchmark (1)
---- -------------------------------- -------------
5/1/1996 10,000 10,000
5/31/1996 10,024 9,818
6/30/1996 10,129 9,876
7/31/1996 9,820 9,590
8/31/1996 9,971 9,613
9/30/1996 10,191 9,870
10/31/1996 10,150 9,771
11/30/1996 10,609 10,162
12/31/1996 10,672 10,034
1/31/1997 10,544 9,685
2/28/1997 10,672 9,846
3/31/1997 10,659 9,884
4/30/1997 10,701 9,939
5/31/1997 11,332 10,588
6/30/1997 11,796 11,174
7/31/1997 12,113 11,357
8/31/1997 10,992 10,511
9/30/1997 11,719 11,102
10/31/1997 10,863 10,252
11/30/1997 10,859 10,149
12/31/1997 10,880 10,240
1/31/1998 11,254 10,711
2/28/1998 11,932 11,401
3/31/1998 12,346 11,755
4/30/1998 12,435 11,850
5/31/1998 12,390 11,795
6/30/1998 12,416 11,887
7/31/1998 12,560 12,011
8/31/1998 10,980 10,525
9/30/1998 10,715 10,205
10/31/1998 11,680 11,272
11/30/1998 12,199 11,852
12/31/1998 12,611 12,323
1/31/1999 12,484 12,309
2/28/1999 12,268 12,034
3/31/1999 12,769 12,615
4/30/1999 13,241 13,246
5/31/1999 12,623 12,623
6/30/1999 13,112 13,204
7/31/1999 13,358 13,514
8/31/1999 13,495 13,561
9/30/1999 13,581 13,653
10/31/1999 14,038 14,161
11/30/1999 15,021 14,728
12/31/1999 16,900 16,133
1/31/2000 15,833 15,257
2/29/2000 16,711 15,669
3/31/2000 16,885 16,258
4/30/2000 15,946 15,351
5/31/2000 15,446 14,958
6/30/2000 16,250 15,595
7/31/2000 15,693 14,979
8/31/2000 16,033 15,165
9/30/2000 15,020 14,323
10/31/2000 14,413 13,868
11/30/2000 13,655 13,245
12/31/2000 14,136 13,698
1/31/2001 14,305 13,916
2/28/2001 13,024 12,821
3/31/2001 12,015 11,897
4/30/2001 12,974 12,706
5/31/2001 12,412 12,356
6/30/2001 11,876 11,881
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
GlaxoSmithKline PLC 4.6% N/A
Total Fina SA 2.7% N/A
Shell Transport & Trading Co. PLC 2.3% 1.2%
Royal Bank of Scotland Group 2.2% N/A
ING Groep NV 2.1% 1.0%
Reed International PLC 2.1% 0.7%
Canon, Inc. 2.0% 0.9%
NTT Mobile Communications Network, Inc. 1.9% 1.1%
Rhone-Poulenc SA 1.9% 0.1%
Vodafone AirTouch PLC 1.8% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Intl. Opportunities Intl. Opportunities MorningStar
Fund Benchmark(1) Peer Group+
------------------- ------------------- -----------
YTD** -15.98% -13.25% -13.81%
1 Year -26.92 -23.81 -24.30
3 Years -1.47% -0.02 0.39
5 Years 3.23 3.77 4.80
Since Inception (5/1/96) 3.39 3.39 N/A
Top Ten Countries (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of %of
investments investments
United Kingdom 24.8% Switzerland 4.5%
Japan 18.2% Germany 4.4%
France 14.2% United States 3.5%
Netherlands 7.6% Sweden 3.2%
Italy 5.9% Hong Kong 2.6%
(1) The International Opportunities Benchmark represents the MSCI EAFE
from May 1996 to December 1998 and the MSCI All Country World Free
Ex. US from January 1999 to present.
* Total returns are for the period ended June 30, 2001 . Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings,
that may not continue to occur in the future." Investment returns
and principal value of fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
There are special risks associated with international investing
including currency fluctuations, political and economic instability,
foreign taxation and different accounting standards, as outlined in
the current prospectus. The performance of the fund on this page is
reported net of Trust level charges (i.e. investment management fees
and operating expenses). It does not reflect expense and charges of
the applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for the sub-
accounts of all variable annuity and life products within the
Morningstar variable universe having a Foreign Stock, Large Cap
investment category.
24
Inception: August 31, 1999
International Equity Fund
Goldman Sachs Asset Management Maeda/Noble/Orchard
During the second quarter of 2001, the International Equity Fund (the "Fund")
generated a total cumulative return of 0.43%, versus the -1.25% total
cumulative return of the Fund's benchmark, the MSCI EAFE Index (the "Index").
During the quarter the Fund's performance was enhanced by positive stock
selection. In particular, our positioning in the Information Technology,
Consumer Discretionary and Industrials sectors was the most beneficial.
Detractors from performance included holdings in Telecoms, Technology Hardware
and Equipment. The entire Telecom sector continued to underperform, due to
concerns about the companies' financial health in light of acquisitions and
expenditure on third generation (3G) mobile phone licenses.
In the U.S. there were some positive signs from the economy. Specifically,
new home sales, consumer confidence and consumption surprised to the upside,
which has given the market some hope that the Federal Reserve Board's actions
are finally starting to take hold. In Europe, the weak Euro and inflationary
pressures have prevented the ECB from reducing interest rates by any
meaningful extent. However, going forward pricing pressures should ease given
stable to declining energy prices, thus enabling room for rates to decline.
Expectations are that the economy will trough in the second half of this year
with the equity markets anticipating a more robust 2002. The UK economy has
shown fewer signs of a significant slowdown, and as such, provides a more
supportive environment for equities. While the risk of more weak earnings news
remains in 2001, we believe that we are beginning to see a bottom in the
equity market, with ample negative sentiment already being factored into the
much maligned technology and telecommunications sectors. Given current
weakness in the global economic environment and Asia's exposure to the
commodity end of the manufacturing sector, we continue to position the
portfolio relatively defensively. We are underweight the property sector in
Hong Kong and Singapore as interest rate cuts have failed to stimulate a
recovery in demand. We continue to favor defensive, high dividend yield plays,
as well as companies that are relatively insulated from the external slowdown.
We are positive on Australia for its defensive characteristics in such a
market environment. The Japanese domestic economy is showing signs of weakness
and it seems likely that 2001 GDP growth will be revised into negative
territory. Also impacting the domestic market are the reform policies of Prime
Minister Koizumi over which there is much debate in terms of political
backing, pace and scale of any potential future reforms. Under these
circumstances, we are selectively moving away from domestic names towards
stocks which are more exposed to a recovery in global GDP. In conclusion, the
U.S. outlook seems to be improving, and signs of a broader global slowdown
seem to be abating, although the "old economy' seems as though it will recover
before the "new economy.' In this environment, we continue to focus on finding
outstanding companies across global sectors, positioning the portfolio for
long-term global re-flation.
Footnotes
Total return figures represent past performance and do not indicate future
results which will vary. The Fund's performance reflects the reinvestment of
dividends and distributions. The MSCI EAFE Unhedged Index is unmanaged and
does not include any fees or expenses. The Fund's foreign investments may be
more volatile than an investment in U.S. securities and are subject to the
risks of currency fluctuations and political developments.
Performance returns for the VST International Equity Fund (the "Fund") are
estimated and supplied as a client accommodation for internal use only within
John Hancock Funds Group. The Fund is subadvised/managed by Goldman Sachs
Asset Management ("GSAM"). As a subadviser, we do not normally perform
administration functions, such as performance calculations. The NAV's,
distributions and expense ratios (which are calculated by the custodian--State
Street Bank) used to calculate total returns have not been independently
validated and approved by GSAM.
(Fund investment information on the next page.)
25
Inception: August 31, 1999
International Equity Fund
Goldman Sachs Asset Management Maeda/Noble/Orchard
[GRAPH]
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
International Equity MSCI EAFE
Date Fund Index
---- -------------------- -----
8/31/1999 10,000 10,000
9/30/1999 9,935 10,103
10/31/1999 10,307 10,484
11/30/1999 11,103 10,851
12/31/1999 12,148 11,826
1/31/2000 11,522 11,077
2/29/2000 12,105 11,377
3/31/2000 12,438 11,820
4/30/2000 11,837 11,201
5/31/2000 11,565 10,930
6/30/2000 11,850 11,359
7/31/2000 11,410 10,886
8/31/2000 11,365 10,983
9/30/2000 10,805 10,450
10/31/2000 10,571 10,205
11/30/2000 10,120 9,825
12/31/2000 10,394 10,177
1/31/2001 10,366 10,171
2/28/2001 9,491 9,410
3/31/2001 8,835 8,787
4/30/2001 9,496 9,403
5/31/2001 9,206 9,078
6/30/2001 8,875 8,711
Top Ten Holdings (as of June 30, 2001)
- -------------------------------------------------------------------------------
- -
% of six months ago
investments % of investments
GlaxoSmithKline PLC 4.1% N/A
Royal Duth Petroleum Co. 2.9% N/A
Vodafone AirTouch PLC 2.6% 1.1%
Nestle SA 2.4% 0.5%
Tesco PLC 2.1% N/A
BP Amoco PLC 2.1% 0.8%
ING Groep NV 1.9% 0.7%
Barclay's PLC 1.8% N/A
Diageo PLC 1.7% 0.3%
Takeda Chemical Industries 1.6% N/A
Average Annual Total Returns*
- -------------------------------------------------------------------------------
- -
International MSCI EAFE MorningStar
Equity Fund Index Peer Group+
------------- --------- -----------
YTD** -14.56% -14.41% -13.81%
1 Year -25.00 -23.32 -24.30
Since Inception (8/31/99) -6.23 -7.25 N/A
Top Ten Countries (as of June 30, 2001)
- -------------------------------------------------------------------------------
- -
% of % of
investments investments
United Kingdom 26.2% Germany 6.4%
Japan 24.4% Sweden 3.7%
Switzerland 9.2% Italy 3.6%
France 8.0% Spain 3.0%
Netherlands 7.9% Australia 2.8%
* Total returns are for the period ended June 30, 2001, returns
represent past performance, assume reinvestment of all
distributions, and are not indicative of future performance.
"Results may have been achieved during market conditions or pursuing
performance opportunities, including investment in initial public
offerings, that may not continue to occur in the future." Investment
returns and principal value of fund shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original
cost. The performance of the fund on this page is reported net of
Trust level charges (i.e. investment management fees and operating
expenses). It does not reflect expense and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
There are special risks associated with international investing,
including currency fluctuations, political and economic instability,
foreign taxation and different accounting standards, as outlined in
the current prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Foreign Stock with Large Cap investment
category.
26
Inception: May 1, 1998
Emerging Markets Equity Fund
Morgan Stanley Investment Management Inc. Meyer/Ramachandran
The portfolio rose 5.57% (on a net basis) versus a benchmark (MSCI EMF)
return of 4.01% for the quarter ended June 30, 2001./1/
The portfolio outperformed the benchmark during the quarter due to stock
selection and country allocation. Stock selection in Taiwan, Brazil and Mexico
added positively to relative performance. On a country allocation basis our
underweight stance in Malaysia and Taiwan coupled with our overweight position
in South Korea added positively to performance. Our underweight stance in
South Africa detracted from performance.
Despite continued concerns about a slowdown in global economic growth and
earnings disappointments, the emerging markets rebounded during the quarter,
posting a 4.0% return. This return was fueled by several US interest rate
easings. As risk aversion diminished during the early part of the quarter, the
emerging markets rallied. However in June, given the slower pace of US Fed
interest rate cuts coupled with the slowdown in the global economy and
concerns over earnings, investors became more cautious, and the emerging
markets gave back some of their return.
The emerging markets will continue to be subject to fluctuations in global
market sentiment, yet are poised to perform strongly in the face of any
improvement. With global interest rates falling, emerging markets have the
potential to trade well in the medium term. These markets continue to offer
attractive valuations.
The information reflects the views of the portfolio manager at the time of
this writing. Of course, these views may change in response to changing
circumstances and market conditions.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/98
(Fund Inception Date)
Emerging Markets MSCI Emerging Markets
Date Equity Fund Free Index
----
5/01/1998 10,000 10,000
5/31/1998 8,688 8,630
6/30/1998 7,960 7,725
7/31/1998 8,533 7,970
8/31/1998 5,845 5,666
9/30/1998 6,556 6,025
10/31/1998 7,081 6,659
11/30/1998 7,668 7,213
12/31/1998 7,113 7,109
1/31/1999 6,934 6,994
2/28/1999 6,732 7,062
3/31/1999 7,603 7,993
4/30/1999 8,545 8,982
5/31/1999 7,990 8,929
6/30/1999 9,227 9,943
7/31/1999 8,932 9,672
8/31/1999 8,752 9,760
9/30/1999 8,575 9,431
10/31/1999 9,055 9,631
11/30/1999 10,559 10,495
12/31/1999 12,900 11,830
1/31/2000 12,556 11,901
2/29/2000 13,602 12,058
3/31/2000 13,829 12,118
4/30/2000 12,047 10,969
5/31/2000 11,234 10,516
6/30/2000 12,012 10,886
7/31/2000 11,066 10,326
8/31/2000 11,162 10,377
9/30/2000 9,707 9,471
10/31/2000 8,762 8,784
11/30/2000 7,691 8,017
12/31/2000 7,726 8,210
1/31/2001 8,827 9,340
2/28/2001 7,938 8,609
3/31/2001 7,092 7,764
4/30/2001 7,533 8,147
5/31/2001 7,613 8,244
6/30/2001 7,488 8,075
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Samsung Electronics 4.6% 8.1%
China Telecom (Hong Kong), Ltd. 3.8% 2.0%
Telefonos de Mexico SA 3.4% 4.5%
Taiwan Semiconductor 2.3% N/A
Grupo Financiero Banamex Accival, SA de CV 2.1% N/A
Petroleo Brasileiro SA 1.9% 0.4%
Cellular CRT Participacoes 1.8% 0.6%
United Microelectronics Corp. 1.7% N/A
Fomento Economico Mexicano SA de CV 1.7% N/A
Surgutneftegaz 1.7% 1.3%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
- -
Emerging Markets MSCI Emerging MorningStar
Equity Fund Markets Free Index Peer Group+
---------------- ------------------ ----------
- -
YTD** -3.08% -1.64% -1.39%
1 Year -37.66 -25.82 -26.61
3 Years -2.02 1.49 1.23
Since Inception (5/1/98) -8.74 -6.53 N/A
Top Ten Countries (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
United States 28.6% India 6.8%
South Korea 13.9% Brazil 5.7%
Taiwan 10.5% Mexico 5.2%
South Africa 9.5% Turkey 2.7%
Hong Kong 9.1% Malaysia 2.2%
/1/Performance is for Class A shares.
(1) Returns reflect extra-ordinary capital contribution of $445,000 in
June 1999.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities. including investment in initial public offerings,
that may not continue to occur in the future." Investment returns
and principal value of fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
International investing entails special risks as outlined in the
prospectus. The performance of the fund on this page is reported net
of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for the sub-
accounts of all variable annuity and the life products within the
Morningstar variable universe having a Diversified Emerging Markets
investment category.
27
Inception: May 1, 2001
Health Sciences Fund
Putnam Investments Richard England
The Health Sciences Fund returned +1.99% (net) for the two-month period of
May 1, 2001 through June 30, 2001.
In May, biotech topped the sub-sector list, followed by pharmaceuticals and
medical technology; health-care services declined during the month. The Fund
benefited from several stocks in its specialty pharmaceutical sub-sector,
which rose over 12% during the month: Allergan (driven by the launch of a new
glaucoma product), Elan (favorable reports on its product pipeline), and King
Pharmaceuticals (product introductions). In the large-cap pharmaceutical area,
American Home Products and Schering-Plough garnered good returns during the
month while Sigma and United Health Care declined.
In June, health-care services was the top performer, driven by a hospital
sub-sector that rebounded following earlier profit-taking. In medical
technology, a recovery in Medtronic, a cardiovascular device manufacturer
whose stock had sold off on disappointing first-quarter revenues, aided
performance.
In pharmaceuticals, robust performance by drug delivery, generics, and
specialty pharmaceuticals were offset by weakness in U.S.-branded
pharmaceutical manufacturers due to concerns over a slowdown in arthritis
treatment drugs and manufacturing problems at Schering-Plough. The Fund's
strongest contributors to performance were HCA (leading hospital company),
Medimmune (biotechnology company specializing in infectious diseases),
Medtronic (cardiovascular devices), Gilead Sciences (biotech), and Ivax
(generic drug manufacturer). Stocks that hindered performance included Waters,
(research equipment), Merck (drug manufacturer), and Schering-Plough.
The U.S. equity market remains volatile. We anticipate additional earnings
disappointments, especially in those stocks leveraged to capital spending. It
appears that the Federal Reserve Open Market Committee is becoming more
confident that the economy is on track to avoid a recession. The full impact
of their monetary and fiscal stimulus is expected to encourage economic growth
in the fourth quarter of 2001 and into 2002.
Given this scenario, the Fund is focusing on both health-care services and
pharmaceutical stocks while reducing exposure to biotechnology and life
sciences. The fundamental outlook for the health-care industries remains
positive and the Fund's broad diversification across the different industry
sectors should enable it to cushion declines in some areas while benefiting
from new opportunities as they arise.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/01
(Fund Inception Date)
Health Sciences S&P GSHI
Fund 500 Index/1/ Index/2/
5/1/2001 10,000 10,000 10,000
5/31/2001 10,241 10,067 10,220
6/30/2001 10,199 9,822 9,962
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Glaxo SmithKline PLC 0.1% N/A
American Home Products Corp. 0.1% N/A
Johnson & Johnson 0.1% N/A
Pharmacia Corp. 0.1% N/A
Merck & Co., Inc. 0.1% N/A
AstraZeneca Group PLC 0.1% N/A
Medtronic, Inc. 0.1% N/A
HCA-The Healthcare Corp. 0.1% N/A
Schering-Plough Corp. 0.1% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
- -
Health GSHI
Sciences S&P 500 Health Care
Fund Index/1/ Index/2/
Since Inception (5/1/01) 1.99%* -1.76% 0.32%
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
- -
% of % of
investments investments
Health Care 2.2% Energy 0.0%
Financial 0.1%
Technology 0.0%
Capital Equipment 0.0%
Retail 0.0%
(1) "S&P 500" is an unmanaged stock index commonly used as a broad
measure of stock market performance.
(2) The Goldman Sachs Healthcare Index is a modified capitalization
weighted index that measures the performance of US healthcare
stocks. The index has a maximum individual stock weighting which is
currently 7.5%. The index includes companies in the following
categories: providers of healthcare related services, researchers,
manufacturers and distributors of pharmaceuticals, drugs and
related sciences, and medical supplies, instruments and products.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original costs. Sector investing entails special risks as discussed
in the prospectus. The performance of the fund on this page is
reported net of Trust level charges (i.e. investment management fees
and operating expenses). It does not reflect expense and charges of
the applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
28
Inception: May 16, 1988
Real Estate Equity Fund
Independence Investment LLC J. DeSantis/T. Spicer
Morgan Stanley Investment Management, Inc. T. Bigman/D. Funke
The Real Estate Equity Fund is a multi-manager fund with two sub-advisers
each of which employs its own independent investment approach in managing its
portion of the Fund. The two managers employ a distinct and complementary
investment strategy. The multi-manager approach seeks to produce more
consistent investment returns over market cycles and to reduce the risk of any
one manager or strategy being out of favor in certain market environments.
II LLC selects real estate stocks using a combination of bottom-up
fundamental equity research and quantitative tools. II LLC Real estate stocks
are purchased that are undervalued relative to the stock's history and have
improving earnings growth prospects.
Morgan Stanley Investment Management (MSIM) uses a combination of top down
market analysis to identify undervalued real estate property sectors and
geographic regions and fundamental, bottom-up equity and real estate research
to select stocks that are attractively priced relative to the underlying real
estate value.
As of June 30, 2001, II LLC managed approximately 49% and MSIM managed
approximately 51% of the Fund's assets. For the year-to-date, the Fund
returned 5.95% versus 9.81% for the Wilshire Real Estate Securities Index.
Independence Investment LLC
The REIT industry has held up extremely well in this economic slowdown as
evidenced by the past year's performance. Even as other "safe-havens' have
come under pressure in this recent quarter, such as the Utility sector, the
REIT market has held its ground and has even added to its year-to-date gains.
During the second quarter of 2001, the Real Estate Equity portfolio
underperformed its benchmark, the Wilshire Real Estate Securities Index,
mainly due to common risk factors and, to a greater degree, stock selection.
The fund owned a greater degree of larger capitalization, higher quality
companies which dragged down relative performance. As the "junk-rally', which
dominated the first quarter, continued into the beginning of the second
quarter these strategies again hurt performance. Fortunately, towards the
latter part of the period, these trends have shown signs of reversing. Stock
selection had the greatest impact on relative return. Many of the companies
had concentrations in areas most affected by the economic downturn. And
although the slowdown has had somewhat of an impact on their operating
performance, the market reaction is overdone.
We expect the positive fundamentals of the group to continue to drive
performance albeit at more normal levels of return (10-12%). While the economy
searches for a bottom to this economic slowdown, REITs will continue to look
attractive to investors with their high dividend yields and predictable
growth. We believe the "junk-rally' is overdone and is starting to show signs
of weakening. We believe quality companies with experienced management teams
located in high barrier to entry markets will stage a comeback for the balance
of the year. Therefore we are even more committed to maintain a quality/large-
cap bias in the portfolio and to stick with companies with these
characteristics.
Morgan Stanley Investment Management, Inc.
REITs experienced a reversal of fortune throughout the first half of the
year, as last year's losers outperformed last year's winners. Perhaps of
greater significance was the strong relationship between dividend yield and
stock performance. Aside from attracting investors for its dividend yield and
defensive nature, the sector gained interest over the potential S&P index
inclusion of REITs.
Clearly, investors favored higher dividend stocks in the first half of the
year; we continue to stress fundamentals and believe the current focus on
income will run its course. To a lesser degree investors remained wary of
apartment companies with high concentrations in Northern California, where
rents and occupancies declined in markets where technology-led demand has
cooled. As a result, stock selection suffered among those companies we owned
for high-barrier-to-entry qualities. We note that these markets have had
limited new supply and home affordability is among the lowest in the country.
The top-down weightings in the portfolio reflect a more defensive stance
given weakening economic fundamentals. We increased our overweighting to
apartments, which we believe will likely experience favorable demand in a
slowing economy as it is a necessity and will compete favorably with the
alternative of purchasing a home. We reduced our overweighting to the office
sector over continued concerns of reduced demand and potential new sub-lease
space. The slowdown in the economy in 2001 will create a more challenging
environment. However, given the declining levels of construction, the modest
level of construction versus total supply outstanding, and historically low
vacancy rates, the U.S. real estate market is better prepared than in previous
periods for an economic slowdown. Based on the current valuation and the
sector's defensive characteristics, investors may find it attractive given the
recent performance and volatility in the equity markets.
29
Inception: May 16, 1988
Real Estate Equity Fund
Independence Investment LLC J. DeSantis/T. Spicer
Morgan Stanley Investment Management, Inc. T. Bigman/D. Funke
[GRAPH]
Historical Fund Return
$10,000
Investment made 7/1/91
(10-Year Period)
Wilshire Real
Date Real Estate Equity Fund Estate Index
---- ----------------------- -------------
7/1/1991 10,000 10,000
7/31/1991 9,993 9,958
8/31/1991 10,031 9,838
9/30/1991 10,154 9,725
10/31/1991 9,973 9,507
11/30/1991 9,781 9,191
12/31/1991 10,667 9,906
1/31/1992 11,092 10,373
2/29/1992 10,972 10,345
3/31/1992 10,938 10,121
4/30/1992 10,792 9,953
5/31/1992 11,107 9,993
6/30/1992 10,827 9,692
7/31/1992 11,145 9,728
8/31/1992 11,179 9,581
9/30/1992 11,455 9,945
10/31/1992 11,660 10,052
11/30/1992 11,797 10,138
12/31/1992 12,375 10,635
1/31/1993 13,333 11,374
2/28/1993 13,919 11,924
3/31/1993 14,896 12,725
4/30/1993 14,076 12,003
5/31/1993 13,850 11,815
6/30/1993 14,130 12,124
7/31/1993 14,323 12,370
8/31/1993 14,418 12,628
9/30/1993 15,260 13,202
10/31/1993 14,977 12,830
11/30/1993 14,331 12,270
12/31/1993 14,515 12,256
1/31/1994 14,860 12,623
2/28/1994 15,475 13,140
3/31/1994 15,010 12,531
4/30/1994 15,110 12,672
5/31/1994 15,415 12,935
6/30/1994 15,008 12,680
7/31/1994 14,922 12,710
8/31/1994 14,943 12,701
9/30/1994 14,860 12,489
10/31/1994 14,223 12,032
11/30/1994 13,743 11,561
12/31/1994 14,931 12,457
1/31/1995 14,415 12,055
2/28/1995 14,718 12,432
3/31/1995 14,757 12,504
4/30/1995 14,570 12,414
5/31/1995 15,189 12,825
6/30/1995 15,430 13,048
7/31/1995 15,721 13,258
8/31/1995 15,830 13,420
9/30/1995 16,207 13,667
10/31/1995 15,663 13,243
11/30/1995 15,726 13,381
12/31/1995 16,769 14,157
1/31/1996 16,964 14,352
2/29/1996 17,142 14,637
3/31/1996 17,296 14,755
4/30/1996 17,238 14,822
5/31/1996 17,559 15,152
6/30/1996 17,924 15,455
7/31/1996 17,868 15,318
8/31/1996 18,621 15,969
9/30/1996 19,136 16,368
10/31/1996 19,634 16,811
11/30/1996 20,313 17,509
12/31/1996 22,314 19,377
1/31/1997 22,559 19,654
2/28/1997 22,541 19,666
3/31/1997 22,412 19,733
4/30/1997 21,737 19,096
5/31/1997 22,417 19,665
6/30/1997 23,567 20,640
7/31/1997 24,201 21,319
8/31/1997 24,047 21,161
9/30/1997 26,138 23,248
10/31/1997 25,195 22,260
11/30/1997 25,517 22,707
12/31/1997 26,156 23,214
1/31/1998 25,413 22,886
2/28/1998 24,963 22,593
3/31/1998 25,591 23,038
4/30/1998 24,791 22,313
5/31/1998 24,620 22,098
6/30/1998 24,542 21,981
7/31/1998 22,881 20,451
8/31/1998 20,817 18,327
9/30/1998 22,252 19,353
10/31/1998 21,697 19,088
11/30/1998 22,004 19,447
12/31/1998 21,786 19,168
1/31/1999 21,189 18,753
2/28/1999 20,671 18,604
3/31/1999 20,568 18,504
4/30/1999 22,747 20,476
5/31/1999 23,343 20,822
6/30/1999 23,098 20,468
7/31/1999 22,327 19,685
8/31/1999 22,226 19,389
9/30/1999 21,168 18,515
10/31/1999 20,724 18,170
11/30/1999 20,561 17,885
12/31/1999 21,419 18,558
1/31/2000 21,448 18,634
2/29/2000 20,991 18,278
3/31/2000 22,117 19,078
4/30/2000 23,416 20,439
5/31/2000 23,735 20,684
6/30/2000 24,347 21,381
7/31/2000 26,752 23,301
8/31/2000 25,876 22,462
9/30/2000 27,009 23,192
10/31/2000 25,829 22,186
11/30/2000 26,386 22,685
12/31/2000 28,121 24,261
1/31/2001 27,926 24,504
2/28/2001 27,438 23,994
3/31/2001 27,243 24,014
4/30/2001 27,765 24,585
5/31/2001 28,354 25,273
6/30/2001 29,794 25,512
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Equity Office Properties Trust 7.5% 4.0%
Avalonbay Communities, Inc. 5.5% 4.0%
Equity Residential Properties Trust 5.3% 4.2%
Speiker Properties, Inc. 5.1% 3.8%
Simon Property Group Inc. 4.5% 2.2%
Boston Properties, Inc. 4.0% N/A
Public Storage, Inc. 3.9% 2.1%
Archstone Communities Trust 3.6% N/A
Starwood Hotels & Resorts Worldwide 3.4% N/A
Vornado Realty Trust 3.3% 2.4%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Real Estate Wilshire Real MorningStar
Equity Fund Estate Index(1) Peer Group+
----------- ------------- -----------
YTD** 5.95% 9.81% 6.34%
1 Year 22.37 24.60 19.11
3 Years 6.68 6.62 5.38
5 Years 10.70 11.51 10.63
10 Years 11.54 10.03 11.09
- ------------------------------------------------------------------------------
Top Industries (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of
investments
Financial 95.0%
Consumer Cyclical 4.9%
Technology 0.1%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original costs. Sector investing entails special risks as discussed
in the prospectus. The performance of the fund on this page is
reported net of Trust level charges (i.e. investment management fees
and operating expenses). It does not reflect expense and charges of
the applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Specialty Real Estate investment
category.
30
Inception: March 29, 1986
Managed Fund
Independence Investment LLC J. Forrelli/J. Leu
Capital Guardian Trust Company Management Team
The Managed Fund is a multi-manager fund with two sub-advisers, each of which
employs its own investment approach and independently manages its portion of
the Fund. The two managers employ a distinct and complementary investment
strategy. The multi-manager approach seeks to produce more consistent
investment returns over market cycles and to reduce the risk of any one
manager or strategy being out of favor in certain market environments.
Independence has a normal target mix of 60% stocks and 40% bonds and selects
stocks and bonds using a combination of fundamental equity research and
quantitative tools. Capital Guardian has a normal target of 70% stocks and 30%
bonds and selects stocks and bonds using a fundamental, research-driven
approach. Capital Guardian also employs a multiple-manager approach by which
each portfolio manager and the research analysts as a group each manage a
separate portion of the portfolio to capture the highest conviction ideas of
the investment team.
As of June 30, 2001, II LLC managed approximately 81.80% and Capital Guardian
managed approximately 18.20% of the Fund's assets. The Fund returned -1.73%
compared to -2.44% for the benchmark year-to-date.
Independence Investment LLC
In the second quarter, the equity market outperformed the fixed income market
for the first time since the fourth quarter of 1999. Your balanced portfolio
performed very well for the quarter, returning 4.63% net, outperforming its
benchmark. Equities contributed the vast majority of the return and the
sectors that added the most value this quarter were Technology, Financials and
Consumer Non-Cyclicals. On the negative side, stock selection within Retail
and Health Care detracted from performance. The Fixed Income portion of the
account had a negligible return for the quarter as bond investors became
fearful that aggressive interest rate cuts by the Federal Reserve might
reignite inflation in 2002.
The worldwide economies are clearly struggling. The U.S. will likely show
negative growth in the current quarter as businesses reign in spending and
investment. European economies slowed considerably this quarter and Japan
appears to have entered another recession. Investors are looking past the
slowdown and focusing instead on the potential rebound over the coming months.
The consumer has remained quite resilient during this slowdown. The Federal
Reserve has aggressively cut interest rates and consumers will be receiving
tax rebate checks in the third quarter. Inflation is clearly coming down as
energy prices have weakened. We continue to overweight equities in your
portfolio. We believe the economy is in the process of bottoming and companies
will once again grow earnings at their historical 5% to 10% rate in 2002. We
favor industrial and basic material companies that will have significant
leverage with a global economic recovery and falling energy prices over the
coming quarters. However, investors must be patient, waiting to see tangible
evidence of the economic recovery over the remainder of the year.
Capital Guardian Trust Company
Our overweight position in U.S. large caps was helpful to returns in two
ways: large-cap indices provided solid returns, and relative outperformance
was strong within the large-cap portfolios we manage. Good stock selection was
also beneficial, as was our overweight position in technology stocks. We fully
participated in April's bounce in NASDAQ-type names, and we were able to trim
some of these positions on strength. On the bond side, results for the
portfolios we manage were helped by our overweight position in corporate
securities. Our participation in a number of new corporate issues was also
beneficial.
We are continuing to overweight equities. The upcoming tax refunds and the
easing monetary policy should provide the economy with a shot in the arm,
though the timing of a recovery will be hard to call. In the technology and
telecommunications areas, many companies have lowered production below the
level of demand in order to bring down excess inventories. Once inventory
levels are reduced, production will have to pick up to meet current demand,
and that should boost market sentiment. With the technology sector having
reaffirmed its cyclical nature, however, investors are not likely to support
the high multiples these stocks enjoyed in recent years. Looking at fixed
income, corporate securities still look undervalued relative to Treasuries,
but less so now that spreads have tightened. We continue to hold our high-
conviction corporate issues, with an emphasis on triple-B credits, though we
may begin to sell some of the more generic names represented in the index. We
are now overweighted in the mortgage sector for the first time in years.
Mortgage-backed securities look increasingly attractive now that rates appear
to have bottomed and prepayment risk has been reduced.
31
Inception: March 29, 1986
Managed Fund
Independence Investment LLC J. Forelli/J. Leu
Capital Guardian Trust Company Management Team
[GRAPH]
Historical Fund Return
$10,000
Investment made 7/1/91
(10-Year Period)
Date Managed Fund Managed Benchmark(1)
---- ------------ --------------------
7/1/1991 10,000 10,000
7/31/1991 10,237 10,297
8/31/1991 10,482 10,536
9/30/1991 10,512 10,559
10/31/1991 10,643 10,676
11/30/1991 10,500 10,514
12/31/1991 11,215 11,292
1/31/1992 11,041 11,103
2/29/1992 11,119 11,203
3/31/1992 10,977 11,062
4/30/1992 11,209 11,257
5/31/1992 11,368 11,397
6/30/1992 11,402 11,398
7/31/1992 11,719 11,773
8/31/1992 11,631 11,707
9/30/1992 11,777 11,854
10/31/1992 11,666 11,784
11/30/1992 11,898 11,978
12/31/1992 12,080 12,160
1/31/1993 12,236 12,337
2/28/1993 12,422 12,549
3/31/1993 12,646 12,706
4/30/1993 12,457 12,599
5/31/1993 12,644 12,767
6/30/1993 12,833 12,933
7/31/1993 12,819 12,943
8/31/1993 13,252 13,339
9/30/1993 13,303 13,314
10/31/1993 13,457 13,476
11/30/1993 13,329 13,336
12/31/1993 13,482 13,447
1/31/1994 13,797 13,772
2/28/1994 13,432 13,436
3/31/1994 13,037 12,980
4/30/1994 13,105 13,011
5/31/1994 13,107 13,104
6/30/1994 12,977 12,927
7/31/1994 13,268 13,271
8/31/1994 13,475 13,545
9/30/1994 13,191 13,279
10/31/1994 13,248 13,424
11/30/1994 13,043 13,165
12/31/1994 13,181 13,304
1/31/1995 13,429 13,605
2/28/1995 13,831 14,027
3/31/1995 14,012 14,282
4/30/1995 14,323 14,589
5/31/1995 14,872 15,183
6/30/1995 15,090 15,423
7/31/1995 15,330 15,650
8/31/1995 15,514 15,772
9/30/1995 15,973 16,183
10/31/1995 16,004 16,274
11/30/1995 16,518 16,765
12/31/1995 16,753 17,044
1/31/1996 17,011 17,390
2/29/1996 16,940 17,289
3/31/1996 16,959 17,299
4/30/1996 16,993 17,367
5/31/1996 17,197 17,575
6/30/1996 17,361 17,730
7/31/1996 16,981 17,356
8/31/1996 17,126 17,519
9/30/1996 17,664 18,167
10/31/1996 18,094 18,628
11/30/1996 18,788 19,508
12/31/1996 18,548 19,207
1/31/1997 18,987 19,814
2/28/1997 19,053 19,915
3/31/1997 18,609 19,382
4/30/1997 19,112 20,103
5/31/1997 19,667 20,814
6/30/1997 20,199 21,403
7/31/1997 21,341 22,580
8/31/1997 20,737 21,826
9/30/1997 21,434 22,595
10/31/1997 21,220 22,398
11/30/1997 21,728 22,976
12/31/1997 22,023 23,293
1/31/1998 22,267 23,579
2/28/1998 23,278 24,582
3/31/1998 24,139 25,368
4/30/1998 24,302 25,571
5/31/1998 24,223 25,405
6/30/1998 24,904 26,111
7/31/1998 24,647 25,965
8/31/1998 22,339 23,883
9/30/1998 23,107 25,024
10/31/1998 24,336 26,193
11/30/1998 25,352 27,204
12/31/1998 26,519 28,178
1/31/1999 26,922 28,964
2/28/1999 26,189 28,222
3/31/1999 26,747 28,962
4/30/1999 27,517 29,671
5/31/1999 27,082 29,146
6/30/1999 28,044 30,079
7/31/1999 27,456 29,465
8/31/1999 27,284 29,371
9/30/1999 26,938 29,024
10/31/1999 27,980 30,168
11/30/1999 28,159 30,536
12/31/1999 28,933 31,556
1/31/2000 27,851 30,562
2/29/2000 27,472 30,363
3/31/2000 29,451 32,306
4/30/2000 29,015 31,686
5/31/2000 28,763 31,290
6/30/2000 29,284 32,013
7/31/2000 29,127 31,830
8/31/2000 30,459 33,202
9/30/2000 29,519 32,233
10/31/2000 29,672 32,236
11/30/2000 28,419 30,924
12/31/2000 28,940 31,246
1/31/2001 29,667 32,114
2/28/2001 28,264 30,470
3/31/2001 27,181 29,373
4/30/2001 28,700 30,692
5/31/2001 28,890 30,888
6/30/2001 28,439 30,484
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Federal National Mortgage Assoc. 14.7% 11.7%
U.S. Treasury 3.4% 3.3%
General Electric Co. 2.6% 3.3%
Pfizer, Inc. 2.6% 0.6%
Microsoft Corp. 2.4% 3.6%
Citigroup, Inc. 2.2% 2.4%
Exxon Mobil Corp. 1.7% 1.0%
AOL Time Warner, Inc. 1.5% N/A
Verizon Communications 1.3% N/A
International Business Machines Corp. 1.2% 1.5%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Managed Managed MorningStar
Fund Benchmark(1) Peer Group+
----------- ------------- -----------
YTD** -1.73% -2.44% -2.16%
1 Year -2.89 -4.78 -1.04
3 Years 4.52 5.30 4.46
5 Years 10.37 11.45 10.20
10 Years 11.02 11.49 10.95
- ------------------------------------------------------------------------------
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Governmental 19.9% Capital Equipment 6.6%
Financial 19.3% Retail 5.6%
Technology 14.5% Utility 5.5%
Health Care 9.5% Energy 5.1%
Consumer Cyclical 7.1% Consumer Staple 3.9%
(1) The Managed Benchmark represents 50% S&P 500/50% Lehman Brothers
Government/Corporate Bond from April 1986 to December 1997, then 60%
S&P 500/40% Lehman Brothers Government/Corporate Bond from 1998 to
April 1998, and now 60% S&P 500/40% Lehman Brothers Aggregate Bond
from May 1998 to present.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary
to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Domestic Hybrid investment category.
32
Inception: August 31, 1999
Aggressive Balanced Fund
Independence Investment LLC J. Forelli/J. Leu
In the second quarter, the equity market outperformed the fixed income market
for the first time since the fourth quarter of 1999. Your balanced portfolio
performed very well for the quarter, returning 5.30% net, outperforming its
benchmark. Equities contributed the vast majority of the return and the
sectors that added the most value this quarter were Technology, Financials and
Consumer Non-Cyclicals. On the negative side, stock selection within Retail
and Health Care detracted from performance. The Fixed Income portion of the
account had a negligible return for the quarter as bond investors became
fearful that aggressive interest rate cuts by the Federal Reserve might
reignite inflation in 2002.
The worldwide economies are clearly struggling. The U.S. will likely show
negative growth in the current quarter as businesses reign in spending and
investment. European economies slowed considerably this quarter and Japan
appears to have entered another recession. Investors are looking past the
slowdown and focusing instead on the potential rebound over the coming months.
The consumer has remained quite resilient during this slowdown. The Federal
Reserve has aggressively cut interest rates and consumers will be receiving
tax rebate checks in the third quarter. Inflation is clearly coming down as
energy prices have weakened. We continue to overweight equities in your
portfolio. We believe the economy is in the process of bottoming and companies
will once again grow earnings at their historical 5% to 10% rate in 2002. We
favor industrial and basic material companies that will have significant
leverage with a global economic recovery and falling energy prices over the
coming quarters. However, investors must be patient, waiting to see tangible
evidence of the economic recovery over the remainder of the year.
[GRAPH]
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Aggressive Aggressive
Balanced Balanced
Date Fund Benchmark(1)
---- ---------- ----------
8/31/1999 10,000 10,000
9/30/1999 9,830 9,823
10/31/1999 10,274 10,298
11/30/1999 10,383 10,455
12/17/1999 10,709 10,905
1/31/2000 10,222 10,485
2/29/2000 10,011 10,367
3/31/2000 10,876 11,162
4/30/2000 10,679 10,902
5/31/2000 10,611 10,733
6/30/2000 10,782 10,988
7/31/2000 10,730 10,884
8/31/2000 11,341 11,431
9/30/2000 10,895 10,997
10/31/2000 10,990 10,980
11/30/2000 10,417 10,376
12/31/2000 10,553 10,462
1/31/2001 10,816 10,783
2/28/2001 10,150 10,070
3/31/2001 9,632 9,603
4/30/2001 10,319 10,153
5/31/2001 10,358 10,219
6/30/2001 10,142 10,042
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
- --
% of six months ago
investments % of investments
Federal National Mortgage Assoc. 12.7% 4.5%
General Electric Co. 4.1% 1.3%
Citigroup, Inc. 3.2% 1.5%
U.S. Treasury 3.1% 3.3%
Microsoft Corp. 3.0% 2.2%
Pfizer, Inc. 2.6% 0.3%
AOL Time Warner, Inc. 2.1% N/A
Exxon Mobil Corp. 2.1% 0.5%
Verizon Communications 1.9% N/A
International Business Machines Corp. 1.7% 0.9%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
- --
Aggressive Aggressive MorningStar
Balanced Balanced Peer
Fund Benchmark(1) Group+
------------- ------------ ------------
YTD** -3.89% -4.02% -2.16%
1 Year -6.00 -8.61 -1.04
Since Inception (8/31/99) 0.74 0.23 N/A
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
- --
% of % of
investments investments
Technology 18.6% Retail 7.4%
Governmental 16.2% Consumer Cyclical 6.6%
Financial 14.2% Energy 5.7%
Health Care 10.1% Utility 4.8%
Capital Equipment 7.9% Consumer Staple 4.6%
(1) The benchmark represents 75% S&P 500 and 25% Lehman Brothers
Aggregate Bond Index.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. Small-company investing entails special risks as
outlined in the prospectus. The performance of the fund on this page
is reported net of Trust level charges (i.e. investment management
fees and operating expenses). It does not reflect expense and
charges of the applicable separate accounts and variable products,
all of which vary to a considerable extent and are described in your
product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Domestic Hybrid investment category.
33
Inception: May 1, 1996
Global Balanced Fund
Capital Guardian Trust Company Management Team
For the quarter ended June 30, 2001, the VST Global Balanced Fund returned
2.39%, beating the blended benchmark return (60% MSCI World/40% Salomon
Brothers World Government Bond Index) of 1.08%.
Our overweight position in U.S. large-cap equities was beneficial to returns.
Among the asset classes we allocate to, U.S. large caps provided the best
returns. Furthermore, relative performance was good for our U.S. large-cap
portfolios. Overweighting emerging markets equities and underweighting non-
U.S. small caps also helped returns. Hindering returns were our overweight
positions in non-U.S. large caps and non-U.S. bonds.
We think active stock selection will beat bond returns in the coming months
and we are overweight most equity categories. Among the large-cap allocations,
we favor both U.S. and non-U.S. stocks. Interest rates have come down more in
the U.S. than elsewhere, and while the capitalization-weighted P/E for the S&P
500 remains high, valuations are reasonable outside the largest stocks in the
index. The U.S. economy was first to slow and may be the first to regain
momentum. Longer term, however, lower valuations, more room for improvement in
profitability, and eventually a weaker dollar, should give non-U.S. equities
an edge.
Looking at fixed income, we think we are near the end of the Federal
Reserve's easing cycle and we would be surprised to see the bond rally go much
further. We continue to favor non-U.S. bonds over those in the U.S. While
Europe has followed the U.S. in a pattern of slowing economic growth, European
bonds have not rallied as much as their U.S. counterparts. Similarly, the ECB
has been slow to cut short-term interest rates, resulting in Europe having
higher short-term rates than the U.S. for the first time in years. Across the
yield curve there seems to be more room for improvement in Europe than in the
U.S.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Global Balanced Global Balanced
Date Fund Composite Benchmark(1)
---- --------------- ----------------------
5/01/1996 9,992 9,892
6/30/1996 10,055 9,940
7/31/1996 9,956 9,849
8/31/1996 10,007 9,898
9/30/1996 10,257 10,068
10/31/1996 10,315 10,085
11/30/1996 10,678 10,397
12/31/1996 10,673 10,280
1/31/1997 10,509 9,927
2/28/1997 10,624 9,986
3/31/1997 10,568 9,972
4/30/1997 10,507 9,942
5/31/1997 11,089 10,498
6/30/1997 11,433 10,909
7/31/1997 11,471 10,941
8/31/1997 10,986 10,435
9/30/1997 11,471 10,907
10/31/1997 11,127 10,460
11/30/1997 10,967 10,291
12/31/1997 10,955 10,320
1/31/1998 11,195 10,632
2/28/1998 11,630 11,136
3/31/1998 11,807 11,311
4/30/1998 11,952 11,457
5/31/1998 11,952 11,413
6/30/1998 11,914 11,439
7/31/1998 11,962 11,494
8/31/1998 11,270 10,652
9/30/1998 11,434 10,701
10/31/1998 12,220 11,596
11/30/1998 12,442 11,898
12/31/1998 12,925 12,314
1/31/1999 12,913 12,250
2/28/1999 12,390 11,901
3/31/1999 12,557 12,234
4/30/1999 12,777 12,571
5/31/1999 12,313 12,072
6/30/1999 12,412 12,279
7/31/1999 12,784 12,662
8/31/1999 12,771 12,716
9/30/1999 12,780 12,890
10/31/1999 12,911 13,211
11/30/1999 12,991 13,450
12/31/1999 13,586 14,251
1/31/2000 12,794 13,540
2/29/2000 12,819 13,718
3/31/2000 13,194 14,254
4/30/2000 12,656 13,557
5/31/2000 12,722 13,373
6/30/2000 12,990 13,781
7/31/2000 12,724 13,448
8/31/2000 12,891 13,699
9/30/2000 12,570 13,216
10/31/2000 12,497 13,014
11/30/2000 11,946 12,645
12/31/2000 12,352 12,949
1/31/2001 12,722 13,093
2/28/2001 12,056 12,428
3/31/2001 11,553 11,797
4/30/2001 12,268 12,305
5/31/2001 12,111 12,198
6/30/2001 11,830 11,925
6/30/2001 11,830 11,925
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
U.S. Treasury 10.2% N/A
Netherlands Government 6.7% N/A
Federal Republic of Germany 3.3% 1.9%
Federal National Mortgage Assoc. 2.5% N/A
AstraZeneca Group PLC 2.1% 0.3%
Government of Japan 1.9% 5.6%
Kingdom of Spain 1.7% N/A
Nokia Oyj 1.4% 0.9%
International-American Development Band 1.3% N/A
Asian Development Bank 1.2% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Global Balanced Global Balanced MorningStar
Fund Composite Benchmark(1) Peer Group+
--------------- ---------------------- ----------
- -
YTD** -4.23% -7.91% -6.01%
1 Year -8.93 -13.47 -5.84
3 Years -0.24 1.40 0.97
5 Years 3.30 3.71 6.19
Since Inception (5/01/96) 3.31 3.47 N/A
Top Ten Countries (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of %of
investments investments
United States 45.9% Germany 4.4%
Japan 9.3% France 3.0%
Netherlands 8.8% Canada 2.8%
Supra National 7.1% Switzerland 2.4%
United Kingdom 6.5% Australia 2.1%
(1) International Balanced Composite Index: 65% Morgan Stanley Capital
International World Index Excluding US, and 35% Salomon Brothers
Non-US Govt. Bond Index, unhedged, May 1996 to April 2000, 65% MSCI
World / 35% Salomon Brothers World Government Bond, Unhedged, May
2000 to October 2000 and 60% MSCI World / 40% Salomon Brothers World
Government Bond, Unhedged, November 2000 to present
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities, including investment in initial public offerings,
that may not continue to occur in the future." Investment returns
and principal value of fund shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
There are special risks associated with international investing
including currency fluctuations, political and economic instability,
foreign taxation and different accounting standards, as outlined in
the current prospectus. The performance of the fund on this page is
reported net of Trust level charges (i.e. investment management fees
and operating expenses). It does not reflect expense and charges of
the applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for the sub-
accounts of all variable annuity and life products within the
Morningstar variable universe having a 60% World Stock, Large Cap,
10% General Bond Intermediate category and a 30% weighting of the
International Bond category. Prior to May 2000 (concurrent with the
Fund's strategy change), the peer group represents the International
Hybrid investment category.
34
Inception: May 1, 1994
Short-Term Bond Fund
Independence Investment LLC Jay Leu
The 2nd quarter was certainly very transitional in nature. Early in the
quarter, the Fed's easing was the market's primary driver. However, a surprise
sudden weakening in economic indicators coupled with severe negative earnings
announcements led to widespread questioning of the "V" shaped recovery and an
aggressive response from the Federal Reserve in the form of an additional 125
basis point reduction in the funds rate.
The Investment Grade Corporate sector posted excellent performance again
during the quarter, making year to date performance for Corporate bonds one of
the best periods in recent memory. Investors have responded positively to the
generous yield levels available in the sector, allowing yield spreads to
tighten in the face of record issuance. The Lehman 1-3 year Credit index
outperformed comparable maturity Treasuries by 44 basis points over the
quarter. Initially, industrial and finance issues both outperformed, but the
former posted a stronger finish as investors clamored for higher yielding,
more cyclical issues later in the quarter.
The fund posted a total return of 1.38% during the quarter, marginally
underperforming its benchmark, which returned 1.45% for the period. The slight
lag was a function of the portfolio's exposure to other high quality spread
sectors, which posted lower outperformance versus Treasuries for the period.
Additionally, the portfolio's lower rated holdings are in the more defensive
sectors such as energy, consumer non-cyclical and healthcare, which
underperformed the more cyclical issues during the quarter. Securities that
posted the best performance include: Gulf Canada, Lehman Brothers, First
Union, Household International, Citicorp, Tenet Healthcare, Philip Morris and
HCA Inc.
Spread sectors will likely moderately outperform for the balance of the year.
It seems likely that the manic buying and tightening activity (particularly in
Corporates) has largely abated. Most of the prospective outperformance will
come from "coupon clipping". Defensive sectors will likely lead performance,
particularly if growth does not rebound as quickly as the market expects.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/94
(Fund Inception Date)
Short-Term Short-Term
Date Bond Fund Bond Benckmark (1)
---- ---------- --------------------
5/1/1994 10,000 10,000
5/31/1994 9,995 10,013
6/30/1994 10,010 10,032
7/31/1994 10,109 10,137
8/31/1994 10,125 10,171
9/30/1994 10,076 10,117
10/31/1994 10,074 10,129
11/30/1994 10,030 10,074
12/31/1994 10,030 10,102
1/31/1995 10,168 10,258
2/28/1995 10,327 10,431
3/31/1995 10,366 10,489
4/30/1995 10,467 10,597
5/31/1995 10,691 10,844
6/30/1995 10,772 10,908
7/31/1995 10,776 10,935
8/31/1995 10,844 11,011
9/30/1995 10,889 11,072
10/31/1995 10,992 11,181
11/30/1995 11,094 11,300
12/31/1995 11,185 11,400
1/31/1996 11,277 11,502
2/29/1996 11,185 11,420
3/31/1996 11,145 11,385
4/30/1996 11,118 11,374
5/31/1996 11,126 11,381
6/30/1996 11,210 11,476
7/31/1996 11,242 11,516
8/31/1996 11,261 11,544
9/30/1996 11,394 11,669
10/31/1996 11,526 11,827
11/30/1996 11,612 11,940
12/31/1996 11,594 11,910
1/31/1997 11,646 11,964
2/28/1997 11,659 11,983
3/31/1997 11,633 11,954
4/30/1997 11,731 12,068
5/31/1997 11,810 12,154
6/30/1997 11,891 12,248
7/31/1997 12,055 12,426
8/31/1997 12,036 12,408
9/30/1997 12,143 12,522
10/31/1997 12,241 12,636
11/30/1997 12,242 12,663
12/31/1997 12,330 12,758
1/31/1998 12,463 12,906
2/28/1998 12,462 12,903
3/31/1998 12,509 12,952
4/30/1998 12,565 13,013
5/31/1998 12,624 13,089
6/30/1998 12,678 13,155
7/31/1998 12,734 13,216
8/31/1998 12,868 13,339
9/30/1998 13,004 13,523
10/31/1998 12,993 13,554
11/30/1998 13,023 13,591
12/31/1998 13,053 13,645
1/31/1999 13,078 13,721
2/28/1999 13,037 13,673
3/31/1999 13,110 13,781
4/30/1999 13,151 13,841
5/31/1999 13,122 13,824
6/30/1999 13,159 13,867
7/31/1999 13,187 13,896
8/31/1999 13,230 13,927
9/30/1999 13,326 14,028
10/31/1999 13,367 14,079
11/30/1999 13,411 14,120
12/31/1999 13,435 14,139
1/31/2000 13,440 14,146
2/29/2000 13,524 14,248
3/31/2000 13,595 14,318
4/30/2000 13,634 14,329
5/31/2000 13,683 14,380
6/30/2000 13,839 14,536
7/31/2000 13,924 14,629
8/31/2000 14,027 14,741
9/30/2000 14,153 14,856
10/31/2000 14,186 14,936
11/30/2000 14,333 15,081
12/31/2000 14,505 15,266
1/31/2001 14,704 15,501
2/28/2001 14,826 15,625
3/31/2001 14,934 15,753
4/30/2001 14,980 15,809
5/31/2001 15,065 15,918
6/30/2001 15,124 15,983
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Federal National Mortgage Assoc. 20.6% 2.8%
U.S. Treasury 13.6% 1.9%
Quebec Province Canada 3.6% N/A
Premier Auto Trust 3.1% N/A
General Electric Capital Corp. 3.1% N/A
Province of Ontario 2.9% N/A
Ford Motor Credit Co. 2.4% 1.4%
Ford Credit Auto Owner Trust 2.4% N/A
Residential Funding and Mortgage Sec. 2.2% N/A
Household Finance Corp. 1.9% 0.9%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Short-Term Short-Term MorningStar
Bond Fund Bond Benchmark(1) Peer Group+
--------------- --------------------- -----------
YTD** 4.23% 4.69% 3.50%
1 Year 9.26 9.95 8.40
3 Years 6.05 6.70 5.45
5 Years 6.17 6.85 6.51
Since Inception (5/1/94) 5.94 6.76 N/A
Fund Composition (as of June 30, 2001)
- ------------------------------------------------------------------------------
Credit Quality Duration
Short Term 4.64% (less than) 1 Year 33.27%
AAA 48.91% 1-3 Years 52.35%
AA 5.79% 3-5 Years 13.97%
A 26.19% 5-10 Years .41%
BBB 13.71%
BB .76%
(1) Short-Term Bond Index represents the Merrill Lynch 1-5 year
Government Bond from May 1994 to April 1998, 65% Lehman Brothers 1-
3 year Credit Bond. 35% Lehman Brothers 1-3 year Government Index,
May 1998 to present.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all
distributions and are not indicative of future performance.
"Results may have been achieved during market conditions or
pursuing performance opportunities that may not continue to occur
in the future." Investment returns and principal value of fund
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. The performance of the fund
on this page is reported net of Trust level charges (i.e.
investment management fees and operating expenses). It does not
reflect expense and charges of the applicable separate accounts and
variable products, all of which vary to a considerable extent and
are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered
from reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a Short-Term Bond Investment category.
Prior to May 1998 (concurrent with the Fund's strategy change), the
peer group represents the Short Term Government Bond category.
35
Inception: May 1, 1998
Bond Index Fund
Mellon Bond Associates, LLP Gregory Curran
The fund continues to meet its investment objective of matching the
performance of the benchmark index. The benchmark includes U.S. dollar-based,
fixed-coupon debt from the U.S. Government, its agencies, including mortgage
backed securities, and investment-grade credit securities. Performance net of
fees for the portfolio was 0.45% for the second quarter, 10.98% for the year
ending June and 6.06% (annualized) since inception in May 1998. Corresponding
returns for the benchmark(/1/) were 0.56%, 11.29% and 6.40%. The fund uses a
representative sample of issues selected through proprietary quantitative
techniques. Selected issues have the best risk-adjusted expected return and,
as a group, match the characteristics of the 6,400 issues in the Index
including price sensitivity, sector, industry, coupon, and credit quality
exposures. An indexed portfolio typically eliminates many risks associated
with active management and has lower fees and expenses.
The benchmark conversion from the Lehman Government Credit Index to the
Lehman Aggregate Index occurred during the first quarter and was fine tuned in
the second quarter. The Aggregate Index outperformed the Government Credit
Index by 26 basis points (0.26%) this quarter while taking on less interest
rate and credit risk. The effective duration of the Aggregate Index was 4.75
at quarter end while the Government Credit Index was 5.47. The inclusion of
mortgage backed securities in the Aggregate Index results in a lower effective
duration because mortgage holders have the option to prepay their mortgages,
either because they refinance, move or simply pay off the loan. This
prepayment is passed on to investors in the form of returned principal,
causing the average maturity to be shorter than the typical 15 year or 30 year
final maturity.
Historical Fund Return
[GRAPH]
$10,000
Investment made 5/1/98
(Fund Inception Date)
Date Bond Index Fund Bond Index Benchmark(1)
---- --------------- -----------------------
5/01/1998 10,000 10,000
5/31/1998 10,102 10,107
6/30/1998 10,211 10,210
7/31/1998 10,220 10,218
8/31/1998 10,461 10,418
9/30/1998 10,757 10,715
10/31/1998 10,689 10,639
11/30/1998 10,703 10,703
12/31/1998 10,720 10,729
1/31/1999 10,795 10,805
2/28/1999 10,521 10,548
3/31/1999 10,584 10,601
4/30/1999 10,609 10,627
5/31/1999 10,485 10,518
6/30/1999 10,450 10,485
7/31/1999 10,420 10,456
8/31/1999 10,414 10,447
9/30/1999 10,497 10,541
10/31/1999 10,514 10,569
11/30/1999 10,513 10,562
12/31/1999 10,445 10,498
1/31/2000 10,425 10,495
2/29/2000 10,551 10,626
3/31/2000 10,713 10,779
4/30/2000 10,666 10,726
5/31/2000 10,640 10,717
6/30/2000 10,855 10,935
7/31/2000 10,957 11,051
8/31/2000 11,123 11,207
9/30/2000 11,165 11,250
10/31/2000 11,245 11,320
11/30/2000 11,445 11,514
12/31/2000 11,678 11,741
1/31/2001 11,840 11,938
2/28/2001 11,942 12,042
3/31/2001 11,993 12,102
4/30/2001 11,938 12,051
5/31/2001 12,008 12,124
6/30/2001 12,047 12,170
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
U.S. Treasury 24.0% 27.7%
Federal National Mortgage Assoc. 18.2% 2.9%
Federal Home Loan Mortgage Corp. 17.0% 3.7%
Government National Mortgage Assoc. 8.1% N/A
Federal Home Loan Bank 2.5% 0.4%
Morgan Stanley Capital, Inc. 1.5% N/A
General Motors Acceptance Corp. 1.0% 0.5%
Associates Corp. of North America 0.9% N/A
Federal Home Loan Bank Discount Note 0.8% N/A
Province of Ontario 0.6% 0.3%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Bond Index Bond Index MorningStar
Fund Benchmark(1) Peer Group+
----------- ------------ -----------
YTD** 3.16% 3.65% 3.17%
1 Year 10.98 11.29 8.66
3 Years 5.67 6.03 4.75
Since Inception (5/1/98) 6.06 6.40 N/A
Fund Composition (as of June 30, 2001)
- ------------------------------------------------------------------------------
Credit Quality Duration
Short Term 0.50% less than 1 Year 4.50%
AAA 75.00% 1-3 Years 12.40%
AA 6.40% 3-5 Years 17.80%
A 10.10% 5-10 Years 49.80%
BBB 8.00% greater than 10 Years 15.50%
(1) The benchmark is the Lehman Government Credit Index from May 1998
through January 2001, linked to the Lehman Aggregate Index from
February 2001 going forward.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. Small-company investing entails special risks as
outlined in the prospectus. The performance of the fund on this page
is reported net of Trust level charges (i.e. investment management
fees and operating expenses). It does not reflect expense and
charges of the applicable separate accounts and variable products,
all of which vary to a considerable extent and are described in your
product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data are as of 6/30/01. Although gathered
from reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a General Bond Intermediate High Quality
investment category.
36
Inception: March 29, 1986
Active Bond Fund
John Hancock Advisers, Inc. James Ho
During the quarter, the portfolio gained 0.93%, outperforming the Lehman
Aggregate Index at 0.56% by 37 basis points.
The portfolio's overweight position in investment grade corporate bonds and
underweight position in Treasuries relative to the index added to performance
results during the quarter.
As high yield bonds were the worst performing sector during the period, the
portfolio's overweight position relative to the index detracted from
performance results. Year-to-date, however, the portfolio's overweighting in
high yield bonds has added to performance results.
In the near-term, we will continue to maintain above average liquidity in the
portfolio, with an overweight position in better quality, more defensive
names. Very recently, we've included some of the economically sensitive
sectors, such as autos and financials, though the move has not been a dramatic
one. We will maintain our slightly shorter duration position, as we expect the
yield curve to flatten as the economy improves. We'll continue to look for
attractive values among lower-rated investment grade issues. Our slight
underweighting in mortgage securities is likely to remain constant, and we are
beginning to emphasize more defensive securities with higher coupons of
between 7% and 7.5%. We have increased our emerging market position slightly
and continue to look closely at this sector as it may present opportunities in
the near-term, especially if the U.S. economy rebounds.
[GRAPH]
Historical Fund Return
$10,000
Investment made 7/1/91
(10-Year Period)
Date Active Bond Fund Active Bond Benchmark(1)
---- ---------------- ------------------------
7/1/1991 10,000 10,000
7/31/1991 10,107 10,126
8/31/1991 10,337 10,359
9/30/1991 10,547 10,575
10/31/1991 10,650 10,670
11/30/1991 10,739 10,776
12/31/1991 11,074 11,139
1/31/1992 10,967 10,975
2/29/1992 10,996 11,033
3/31/1992 10,968 10,972
4/30/1992 11,039 11,038
5/31/1992 11,223 11,252
6/30/1992 11,369 11,417
7/31/1992 11,643 11,710
8/31/1992 11,770 11,814
9/30/1992 11,928 11,975
10/31/1992 11,783 11,791
11/30/1992 11,746 11,781
12/31/1992 11,923 11,983
1/31/1993 12,136 12,245
2/28/1993 12,388 12,499
3/31/1993 12,456 12,542
4/30/1993 12,534 12,638
5/31/1993 12,527 12,632
6/30/1993 12,784 12,919
7/31/1993 12,892 13,001
8/31/1993 13,165 13,300
9/30/1993 13,230 13,347
10/31/1993 13,244 13,402
11/30/1993 13,144 13,250
12/31/1993 13,206 13,309
1/31/1994 13,398 13,508
2/28/1994 13,153 13,214
3/31/1994 12,873 12,890
4/30/1994 12,759 12,783
5/31/1994 12,737 12,760
6/30/1994 12,724 12,731
7/31/1994 12,930 12,985
8/31/1994 12,961 12,990
9/30/1994 12,810 12,794
10/31/1994 12,789 12,780
11/30/1994 12,765 12,757
12/31/1994 12,867 12,841
1/31/1995 13,112 13,088
2/28/1995 13,425 13,392
3/31/1995 13,530 13,481
4/30/1995 13,726 13,669
5/31/1995 14,317 14,241
6/30/1995 14,439 14,355
7/31/1995 14,377 14,299
8/31/1995 14,543 14,482
9/30/1995 14,689 14,630
10/31/1995 14,928 14,845
11/30/1995 15,152 15,090
12/31/1995 15,382 15,312
1/31/1996 15,473 15,407
2/29/1996 15,175 15,080
3/31/1996 15,083 14,954
4/30/1996 15,006 14,850
5/31/1996 15,003 14,825
6/30/1996 15,155 15,024
7/31/1996 15,203 15,058
8/31/1996 15,214 15,022
9/30/1996 15,490 15,290
10/31/1996 15,819 15,646
11/30/1996 16,067 15,934
12/31/1996 16,013 15,757
1/31/1997 16,073 15,776
2/28/1997 16,149 15,809
3/31/1997 15,978 15,621
4/30/1997 16,196 15,849
5/31/1997 16,378 15,996
6/30/1997 16,593 16,188
7/31/1997 17,090 16,684
8/31/1997 16,923 16,497
9/30/1997 17,197 16,756
10/31/1997 17,345 17,024
11/30/1997 17,441 17,114
12/31/1997 17,632 17,294
1/31/1998 17,874 17,538
2/28/1998 17,859 17,503
3/31/1998 17,960 17,557
4/30/1998 18,047 17,645
5/31/1998 18,208 17,833
6/30/1998 18,382 18,015
7/31/1998 18,417 18,030
8/31/1998 18,598 18,381
9/30/1998 19,024 18,907
10/31/1998 18,846 18,773
11/30/1998 19,027 18,885
12/31/1998 19,084 18,931
1/31/1999 19,259 19,065
2/28/1999 18,864 18,611
3/31/1999 18,999 18,704
4/30/1999 19,058 18,751
5/31/1999 18,852 18,558
6/30/1999 18,805 18,501
7/31/1999 18,767 18,449
8/31/1999 18,730 18,434
9/30/1999 18,897 18,600
10/31/1999 18,935 18,669
11/30/1999 19,002 18,667
12/31/1999 18,904 18,577
1/31/2000 18,825 18,516
2/29/2000 19,037 18,740
3/31/2000 19,229 18,987
4/30/2000 19,155 18,932
5/31/2000 19,138 18,923
6/30/2000 19,540 19,316
7/31/2000 19,696 19,492
8/31/2000 19,995 19,775
9/30/2000 20,107 19,899
10/31/2000 20,214 20,031
11/30/2000 20,483 20,359
12/31/2000 20,880 20,738
1/31/2001 21,222 21,076
2/28/2001 21,398 21,259
3/31/2001 21,497 21,366
4/30/2001 21,421 21,276
5/31/2001 21,569 21,404
6/30/2001 21,636 21,485
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
- --
% of six months ago
investments % of investments
Government National Mortgage Assoc. 17.6% 21.5%
Federal National Mortgage Assoc. 13.7% 10.2%
U.S. Treasury 7.8% 17.9%
Amresco Residential Securities 1.0% 1.0%
GMAC Commercial Mortgage Securities, Inc. 1.0% 1.3%
UCFC Home Equity Loan 0.9% 1.5%
Household Financial Corp. 0.9% N/A
Cleveland Electric Illuminating Co. 0.8% 0.8%
New York Life Insurance Co. 0.7% 0.7%
CSC Holdings, Inc. 0.7% 0.3%
Average Annual Total Returns*
- ----------------------------------------------------------------------------
Active Bond Active Bond MoringStar
Fund Benchmark(1) Peer Group+
------------ ------------ -----------
YTD** 3.63% 3.60% 3.17%
1 Year 10.73 11.23 8.66
3 Years 5.58 6.05 4.75
5 Years 7.38 7.42 6.55
10 Years 8.02 7.75 7.65
Fund Composition (as of June 30, 2001)
- ----------------------------------------------------------------------------
Credit Quality Duration
Short Term 5.90% less than 1 Year 7.10%
AAA 43.70% 1-3 Years 5.50%
AA 4.10% 3-5 Years 26.20%
A 11.40% 5-10 Years 44.40%
BBB 23.20% greater than 10 Years 16.80%
BB 7.60%
B 3.20%
NR/NA .90%
(1) The Active Bond Benchmark represents the Lehman Brothers
Government/Corporate Bond Index from April 1986 to September 1999
and Lehman Brothers Aggregate Bond Index from October 1999 to
present.
* Total returns are for the period ended June 30, 2001, returns
represent past performance, assume reinvestment of all
distributions, and are not indicative of future performance.
"Results may have been achieved during market conditions or
pursuing performance opportunities that may not continue to occur
in the future." Investment returns and principal value of fund
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. The performance of the fund
on this page is reported net of Trust level charges (i.e.
investment management fees and operating expenses). It does not
reflect expense and charges of the applicable separate accounts and
variable products, all of which vary to a considerable extent and
are described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered
from reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having an Intermediate Term Bond investment
category.
37
Inception: June 30, 2000
Active Bond II Fund (Formerly Core Bond Fund)
John Hancock Advisers, Inc. James Ho
Effective January 1, 2001 John Hancock Advisors. Inc. assumed management of
the Fund.
During the quarter the portfolio gained 0.46%, underperforming the Lehman
Aggregate Index at 0.56% by 10 basis points.
The portfolio's overweight position in investment grade corporate bonds and
underweight position in Treasuries relative to the index added to performance
results during the quarter.
As high yield bonds were the worst performing sector during the period, the
portfolio's overweight position relative to the index detracted from
performance results. Year-to-date, however the portfolio's overweighting in
high yield bonds has added to performance results.
In the near-term, we will continue to maintain above average liquidity in the
portfolio, with an overweight position in better quality, more defensive
names. Very recently, we've included some of the economically sensitive
sectors, such as autos and financials, though the move has not been a dramatic
one. We will maintain our slightly shorter duration position, as we expect the
yield curve to flatten as the economy improves. We'll continue to look for
attractive values among lower-rated investment grade issues. Our slight
underweighting in mortgage securities is likely to remain constant, and we are
beginning to emphasize more defensive securities with higher coupons of
between 7% and 7.5%. We have increased our emerging market position slightly
and continue to look closely at this sector as it may present opportunities in
the near-term, especially if the U.S. economy rebounds.
[GRAPH]
Historical Fund Return
$10,000
Investment made 6/30/00
(Fund Inception Date)
Lehman Brothers
Active Bond II Aggregate
Date Fund Bond Index
---- ----------- ---------------
6/30/2000 10,000 10,000
10,076 10,091
10,214 10,237
10,278 10,302
10,339 10,370
10,511 10,540
12/31/2000 10,700 10,736
10,891 10,911
10,960 11,006
11,008 11,061
10,952 11,014
11,020 11,080
6/30/2001 11,046 11,123
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Federal National Mortgage Assoc. 24.8% 33.2%
U.S. Treasury 11.9% 13.6%
Government National Mortgage Assoc. 9.3% 6.7%
Federal Home Loan Mortgage Corp. 4.3% 3.3%
Target Corp. 1.7% 1.7%
General Motors Acceptance Corp. 1.7% 1.7%
United Airlines 1.7% 1.7%
TOSCO Corp. 1.7% 1.7%
General Electric Capital Corp. 1.7% 1.7%
International Speedway Corp. 1.7% 1.7%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Active Bond II Lehman Brothers MorningStar
Fund Aggregate Bond Peer Group+
-------------- --------------- ----------
YTD** 3.24% 3.60% 3.17%
1 Year 10.46 11.23 8.66
Since Inception (6/30/00) 10.46 11.23 N/A
Fund Composition (as of June 30, 2001)
- ------------------------------------------------------------------------------
Credit Quality Duration
Short Term 7.20% less than 1 Year 7.20%
AAA 52.90% 1-3 Years 12.20%
AA 2.80% 3-5 Years 25.40%
A 12.00% 5-10 Years 42.30%
BBB 19.10% greater than 10 Years 12.90%
BB 3.30%
B 2.40%
NR/NA .30%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. The performance of the fund on this page is reported
net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which
vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be guaranteed.
Represents an average annual total return for all variable annuity and
life sub-accounts within the Morningstar variable universe having a
Intermediate Term Bond investment category.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having an Intermediate-Term Bond investment
category.
38
Inception: May 1, 1998
High Yield Bond Fund
Wellington Management Company, LLP Crawford/Smith/McEvoy
During the quarter, the Fund decreased -2.9% compared to a -2.3% return of
the Lehman High Yield Index. For the first half of the year, the return on the
Fund has been 5.33%, compared to the 3.93% return of the Lehman HY Index.
The high yield market had an unusual quarter. The Lehman HY Index had a
return of -2.3%, trailing the 0.6% return of the Lehman Aggregate (a proxy for
investment grade bonds). Yet, while underperforming, the spread of the high
yield market still tightened from 763 basis points to 730 basis points over
the 10 year US Treasury during the quarter. This phenomenon resulted, in large
part, because of the high amount of defaults during the quarter. A high yield
issue is removed from the Lehman HY index when it defaults, often reducing the
yield of the index since the issue was most likely distressed in the previous
months. A period of high defaults can cause the removal of many high-yielding
issues, reducing the yield of the market, but not delivering a commensurate
return. During the quarter, holdings in 4 issuers defaulted. We continue to
hold the securities of these companies based on current depressed valuations,
but with a preference of minimizing non-paying securities.
The second quarter of 2001 saw higher-quality high yield bonds get back to
outperforming lower quality high yield bonds by a large margin. Within high
yield, lower quality ("B-rated") issues underperformed higher quality bonds
("BB-rated") for the quarter.
As we look ahead, our strategy remains the same. We will continue to adhere
to our long-running preference for issuers that have recurring revenue from
repeat customers. To that end, telecommunications and cable continue to be two
of the largest industry weightings in the Fund.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/98
(Fund Inception Date)
Lehman Brothers
High Yield
Date High-Yield Bond Fund Bond Index
---- -------------------- ---------------
5/1/1998 10,000 10,000
5/31/1998 9,987 10,035
6/30/1998 10,028 10,071
7/31/1998 10,075 10,129
8/31/1998 9,309 9,569
9/30/1998 9,280 9,612
10/31/1998 9,120 9,415
11/30/1998 9,802 9,806
12/31/1998 9,702 9,817
1/31/1999 9,875 9,962
2/28/1999 9,884 9,903
3/31/1999 10,061 9,998
4/30/1999 10,214 10,192
5/31/1999 9,992 10,054
6/30/1999 9,989 10,033
7/31/1999 9,993 10,073
8/31/1999 9,924 9,961
9/30/1999 9,874 9,889
10/31/1999 9,806 9,824
11/30/1999 10,089 9,940
12/31/1999 10,200 10,051
1/31/2000 10,132 10,008
2/29/2000 10,123 10,027
3/31/2000 9,876 9,817
4/30/2000 9,945 9,832
5/31/2000 9,777 9,731
6/30/2000 10,006 9,930
7/31/2000 10,121 10,005
8/31/2000 10,203 10,073
9/30/2000 9,974 9,985
10/31/2000 9,578 9,666
11/30/2000 9,016 9,283
12/31/2000 9,097 9,462
1/31/2001 9,829 10,171
2/28/2001 10,014 10,306
3/31/2001 9,866 10,063
4/30/2001 9,755 9,938
5/31/2001 9,951 10,117
6/30/2001 9,582 9,834
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Allied Waste North America 2.0% N/A
Charter Communications Holdings, LLC 1.9% 0.8%
Nextel Communications, Inc. 1.9% 1.4%
Time Warner Telecom, Inc. 1.9% N/A
Calpine Corp. 1.9% N/A
EchoStar DBS Corp. 1.9% 1.0%
Amkor Technologies, Inc. 1.8% N/A
Fairchild Semiconductor Corp. 1.7% 0.9%
Alaris Medical Systems, Inc. 1.6% N/A
Global Crossing Holdings, Ltd. 1.6% 0.3%
Average Annual Total Returns*
- ------------------------------------------------------------------------------
High Yield L/B High-
Yield MorningStar
Bond Fund Bond Index Peer Group+
------------ ---------------- -----------
- -
YTD** 5.33% 3.93% 1.35%
1 Year -4.25 -0.96 -4.14
3 Years -1.51 -0.79 -2.32
Since Inception (5/1/98) -1.34 -0.53 N/A
Fund Composition (as of June 30, 2001)
- ------------------------------------------------------------------------------
Credit Quality Duration
Short Term 2.99% less than 1 Year 2.99%
BBB 1.01% 1-3 Years 3.61%
BB 27.86% 3-5 Years 9.55%
B 58.70% 5-10 Years 81.76%
Below B 8.80% greater than 10 Years 1.81%
NR/NA .64% Equity/Other 0.28%
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. Small-company investing entails special risks as
outlined in the prospectus. The performance of the fund on this page
is reported net of Trust level charges (i.e. investment management
fees and operating expenses). It does not reflect expense and charges
of the applicable separate accounts and variable products, all of
which vary to a considerable extent and are described in your product
prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a High Yield investment category.
39
Inception: May 1, 1996
Global Bond Fund
Capital Guardian Trust Company Management Team
For the quarter ended June 30, 2001, the Global Bond Fund returned (1.59%),
which was slightly below the Salomon Brothers World Government Bond Index
return of (1.57%).
Overall, significant spread tightening in credit markets in April and much of
May helped relative performance, though government bonds were a drag on
absolute returns. We remained overweight in European bonds, which hurt
returns, though we hedged some of our euro exposure as the common currency
continued to weaken. In Japan, our underweight detracted from performance as
yields fell further.
We began adding mortgage-backed securities in the United States when the
diminishing risk of mortgage prepayments made this area attractive as rates
fell. High-grade as well as high-yield spreads narrowed after investors
anticipated improving corporate profitability in the next six to nine months.
A spate of negative earnings preannouncements from technology companies in May
and June, however, caused corporates to give back some of their earlier gains.
With the Federal Reserve well into its easing cycle and rebates hitting U.S.
taxpayers' mailboxes this summer, we believe government yields have entered a
bottoming phase and we will begin to see economic activity improve. We do not
anticipate maintaining our underweight position on the euro for long as higher
real yields in Europe should eventually favor euro-denominated assets over
dollar-denominated assets. In Japan, we still see very little upside, with 10-
year yields hovering around 1.20% and overnight rates essentially at zero.
As the U.S. and European economies begin to establish a bottom and investors
anticipate longer-term recoveries, we believe mortgage-backed securities in
the United States will outperform, as will U.S. and European corporates. Even
with the most recent pull-back in the corporate sector, we believe this area
still offers the most value and upside potential for investors.
[GRAPH]
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Global Bond Global Bond
Date Fund Benchmark (1)
---- ----------- -------------
5/01/1996 10,000 10,000
5/31/1996 9,983 10,002
6/30/1996 10,068 10,123
7/31/1996 10,103 10,163
8/31/1996 10,112 10,184
9/30/1996 10,297 10,371
10/31/1996 10,490 10,587
11/30/1996 10,674 10,775
12/31/1996 10,671 10,704
01/31/1997 10,723 10,763
02/28/1997 10,755 10,801
03/31/1997 10,634 10,697
04/30/1997 10,761 10,847
05/31/1997 10,871 10,938
06/30/1997 11,021 11,082
07/31/1997 11,262 11,351
08/31/1997 11,194 11,281
09/30/1997 11,396 11,456
10/31/1997 11,459 11,599
11/30/1997 11,518 11,661
12/31/1997 11,638 11,787
01/31/1998 11,775 11,939
02/28/1998 11,795 11,958
03/31/1998 11,844 12,015
04/30/1998 11,899 12,078
05/31/1998 12,012 12,206
06/30/1998 12,101 12,296
07/31/1998 12,133 12,344
08/31/1998 12,316 12,556
09/30/1998 12,624 12,852
10/31/1998 12,539 12,796
11/30/1998 12,640 12,886
12/31/1998 12,703 12,910
01/31/1999 12,812 13,019
02/28/1999 12,564 12,826
03/31/1999 12,668 12,917
04/30/1999 12,705 12,990
05/31/1999 12,578 12,912
06/30/1999 12,447 12,766
07/31/1999 12,562 12,739
08/31/1999 12,512 12,753
09/30/1999 12,436 12,818
10/31/1999 12,430 12,844
11/30/1999 12,455 12,887
12/31/1999 12,429 12,889
01/31/2000 12,395 12,899
02/29/2000 12,497 13,029
03/31/2000 12,674 13,245
04/30/2000 12,671 13,279
05/31/2000 12,739 13,357
06/30/2000 12,828 13,473
07/31/2000 12,903 13,575
08/31/2000 12,937 13,638
09/30/2000 13,005 13,717
10/31/2000 13,113 13,832
11/30/2000 13,320 14,107
12/31/2000 13,920 14,613
01/31/2001 13,913 14,594
02/28/2001 13,915 14,588
03/31/2001 13,483 14,168
04/30/2001 13,457 14,117
05/31/2001 13,357 14,074
06/30/2001 13,269 13,945
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
U.S. Treasury 10.8% 16.7%
Federal Republic of Germany 9.7% 1.5%
Federal National Mortgage Assoc. 9.3% 8.8%
Government of Japan 6.6% 8.1%
Government of France 4.8% 18.8%
Republic of Finland 4.8% N/A
Bundesrepublic Deutschland 3.9% 2.1%
European Investment Bank 3.8% 2.3%
Kingdom of Spain 3.6% N/A
Kingdom of Netherlands 2.8% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Global Bond Global Bond MorningStar
Fund Benchmark(1) Peer Group+
------------- -------------- ------------
YTD** -4.68% -4.57% 0.06%
1 Year 3.44 3.50 5.24
3 Years 3.12 4.28 2.94
5 Years 5.68 6.62 5.20
Since Inception (5/1/96) 5.63 6.65 N/A
Fund Composition (as of June 30, 2001)
- ------------------------------------------------------------------------------
Credit Quality Duration
Short Term 4.09% less than 1 Year 6.24%
AAA 17.69% 1-3 Years 11.99%
A .87% 3-5 Years 27.01%
BBB 4.03% 5-10 Years 53.75%
B 1.52% greater than 10 Years
Foreign Currency 71.80%
(1) Global Bond Benchmark: 75% Lehman Brothers Aggregate Bond and 25%
J.P. Morgan Non-US Government Bond Index, Hedged, from May 1996 to
April 1999, the J.P. Morgan Global Bond Index (Hedged), May 1999 to
October 2000, and the Salomon Brothers World Government Bond Index,
Unhedged, November 2000 to present.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future."
Investment returns and principal value of fund shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. There are special risks associated with international
investing including currency fluctuations, political and economic
instability, foreign taxation and different accounting standards, as
outlined in the current prospectus. The performance of the fund on
this page is reported net of Trust level changes (i.e. investment
management fees and operating expenses). It does not reflect expense
and charges of the applicable separate accounts and variable
products, all of which vary to a considerable extent and are
described in your product prospectus.
** Year-to-date total returns not annualized.
+ Source: MorningStar, Inc. Data as of 6/30/01. Although gathered from
reliable sources, data completeness and accuracy cannot be
guaranteed. Represents an average annual total return for all
variable annuity and life sub-accounts within the Morningstar
variable universe having a 75% International Bond and 25% General
Bond Intermediate category. Prior to November 2000, General Bond
Intermediate High Quality investment style and an International Bond
investment style. The peer group represents a 35% weighting of the
General Bond Intermediate High Quality category and a 65% weighting
of the International Bond category. Prior to May 1999 (concurrent
with the Fund's strategy change), the peer group represents a 75%
weighting of the General Bond Intermediate High Quality category and
a 25% weighting of the International Bond category.
40
Inception: March 29, 1986
Money Market Fund
Wellington Management Company, LLP John C. Keogh
Effective May 1, 2001, Wellington Management Company, LLP assumed management
of the Fund.
Since we began managing the John Hancock Money Market Fund on May 1, 2001,
the Fund (0.7%) has performed in line with the Fund's benchmark, iMoneyNet
First Tier Institutional Average, which has also gained 0.7%.
Credit concerns continued to affect investment dollars as liquidity flowed
away from those companies with earnings disappointments, litigation, and
management miscues. Corporate management has strategically shifted its
borrowing from short term commercial paper and bank loans toward longer
maturity debt, opting for committed capital despite the higher costs
associated with long term borrowing. This is evidenced by the decline of $146
billion in commercial paper outstanding since the beginning of the year and
the simultaneous surge in bond issuance. Most Money Market Mutual Funds
continue to avoid the problem issuers, especially since the California
utilities' commercial paper defaulted early in the year.
The money market yield curve has shifted from inverted, where longer maturity
yields are lower than short maturity yields, toward a positive slope. This
shift reflects market consensus that we are now at or near the bottom of the
Fed's easing cycle.
Money Market Mutual Funds continue to attract investment flows as market
interest rates declined further. Funds' yields typically lag market rates
lower, offering investors opportunities to invest at attractive levels until
the yields decline to market levels.
The bond market is now anticipating that short term interest rates are near
their cyclical bottom and bond yields have begun to rise. However, we do not
foresee a turn in the Fed's policy direction for the next several months as
they wait to see if these stimulative forces take hold. For this reason, we
are not inclined toward a defensive interest rate posture at this time. We
will continue to invest aggressively with the expectation that short term
rates might still go lower and that there is little risk to the Fed changing
course in the near term.
[GRAPH]
Historical Fund Return
$10,000
Investment made 7/1/91
(10-Year Period)
DATE Money Market Fund
---- -----------------
7/1/1991 10,000
7/31/1991 10,052
8/31/1991 10,099
9/30/1991 10,145
10/31/1991 10,189
12/31/1991 10,189
1/31/1992 10,225
2/29/1992 10,255
3/31/1992 10,290
4/30/1992 10,323
5/31/1992 10,354
6/30/1992 10,389
7/31/1992 10,422
8/31/1992 10,453
9/30/1992 10,483
10/31/1992 10,502
11/30/1992 10,530
12/31/1992 10,560
1/31/1993 10,587
2/28/1993 10,612
3/31/1993 10,641
4/30/1993 10,667
5/31/1993 10,691
6/30/1993 10,720
7/31/1993 10,746
8/31/1993 10,775
9/30/1993 10,801
10/31/1993 10,826
11/30/1993 10,854
12/31/1993 10,883
1/31/1994 10,911
2/28/1994 10,936
3/31/1994 10,965
4/30/1994 10,993
5/31/1994 11,027
6/30/1994 11,063
7/31/1994 11,100
8/31/1994 11,144
9/30/1994 11,186
10/31/1994 11,225
11/30/1994 11,270
12/31/1994 11,318
1/31/1995 11,372
2/28/1995 11,422
3/31/1995 11,478
4/30/1995 11,529
5/31/1995 11,589
6/30/1995 11,643
7/31/1995 11,699
8/31/1995 11,754
9/30/1995 11,806
10/31/1995 11,862
11/30/1995 11,917
12/31/1995 11,973
1/31/1996 12,029
2/29/1996 12,079
3/31/1996 12,127
4/30/1996 12,181
5/31/1996 12,234
6/30/1996 12,282
7/31/1996 12,339
8/31/1996 12,392
9/30/1996 12,447
10/31/1996 12,502
11/30/1996 12,554
12/31/1996 12,612
1/31/1997 12,667
2/28/1997 12,718
3/31/1997 12,774
4/30/1997 12,829
5/31/1997 12,887
6/30/1997 12,944
7/31/1997 13,003
8/31/1997 13,062
9/30/1997 13,120
10/31/1997 13,180
11/30/1997 13,239
12/31/1997 13,300
1/31/1998 13,362
2/28/1998 13,417
3/31/1998 13,478
4/30/1998 13,537
5/31/1998 13,599
6/30/1998 13,659
7/31/1998 13,721
8/31/1998 13,783
9/30/1998 13,844
10/31/1998 13,905
11/30/1998 13,964
12/31/1998 14,024
1/31/1999 14,083
2/28/1999 14,134
3/31/1999 14,190
4/30/1999 14,244
5/31/1999 14,301
6/30/1999 14,356
7/31/1999 14,415
8/31/1999 14,475
9/30/1999 14,535
10/31/1999 14,599
11/30/1999 14,663
12/31/1999 14,733
1/31/2000 14,804
2/29/2000 14,870
3/31/2000 14,941
4/30/2000 15,012
5/31/2000 15,090
6/30/2000 15,168
7/31/2000 15,250
8/31/2000 15,333
9/30/2000 15,414
10/31/2000 15,495
11/30/2000 15,577
12/31/2000 15,662
1/31/2001 15,744
2/28/2001 15,813
3/31/2001 15,884
4/30/2001 15,945
5/31/2001 16,004
6/30/2001 16,058
Top Ten Holdings (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of six months ago
investments % of investments
Federal Home Loan Bank Note 7.1% N/A
SBC WARBURG REPO 5.0% N/A
General Electric Capital Corp. 3.8% 3.1%
Branch Banking & Trust Co. 3.3% N/A
Falcon Asset Securitization 3.2% N/A
Federal National Mortgage Assoc. 3.2% N/A
LaSalle Bank NA 3.1% N/A
Merck & Co., Inc. 3.1% N/A
Gannett, Inc. 3.1% N/A
President & Fellows Harvard Co. 3.0% N/A
Average Annual Total Returns*
- ------------------------------------------------------------------------------
Money Market
Fund(1)
--------------
YTD** 2.51%
1 Year 5.83
3 Years 5.54
5 Years 5.51
10 Years 4.93
Top Ten Sectors (as of June 30, 2001)
- ------------------------------------------------------------------------------
% of % of
investments investments
Financial 63.0% Capital Equipment 3.3%
Government 10.3% Health Care 3.1%
Consumer Staple 6.2% Retail 3.0%
Rights/Warrants 5.0% Technology 0.7%
Consumer Cyclical 4.9% Utility 0.7%
The Money Market Fund is neither insured nor guaranteed by the U.S.
Government and there is no guarantee the fund will be able to maintain
a stable net asset value of $10.00/share.
(1) Returns reflect extra-ordinary capital contribution of $284,471 in
October 2000.
* Total returns are for the period ended June 30, 2001. Returns
represent past performance, assume reinvestment of all distributions
and are not indicative of future performance. "Results may have been
achieved during market conditions or pursuing performance
opportunities that may not continue to occur in the future." The
performance of the fund on this page is reported net of Trust level
charges (i.e. investment management fees and operating expenses). It
does not reflect expense and charges of the applicable separate
accounts and variable products, all of which vary to a considerable
extent and are described in your product prospectus.
** Year-to-date total returns not annualized.
41
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------
(000's Omitted)
Large Cap Fundamental Aggressive Active Active Emerging International International
Growth Growth Balanced Bond Bond II Markets Equity Equity Index Equity
---------- ----------- ---------- ---------- ------- -------------- ------------- -------------
ASSETS
Long term investments
at cost................ $ 879,877 $43,668 $19,821 $ 751,001 $6,036 $ 31,458 $172,212 $22,763
Net unrealized
appreciation
(depreciation) of
investments............ (6,604) (4,054) 362 7,394 74 (5,000) (18,761) (2,759)
Short-term investments
at value............... 37,681 1,186 1,495 300,881 547 1,094 26,881 1,200
---------- ------- ------- ---------- ------ -------- -------- -------
Total investments..... 910,954 40,800 21,678 1,059,276 6,657 27,552 180,332 21,204
Cash................... -- 3 -- 4,508 38 54 1 55
Foreign currency at
value (cost $0, $0, $0,
$0, $0, $344, $127, and
$66, respectively)..... -- -- -- -- -- 345 127 60
Receivable for:
Investments sold...... -- 657 135 11,436 79 88 -- 7
Interest.............. 2 -- 54 10,821 88 68 -- --
Dividends............. 180 12 14 -- -- -- 379 40
Futures contracts
variation margin...... -- -- -- -- -- -- -- 10
Forward foreign
currency exchange
contracts sold........ -- -- -- -- -- -- 12 --
Other assets.......... -- -- -- -- -- -- 2 --
---------- ------- ------- ---------- ------ -------- -------- -------
Total assets........... 911,136 41,472 21,881 1,086,041 6,862 28,107 180,853 21,376
---------- ------- ------- ---------- ------ -------- -------- -------
LIABILITIES
Payables for:
Investments purchased. 12,491 1,114 1,497 22,293 276 353 -- 286
Futures contracts
variation margin...... -- -- -- -- -- -- 11 --
Securities on loan.... 20,023 -- -- 247,041 -- -- 25,718 --
Forward foreign
currency exchange
contracts purchased... -- -- -- -- -- -- 30 --
Forward foreign
currency exchange
contracts sold........ -- -- -- -- -- 98 -- --
Other liabilities..... 740 16 6 410 3 50 -- 4
---------- ------- ------- ---------- ------ -------- -------- -------
Total liabilities...... 33,254 1,130 1,503 269,744 279 501 25,759 290
---------- ------- ------- ---------- ------ -------- -------- -------
Net assets............. $ 877,882 $40,342 $20,378 $ 816,297 $6,583 $ 27,606 $155,094 $21,086
========== ======= ======= ========== ====== ======== ======== =======
Shares of beneficial
interest outstanding... 53,477 4,090 2,087 86,035 635 4,252 11,557 2,519
---------- ------- ------- ---------- ------ -------- -------- -------
Net asset value per
share.................. $ 16.41 $ 9.86 $ 9.76 $ 9.49 $10.37 $ 6.49 $ 13.42 $ 8.37
========== ======= ======= ========== ====== ======== ======== =======
Composition of net
assets:
Capital paid-in....... $1,050,770 $58,489 $21,445 $ 832,574 $6,409 $ 45,340 $174,948 $24,515
Accumulated net
realized gain (loss)
on investments,
futures and foreign
currency transactions. (166,441) (14,000) (1,425) (25,862) 100 (12,675) (639) (685)
Undistributed
(distribution in
excess of) net
investment income
(loss)................ 157 (93) (4) 2,191 -- 44 (426) 18
Net unrealized
appreciation
(depreciation) of:
Investments........... (6,604) (4,054) 362 7,394 74 (5,000) (18,761) (2,759)
Futures............... -- -- -- -- -- -- 9 1
Translation of assets
and liabilities in
foreign currencies.... -- -- -- -- -- (103) (37) (4)
---------- ------- ------- ---------- ------ -------- -------- -------
Net assets............. $ 877,882 $40,342 $20,378 $ 816,297 $6,583 $ 27,606 $155,094 $21,086
========== ======= ======= ========== ====== ======== ======== =======
See notes to financial statements.
42
STATEMENT OF ASSETS AND LIABILITIES--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------
(000's Omitted)
Small Cap Health Global Mid Cap Mid Cap Large Cap Large Cap Large Cap
Growth Sciences Balanced Growth Blend Value Value CORE Value CORE II
--------- -------- -------- --------- ------- --------- ---------- -------------
ASSETS
Long term investments at
cost.................... $193,543 $20,732 $28,446 $ 335,271 $20,788 $198,377 $41,072 $6,427
Net unrealized
appreciation
(depreciation) of
investments............. 1,583 363 (1,865) (41,486) 1,715 17,417 596 137
Short-term investments
at value................ 22,608 1,218 931 20,587 5 14,438 3,200 --
-------- ------- ------- --------- ------- -------- ------- ------
Total investments...... 217,734 22,313 27,512 314,372 22,508 230,232 44,868 6,564
Cash.................... -- -- -- 86 -- -- 264 29
Receivable for:
Investments sold....... 1,582 41 525 334 86 1,305 -- --
Interest............... 1 -- 172 -- -- 1 -- --
Dividends.............. 9 11 27 12 18 289 34 6
Futures contracts
variation margin....... -- -- -- -- -- -- 7 --
Forward foreign
currency exchange
contracts sold......... -- -- 24 -- -- -- -- --
Other assets........... -- -- -- -- -- 1 -- --
-------- ------- ------- --------- ------- -------- ------- ------
Total assets............ 219,326 22,365 28,260 314,804 22,612 231,828 45,173 6,599
-------- ------- ------- --------- ------- -------- ------- ------
LIABILITIES
Payables for:
To custodian........... 300 -- 1 -- -- -- -- --
Investments purchased.. 1,596 173 111 -- -- 1,337 1,177 --
Securities on loan..... 15,318 -- -- 12,189 -- 5,765 -- --
Forward foreign
currency exchange
contracts purchased.... -- -- 27 -- -- -- -- --
Other liabilities...... 59 3 15 68 13 -- 9 3
-------- ------- ------- --------- ------- -------- ------- ------
Total liabilities....... 17,273 176 154 12,257 13 7,102 1,186 3
-------- ------- ------- --------- ------- -------- ------- ------
Net assets.............. $202,053 $22,189 $28,106 $ 302,547 $22,599 $224,726 $43,987 $6,596
======== ======= ======= ========= ======= ======== ======= ======
Shares of beneficial
interest outstanding.... 16,291 2,177 3,188 25,854 1,876 15,393 4,268 621
-------- ------- ------- --------- ------- -------- ------- ------
Net asset value per
share................... $ 12.40 10.19 $ 8.82 $ 11.70 $ 12.04 $ 14.60 $ 10.31 $10.63
======== ======= ======= ========= ======= ======== ======= ======
Composition of net
assets:
Capital paid-in........ $243,011 $21,831 $30,947 $ 503,511 $21,862 $205,528 $43,519 $6,249
Accumulated net
realized gain (loss) on
investments, futures
and foreign currency
transactions........... (42,095) 6 (257) (158,940) (991) 1,722 (131) 210
Undistributed
(distribution in excess
of) net investment
income (loss).......... (446) (11) (706) (538) 13 59 -- --
Net unrealized
appreciation
(depreciation) of:
Investments............ 1,583 363 (1,865) (41,486) 1,715 17,417 596 137
Futures................ -- -- -- -- -- -- 3 --
Translation of assets
and liabilities in
foreign currencies..... -- -- (13) -- -- -- -- --
-------- ------- ------- --------- ------- -------- ------- ------
Net assets.............. $202,053 $22,189 $28,106 $ 302,547 $22,599 $224,726 $43,987 $6,596
======== ======= ======= ========= ======= ======== ======= ======
See notes to financial statements.
43
STATEMENT OF ASSETS AND LIABILITIES--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------
(000's Omitted)
Large/Mid Money Large/Mid Cap Small/Mid Cap Bond Large Cap Small/Mid Cap Small Cap
Cap Value Market Value II Growth Index Aggressive Growth CORE Value
--------- -------- ------------- ------------- ------- ----------------- ------------- ---------
ASSETS
Long term investments
at cost................ $34,451 -- $121,079 $173,354 $78,055 $36,458 $26,120 $48,906
Net unrealized
appreciation
(depreciation) of
investments............ 300 -- (915) 6,289 490 (1,698) 971 5,619
Short-term investments
at value............... 2,037 $458,804 8,029 29,349 1,626 1,006 300 3,994
------- -------- -------- -------- ------- ------- ------- -------
Total investments..... 36,788 458,804 128,193 208,992 80,171 35,766 27,391 58,519
Cash................... -- -- -- -- 788 18 237 --
Receivable for:
Investments sold...... 354 -- 1,056 1,065 -- -- 41 --
Interest.............. -- 618 -- -- 1,007 -- -- 1
Dividends............. 43 -- 191 29 -- 10 26 57
Futures contracts
variation margin...... 2 -- 4 -- -- -- 4 11
------- -------- -------- -------- ------- ------- ------- -------
Total assets........... 37,187 459,422 129,444 210,086 81,966 35,794 27,699 58,588
------- -------- -------- -------- ------- ------- ------- -------
LIABILITIES
Payables for:
To custodian.......... -- -- 6 -- -- -- -- --
Investments purchased. 613 -- 1,866 373 788 160 2 --
Securities on loan.... -- -- 6,461 28,339 -- -- -- --
Other liabilities..... 5 53 9 60 17 5 8 15
------- -------- -------- -------- ------- ------- ------- -------
Total liabilities ..... 618 53 8,342 28,772 805 165 10 15
------- -------- -------- -------- ------- ------- ------- -------
Net assets............. $36,569 $459,369 $121,102 $181,314 $81,161 $35,629 $27,689 $58,573
======= ======== ======== ======== ======= ======= ======= =======
Shares of beneficial
interest outstanding... 3,246 459,369 8,480 13,003 8,326 4,292 2,787 4,245
------- -------- -------- -------- ------- ------- ------- -------
Net asset value per
share.................. $ 11.27 $ 1.00 $ 14.28 $ 13.94 $ 9.75 $ 8.30 $ 9.94 $ 13.80
======= ======== ======== ======== ======= ======= ======= =======
Composition of net
assets:
Capital paid-in....... $35,651 $459,369 $106,971 $175,043 $81,255 $43,197 $27,098 $52,329
Accumulated net
realized gain (loss)
on investments,
futures and foreign
currency transactions. 616 (92) 15,084 257 88 (5,859) (393) 592
Undistributed
(distribution in
excess of) net
investment income
(loss)................ (1) 92 (3) (275) (672) (11) (1) 1
Net unrealized
appreciation
(depreciation) of:
Investments........... 300 -- (915) 6,289 490 (1,698) 971 5,619
Futures............... 3 -- (35) -- -- -- 14 32
------- -------- -------- -------- ------- ------- ------- -------
Net assets............. $36,569 $459,369 $121,102 $181,314 $81,161 $35,629 $27,689 $58,573
======= ======== ======== ======== ======= ======= ======= =======
See notes to financial statements.
44
STATEMENT OF ASSETS AND LIABILITIES--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------
(000's Omitted)
Real Estate Growth & Short-Term Small Cap International Equity High Yield Global
Equity Income Managed Bond Equity Opportunities Index Bond Bond
----------- ---------- ---------- ---------- --------- ------------- -------- ---------- -------
ASSETS
Long term investments
at cost................ $131,899 $2,539,202 $2,488,798 $107,177 $81,967 $102,682 $556,479 $41,135 $57,066
Net unrealized
appreciation
(depreciation) of
investments............ 24,436 221,717 202,511 1,322 (6,601) (19,769) (36,201) (4,951) (1,328)
Short-term investments
at value............... 3,401 55,129 386,707 17,189 567 14,260 18,987 1,554 5,332
-------- ---------- ---------- -------- ------- -------- -------- ------- -------
Total investments..... 159,736 2,816,048 3,078,016 125,688 75,933 97,173 539,265 37,738 61,070
Cash................... -- -- 6,518 -- -- -- 68 403 --
Foreign currency at
value (cost $0, $0,
$0, $0, $0, $3,211,
$0, $0 and $0,
respectively)......... -- -- -- -- -- 3,181 -- -- --
Receivable for:
Investments sold...... 25 13,303 8,325 3,683 387 469 -- 93 373
Interest.............. -- 5 10,298 1,336 -- -- 2 1,172 918
Dividends............. 920 2,026 1,439 -- 35 160 387 -- --
Futures contracts
variation margin...... -- -- -- -- -- -- 66 -- --
Forward foreign
currency exchange
contracts sold........ -- -- 1,852 -- -- -- -- -- 215
-------- ---------- ---------- -------- ------- -------- -------- ------- -------
Total assets........... 160,681 2,831,382 3,106,448 130,707 76,355 100,983 539,788 39,406 62,576
-------- ---------- ---------- -------- ------- -------- -------- ------- -------
LIABILITIES
Payables for:
To custodian.......... -- -- 3,186 -- 11 -- -- -- --
Investments purchased. 20 19,727 327,088 3,681 107 203 547 935 203
Securities on loan.... -- 9,945 43,710 11,816 -- 13,433 -- -- 4,186
Forward foreign
currency exchange
contracts purchased... -- -- 1,258 -- -- -- -- -- 76
Other liabilities..... 32 1,720 1,342 26 6 14 94 8 2
-------- ---------- ---------- -------- ------- -------- -------- ------- -------
Total liabilities...... 52 31,392 376,584 15,523 124 13,650 641 943 4,467
-------- ---------- ---------- -------- ------- -------- -------- ------- -------
Net assets............. $160,629 $2,799,990 $2,729,864 $115,184 $76,231 $ 87,333 $539,147 $38,463 $58,109
======== ========== ========== ======== ======= ======== ======== ======= =======
Shares of beneficial
interest outstanding... 11,258 217,626 203,150 11,531 8,016 8,823 32,952 5,214 5,896
-------- ---------- ---------- -------- ------- -------- -------- ------- -------
Net asset value per
share.................. $ 14.27 $ 12.87 $ 13.44 $ 9.99 $ 9.51 $ 9.90 $ 16.36 $ 7.38 $ 9.86
======== ========== ========== ======== ======= ======== ======== ======= =======
Composition of net
assets:
Capital paid-in....... $133,527 $2,963,174 $2,571,337 $115,862 $87,314 $110,611 $563,431 $45,085 $60,689
Accumulated net
realized gain (loss)
on investments,
futures and foreign
currency transactions. 1,890 (385,265) (85,654) (1,777) (4,481) (3,512) 12,451 (1,634) (3,885)
Undistributed
(distribution in
excess of) net
investment income
(loss)................ 776 364 41,073 (223) (1) 43 (19) (37) 2,527
Net unrealized
appreciation
(depreciation) of:
Investments........... 24,436 221,717 202,511 1,322 (6,601) (19,769) (36,201) (4,951) (1,328)
Futures............... -- -- -- -- -- -- (515) -- --
Translation of assets
and liabilities in
foreign currencies.... -- -- 597 -- -- (40) -- -- 106
-------- ---------- ---------- -------- ------- -------- -------- ------- -------
Net assets............. $160,629 $2,799,990 $2,729,864 $115,184 $76,231 $ 87,333 $539,147 $38,463 $58,109
======== ========== ========== ======== ======= ======== ======== ======= =======
See notes to financial statements.
45
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------
(000's Omitted)
Large Cap Fundamental Aggressive Active Active Emerging International International
Growth Growth Balanced Bond Bond II Markets Equity Equity Index Equity
--------- ----------- ---------- ------- ------- -------------- ------------- -------------
INVESTMENT INCOME
Interest............... $ 237 $ 41 $ 148 $28,533 $196 $ 48 $ 114 $ 33
Dividends.............. 2,177 59 100 -- -- 351 1,989 149
Securities lending..... 55 3 -- 92 -- -- 154 --
--------- -------- ------- ------- ---- ------- -------- -------
Total investment income. 2,469 103 248 28,625 196 399 2,257 182
--------- -------- ------- ------- ---- ------- -------- -------
EXPENSES
Investment advisory
fee.................... 1,835 177 72 2,561 21 189 146 81
Auditors fees.......... 122 2 1 84 -- 1 7 1
Custodian fees......... 357 37 20 189 17 284 63 16
Fidelity Bond fees..... 1 -- -- -- -- -- -- --
Legal fees............. 34 1 -- 27 -- -- 2 --
Printing & mailing
fees................... 161 29 18 169 9 6 10 32
Trustees' fees......... 31 -- -- 24 -- -- 2 --
Other fees............. 20 -- -- 16 -- 10 4 1
--------- -------- ------- ------- ---- ------- -------- -------
Total expenses.......... 2,561 246 111 3,070 47 490 234 131
Less expenses
reimbursed............. (249) (50) (28) (84) (23) (286) (15) (42)
--------- -------- ------- ------- ---- ------- -------- -------
Net expenses............ 2,312 196 83 2,986 24 204 219 89
--------- -------- ------- ------- ---- ------- -------- -------
Net investment income
(loss).................. 157 (93) 165 25,639 172 195 2,038 93
--------- -------- ------- ------- ---- ------- -------- -------
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss)
on:
Investments............ (126,087) (11,791) (1,182) 13,062 100 (9,123) 186 (642)
Financial futures
contracts.............. -- -- -- -- -- -- (600) 9
Foreign currency
transactions........... -- -- -- -- -- (84) (375) 6
Change in unrealized
appreciation
(depreciation) on:
Investments............ (21,009) 1,888 180 (4,973) (92) 7,835 (23,529) (2,060)
Futures................ -- -- -- -- -- -- 179 24
Translation of assets
and liabilities in
foreign currencies..... -- -- -- -- -- (105) (84) (2)
--------- -------- ------- ------- ---- ------- -------- -------
Net realized and
unrealized gain (loss). (147,096) (9,903) (1,002) 8,089 8 (1,477) (24,223) (2,665)
--------- -------- ------- ------- ---- ------- -------- -------
Net increase (decrease)
in net assets resulting
from operations........ $(146,939) $ (9,996) $ (837) $33,728 $180 $(1,282) $(22,185) $(2,572)
========= ======== ======= ======= ==== ======= ======== =======
See notes to financial statements.
46
STATEMENT OF OPERATIONS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------
(000's Omitted)
Small Cap Health Global Mid Cap Mid Cap Large Cap Large Cap Large Cap
Growth Sciences(*) Balanced Growth Blend Value Value CORE Value CORE II
--------- ----------- -------- --------- ------- --------- ---------- -------------
INVESTMENT INCOME
Interest............... $ 119 $ 14 $ 244 $ 640 $ 10 $ 221 $ 30 $ 2
Dividends.............. 98 30 124 124 137 2,322 195 51
Securities lending..... 190 -- -- 119 -- 10 -- --
-------- ---- ------- --------- ----- ------ ----- -----
Total investment income. 407 44 368 883 147 2,553 225 53
-------- ---- ------- --------- ----- ------ ----- -----
EXPENSES
Investment advisory
fee.................... 759 35 147 1,310 85 779 94 24
Auditors fees.......... 9 1 1 9 1 4 1 1
Custodian fees......... 26 1 34 40 14 11 29 28
Legal fees............. 3 -- -- 4 -- 2 1 --
Printing & mailing
fees................... 52 2 1 54 19 22 2 9
Trustees' fees......... 2 -- 1 4 -- 2 -- --
Other fees............. 2 -- 1 -- 1 1 1 --
-------- ---- ------- --------- ----- ------ ----- -----
Total expenses.......... 853 39 185 1,421 120 821 128 62
Less expenses
reimbursed............. -- -- (24) -- (24) -- (21) (34)
-------- ---- ------- --------- ----- ------ ----- -----
Net expenses............ 853 39 161 1,421 96 821 107 28
-------- ---- ------- --------- ----- ------ ----- -----
Net investment income
(loss).................. (446) 5 207 (538) 51 1,732 118 25
-------- ---- ------- --------- ----- ------ ----- -----
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss)
on:
Investments............ (29,735) 6 10 (117,605) (534) 1,974 39 218
Financial futures
contracts.............. -- -- -- -- -- -- (102) (8)
Foreign currency
transactions........... -- -- (66) -- -- -- -- --
Change in unrealized
appreciation
(depreciation) on:
Investments............ 10,825 363 (1,313) 17,848 345 1,341 (101) (236)
Futures................ -- -- -- -- -- -- 3 --
Translation of assets
and liabilities in
foreign currencies..... -- -- (31) -- -- -- -- --
-------- ---- ------- --------- ----- ------ ----- -----
Net realized and
unrealized gain (loss). (18,910) 369 (1,400) (99,757) (189) 3,315 (161) (26)
-------- ---- ------- --------- ----- ------ ----- -----
Net increase (decrease)
in net assets resulting
from operations........ $(19,356) $374 $(1,193) $(100,295) $(138) $5,047 $ (43) $ (1)
======== ==== ======= ========= ===== ====== ===== =====
(*) Commenced operations on May 1, 2001
See notes to financial statements.
47
STATEMENT OF OPERATIONS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------
(000's Omitted)
Large/Mid Cap Money Large/Mid Cap Small/Mid Cap Bond Large Cap Small/Mid Cap Small Cap Real Estate
Value Market Value II Growth Index Aggressive Growth CORE Value Equity
------------- ------- ------------- ------------- ------ ----------------- ------------- --------- -----------
INVESTMENT INCOME
Interest........ $ 27 $12,717 $ 64 $ 158 $2,281 $ 35 $ 20 $ 46 $ 65
Dividends....... 187 -- 1,074 278 -- 85 152 283 2,902
Securities
lending......... -- -- 8 55 4 2 -- -- --
------- ------- -------- ------ ------ ------- ----- ------ ------
Total investment
income........... 214 12,717 1,146 491 2,285 122 172 329 2,967
------- ------- -------- ------ ------ ------- ----- ------ ------
EXPENSES
Investment
advisory fee.... 104 602 490 673 54 119 93 182 748
Auditors fees... 1 10 5 7 3 1 1 1 6
Custodian fees.. 22 37 13 34 25 9 39 21 30
Legal fees...... 1 7 2 2 1 1 -- 1 2
Printing &
mailing fees.... 2 27 12 47 6 2 2 7 25
Trustees' fees.. -- 3 1 2 1 -- -- -- 1
Other fees...... -- 1 4 1 -- 1 1 -- 1
------- ------- -------- ------ ------ ------- ----- ------ ------
Total expenses... 130 687 527 766 90 133 136 212 813
Less expenses
reimbursed...... (14) -- -- -- -- -- (31) (11) --
------- ------- -------- ------ ------ ------- ----- ------ ------
Net expenses..... 116 687 527 766 90 133 105 201 813
------- ------- -------- ------ ------ ------- ----- ------ ------
Net investment
income (loss).... 98 12,030 619 (275) 2,195 (11) 67 128 2,154
------- ------- -------- ------ ------ ------- ----- ------ ------
REALIZED AND
UNREALIZED GAIN
(LOSS)
Net realized gain
(loss) on:
Investments..... 762 -- 16,763 233 811 (5,040) (298) 551 1,976
Financial
futures
contracts....... (67) -- 21 -- -- -- 17 36 --
Foreign currency
transactions.... -- -- -- -- -- -- -- -- 1
Change in
unrealized
appreciation
(depreciation)
on:
Investments..... (1,231) -- (19,849) 2,780 (208) 1,387 690 5,762 3,353
Futures......... 3 -- (35) -- -- -- (18) 32 (1)
------- ------- -------- ------ ------ ------- ----- ------ ------
Net realized and
unrealized gain
(loss).......... (533) -- (3,100) 3,013 603 (3,653) 391 6,381 5,329
------- ------- -------- ------ ------ ------- ----- ------ ------
Net increase
(decrease) in
net assets
resulting from
operations...... $ (435) $12,030 $ (2,481) $2,738 $2,798 $(3,664) $ 458 $6,509 $7,483
======= ======= ======== ====== ====== ======= ===== ====== ======
See notes to financial statements.
48
STATEMENT OF OPERATIONS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------
(000's Omitted)
Growth & Short-Term Small Cap International Equity High Yield Global
Income Managed Bond Equity Opportunities Index Bond Bond
--------- --------- ---------- --------- ------------- -------- ---------- -------
INVESTMENT INCOME
Interest............... $ 769 $ 30,071 $3,093 $ 62 $ 73 $ 419 $1,532 $ 1,518
Dividends.............. 15,759 11,167 -- 273 979 3,016 5 --
Securities lending..... 87 175 15 8 56 -- -- 7
--------- --------- ------ ------- -------- -------- ------ -------
Total investment income. 16,615 41,413 3,108 343 1,108 3,435 1,537 1,525
--------- --------- ------ ------- -------- -------- ------ -------
EXPENSES
Investment advisory
fee.................... 9,934 9,411 150 321 431 341 100 272
Auditors fees.......... 199 148 1 3 4 14 1 3
Custodian fees......... 512 606 9 33 90 71 21 31
Fidelity Bond fees..... 2 2 -- -- -- -- -- --
Legal fees............. 192 61 1 1 2 3 1 1
Printing & mailing
fees................... 536 420 7 3 9 56 6 5
Trustees' fees......... 102 50 1 1 1 2 -- 1
Other fees............. 73 61 1 -- 3 2 -- 1
--------- --------- ------ ------- -------- -------- ------ -------
Total expenses.......... 11,550 10,759 170 362 540 489 129 314
Less expenses
reimbursed............. (149) -- -- (3) (57) -- (14) (9)
--------- --------- ------ ------- -------- -------- ------ -------
Net expenses............ 11,401 10,759 170 359 483 489 115 305
--------- --------- ------ ------- -------- -------- ------ -------
Net investment income
(loss).................. 5,214 30,654 2,938 (16) 625 2,946 1,422 1,220
--------- --------- ------ ------- -------- -------- ------ -------
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss)
on:
Investments............ (358,645) (102,984) 368 (4,381) (2,857) 13,974 (838) 427
Financial futures
contracts.............. -- 1,734 -- -- -- (1,404) -- --
Foreign currency
transactions........... -- 7,864 -- -- (186) -- -- (917)
Change in unrealized
appreciation
(depreciation) on:
Investments............ 54,423 13,088 1,013 7,093 (15,736) (51,537) 442 (4,071)
Futures................ -- (1,645) -- -- -- 58 -- --
Translation of assets
and liabilities in
foreign currencies..... -- 5,517 -- -- (32) -- -- 429
--------- --------- ------ ------- -------- -------- ------ -------
Net realized and
unrealized gain (loss). (304,222) (76,426) 1,381 2,712 (18,811) (38,909) (396) (4,132)
--------- --------- ------ ------- -------- -------- ------ -------
Net increase (decrease)
in net assets resulting
from operations........ $(299,008) $ (45,772) $4,319 $ 2,696 $(18,186) $(35,963) $1,026 $(2,912)
========= ========= ====== ======= ======== ======== ====== =======
See notes to financial statements.
49
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Large Cap Growth Fundamental Growth Aggressive Balanced
----------------------------- ----------------------------- -----------------------------
Unaudited Unaudited Unaudited
Six-Month Period Year Ended Six-Month Period Year Ended Six-Month Period Year Ended
Ended June 30, December 31, Ended June 30, December 31, Ended June 30, December 31,
2001 2000 2001 2000 2001 2000
---------------- ------------ ---------------- ------------ ---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment
income (loss)... $ 157 $ 1,410 $ (93) $ (109) $ 165 $ 288
Net realized
gain (loss)..... (126,087) 101,421 (11,791) 2,219 (1,182) (221)
Change in net
unrealized
appreciation
(depreciation).. (21,009) (356,204) 1,888 (8,121) 180 (433)
---------- ---------- -------- -------- ------- -------
Net increase
(decrease) in
net assets
resulting from
operations...... (146,939) (253,373) (9,996) (6,011) (837) (366)
Distributions to shareholders from:
Net investment
income.......... -- (2,000) -- -- (167) (289)
Realized gains.. -- (137,737) -- (2,478) -- (41)
In excess of
realized gain... -- (40,230) -- (2,097) -- (15)
Capital paid-in. -- (3,418) -- (111) -- --
---------- ---------- -------- -------- ------- -------
Decrease in net
assets resulting
from
distributions... -- (183,385) -- (4,686) (167) (345)
From fund share transactions:
Proceeds from
shares sold..... 51,493 206,257 10,494 76,255 4,385 10,598
Distributions
reinvested...... -- 183,384 -- 4,686 167 345
Payment for
shares redeemed. (173,459) (188,569) (6,270) (33,305) (4,111) (1,174)
---------- ---------- -------- -------- ------- -------
Increase
(decrease) in
net assets from
fund
share
transactions.... (121,966) 201,072 4,224 47,636 441 9,769
---------- ---------- -------- -------- ------- -------
NET INCREASE
(DECREASE) IN NET
ASSETS........... (268,905) (235,686) (5,772) 36,939 (563) 9,058
NET ASSETS
Beginning of
Period.......... 1,146,787 1,382,473 46,114 9,175 20,941 11,883
---------- ---------- -------- -------- ------- -------
End of Period... $ 877,882 $1,146,787 $ 40,342 $ 46,114 $20,378 $20,941
========== ========== ======== ======== ======= =======
Analysis of fund share transactions:
Sold............ 3,033 7,547 1,032 4,670 441 1,004
Reinvested...... -- 9,625 -- 383 17 33
Redeemed........ (10,275) (7,033) (626) (2,005) (417) (110)
---------- ---------- -------- -------- ------- -------
Net increase
(decrease) in
fund shares
outstanding...... (7,242) 10,139 406 3,048 41 927
========== ========== ======== ======== ======= =======
Active Bond
-----------------------------
Unaudited
Six-Month Period Year Ended
Ended June 30, December 31,
2001 2000
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment
income (loss)... $ 25,639 $ 57,674
Net realized
gain (loss)..... 13,062 (11,679)
Change in net
unrealized
appreciation
(depreciation).. (4,973) 36,028
---------------- ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 33,728 82,023
Distributions to shareholders from:
Net investment
income.......... (26,016) (53,480)
Realized gains.. -- --
In excess of
realized gain... -- --
Capital paid-in. -- --
---------------- ------------
Decrease in net
assets resulting
from
distributions... (26,016) (53,480)
From fund share transactions:
Proceeds from
shares sold..... 53,348 95,188
Distributions
reinvested...... 26,016 53,480
Payment for
shares redeemed. (113,078) (185,198)
---------------- ------------
Increase
(decrease) in
net assets from
fund
share
transactions.... (33,714) (36,530)
---------------- ------------
NET INCREASE
(DECREASE) IN NET
ASSETS........... (26,002) (7,987)
NET ASSETS
Beginning of
Period.......... 842,299 850,286
---------------- ------------
End of Period... $816,297 $ 842,299
================ ============
Analysis of fund share transactions:
Sold............ 5,944 10,355
Reinvested...... 2,730 5,823
Redeemed........ (11,836) (20,181)
---------------- ------------
Net increase
(decrease) in
fund shares
outstanding...... (3,162) (4,003)
================ ============
See notes to financial statements.
50
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Active Bond II Emerging Markets Equity International Equity Index
--------------------------------- ----------------------------- -----------------------------
Unaudited Period from Unaudited Unaudited
Six-Month Period June 30, 2000(*) Six-Month Period Year Ended Six-Month Period Year Ended
Ended June 30, to December 31, Ended June 30, December 31, Ended June 30, December 31,
2001 2000 2001 2000 2001 2000
---------------- ---------------- ---------------- ------------ ---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment
income (loss)... $ 172 $ 159 $ 195 $ (120) $ 2,038 $ 2,860
Net realized
gain (loss)..... 100 27 (9,207) (614) (789) 6,657
Change in net
unrealized
appreciation
(depreciation).. (92) 166 7,730 (20,977) (23,434) (51,585)
------ ------ ------- -------- -------- --------
Net increase
(decrease) in
net assets
resulting from
operations...... 180 352 (1,282) (21,711) (22,185) (42,068)
Distributions to shareholders from:
Net investment
income.......... (174) (156) -- -- (2,023) (2,257)
Realized gains.. -- (27) -- (2,658) -- (7,138)
In excess of
realized gain... -- -- -- -- -- --
Capital paid-in. -- -- -- (47) -- (916)
------ ------ ------- -------- -------- --------
Decrease in net
assets resulting
from
distributions... (174) (183) -- (2,705) (2,023) (10,311)
From fund share transactions:
Proceeds from
shares sold..... 1,228 5,120 16,551 59,279 13,804 61,181
Distributions
reinvested...... 174 183 -- 2,705 2,023 10,313
Payment for
shares redeemed. (253) (44) (18,673) (39,154) (31,537) (68,120)
------ ------ ------- -------- -------- --------
Increase
(decrease) in
net assets from
fund share
transactions.... 1,149 5,259 (2,122) 22,830 (15,710) 3,374
------ ------ ------- -------- -------- --------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 1,155 5,428 (3,404) (1,586) (39,918) (49,005)
NET ASSETS
Beginning of
Period.......... 5,428 -- 31,010 32,596 195,012 244,017
------ ------ ------- -------- -------- --------
End of Period... $6,583 $5,428 $27,606 $ 31,010 $155,094 $195,012
====== ====== ======= ======== ======== ========
Analysis of fund share transactions:
Sold............ 117 512 2,451 5,177 953 3,450
Reinvested...... 17 18 -- 408 145 651
Redeemed........ (24) (5) (2,828) (3,614) (2,209) (3,854)
------ ------ ------- -------- -------- --------
Net increase
(decrease) in
fund shares
outstanding...... 110 525 (377) 1,971 (1,111) 247
====== ====== ======= ======== ======== ========
International Equity
-----------------------------
Unaudited
Six-Month Period Year Ended
Ended June 30, December 31,
2001 2000
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment
income (loss)... $ 93 $ 74
Net realized
gain (loss)..... (627) 454
Change in net
unrealized
appreciation
(depreciation).. (2,038) (2,697)
---------------- ------------
Net increase
(decrease) in
net assets
resulting from
operations...... (2,572) (2,169)
Distributions to shareholders from:
Net investment
income.......... (95) (47)
Realized gains.. -- (471)
In excess of
realized gain... -- (58)
Capital paid-in. -- --
---------------- ------------
Decrease in net
assets resulting
from
distributions... (95) (576)
From fund share transactions:
Proceeds from
shares sold..... 14,599 13,293
Distributions
reinvested...... 95 576
Payment for
shares redeemed. (6,657) (7,838)
---------------- ------------
Increase
(decrease) in
net assets from
fund share
transactions.... 8,037 6,031
---------------- ------------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 5,370 3,286
NET ASSETS
Beginning of
Period.......... 15,716 12,430
---------------- ------------
End of Period... $21,086 $15,716
================ ============
Analysis of fund share transactions:
Sold............ 1,635 1,223
Reinvested...... 11 59
Redeemed........ (722) (727)
---------------- ------------
Net increase
(decrease) in
fund shares
outstanding...... 924 555
================ ============
(*) Commencement of operations
See notes to financial statements.
51
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Small Cap Growth Health Sciences Global Balanced Mid Cap Growth
----------------------------- ---------------- ----------------------------- -----------------------------
Unaudited Unaudited Unaudited Unaudited
Six-Month Period Year Ended Period from Six-Month Period Year Ended Six-Month Period Year Ended
Ended June 30, December 31, May 1, 2001(*) Ended June 30, December 31, Ended June 30, December 31,
2001 2000 to June 30, 2001 2001 2000 2001 2000
---------------- ------------ ---------------- ---------------- ------------ ---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment
income (loss)... $ (446) $ (1,308) $ 5 $ 207 $ 688 $ (538) $ (2,311)
Net realized
gain (loss)..... (29,735) (9,498) 6 (56) (789) (117,605) (7,215)
Change in net
unrealized
appreciation
(depreciation).. 10,825 (67,925) 363 (1,344) (2,738) 17,848 (229,686)
-------- --------- ------- ------- ------- --------- ---------
Net increase
(decrease) in
net assets
resulting from
operations...... (19,356) (78,731) 374 (1,193) (2,839) (100,295) (239,212)
Distributions to
shareholders
from:
Net investment
income.......... -- -- (16) (211) (703) -- --
Realized gains.. -- (1,933) -- -- (41) -- (8,563)
In excess of
realized gain... -- -- -- -- (283) -- (33,799)
Capital paid-in. -- (20,976) -- -- (355) -- (22,185)
-------- --------- ------- ------- ------- --------- ---------
Decrease in net
assets resulting
from
distributions... -- (22,909) (16) (211) (1,382) -- (64,547)
From fund share
transactions:
Proceeds from
shares sold..... 44,516 239,410 21,816 5,213 8,360 82,935 311,599
Distributions
reinvested...... -- 22,968 16 211 1,382 -- 64,547
Payment for
shares redeemed. (57,649) (105,766) (1) (4,441) (8,571) (74,081) (131,336)
-------- --------- ------- ------- ------- --------- ---------
Increase
(decrease) in
net assets from
fund share
transactions.... (13,133) 156,612 21,831 983 1,171 8,854 244,810
-------- --------- ------- ------- ------- --------- ---------
NET INCREASE
(DECREASE) IN NET
ASSETS........... (32,489) 54,972 22,189 (421) (3,050) (91,441) (58,949)
NET ASSETS
Beginning of Pe-
riod............ 234,542 179,570 -- 28,527 31,577 393,988 452,937
-------- --------- ------- ------- ------- --------- ---------
End of Period... $202,053 $ 234,542 $22,189 $28,106 $28,527 $ 302,547 $ 393,988
======== ========= ======= ======= ======= ========= =========
Analysis of fund
share
transactions:
Sold............ 3,675 11,984 2,175 578 848 6,626 10,835
Reinvested...... -- 1,788 2 23 145 -- 4,228
Redeemed........ (4,793) (5,757) -- (489) (867) (6,026) (5,305)
-------- --------- ------- ------- ------- --------- ---------
Net increase
(decrease) in
fund shares
outstanding...... (1,118) 8,015 2,177 112 126 600 9,758
======== ========= ======= ======= ======= ========= =========
(*) Commencement of operations
See notes to financial statements.
52
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Mid Cap Blend Large Cap Value Large Cap Value CORE
----------------------------- ----------------------------- -----------------------------
Unaudited Unaudited Unaudited
Six-Month Period Year Ended Six-Month Period Year Ended Six-Month Period Year Ended
Ended June 30, December 31, Ended June 30, December 31, Ended June 30, December 31,
2001 2000 2001 2000 2001 2000
---------------- ------------ ---------------- ------------ ---------------- ------------
INCREASE (DE-
CREASE) IN NET
ASSETS
From operations
Net investment
income.......... $ 51 $ 49 $ 1,732 $ 3,416 $ 118 $ 168
Net realized
gain (loss)..... (534) 324 1,974 7,226 (63) 79
Change in net
unrealized ap-
preciation (de-
preciation)..... 345 1,064 1,341 11,967 (98) 619
------- ------- -------- -------- ------- -------
Net increase
(decrease) in
net assets
resulting from
operations...... (138) 1,437 5,047 22,609 (43) 866
Distributions to
shareholders
from:
Net investment
income.......... (38) (51) (1,724) (3,459) (118) (169)
In excess of net
investment
income.......... -- -- -- (6) -- --
Realized gains.. -- (391) -- (7,200) -- (93)
In excess of
realized gain... -- (455) -- (131) -- (59)
Capital paid-in. -- -- -- (90) -- (14)
------- ------- -------- -------- ------- -------
Decrease in net
assets resulting
from
distributions... (38) (897) (1,724) (10,886) (118) (335)
From fund share
transactions:
Proceeds from
shares sold..... 10,944 17,016 53,657 73,820 26,533 11,275
Distributions
reinvested...... 38 897 1,724 10,886 118 335
Payment for
shares redeemed. (9,466) (3,004) (38,513) (47,743) (667) (348)
------- ------- -------- -------- ------- -------
Increase in net
assets from fund
share transac-
tions........... 1,516 14,909 16,868 36,963 25,984 11,262
------- ------- -------- -------- ------- -------
NET INCREASE IN
NET ASSETS....... 1,340 15,449 20,191 48,686 25,823 11,793
NET ASSETS
Beginning of
Period.......... 21,259 5,810 204,535 155,849 18,164 6,371
------- ------- -------- -------- ------- -------
End of Period... $22,599 $21,259 $224,726 $204,535 $43,987 $18,164
======= ======= ======== ======== ======= =======
Analysis of fund
share
transactions:
Sold............ 924 1,377 3,722 5,462 2,580 1,118
Reinvested...... 3 75 119 780 12 33
Redeemed........ (804) (242) (2,673) (3,569) (67) (35)
------- ------- -------- -------- ------- -------
Net increase in
fund shares
outstanding...... 123 1,210 1,168 2,673 2,525 1,116
======= ======= ======== ======== ======= =======
Large Cap Value CORE II
---------------------------------
Unaudited Period from
Six-Month Period June 30, 2000(*)
Ended June 30, to December 31,
2001 2000
---------------- ----------------
INCREASE (DE-
CREASE) IN NET
ASSETS
From operations
Net investment
income.......... $ 25 $ 34
Net realized
gain (loss)..... 210 18
Change in net
unrealized ap-
preciation (de-
preciation)..... (236) 373
---------------- ----------------
Net increase
(decrease) in
net assets
resulting from
operations...... (1) 425
Distributions to
shareholders
from:
Net investment
income.......... (25) (34)
In excess of net
investment
income.......... -- --
Realized gains.. -- (18)
In excess of
realized gain... -- --
Capital paid-in. -- --
---------------- ----------------
Decrease in net
assets resulting
from
distributions... (25) (52)
From fund share
transactions:
Proceeds from
shares sold..... 931 6,694
Distributions
reinvested...... 25 51
Payment for
shares redeemed. (363) (1,089)
---------------- ----------------
Increase in net
assets from fund
share transac-
tions........... 593 5,656
---------------- ----------------
NET INCREASE IN
NET ASSETS....... 567 6,029
NET ASSETS
Beginning of
Period.......... 6,029
---------------- ----------------
End of Period... $6,596 $ 6,029
================ ================
Analysis of fund
share
transactions:
Sold............ 90 662
Reinvested...... 2 4
Redeemed........ (34) (103)
---------------- ----------------
Net increase in
fund shares
outstanding...... 58 563
================ ================
(*) Commencement of operations
See notes to financial statements.
53
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Large/Mid Cap Value Money Market Large/Mid Cap Value II
----------------------------- ----------------------------- -----------------------------
Unaudited Unaudited Unaudited
Six-Month Period Year Ended Six-Month Period Year Ended Six-Month Period Year Ended
Ended June 30, December 31, Ended June 30, December 31, Ended June 30, December 31,
2001 2000 2001 2000 2001 2000
---------------- ------------ ---------------- ------------ ---------------- ------------
INCREASE (DE-
CREASE) IN NET
ASSETS
From operations
Net investment
income (loss) .. $ 98 $ 90 $ 12,030 $ 24,827 $ 619 $ 433
Net realized
gain............ 695 103 -- 16,784 12,793
Change in net
unrealized
appreciation
(depreciation).. (1,228) 1,310 -- (19,884) 13,928
------- ------- --------- --------- -------- --------
Net increase
(decrease) in
net assets
resulting from
operations...... (435) 1,503 12,030 24,827 (2,481) 27,154
Distributions to
shareholders
from:
Net investment
income.......... (99) (91) (12,030) (25,112) (622) (434)
Realized gains.. -- (106) -- -- -- (3,233)
In excess of
realized gain... -- (71) -- -- -- (9,663)
------- ------- --------- --------- -------- --------
Decrease in net
assets resulting
from
distributions... (99) (268) (12,030) (25,112) (622) (13,330)
Capital
contributions.... -- -- -- 284 -- --
From fund share
transactions:
Proceeds from
shares sold..... 28,374 8,712 337,399 582,795 26,003 46,034
Distributions
reinvested...... 99 268 12,030 25,121 622 13,330
Payment for
shares redeemed. (7,098) (588) (386,913) (562,297) (31,653) (36,105)
------- ------- --------- --------- -------- --------
Increase
(decrease) in
net assets from
fund
share
transactions.... 21,375 8,392 (37,484) 45,619 (5,028) 23,259
------- ------- --------- --------- -------- --------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 20,841 9,627 (37,484) 45,618 (8,131) 37,083
NET ASSETS
Beginning of
Period.......... 15,728 6,101 496,853 451,235 129,233 92,150
------- ------- --------- --------- -------- --------
End of Period... $36,569 $15,728 $ 459,369 $ 496,853 $121,102 $129,233
======= ======= ========= ========= ======== ========
Analysis of fund
share transac-
tions:
Sold............ 2,505 806 337,403 58,279 1,831 3,243
Reinvested...... 9 24 12,026 2,512 43 935
Redeemed........ (628) (56) (386,913) (56,230) (2,213) (2,571)
------- ------- --------- --------- -------- --------
Net increase
(decrease) in
fund shares
outstanding...... 1,886 774 (37,484) 4,561 (339) 1,607
======= ======= ========= ========= ======== ========
Small/Mid Cap Growth
-----------------------------
Unaudited
Six-Month Period Year Ended
Ended June 30, December 31,
2001 2000
---------------- ------------
INCREASE (DE-
CREASE) IN NET
ASSETS
From operations
Net investment
income (loss) .. $ (275) $ (366)
Net realized
gain............ 233 18,384
Change in net
unrealized
appreciation
(depreciation).. 2,780 (2,257)
---------------- ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 2,738 15,761
Distributions to
shareholders
from:
Net investment
income.......... -- --
Realized gains.. -- (17,683)
In excess of
realized gain... -- (1,947)
---------------- ------------
Decrease in net
assets resulting
from
distributions... -- (19,630)
Capital
contributions.... -- --
From fund share
transactions:
Proceeds from
shares sold..... 25,249 35,984
Distributions
reinvested...... -- 19,630
Payment for
shares redeemed. (36,683) (43,666)
---------------- ------------
Increase
(decrease) in
net assets from
fund
share
transactions.... (11,434) 11,948
---------------- ------------
NET INCREASE
(DECREASE) IN NET
ASSETS........... (8,696) 8,079
NET ASSETS
Beginning of
Period.......... 190,010 181,931
---------------- ------------
End of Period... $181,314 $190,010
================ ============
Analysis of fund
share transac-
tions:
Sold............ 1,881 2,392
Reinvested...... -- 1,474
Redeemed........ (2,744) (2,963)
---------------- ------------
Net increase
(decrease) in
fund shares
outstanding...... (863) 903
================ ============
See notes to financial statements.
54
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Bond Index Large Cap Aggressive Growth Small/Mid Cap CORE
----------------------------- ----------------------------- -----------------------------
Unaudited Unaudited Unaudited
Six-Month Period Year Ended Six-Month Period Year Ended Six-Month Period Year Ended
Ended June 30, December 31, Ended June 30, December 31, Ended June 30, December 31,
2001 2000 2001 2000 2001 2000
---------------- ------------ ---------------- ------------ ---------------- ------------
INCREASE
(DECREASE) IN NET
ASSETS
From operations
Net investment
income (loss)... $ 2,195 $ 3,295 $ (11) $ (88) $ 67 $ 91
Net realized
gain (loss)..... 811 (532) (5,040) (648) (281) 669
Change in net
unrealized
appreciation
(depreciation).. (208) 2,964 1,387 (5,205) 672 (536)
------- ------- ------- ------- ------- -------
Net increase
(decrease) in
net assets
resulting from
operations...... 2,798 5,727 (3,664) (5,941) 458 224
Distributions to
shareholders
from:
Net investment
income.......... (2,234) (3,317) -- -- (68) (90)
Realized gains.. -- -- -- (28) -- (671)
In excess of
realized gain... -- -- -- (168) -- (102)
Capital paid-in. -- -- -- (284) -- (53)
------- ------- ------- ------- ------- -------
Decrease in net
assets resulting
from
distributions... (2,234) (3,317) -- (480) (68) (916)
From fund share
transactions:
Proceeds from
shares sold..... 64,374 45,465 21,278 24,586 11,646 22,514
Distributions
reinvested...... 2,234 1,488 -- 481 68 669
Payment for
shares redeemed. (50,779) (23,031) (8,229) (7,476) (6,051) (9,103)
------- ------- ------- ------- ------- -------
Increase in net
assets from fund
share
transactions.... 15,829 23,922 13,049 17,591 5,663 14,080
------- ------- ------- ------- ------- -------
NET INCREASE IN
NET ASSETS....... 16,393 26,332 9,385 11,170 6,053 13,388
NET ASSETS
Beginning of
Period.......... 64,768 38,436 26,244 15,074 21,636 8,248
------- ------- ------- ------- ------- -------
End of Period... $81,161 $64,768 $35,629 $26,244 $27,689 $21,636
======= ======= ======= ======= ======= =======
Analysis of fund
share
transactions:
Sold............ 6,620 4,808 2,489 2,136 1,209 2,174
Reinvested...... 228 158 -- 51 7 70
Redeemed........ (5,170) (2,443) (955) (692) (633) (880)
------- ------- ------- ------- ------- -------
Net increase in
fund shares
outstanding...... 1,678 2,523 1,534 1,495 583 1,364
======= ======= ======= ======= ======= =======
Small Cap Value
-----------------------------
Unaudited
Six-Month Period Year Ended
Ended June 30, December 31,
2001 2000
---------------- ------------
INCREASE
(DECREASE) IN NET
ASSETS
From operations
Net investment
income (loss)... $ 128 $ 18
Net realized
gain (loss)..... 587 3,781
Change in net
unrealized
appreciation
(depreciation).. 5,794 (223)
---------------- ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 6,509 3,576
Distributions to
shareholders
from:
Net investment
income.......... (127) (17)
Realized gains.. -- (3,779)
In excess of
realized gain... -- --
Capital paid-in. -- --
---------------- ------------
Decrease in net
assets resulting
from
distributions... (127) (3,796)
From fund share
transactions:
Proceeds from
shares sold..... 38,479 21,624
Distributions
reinvested...... 127 3,796
Payment for
shares redeemed. (15,851) (1,334)
---------------- ------------
Increase in net
assets from fund
share
transactions.... 22,755 24,086
---------------- ------------
NET INCREASE IN
NET ASSETS....... 29,137 23,866
NET ASSETS
Beginning of
Period.......... 29,436 5,570
---------------- ------------
End of Period... $58,573 $29,436
================ ============
Analysis of fund
share
transactions:
Sold............ 2,965 1,733
Reinvested...... 10 339
Redeemed........ (1,245) (107)
---------------- ------------
Net increase in
fund shares
outstanding...... 1,730 1,965
================ ============
See notes to financial statements.
55
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Real Estate Equity Growth & Income Managed
----------------------------- ----------------------------- -----------------------------
Unaudited Unaudited Unaudited
Six-Month Period Year Ended Six-Month Period Year Ended Six-Month Period Year Ended
Ended June 30, December 31, Ended June 30, December 31, Ended June 30, December 31,
2001 2000 2001 2000 2001 2000
---------------- ------------ ---------------- ------------ ---------------- ------------
INCREASE
(DECREASE) IN NET
ASSETS
From operations
Net investment
income.......... $ 2,154 $ 8,456 $ 5,214 $ 32,578 $ 30,654 $ 91,310
Net realized
gain (loss)..... 1,977 4,057 (358,645) 445,349 (93,386) 237,169
Change in net
unrealized
appreciation
(depreciation).. 3,352 25,634 54,423 (990,353) 16,960 (328,984)
-------- -------- ---------- ---------- ---------- ----------
Net increase
(decrease) in
net assets
resulting from
operations...... 7,483 38,147 (299,008) (512,426) (45,772) (505)
Distributions to
shareholders
from:
Net investment
income.......... (2,314) (8,456) (4,850) (33,412) (31,123) (93,117)
In excess of net
investment
income.......... -- (404) -- -- -- --
Realized gains.. -- (649) -- (519,555) -- (235,437)
In excess of
realized gain... -- (3,328) -- (25,745) -- --
Capital paid-in. -- (1,440) -- (44,762) -- --
-------- -------- ---------- ---------- ---------- ----------
Decrease in net
assets resulting
from
distributions... (2,314) (14,277) (4,850) (623,474) (31,123) (328,554)
From fund share
transactions:
Proceeds from
shares sold..... 34,355 51,873 163,739 110,896 369,833 66,759
Distributions
reinvested...... 2,314 14,277 4,850 623,473 31,123 328,531
Payment for
shares redeemed. (40,020) (57,423) (389,729) (492,322) (589,991) (501,356)
-------- -------- ---------- ---------- ---------- ----------
Increase (de-
crease) in net
assets from fund
share transac-
tions........... (3,351) 8,727 (221,140) 242,047 (189,035) (106,066)
-------- -------- ---------- ---------- ---------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 1,818 32,597 (524,998) (893,853) (265,930) (435,125)
NET ASSETS
Beginning of
Period.......... 158,811 126,214 3,324,988 4,218,841 2,995,794 3,430,919
-------- -------- ---------- ---------- ---------- ----------
End of Period... $160,629 $158,811 $2,799,990 $3,324,988 $2,729,864 $2,995,794
======== ======== ========== ========== ========== ==========
Analysis of fund
share
transactions:
Sold............ 2,435 4,031 12,542 5,816 27,678 4,373
Reinvested...... 168 1,085 364 43,333 2,297 23,203
Redeemed........ (2,962) (4,499) (29,744) (25,508) (43,513) (32,979)
-------- -------- ---------- ---------- ---------- ----------
Net increase
(decrease) in
fund shares
outstanding...... (359) 617 (16,838) 23,641 (13,538) (5,403)
======== ======== ========== ========== ========== ==========
Short-Term Bond
-----------------------------
Unaudited
Six-Month Period Year Ended
Ended June 30, December 31,
2001 2000
---------------- ------------
INCREASE
(DECREASE) IN NET
ASSETS
From operations
Net investment
income.......... $ 2,938 $ 4,615
Net realized
gain (loss)..... 368 (582)
Change in net
unrealized
appreciation
(depreciation).. 1,013 1,702
---------------- ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 4,319 5,735
Distributions to
shareholders
from:
Net investment
income.......... (2,981) (4,591)
In excess of net
investment
income.......... -- --
Realized gains.. -- --
In excess of
realized gain... -- --
Capital paid-in. -- --
---------------- ------------
Decrease in net
assets resulting
from
distributions... (2,981) (4,591)
From fund share
transactions:
Proceeds from
shares sold..... 60,735 29,529
Distributions
reinvested...... 2,981 4,591
Payment for
shares redeemed. (29,979) (23,999)
---------------- ------------
Increase (de-
crease) in net
assets from fund
share transac-
tions........... 33,737 10,121
---------------- ------------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 35,075 11,265
NET ASSETS
Beginning of
Period.......... 80,109 68,844
---------------- ------------
End of Period... $115,184 $80,109
================ ============
Analysis of fund
share
transactions:
Sold............ 6,108 3,035
Reinvested...... 299 472
Redeemed........ (2,998) (2,466)
---------------- ------------
Net increase
(decrease) in
fund shares
outstanding...... 3,409 1,041
================ ============
See notes to financial statements.
56
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Small Cap Equity International Opportunities Equity Index
----------------------------- ----------------------------- -----------------------------
Unaudited Unaudited Unaudited
Six-Month Period Year Ended Six-Month Period Year Ended Six-Month Period Year Ended
Ended June 30, December 31, Ended June 30, December 31, Ended June 30, December 31,
2001 2000 2001 2000 2001 2000
---------------- ------------ ---------------- ------------ ---------------- ------------
INCREASE (DE-
CREASE) IN NET
ASSETS
From operations
Net investment
income (loss)... $ (16) $ 920 $ 625 $ 465 $ 2,946 $ 5,723
Net realized
gain (loss)..... (4,381) 4,551 (3,043) 4,855 12,570 18,724
Change in net
unrealized
appreciation
(depreciation).. 7,093 (12,268) (15,768) (22,688) (51,479) (77,249)
-------- -------- -------- -------- --------- --------
Net increase
(decrease) in
net assets
resulting from
operations...... 2,696 (6,797) (18,186) (17,368) (35,963) (52,802)
Distributions to
shareholders
from:
Net investment
income.......... -- (1,004) (582) (423) (2,965) (5,292)
Realized gains.. -- (990) -- (4,722) -- (20,438)
In excess of
realized gain... -- (1,431) -- (390) -- (231)
Capital paid-in. -- (2,130) -- (749) -- (555)
-------- -------- -------- -------- --------- --------
Decrease in net
assets resulting
from
distributions... -- (5,555) (582) (6,284) (2,965) (26,516)
From fund share
transactions:
Proceeds from
shares sold..... 23,006 33,823 41,686 81,609 171,574 226,311
Shares issued in
reorganization.. -- -- -- 22,528 -- --
Distributions
reinvested...... -- 5,555 582 6,285 2,965 26,516
Payment for
shares redeemed. (19,502) (25,895) (56,201) (46,530) (122,123) (99,146)
-------- -------- -------- -------- --------- --------
Increase
(decrease) in
net assets from
fund share
transactions.... 3,504 13,483 (13,933) 63,892 52,416 153,681
-------- -------- -------- -------- --------- --------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 6,200 1,131 (32,701) 40,240 13,488 74,363
NET ASSETS
Beginning of
Period.......... 70,031 68,900 120,034 79,794 525,659 451,296
-------- -------- -------- -------- --------- --------
End of Period... $ 76,231 $ 70,031 $ 87,333 $120,034 $ 539,147 $525,659
======== ======== ======== ======== ========= ========
Analysis of fund
share
transactions:
Sold............ 2,500 3,114 3,880 5,776 10,292 11,361
Issued in
reorganization.. -- -- -- 1,947 -- --
Reinvested...... -- 614 55 536 178 1,473
Redeemed........ (2,145) (2,378) (5,240) (3,390) (7,311) (5,101)
-------- -------- -------- -------- --------- --------
Net increase
(decrease) in
fund shares
outstanding...... 355 1,350 (1,305) 4,869 3,159 7,733
======== ======== ======== ======== ========= ========
High Yield Bond
-----------------------------
Unaudited
Six-Month Period Year Ended
Ended June 30, December 31,
2001 2000
---------------- ------------
INCREASE (DE-
CREASE) IN NET
ASSETS
From operations
Net investment
income (loss)... $ 1,422 $ 2,175
Net realized
gain (loss)..... (838) (518)
Change in net
unrealized
appreciation
(depreciation).. 442 (4,604)
---------------- ------------
Net increase
(decrease) in
net assets
resulting from
operations...... 1,026 (2,947)
Distributions to
shareholders
from:
Net investment
income.......... (1,445) (2,186)
Realized gains.. -- --
In excess of
realized gain... -- --
Capital paid-in. -- --
---------------- ------------
Decrease in net
assets resulting
from
distributions... (1,445) (2,186)
From fund share
transactions:
Proceeds from
shares sold..... 51,560 22,157
Shares issued in
reorganization.. -- --
Distributions
reinvested...... 1,445 2,227
Payment for
shares redeemed. (40,101) (13,194)
---------------- ------------
Increase
(decrease) in
net assets from
fund share
transactions.... 12,904 11,190
---------------- ------------
NET INCREASE
(DECREASE) IN NET
ASSETS........... 12,485 6,057
NET ASSETS
Beginning of
Period.......... 25,978 19,921
---------------- ------------
End of Period... $ 38,463 $ 25,978
================ ============
Analysis of fund
share
transactions:
Sold............ 6,650 2,663
Issued in
reorganization.. -- --
Reinvested...... 188 273
Redeemed........ (5,167) (1,610)
---------------- ------------
Net increase
(decrease) in
fund shares
outstanding...... 1,671 1,326
================ ============
See notes to financial statements.
57
STATEMENT OF CHANGES IN NET ASSETS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
(000's Omitted)
Global Bond
-----------------------------
Unaudited
Six-Month Period Year Ended
Ended June 30, December 31,
2001 2000
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income........................... $ 1,220 $ 3,081
Net realized loss............................... (490) (126)
Change in net unrealized appreciation
(depreciation).................................. (3,642) 4,415
-------- --------
Net increase (decrease) in net assets resulting
from operations................................. (2,912) 7,370
Distributions to shareholders from:
Net investment income........................... -- (4,040)
-------- --------
Decrease in net assets resulting from
distributions................................... -- (4,040)
From fund share transactions:
Proceeds from shares sold....................... 9,574 11,709
Distributions reinvested........................ -- 4,046
Payment for shares redeemed..................... (17,026) (21,603)
-------- --------
Decrease in net assets from fund share
transactions.................................... (7,452) (5,848)
-------- --------
NET DECREASE IN NET ASSETS....................... (10,364) (2,518)
NET ASSETS
Beginning of Period............................. 68,473 70,991
-------- --------
End of Period................................... $ 58,109 $ 68,473
======== ========
Analysis of fund share transactions:
Sold............................................ 960 1,168
Reinvested...................................... -- 401
Redeemed........................................ (1,687) (2,176)
-------- --------
Net decrease in fund shares outstanding.......... (727) (607)
======== ========
See notes to financial statements.
58
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding throughout
the period end indicated:
Income from Investment Operations Less Distributions
------------------------------------ ---------------------------------------------------
Net Net Distribution
Assets Investment Net Realized Distribution Distribution in Excess of
Value at Income and Unrealized Total From From Net From Net Net Distribution
Beginning Gain Gain (Loss) on Investment Investment Gains on Investment From Capital
of Period (Loss) Investments(a) Operations Income Investments Income/Gains Paid-in
--------- ---------- -------------- ---------- ------------ ------------ ------------ ------------
Large Cap Growth
Unaudited Period
Ended June 30,
2001............ $18.89 -- $(2.48) $(2.48) -- -- -- --
Year Ended De-
cember 31,
2000............ 27.33 $ 0.03 (4.89) (4.86) $(0.04) $(2.69) $(0.78) $(0.07)
1999............ 26.19 0.09 6.03 6.12 (0.09) (4.89) -- --
1998............ 20.82 0.14 8.05 8.19 (0.14) (2.68) -- --
1997............ 17.49 0.17 5.21 5.38 (0.17) (1.88) -- --
1996............ 17.37 0.25 2.89 3.14 (0.25) (2.77) -- --
- ---------------------------------------------------------------------------------------------------------------------
Fundamental
Growth
Unaudited Period
Ended June 30,
2001............ 12.52 (0.02) (2.64) (2.66) -- -- -- --
Year Ended
December 31,
2000(f)......... 14.42 (0.02) (0.44) (0.46) -- (0.76) (0.65) (0.03)
Period from
August 31, to
December 31,
1999(h)......... 10.00 (0.02) 5.34 5.32 -- (0.90) -- --
- ---------------------------------------------------------------------------------------------------------------------
Aggressive Bal-
anced
Unaudited Period
Ended June 30,
2001............ 10.24 0.08 (0.48) (0.40) (0.08) -- -- --
Year Ended
December 31,
2000............ 10.62 0.19 (0.35) (0.16) (0.19) (0.02) (0.01) --
Period from
August 31, to
December 31,
1999(h)......... 10.00 0.06 0.64 0.70 (0.05) (0.03) -- --
- ---------------------------------------------------------------------------------------------------------------------
Active Bond
Unaudited Period
Ended June 30,
2001............ 9.44 0.29 0.06 0.35 (0.30) -- -- --
Year ended
December 31,
2000............ 9.12 0.64 0.28 0.92 (0.60) -- -- --
1999............ 9.92 0.67 (0.76) (0.09) (0.71) -- -- --
1998............ 9.95 0.69 0.11 0.80 (0.69) (0.14) -- --
1997............ 9.77 0.71 0.24 0.95 (0.71) (0.06) -- --
1996............ 10.13 0.69 (0.31) 0.38 (0.69) (0.05) -- --
- ---------------------------------------------------------------------------------------------------------------------
Active Bond II
Unaudited Period
Ended June 30,
2001(l)......... 10.33 0.29 0.05 0.34 (0.30) -- -- --
Period from June
30, to December
31, 2000(h)..... 10.00 0.32 0.37 0.69 (0.31) (0.05) -- --
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-------------------------------------------------------
Operating Net
Net Assets Expenses Investment
Net Assets End of to Income
Value Total Period Average (Loss) to Portfolio
Total at End of Investment (000s Net Average Turnover
Distributions Period Return(b) Omitted) Assets Net Assets Rate
------------- ---------- ------------- ---------- -------------- ---------------- ------------
Large Cap Growth
Unaudited Period
Ended June 30,
2001............ -- $16.41 (13.11%)(c) $ 877,882 0.47%(d)(e) 0.03%(d) 46.84%(c)
Year Ended De-
cember 31,
2000............ $(3.58) 18.89 (17.89%) 1,146,787 0.46% 0.10% 89.30%
1999............ (4.98) 27.33 24.07% 1,382,473 0.39% 0.33% 37.42%
1998............ (2.82) 26.19 39.51% 1,126,764 0.41% 0.59% 56.41%
1997............ (2.05) 20.82 30.89% 754,398 0.44% 0.86% 83.82%
1996............ (3.02) 17.49 18.27% 524,145 0.44% 1.35% 135.98%
- ---------------------------------------------------------------------------------------------------------------------
Fundamental
Growth
Unaudited Period
Ended June 30,
2001............ -- 9.86 (21.20%)(c) 40,342 0.99%(d)(g) (0.47%)(d) 51.34%(c)
Year Ended
December 31,
2000(f)......... (1.44) 12.52 (3.03%) 46,114 0.96%(g) (0.38%) 250.46%
Period from
August 31, to
December 31,
1999(h)......... (0.90) 14.42 54.57%(c) 9,175 0.95%(d)(g) (0.55%)(d) 61.66%(c)
- ---------------------------------------------------------------------------------------------------------------------
Aggressive Bal-
anced
Unaudited Period
Ended June 30,
2001............ (0.08) 9.76 (3.89%)(c) 20,378 0.77%(d)(i) 1.54%(d)(24) 86.54%(c)
Year Ended
December 31,
2000............ (0.22) 10.24 (1.53%) 20,941 0.78%(i) 1.87% 164.89%
Period from
August 31, to
December 31,
1999(h)......... (0.08) 10.62 7.09%(c) 11,883 0.78%(d)(i) 1.68%(d) 70.28%(c)
- ---------------------------------------------------------------------------------------------------------------------
Active Bond
Unaudited Period
Ended June 30,
2001............ (0.30) 9.49 3.63%(c) 816,297 0.71%(d)(j) 6.13%(d)(25) 130.85%(c)
Year ended
December 31,
2000............ (0.60) 9.44 10.45% 842,299 0.41%(k) 6.98% 224.24%
1999............ (0.71) 9.12 (0.94%) 850,286 0.28% 6.97% 182.90%
1998............ (0.82) 9.92 8.23% 907,121 0.29% 6.84% 228.74%
1997............ (0.77) 9.95 10.11% 803,770 0.31% 7.18% 138.29%
1996............ (0.74) 9.77 4.10% 726,111 0.29% 7.07% 119.12%
- ---------------------------------------------------------------------------------------------------------------------
Active Bond II
Unaudited Period
Ended June 30,
2001(l)......... (0.30) 10.37 3.24%(c) 6,583 0.80%(d)(m) 5.70%(d)(26) 24.50%(c)
Period from June
30, to December
31, 2000(h)..... (0.36) 10.33 7.00%(c) 5,428 0.75%(d) 16.09%(d) 131.71%(c)
- ---------------------------------------------------------------------------------------------------------------------
59
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding throughout
the period end indicated:
Income from Investment Operations Less Distributions
------------------------------------ ---------------------------------------------------
Net Net Distribution
Assets Investment Net Realized Distribution Distribution in Excess of
Value at Income and Unrealized Total From From Net From Net Net Distribution
Beginning Gain Gain (Loss) on Investment Investment Gains on Investment From Capital
of Period (Loss) Investments(a) Operations Income Investments Income/Gains Paid-in
--------- ---------- -------------- ---------- ------------ ------------ ------------ ------------
Emerging Markets
Equity
Unaudited Period
Ended June 30,
2001............ $ 6.70 $ 0.04 $(0.25) $(0.21) -- -- -- --
Year Ended De-
cember 31,
2000............ 12.26 (0.02) (4.91) (4.93) -- $(0.62) -- $(0.01)
1999(o)......... 7.09 0.03 5.35 5.38 $(0.01) (0.10) $(0.42) --
Period from May
1, to December
31, 1988(h)..... 10.00 0.03 (2.91) (2.88) (0.02) -- -- (0.01)
- --------------------------------------------------------------------------------------------------------------------------
International
Equity Index
Unaudited Period
Ended
June 30, 2001... 15.39 0.17 (1.97) (1.80) (0.17) -- -- --
Year Ended
December 31,
2000............ 19.64 0.23 (3.64) (3.41) (0.18) (0.59) -- (0.07)
1999............ 15.56 0.21 4.51 4.72 (0.21) (0.38) (0.05) --
1998............ 15.20 0.23 2.91 3.14 (0.23) (2.55) -- --
1997............ 16.83 0.13 (0.97) (0.84) (0.13) (0.66) -- --
1996............ 15.61 0.21 1.22 1.43 (0.21) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
International
Equity
Unaudited Period
Ended June 30,
2001............ 9.85 0.05 (1.48) (1.43) (0.05) -- -- --
Year ended
December 31,
2000............ 11.95 0.06 (1.78) (1.72) (0.04) (0.30) (0.04) --
Period from
August 31, to
December 31,
1999(h)......... 10.00 0.01 2.12 2.13 (0.01) (0.17) -- --
- --------------------------------------------------------------------------------------------------------------------------
Small Cap Growth
Unaudited Period
Ended June 30,
2001............ 13.47 (0.04) (1.03) (1.07) -- -- -- --
Year ended
December 31,
2000............ 19.12 (0.02) (4.16) (4.18) -- (0.12) -- (1.35)
1999............ 12.99 (0.21) 9.06 8.85 -- (2.72) -- --
1998............ 11.34 (0.05) 1.70 1.65 -- -- -- --
1997............ 9.93 (0.02) 1.44 1.42 -- -- -- (0.01)
Period from May
1, to December
31, 1996(h)..... 10.00 0.01 (0.06) (0.05) (0.02) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------------
Net Operating Net
Assets Expenses Investment
Net Assets End of to Income
Value Total Period Average (Loss) to Portfolio
Total Capital at End of Investment (000s Net Average Turnover
Distributions Contributions Period Return(b) Omitted) Assets Net Assets Rate
------------- ------------- ---------- ------------- -------- -------------- ------------- ------------
Emerging Markets
Equity
Unaudited Period
Ended June 30,
2001............ -- -- $ 6.49 (3.08)%(c) $27,606 1.33%(d)(n) 1.26%(d) 67.07%(c)
Year Ended De-
cember 31,
2000............ $(0.63) -- 6.70 (40.11)% 31,010 1.32%(n) (0.28)% 103.90%
1999(o)......... (0.53) $0.32 12.26 81.37%(p) 32,596 1.39%(n) 0.19% 196.32%
Period from May
1, to December
31, 1988(h)..... (0.03) -- 7.09 (28.87)%(c) 7,310 1.55%(d)(n) 0.51%(d) 53.95%(c)
- --------------------------------------------------------------------------------------------------------------------------
International
Equity Index
Unaudited Period
Ended
June 30, 2001... (0.17) -- 13.42 (11.77)%(c) 155,094 0.29%(d)(q) 2.71%(d) 0.88%(c)
Year Ended
December 31,
2000............ (0.84) -- 15.39 (17.42)% 195,012 0.28%(r) 1.40% 14.86%
1999............ (0.64) -- 19.64 30.87% 244,017 0.31%(r) 1.26% 19.01%
1998............ (2.78) -- 15.56 20.82% 173,137 0.56%(r) 1.45% 158.63%
1997............ (0.79) -- 15.20 (5.03)% 152,359 0.79% 0.78% 83.13%
1996............ (0.21) -- 16.83 9.19% 155,753 0.76% 1.30% 92.03%
- --------------------------------------------------------------------------------------------------------------------------
International
Equity
Unaudited Period
Ended June 30,
2001............ (0.05) -- 8.37 (14.56)%(c) 21,086 1.09%(d)(s) 1.15%(d) 22.65%(c)
Year ended
December 31,
2000............ (0.38) -- 9.85 (14.37)% 15,716 1.10%(s) 0.53% 75.41%
Period from
August 31, to
December 31,
1999(h)......... (0.18) -- 11.95 21.49%(c) 12,430 1.10%(d)(s) 0.21%(d) 26.76%(c)
- --------------------------------------------------------------------------------------------------------------------------
Small Cap Growth
Unaudited Period
Ended June 30,
2001............ -- -- 12.40 (7.94)%(c) 202,053 0.84%(d) (0.44%)(d) 45.16%(c)
Year ended
December 31,
2000............ (1.47) -- 13.47 (21.43)% 234,542 0.82% (0.50)% 97.73%
1999............ (2.72) -- 19.12 70.38% 179,570 0.89% (0.70)% 113.11%
1998............ -- -- 12.99 14.49% 74,849 1.00%(t) (0.65)% 101.16%
1997............ (0.01) -- 11.34 14.26% 48,761 1.00%(t) (0.28)% 86.23%
Period from May
1, to December
31, 1996(h)..... (0.02) -- 9.93 (0.50)%(c) 20,633 1.00%(d)(t) 0.12%(d) 50.93%(c)
- --------------------------------------------------------------------------------------------------------------------------
60
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding throughout
the period end indicated:
Income from Investment Operations Less Distributions
------------------------------------ ---------------------------------------------------
Net Net Distribution
Assets Investment Net Realized Distribution Distribution in Excess of
Value at Income and Unrealized Total From From Net From Net Net Distribution
Beginning Gain Gain (Loss) on Investment Investment Gains on Investment From Capital
of Period (Loss) Investments(a) Operations Income Investments Income/Gains Paid-in
--------- ---------- -------------- ---------- ------------ ------------ ------------ ------------
Health Sciences
Period from May
1, 2001,
to June 30,
2001(h)......... $10.00 -- $ 0.20 $ 0.20 $(0.01) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Global Balanced
Unaudited Period
Ended June 30,
2001............ 9.27 $0.07 (0.45) (0.38) (0.07) -- -- --
Year ended
December 31,
2000(v)......... 10.71 0.23 (1.20) (0.97) (0.24) $(0.01) $(0.10) $(0.12)
1999............ 11.12 0.29 0.25 0.54 (0.29) (0.44) (0.16) (0.06)
1998............ 10.11 0.34 1.44 1.78 (0.34) (0.42) -- (0.01)
1997............ 10.39 0.33 (0.05) 0.28 (0.33) (0.22) -- (0.01)
Period from May
1, to December
31, 1996(h)..... 10.00 0.24 0.41 0.65 (0.24) (0.02) -- --
- ---------------------------------------------------------------------------------------------------------------------
Mid Cap Growth
Unaudited Period
Ended June 30,
2001............ 15.60 (0.02) (3.88) (3.90) -- -- -- --
Year ended
December 31,
2000............ 29.22 (0.05) (10.49) (10.54) -- (0.41) (1.61) (1.06)
1999............ 15.12 (0.19) 17.70 17.51 -- (3.41) -- --
1998............ 11.93 (0.09) 4.75 4.66 -- (1.32) -- (0.15)
1997............ 10.22 (0.02) 1.73 1.71 -- -- -- --
Period from May
1, to December
31, 1996(h)..... 10.00 0.05 0.22 0.27 (0.05) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Mid Cap Blend
Unaudited Period
Ended June 30,
2001............ 12.12 0.03 (0.09) (0.06) (0.02) -- -- --
Year ended
December 31,
2000............ 10.70 0.04 1.93 1.97 (0.04) (0.24) (0.27) --
Period from
August 31, to
December 31,
1999(h)......... 10.00 0.03 1.10 1.13 (0.03) (0.40) -- --
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------
Net Operating Net
Assets Expenses Investment
Net Assets End of to Income
Value Total Period Average (Loss) to Portfolio
Total at End of Investment (000s Net Average Turnover
Distributions Period Return(b) Omitted) Assets Net Assets Rate
------------- ---------- ------------- -------- -------------- ---------------- ------------
Health Sciences
Period from May
1, 2001,
to June 30,
2001(h)......... $(0.01) $10.19 1.99%(c) $ 22,189 1.10%(d) 0.14%(d) 12.66%(c)
- ---------------------------------------------------------------------------------------------------------------------
Global Balanced
Unaudited Period
Ended June 30,
2001............ (0.07) 8.82 (4.23)%(c) 28,106 1.14%(d)(u) 1.48%(d)(27) 19.33%(c)
Year ended
December 31,
2000(v)......... (0.47) 9.27 (9.08)% 28,527 0.98%(u) 2.32% 204.98%
1999............ (0.95) 10.71 5.11% 31,577 1.00%(u) 2.73% 131.21%
1998............ (0.77) 11.12 17.99% 30,416 1.10%(u) 3.20% 103.55%
1997............ (0.56) 10.11 2.65% 25,420 1.10%(u) 3.18% 81.04%
Period from May
1, to December
31, 1996(h)..... (0.26) 10.39 6.73%(c) 24,098 1.10%(d)(u) 3.59%(d) 22.21%(c)
- ---------------------------------------------------------------------------------------------------------------------
Mid Cap Growth
Unaudited Period
Ended June 30,
2001............ -- 11.70 (24.99)%(c) 302,547 0.88%(d) (0.33)%(d) 58.57%(c)
Year ended
December 31,
2000............ (3.08) 15.60 (35.86)% 393,988 0.85% (0.43)% 140.94%
1999............ (3.41) 29.22 118.31% 452,937 0.93% (0.68)% 106.06%
1998............ (1.47) 15.12 39.07% 94,085 1.10%(w) (0.64)% 137.01%
1997............ -- 11.93 16.66% 40,235 1.10%(w) (0.26)% 124.04%
Period from May
1, to December
31, 1996(h)..... (0.05) 10.22 2.69%(c) 16,492 1.10%(d)(w) 0.92%(d) 71.25%(c)
- ---------------------------------------------------------------------------------------------------------------------
Mid Cap Blend
Unaudited Period
Ended June 30,
2001............ (0.02) 12.04 (0.50)%(c) 22,599 0.85%(d)(x) 0.45%(d) 74.26%(c)
Year ended
December 31,
2000............ (0.55) 12.12 18.58% 21,259 0.85%(x) 0.44% 138.64%
Period from
August 31, to
December 31,
1999(h)......... (0.43) 10.70 11.53%(c) 5,810 0.85%(d)(x) 0.82%(d) 55.68%(c)
- ---------------------------------------------------------------------------------------------------------------------
61
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding throughout
the period end indicated:
Income from Investment Operations Less Distributions
------------------------------------ ---------------------------------------------------
Net Net Distribution
Assets Investment Net Realized Distribution Distribution in Excess of
Value at Income and Unrealized Total From From Net From Net Net Distribution
Beginning Gain Gain (Loss) on Investment Investment Gains on Investment From Capital
of Period (Loss) Investments(a) Operations Income Investments Income/Gains Paid-in
--------- ---------- -------------- ---------- ------------ ------------ ------------ ------------
Large Cap Value
Unaudited Period
Ended
June 30, 2001... $14.38 $0.11 $ 0.22 $ 0.33 $(0.11) -- -- --
Year ended
December 31,
2000............ 13.49 0.27 1.45 1.72 (0.28) $(0.53) $(0.01) $(0.01)
1999............ 14.02 0.27 0.18 0.45 (0.27) (0.71) -- --
1998............ 13.57 0.28 0.96 1.24 (0.28) (0.51) -- --
1997............ 11.09 0.29 2.84 3.13 (0.29) (0.36) -- --
Period from May
1, to
December 31,
1996(h)......... 10.00 0.16 1.22 1.38 (0.16) (0.13) -- --
- ---------------------------------------------------------------------------------------------------------------------
Large Cap Value
CORE
Unaudited Period
Ended
June 30, 2001... 10.42 0.04 (0.11) (0.07) (0.04) -- -- --
Year ended
December 31,
2000............ 10.16 0.15 0.36 0.51 (0.15) (0.06) (0.03) (0.01)
Period from
August 31, to
December 31,
1999(h)......... 10.00 0.04 0.31 0.35 (0.03) (0.14) (0.01) (0.01)
- ---------------------------------------------------------------------------------------------------------------------
Large Cap Value
CORE II
Unaudited Period
Ended
June 30, 2001(1). 10.71 0.04 (0.08) (0.04) (0.04) -- -- --
Period from June
30, to
December 31,
2000(h)......... 10.00 0.06 0.74 0.80 (0.06) (0.03) -- --
- ---------------------------------------------------------------------------------------------------------------------
Large/Mid Cap
Value
Unaudited Period
Ended
June 30, 2001... 11.57 0.05 (0.30) (0.25) (0.05) -- -- --
Year ended
December 31,
2000............ 10.42 0.09 1.30 1.39 (0.10) (0.08) (0.06) --
Period from
August 31, to
December 31,
1999(h)......... 10.00 0.03 0.45 0.48 (0.03) (0.02) (0.01) --
- ---------------------------------------------------------------------------------------------------------------------
Money Market
Unaudited Period
Ended
June 30, 2001(4). 1.00 0.02 -- 0.02 (0.02) -- -- --
Year ended
December 31,
2000............ 1.00 0.06 -- 0.06 (0.06) -- -- --
1999(23)........ 1.00 0.04 -- 0.04 (0.04) -- -- --
1998(23)........ 1.00 0.05 -- 0.05 (0.05) -- -- --
1997(23)........ 1.00 0.05 -- 0.05 (0.05) -- -- --
1996(23)........ 1.00 0.05 -- 0.05 (0.05) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------
Net Operating Net
Assets Expenses Investment
Net Assets End of to Income
Value Total Period Average (Loss) to Portfolio
Total at End of Investment (000s Net Average Turnover
Distributions Period Return(b) Omitted) Assets Net Assets Rate
------------- ---------- ------------- -------- -------------- ----------- -----------
Large Cap Value
Unaudited Period
Ended
June 30, 2001... $(0.11) $14.60 2.34%(c) $224,726 0.77%(d) 1.62%(d) 7.04%(c)
Year ended
December 31,
2000............ (0.83) 14.38 12.97% 204,535 0.78% 2.04% 42.12%
1999............ (0.98) 13.49 3.28% 155,849 0.85% 1.88% 32.62%
1998............ (0.79) 14.02 9.26% 123,365 0.92% 2.08% 18.46%
1997............ (0.65) 13.57 28.56% 73,269 1.00%(y) 2.42% 19.21%
Period from May
1, to
December 31,
1996(h)......... (0.29) 11.09 13.90%(c) 19,781 1.00%(d)(y) 2.74%(d) 19.95%(c)
- ---------------------------------------------------------------------------------------------------------------------
Large Cap Value
CORE
Unaudited Period
Ended
June 30, 2001... (0.04) 10.31 (0.66)%(c) 43,987 0.84%(d)(z) 0.93%(d) 29.44%(c)
Year ended
December 31,
2000............ (0.25) 10.42 5.12% 18,164 0.85%(z) 1.54% 59.15%
Period from
August 31, to
December 31,
1999(h)......... (0.19) 10.16 3.58%(c) 6,371 0.85%(d)(z) 1.13%(d) 30.90%(c)
- ---------------------------------------------------------------------------------------------------------------------
Large Cap Value
CORE II
Unaudited Period
Ended
June 30, 2001(1). (0.04) 10.63 (0.33)%(c) 6,596 0.88%(d)(2) 0.81%(d) 14.04%(c)
Period from June
30, to
December 31,
2000(h)......... (0.09) 10.71 8.00%(c) 6,029 0.85%(d) 1.22%(d) 17.16%(c)
- ---------------------------------------------------------------------------------------------------------------------
Large/Mid Cap
Value
Unaudited Period
Ended
June 30, 2001... (0.05) 11.27 (2.22)%(c) 36,569 1.03%(d)(3) 0.88%(d) 38.78%(c)
Year ended
December 31,
2000............ (0.24) 11.57 13.41% 15,728 1.05%(3) 0.97% 86.97%
Period from
August 31, to
December 31,
1999(h)......... (0.06) 10.42 4.72%(c) 6,101 1.05%(d)(3) 0.94%(d) 23.03%(c)
- ---------------------------------------------------------------------------------------------------------------------
Money Market
Unaudited Period
Ended
June 30, 2001(4). (0.02) 1.00 2.51%(c) 459,369 0.29%(d) 5.03%(d) n/a
Year ended
December 31,
2000............ (0.06) 1.00 6.29%(5) 496,853 0.29% 6.05% n/a
1999(23)........ (0.04) 1.00 5.05% 451,235 0.31% 4.95% n/a
1998(23)........ (0.05) 1.00 5.40% 395,195 0.31% 5.29% n/a
1997(23)........ (0.05) 1.00 5.38% 229,443 0.33% 5.32% n/a
1996(23)........ (0.05) 1.00 5.32% 213,235 0.30% 5.20% n/a
- ---------------------------------------------------------------------------------------------------------------------
62
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding throughout
the period end indicated:
Income from Investment Operations Less Distributions
------------------------------------ ---------------------------------------------------
Net Net Distribution
Assets Investment Net Realized Distribution Distribution in Excess of
Value at Income and Unrealized Total From From Net From Net Net Distribution
Beginning Gain Gain (Loss) on Investment Investment Gains on Investment From Capital
of Period (Loss) Investments(a) Operations Income Investments Income/Gains Paid-in
--------- ---------- -------------- ---------- ------------ ------------ ------------ ------------
Large/Mid Cap
Value II
Unaudited Period
Ended
June 30,
2001(4)......... $14.65 $ 0.07 $(0.37) $(0.30) $(0.07) -- -- --
Year ended
December 31,
2000............ 12.78 0.06 3.51 3.57 (0.06) $(0.41) $(1.23) --
1999............ 12.19 0.08 0.59 0.67 (0.08) -- -- --
1998............ 13.87 0.11 (1.68) (1.57) (0.11) -- -- --
1997............ 11.35 0.05 3.59 3.64 (0.05) (1.07) -- --
Period from May
1, to
December 31,
1996(h)......... 10.00 0.04 1.57 1.61 (0.04) (0.22) -- --
- ---------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
Growth
Unaudited Period
Ended
June 30, 2001... 13.70 (0.03) 0.27 0.24 -- -- -- --
Year ended
December 31,
2000............ 14.03 (0.02) 1.27 1.25 -- (1.43) (0.15) --
1999............ 15.94 (0.07) 0.74 0.67 -- (2.41) -- $(0.17)
1998............ 15.39 (0.02) 0.88 0.86 -- (0.31) -- --
1997............ 16.52 0.01 0.56 0.57 (0.01) (1.69) -- --
1996............ 13.18 0.02 3.99 4.01 (0.02) (0.65) -- --
- ---------------------------------------------------------------------------------------------------------------------
Bond Index
Unaudited Period
Ended
June 30, 2001... 9.74 0.29 0.02 0.31 (0.30) -- -- --
Year ended
December 31,
2000............ 9.32 0.62 0.43 1.05 (0.63) -- -- --
1999............ 10.19 0.63 (0.89) (0.26) (0.61) -- -- --
Period from May
1, to
December 31,
1998(h)......... 10.00 0.42 0.29 0.71 (0.42) (0.10) -- --
- ---------------------------------------------------------------------------------------------------------------------
Large Cap
Aggressive Growth
Unaudited Period
Ended
June 30, 2001... 9.52 0.01 (1.23) (1.22) -- -- -- --
Year ended
December 31,
2000............ 11.94 (0.03) (2.21) (2.24) -- (0.01) (0.06) (0.11)
Period from
August 31, to
December 31,
1999(h)......... 10.00 (0.01) 2.03 2.02 -- (0.08) -- --
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------
Net Operating Net
Assets Expenses Investment
Net Assets End of to Income
Value Total Period Average (Loss) to Portfolio
Total at End of Investment (000s Net Average Turnover
Distributions Period Return(b) Omitted) Assets Net Assets Rate
------------- ---------- ------------- -------- -------------- ---------------- ------------
Large/Mid Cap
Value II
Unaudited Period
Ended
June 30,
2001(4)......... $(0.07) $14.28 (2.06)%(c) $121,102 0.85%(d) 1.00%(d) 141.53%(c)
Year ended
December 31,
2000............ (1.70) 14.65 28.38% 129,233 0.87% 0.42% 235.80%
1999............ (0.08) 12.78 5.52% 92,150 0.92% 0.64% 137.06%
1998............ (0.11) 12.19 (11.33)% 94,820 0.96% 0.93% 173.33%
1997............ (1.12) 13.87 32.17% 64,973 1.05%(6) 0.53% 93.78%
Period from May
1, to
December 31,
1996(h)......... (0.26) 11.35 16.18%(c) 10,926 1.05%(d)(6) 0.69%(d) 62.99%(c)
- ---------------------------------------------------------------------------------------------------------------------
Small/Mid Cap
Growth
Unaudited Period
Ended
June 30, 2001... -- 13.94 1.76%(c) 181,314 0.85%(d) (0.30%)(d) 48.75%(c)
Year ended
December 31,
2000............ (1.58) 13.70 9.25% 190,010 0.85% (0.20)% 103.19%
1999............ (2.58) 14.03 5.15% 181,931 0.85% (0.27)% 172.58%
1998............ (0.31) 15.94 5.61% 193,332 0.89% (0.11)% 162.21%
1997............ (1.70) 15.39 3.44% 213,612 0.85% 0.09% 331.19%
1996............ (0.67) 16.52 30.33% 194,108 0.84% 0.18% 217.84%
- ---------------------------------------------------------------------------------------------------------------------
Bond Index
Unaudited Period
Ended
June 30, 2001... (0.30) 9.75 3.16%(c) 81,161 0.25%(d) 6.05%(d)(28) 53.84%(c)
Year ended
December 31,
2000............ (0.63) 9.74 11.81% 64,768 0.25%(7) 6.80% 40.46%
1999............ (0.61) 9.32 (2.57)% 38,436 0.29%(7) 6.56% 17.06%
Period from May
1, to
December 31,
1998(h)......... (0.52) 10.19 7.20%(c) 28,001 0.40%(d)(7) 6.17%(d) 21.09%(c)
- ---------------------------------------------------------------------------------------------------------------------
Large Cap
Aggressive Growth
Unaudited Period
Ended
June 30, 2001... -- 8.30 (12.77)%(c) 35,629 0.98%(d) (0.08)%(d) 53.63%(c)
Year ended
December 31,
2000............ (0.18) 9.52 (18.77)% 26,244 1.00%(8) (0.37)% 75.97%
Period from
August 31, to
December 31,
1999(h)......... (0.08) 11.94 20.18%(c) 15,074 1.08%(d)(8) (0.39)%(d) 18.97%(c)
- ---------------------------------------------------------------------------------------------------------------------
63
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding throughout
the period end indicated:
Income from Investment Operations Less Distributions
------------------------------------ ---------------------------------------------------
Net Net Distribution
Assets Investment Net Realized Distribution Distribution in Excess of
Value at Income and Unrealized Total From From Net From Net Net Distribution
Beginning Gain Gain (Loss) on Investment Investment Gains on Investment From Capital
of Period (Loss) Investments(a) Operations Income Investments Income/Gains Paid-in
--------- ---------- -------------- ---------- ------------ ------------ ------------ ------------
Small/Mid Cap
CORE
Unaudited Period
Ended June 30,
2001............ $ 9.82 $0.03 $ 0.12 $ 0.15 $(0.03) -- -- --
Year ended
December 31,
2000............ 9.82 0.05 0.39 0.44 (0.05) $(0.32) $(0.05) $(0.02)
1999............ 9.02 0.02 1.77 1.79 (0.03) (0.96) -- --
Period from May
1, to December
31, 1998(h)..... 10.00 -- (0.98) (0.98) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Small Cap Value
Unaudited Period
Ended June 30,
2001(10)........ 11.70 0.04 2.10 2.14 (0.04) -- -- --
Year ended
December 31,
2000............ 10.13 0.01 3.37 3.38 (0.01) (1.80) -- --
Period from
August 31, to
December 31,
1999(h)......... 10.00 -- 0.49 0.49 -- (0.36) -- --
- ---------------------------------------------------------------------------------------------------------------------
Real Estate
Equity
Unaudited Period
Ended June 30,
2001............ 13.67 0.19 0.62 0.81 (0.21) -- -- --
Year ended
December 31,
2000(o)......... 11.47 0.76 2.73 3.49 (0.76) (0.06) (0.17) (0.30)
1999............ 12.46 0.78 (0.99) (0.21) (0.78) -- -- --
1998............ 15.91 0.77 (3.38) (2.61) (0.70) (0.14) -- --
1997............ 14.64 0.77 1.68 2.45 (0.71) (0.41) -- (0.06)
1996............ 11.70 0.76 2.97 3.73 (0.76) (0.03) -- --
- ---------------------------------------------------------------------------------------------------------------------
Growth & Income
Unaudited Period
Ended June 30,
2001............ 14.18 0.02 (1.31) (1.29) (0.02) -- -- --
Year ended
December 31,
2000(f)......... 20.01 0.17 (2.77) (2.60) (0.17) (2.69) (0.14) (0.23)
1999............ 19.49 0.20 2.88 3.08 (0.20) (2.36) -- --
1998............ 16.61 0.23 4.75 4.98 (0.23) (1.87) -- --
1997............ 14.65 0.27 4.07 4.34 (0.27) (2.11) -- --
1996............ 13.94 0.34 2.43 2.77 (0.34) (1.72) -- --
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------
Operating Net
Net Assets Expenses Investment
Net Assets End of to Income
Value Total Period Average (Loss) to Portfolio
Total at End of Investment (000s Net Average Turnover
Distributions Period Return(b) Omitted) Assets Net Assets Rate
------------- ---------- ------------- ---------- --------------- ------------- ------------
Small/Mid Cap
CORE
Unaudited Period
Ended June 30,
2001............ $(0.03) $ 9.94 1.51%(c) $ 27,689 0.90%(d)(9) 0.57%(d) 33.72%(c)
Year ended
December 31,
2000............ (0.44) 9.82 4.63% 21,636 0.90%(9) 0.56% 94.78%
1999............ (0.99) 9.82 20.54% 8,248 0.94%(9) 0.30% 109.12%
Period from May
1, to December
31, 1998(h)..... -- 9.02 (9.81)%(c) 5,015 1.05%(d)(9) (0.01)%(d) 60.51%(c)
- ---------------------------------------------------------------------------------------------------------------------
Small Cap Value
Unaudited Period
Ended June 30,
2001(10)........ (0.04) 13.80 18.25%(c) 58,573 1.04%(d)(11) 0.66%(d) 77.07%(c)
Year ended
December 31,
2000............ (1.81) 11.70 34.19% 29,436 1.05%(11) 0.13% 220.80%
Period from
August 31, to
December 31,
1999(h)......... (0.36) 10.13 5.08%(c) 5,570 1.05%(d)(11) (0.12)%(d) 51.97%(c)
- ---------------------------------------------------------------------------------------------------------------------
Real Estate
Equity
Unaudited Period
Ended June 30,
2001............ (0.21) 14.27 5.95%(c) 160,629 1.08%(d) 2.87%(d) 10.80%(c)
Year ended
December 31,
2000(o)......... (1.29) 13.67 31.29% 158,811 0.76% 5.99% 58.81%
1999............ (0.78) 11.47 (1.69)% 126,214 0.70% 6.38% 12.95%
1998............ (0.84) 12.46 (16.71)% 152,789 0.69% 5.48% 22.69%
1997............ (1.18) 15.91 17.22% 204,131 0.69% 5.12% 20.04%
1996............ (0.79) 14.64 33.07% 151,105 0.69% 6.14% 18.37%
- ---------------------------------------------------------------------------------------------------------------------
Growth & Income
Unaudited Period
Ended June 30,
2001............ (0.02) 12.87 (9.13)%(c) 2,799,990 0.77%(d)(12) 0.35%(d) 43.75%(c)
Year ended
December 31,
2000(f)......... (3.23) 14.18 (13.10)% 3,324,988 0.40% 0.84% 112.94%
1999............ (2.56) 20.01 16.23% 4,218,841 0.28% 0.98% 70.16%
1998............ (2.10) 19.49 30.25% 3,670,785 0.27% 1.24% 48.45%
1997............ (2.38) 16.61 29.79% 2,785,964 0.28% 1.61% 74.56%
1996............ (2.06) 14.65 20.10% 2,047,927 0.27% 2.24% 81.02%
- ---------------------------------------------------------------------------------------------------------------------
64
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding throughout
the period end indicated:
Income from Investment Operations Less Distributions
------------------------------------ ---------------------------------------------------
Net Net Distribution
Assets Investment Net Realized Distribution Distribution in Excess of
Value at Income and Unrealized Total From From Net From Net Net Distribution
Beginning Gain Gain (Loss) on Investment Investment Gains on Investment From Capital
of Period (Loss) Investments(a) Operations Income Investments Income/Gains Paid-in
--------- ---------- -------------- ---------- ------------ ------------ ------------ ------------
Managed
Unaudited Period
Ended June 30,
2001............ $13.82 $0.15 $(0.38) $(0.23) $(0.15) -- -- --
Year ended
December 31,
2000(v)......... 15.45 0.44 (0.45) (0.01) (0.44) $(1.18) -- --
1999............ 15.64 0.44 0.94 1.38 (0.43) (1.14) -- --
1998............ 14.35 0.46 2.43 2.89 (0.46) (1.09) -- $(0.05)
1997............ 13.35 0.59 1.86 2.45 (0.59) (0.78) -- (0.08)
1996............ 13.73 0.61 0.81 1.42 (0.61) (1.19) -- --
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Bond
Unaudited Period
Ended June 30,
2001............ 9.86 0.28 0.14 0.42 (0.29) -- -- --
Year ended
December 31,
2000............ 9.72 0.61 0.14 0.75 (0.61) -- -- --
1999............ 10.05 0.61 (0.33) 0.28 (0.61) -- -- --
1998............ 10.08 0.61 (0.03) 0.58 (0.61) -- -- --
1997............ 10.05 0.59 0.03 0.62 (0.59) -- -- --
1996............ 10.23 0.54 (0.18) 0.36 (0.54) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Small Cap Equity
Unaudited Period
Ended June 30,
2001............ 9.14 -- 0.37 0.37 -- -- -- --
Year ended
December 31,
2000(v)......... 10.92 0.14 (1.13) (0.99) (0.15) (0.14) $(0.20) (0.30)
1999............ 11.59 0.09 (0.50) (0.41) (0.07) (0.01) (0.18) --
1998............ 12.40 0.07 (0.81) (0.74) (0.07) -- -- --
1997............ 10.73 0.08 2.66 2.74 (0.08) (0.99) -- --
Period from May
1, to
December 31,
1996(h)......... 10.00 0.07 0.96 1.03 (0.07) (0.23) -- --
- ---------------------------------------------------------------------------------------------------------------------
International
Opportunities
Unaudited Period
Ended June 30,
2001............ 11.85 0.07 (1.96) (1.89) (0.06) -- -- --
Year ended
December 31,
2000(16)........ 15.17 0.07 (2.57) (2.50) (0.06) (0.62) (0.05) (0.09)
1999............ 12.21 0.10 3.95 4.05 (0.11) (0.94) (0.04) --
1998............ 10.63 0.11 1.57 1.68 (0.10) -- -- --
1997............ 10.60 0.10 0.11 0.21 (0.10) (0.08) -- --
Period from May
1, to
December 31,
1996(h)......... 10.00 0.07 0.60 0.67 (0.07) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
---------------------------------------------------------
Operating Net
Net Assets Expenses Investment
Net Assets End of to Income
Value Total Period Average (Loss) to Portfolio
Total at End of Investment (000s Net Average Turnover
Distributions Period Return(b) Omitted) Assets Net Assets Rate
------------- ---------- -------------- ---------- --------------- ---------------- -------------
Managed
Unaudited Period
Ended June 30,
2001............ $(0.15) $13.44 (1.73)%(c) $2,729,864 0.77%(d) 2.19%(d)(29) 90.71%(c)
Year ended
December 31,
2000(v)......... (1.62) 13.82 0.03% 2,995,794 0.46% 2.86% 210.35%
1999............ (1.57) 15.45 9.10% 3,430,919 0.36% 2.75% 203.86%
1998............ (1.60) 15.64 20.42% 3,301,910 0.36% 2.99% 160.57%
1997............ (1.45) 14.35 18.72% 2,800,127 0.37% 4.18% 200.41%
1996............ (1.80) 13.35 10.72% 2,386,660 0.36% 4.41% 113.61%
- ---------------------------------------------------------------------------------------------------------------------
Short-Term Bond
Unaudited Period
Ended June 30,
2001............ (0.29) 9.99 4.23%(c) 115,184 0.34%(d) 5.85%(d)(30) 45.15%(c)
Year ended
December 31,
2000............ (0.61) 9.86 7.98% 80,109 0.36% 6.27% 52.68%
1999............ (0.61) 9.72 2.96% 68,844 0.43% 6.25% 100.04%
1998............ (0.61) 10.05 5.82% 77,194 0.53% 6.17% 184.50%
1997............ (0.59) 10.08 6.41% 51,120 0.57% 5.67% 108.29%
1996............ (0.54) 10.05 3.61% 58,676 0.75%(13) 5.66% 20.68%
- ---------------------------------------------------------------------------------------------------------------------
Small Cap Equity
Unaudited Period
Ended June 30,
2001............ -- 9.51 4.02%(c) 76,231 1.00%(d)(14) (0.05)%(d) 21.00%(c)
Year ended
December 31,
2000(v)......... (0.79) 9.14 (8.89)% 70,031 0.92%(14) 1.25% 189.57%
1999............ (0.26) 10.92 (3.43)% 68,900 0.95%(14) 0.78% 117.33%
1998............ (0.07) 11.59 5.96% 64,095 1.05%(14) 0.63% 100.83%
1997............ (1.07) 12.40 25.57% 43,261 1.05%(14) 0.68% 126.10%
Period from May
1, to
December 31,
1996(h)......... (0.30) 10.73 10.33%(c) 10,541 1.05%(d)(14) 1.15%(d) 66.31%(c)
- ---------------------------------------------------------------------------------------------------------------------
International
Opportunities
Unaudited Period
Ended June 30,
2001............ (0.06) 9.90 (15.98)%(c) 87,333 0.92%(d)(15) 1.19%(d) 8.59%(c)
Year ended
December 31,
2000(16)........ (0.82) 11.85 (16.36)%(17) 120,034 0.93%(15) 0.47% 37.92%(17)
1999............ (1.09) 15.17 34.01% 79,794 1.02%(15) 0.77% 34.02%
1998............ (0.10) 12.21 15.92% 64,250 1.16%(15) 0.89% 18.67%
1997............ (0.18) 10.63 1.95% 30,631 1.22%(15) 0.65% 21.09%
Period from May
1, to
December 31,
1996(h)......... (0.07) 10.60 6.72%(c) 17,898 1.25%(d)(15) 0.87%(d) 5.46%(c)
- ---------------------------------------------------------------------------------------------------------------------
65
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- -------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding
throughout the period end indicated:
Income from Investment Operations Less Distributions
------------------------------------ ----------------------------------------------------
Net Net
Assets Investment Net Realized Distribution Distribution Net Assets
Value at Income and Unrealized Total From From Net From Net Distribution Value
Beginning Gain Gain (Loss) on Investment Investment Gains on From Capital Total at End of
of Period (Loss) Investments(a) Operations Income Investments Paid-in Distributions Period
--------- ---------- -------------- ---------- ------------ ------------ ------------ ------------- ----------
Equity Index
Unaudited Period
Ended June 30,
2001............ $17.64 $0.09 $(1.27) $(1.18) $(0.10) -- -- $(0.10) $16.36
Year ended
December 31,
2000............ 20.46 0.22 (2.09) (1.87) (0.22) $(0.72) $(0.01) (0.95) 17.64
1999............ 17.70 0.27 3.41 3.68 (0.26) (0.66) -- (0.92) 20.46
1998............ 14.21 0.25 3.76 4.01 (0.24) (0.28) -- (0.52) 17.70
1997............ 11.10 0.24 3.41 3.65 (0.24) (0.25) (0.05) (0.54) 14.21
Period from May
1, to
December 31,
1996(h)......... 10.00 0.15 1.26 1.41 (0.15) (0.10) (0.06) (0.31) 11.10
- ---------------------------------------------------------------------------------------------------------------------------------
High Yield Bond
Unaudited Period
Ended June 30,
2001............ 7.33 0.35 0.06 0.41 (0.36) -- -- (0.36) 7.38
Year ended
December 31,
2000............ 8.99 0.73 (1.65) (0.92) (0.74) -- -- (0.74) 7.33
1999............ 9.23 0.72 (0.26) 0.46 (0.70) -- -- (0.70) 8.99
Period from May
1, to
December 31,
1998(h)......... 10.00 0.46 (0.76) (0.30) (0.46) (0.01) -- (0.47) 9.23
- ---------------------------------------------------------------------------------------------------------------------------------
Global Bond
Unaudited Period
Ended June 30,
2001............ 10.34 0.18 (0.66) (0.48) -- -- -- -- 9.86
Year ended
December 31,
2000(v)......... 9.82 0.48 0.67 1.15 (0.63) -- -- (0.63) 10.34
1999............ 10.60 0.48 (0.70) (0.22) (0.56) -- -- (0.56) 9.82
1998............ 10.24 0.54 0.38 0.92 (0.29) (0.09) (0.18) (0.56) 10.60
1997............ 10.16 0.59 0.30 0.89 (0.61) (0.15) (0.05) (0.81) 10.24
Period from May
1, to
December 31,
1996(h)......... 10.00 0.38 0.28 0.66 (0.38) (0.12) -- (0.50) 10.16
Ratios/Supplemental Data
-----------------------------------------------------
Net Operating Net
Assets Expenses Investment
End of to Income
Total Period Average (Loss) to Portfolio
Investment (000s Net Average Turnover
Return(b) Omitted) Assets Net Assets Rate
---------------- -------- --------------- --------------- ------------
Equity Index
Unaudited Period
Ended June 30,
2001............ (6.74)%(c) $539,147 0.19%(d) 1.15%(d) 11.28%(c)
Year ended
December 31,
2000............ (9.15)% 525,659 0.19% 1.12% 34.11%
1999............ 21.08% 451,296 0.00%(18) 1.42% 55.24%
1998............ 28.45% 232,578 0.00%(18) 1.59% 43.31%
1997............ 32.79%(19) 101,390 0.00%(18) 1.97% 64.56%
Period from May
1, to
December 31,
1996(h)......... 14.23%(c)(20) 14,650 0.00%(d)(18) 2.47%(d) 15.72%(c)
- -----------------------------------------------------------------------------------------
High Yield Bond
Unaudited Period
Ended June 30,
2001............ 5.33%(c) 38,463 0.74%(d)(21) 9.21%(d)(31) 16.59%(c)
Year ended
December 31,
2000............ (10.81)% 25,978 0.75%(21) 8.88% 21.94%
1999............ 5.13% 19,921 0.80%(21) 7.94% 38.62%
Period from May
1, to
December 31,
1998(h)......... (2.98)%(c) 14,789 0.90%(d)(21) 7.43%(d) 17.67%(c)
- -----------------------------------------------------------------------------------------
Global Bond
Unaudited Period
Ended June 30,
2001............ (4.68)%(c) 58,109 0.95%(d)(22) 3.79%(d)(32) 20.80%(c)
Year ended
December 31,
2000(v)......... 12.00% 68,473 0.81%(22) 4.71% 259.60%
1999............ (2.16)% 70,991 0.83%(22) 4.70% 332.06%
1998............ 9.15% 66,791 0.95%(22) 5.27% 186.70%
1997............ 9.05% 28,647 1.00%(22) 5.80% 69.38%
Period from May
1, to
December 31,
1996(h)......... 6.71%(c) 12,907 1.00%(d)(22) 6.05%(d) 171.39%(c)
(a) The amount shown at this caption for each fund share outstanding
throughout the year may not accord with the change in the aggregate gains
and losses in the portfolio securities for the year because of the timing
of the purchases and withdrawals of the fund shares in relation to the
fluctuating market values of the portfolio.
(b) The performance of the Funds shown on this page does not reflect expense
reimbursements without which the returns would have been lower during the
periods shown, and does not reflect expenses and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product's prospectus.
(c) Not annualized
(d) Annualized
(e) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .52% for the
period ended June 30, 2001.
(f) The Fund entered into a new sub-advisory agreement with Putnam Investment
Management, Inc. during the period shown.
66
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- -------------------------------------------------------------------------------
(g) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.00% and 1.09%
for the years ended December 31, 2000 and 1999, respectively, and 1.25%
for the period ended June 30, 2001.
(h) Commencement of investment operations
(i) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .89% and .96% for
the years ended December 31, 2000 and 1999, respectively, and 1.04% for
the period ended June 30, 2001.
(j) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .73% for the
period ended June 30, 2001.
(k) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .44% for the year
ended December 31, 2000.
(l) The Fund entered into a new sub-advisory agreement with John Hancock
Advisers, Inc. during the period shown.
(m) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.57% for the
period ended June 30, 2001.
(n) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 2.49%, 3.44%, and
3.69% for the years ended December 31, 2000, 1999, and 1998, respectively,
and 3.18% for the period ended June 30, 2001.
(o) The Fund entered into a new sub-advisory agreement with Morgan Stanley
Dean Witter Investment Management, Inc. during the period shown.
(p) The total investment return includes the effect of the capital
contribution of $.32 per share. The total investment return without the
capital contribution would have been 79.02%.
(q) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .31% for the
period ended June 30, 2001.
(r) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .37% and .38% and
.63% for the years ended December 31, 2000, 1999, and 1998, respectively.
(s) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.76% and 1.71%
for the years ended December 31, 2000 and 1999, respectively, and 1.61%
for the period ended June 30, 2001.
(t) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.05%, 1.12%, and
1.55%, for the years ended December 31, 1998, 1997, and 1996,
respectively.
(u) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.27%, 1.31%,
1.82, 1.56%, and 1.44% for the years ended December 31, 2000, 1999, 1998,
1997, and 1996, respectively, and 1.31% for the period ended June 30,
2001.
(v) The Fund entered into a new sub-advisory agreement with Capital Guardian
Trust Company during the period shown.
(w) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.13%, 1.42%, and
2.34%, for the years ended December 31, 1998, 1997, and 1996,
respectively.
(x) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.04% and 1.20%
for the years ended December 31, 2000 and 1999, respectively, and 1.06%
for the period ended June 30, 2001.
(y) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.06% and 2.74%,
for the years ended December 31, 1997 and 1996, respectively.
(z) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.09% and 1.17%
for the years ended December 31, 2000 and 1999, respectively, and 1.00%
for the period ended June 30, 2001.
(1) The Fund entered into a new sub-advisory agreement with Goldman Sachs
Asset Management during the period shown.
(2) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.95% for the
period ended June 30, 2001.
(3) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.36% and 1.42%
for the years ended December 31, 2000 and 1999, respectively, and 1.16%
for the period ended June 30, 2001.
(4) The Fund entered into a new sub-advisory agreement with Wellington
Management Company, LLP during the period shown.
(5) The total investment return includes the effect of the capital
contribution of $0.001 per share. The total investment return without the
capital contribution would have been 6.18%.
(6) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.14% and 2.15%,
for the years ended December 31, 1997 and 1996, respectively.
(7) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .27%, .35%, and
.71%, for the years ended December 31, 2000, 1999, and 1998, respectively.
67
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- -------------------------------------------------------------------------------
(8) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.05% and 1.17%
for the year ended December 31, 2000 and 1999, respectively.
(9) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.23%, 2.24%, and
4.55%, for the years ended December 31, 2000, 1999, and 1998,
respectively, and 1.16% for the period ended June 30, 2001.
(10) The Fund entered into a new sub-advisory agreement with T. Rowe Price
Associates, Inc. during the period shown.
(11) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.29% and 1.61%
for the year ended December 31, 2000 and 1999, respectively, and 1.10%
for the period ended June 30, 2001.
(12) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .78% for the
period ended June 30, 2001.
(13) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .79% for the year
ended December 31, 1996.
(14) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .95%, .96%,
1.08%, 1.30%, and 2.06%, for the years ended December 31, 2000, 1999,
1998, 1997 and 1996, respectively, and 1.01% for the period ended June
30, 2001.
(15) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been 1.09%, 1.15%,
1.46%, 1.57%, and 2.76%, for the years ended December 3, 2000, 1999,
1998, 1997, and 1996, respectively, and 1.03% for the period ended June
30, 2001.
(16) The Fund entered into a new sub-advisory agreement with T. Rowe Price
International, Inc. during the period shown.
(17) Excludes merger activity.
(18) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .22%, .34%, .65%,
and 1.61%, for the years ended December 31, 1999, 1998, 1997, and 1996,
respectively.
(19) The total investment return includes the effect of the capital
contribution of $.04 per share. The total investment return without the
capital contribution would have been 32.47%.
(20) The total investment return includes the effect of the capital
contribution of $.06 per share. The total investment return without the
capital contribution would have been 13.59%.
(21) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .87%, 1.04%, and
2.03%, for the years ended December 31, 2000, 1999, and 1998,
respectively, and .84% for the period ended June 30, 2001.
(22) Expense ratio is net of expense reimbursements. Had such reimbursements
not been made, the annual expense ratio would have been .91%, .84%,
1.02%, 1.32%, and 1.57%, for the years ended December 31, 2000, 1999,
1998, 1997, and 1996, respectively, and .98% for the period ended June
30, 2001.
(23) Per share amounts have been restated to reflect a 10-for-1 stock split
effective May 1, 2001.
(24) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 1.58% for the period
ended June 30, 2001.
(25) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 6.33% for the period
ended June 30, 2001.
(26) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 5.85% for the period
ended June 30, 2001.
(27) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 1.75% for the period
ended June 30, 2001.
(28) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 6.40% for the period
ended June 30, 2001.
(29) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 1.58% for the period
ended June 30, 2001.
(30) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 6.14% for the period
ended June 30, 2001.
(31) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 9.27% for the period
ended June 30, 2001.
(32) Had the Fund not amortized premiums on debt securities, the annual ratio
of net income to average net assets would have been 4.43% for the period
ended June 30, 2001.
68
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Automobile - 0.5%
General Motors Corp. - Cl. H ......................... 216,600 $ 4,386
Chemical - 0.3%
Praxair, Inc. ........................................ 65,000 3,055
Commercial Services - 1.7%
Arbitron, Inc. ....................................... 90,000 2,169
Concord EFS, Inc. .................................... 110,000 5,721
Informix Corp. ....................................... 12,452 73
Omnicom Group, Inc. .................................. 78,100 6,716
---------
14,679
Computer Equipment - 10.0%
Advanced Micro Devices, Inc. ......................... 110,000 3,177
Dell Computer Corp. .................................. 385,300 10,076
Intel Corp. .......................................... 1,322,100 38,671
International Business Machines Corp. ................ 234,200 26,465
Lexmark International Group, Inc. - Cl. A ............ 134,000 9,011
---------
87,400
Computer Software & Services - 13.6%
Adobe Systems, Inc. .................................. 189,800 8,921
Cadence Design Systems, Inc. * ....................... 281,400 5,242
Electronic Data Systems Corp. ........................ 83,000 5,187
First Data Corp. ..................................... 50,100 3,219
Fiserv, Inc. ......................................... 60,000 3,839
Intuit, Inc.* ........................................ 206,000 8,238
Microsoft Corp. ...................................... 843,000 61,539
Oracle Corp.* ........................................ 671,200 12,753
Peoplesoft, Inc. ..................................... 60,300 2,969
SunGard Data Systems, Inc. ........................... 239,200 7,178
---------
119,085
Consumer Miscellaneous - 0.8%
Black & Decker Corp. ................................. 184,100 7,265
Cosmetic & Personal Care - 0.8%
Colgate-Palmolive Co. ................................ 120,000 7,079
Diversified Operations - 10.1%
Danaher Corp. ........................................ 98,200 5,499
General Electric Co. ................................. 1,599,500 77,976
Tyco International, Ltd. ............................. 90,000 4,905
---------
88,380
Electric Power - 1.1%
Calpine Corp. * ...................................... 91,400 3,455
Duke Energy Co. ...................................... 95,000 3,706
Exelon Corp. ......................................... 35,000 2,244
---------
9,405
Electronic Products & Services - 8.8%
Analog Devices, Inc.* ................................ 179,600 7,768
Applera Corporation - Applied Biosystems Group ....... 160,000 4,280
Applied Materials, Inc.* ............................. 169,400 8,317
Cabot Microelectronics Corp. ......................... 38,000 2,356
Cisco Systems, Inc. * ................................ 668,300 12,163
KLA-Tencor Corp. * ................................... 105,900 6,192
LSI Logic Corp. ...................................... 179,000 3,365
Maxim Integrated Products, Inc.* ..................... 141,500 6,256
Novellus Systems, Inc. * ............................. 101,900 5,787
QLogic Corp. ......................................... 24,500 1,579
Tektronix, Inc. ...................................... 115,600 3,139
Texas Instruments, Inc. .............................. 297,500 9,371
Waters Corp. ......................................... 71,300 1,969
Xilinx, Inc. * ....................................... 117,100 4,829
---------
77,371
Energy - Alternative Source - 0.9%
Dynegy, Inc. - Cl. A ................................. 132,100 6,143
El Paso Corp. ........................................ 43,500 2,285
---------
8,428
Food, Beverage & Tobacco - 2.0%
Archer Daniels Midland Co. ........................... 184,100 2,393
Philip Morris Cos., Inc. ............................. 275,800 13,997
Sara Lee Corp. ....................................... 63,402 1,201
---------
17,591
Health Care Products - 18.7%
Abbott Laboratories .................................. 140,000 6,721
Allergan, Inc. ....................................... 155,400 13,287
American Home Products Corp. ......................... 172,900 10,104
Baxter International, Inc. ........................... 72,000 3,528
Bristol-Myers Squibb Co. ............................. 187,700 9,817
Invitrogen Corp. * ................................... 87,600 6,290
Johnson & Johnson .................................... 322,774 16,139
Laboratory Corp. of America Holdings ................. 62,400 4,798
Merck & Co., Inc. .................................... 256,500 16,393
Pfizer, Inc. ......................................... 1,388,500 55,609
Pharmacia Corp. ...................................... 141,700 6,511
Schering-Plough Corp. ................................ 330,400 11,974
UnitedHealth Group, Inc. ............................. 48,000 2,964
---------
164,135
Health Care Services - 1.9%
Lincare Holdings, Inc. ............................... 283,000 8,493
Trigon Healthcare, Inc. .............................. 73,700 4,779
Universal Health Services, Inc. - Cl. B * ............ 82,200 3,740
---------
17,012
Insurance - 1.8%
Everest Group, Ltd. .................................. 25,000 1,870
Hartford Financial Services Group, Inc. .............. 62,700 4,289
Lincoln National Corp. ............................... 88,500 4,580
69
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Insurance - Continued
Partners, Ltd. .......................................... 86,200 $ 4,775
---------
15,514
Leisure & Recreation - 0.2%
Sabre Group Holdings, Inc. .............................. 38,000 1,900
Media - TV & Radio - 7.0%
AOL Time Warner, Inc. * ................................. 802,400 42,527
BEA Systems, Inc. ....................................... 108,100 3,320
Clear Channel Communications, Inc. * .................... 38,700 2,426
Viacom, Inc. - Cl. B * .................................. 168,900 8,741
Westwood One, Inc. * .................................... 123,800 4,562
---------
61,576
Natural Gas Distribution - 0.4%
Enron Corp. ............................................. 69,800 3,420
Oil & Natural Gas Exploration & Production - 0.3%
Noble Drilling Corp. * .................................. 80,000 2,620
Oil - Equipment & Service - 0.3%
BJ Services Co. ......................................... 107,200 3,042
Personal & Commercial Lending - 0.9%
Citigroup, Inc. ......................................... 150,000 7,926
Retail - Department Stores - 9.0%
Abercrombie & Fitch Co. ................................. 102,800 4,575
Bed Bath & Beyond, Inc. ................................. 100,000 3,120
Family Dollar Stores, Inc. .............................. 175,300 4,493
Home Depot, Inc. ........................................ 400,000 18,620
Kohl's Corp. ............................................ 289,500 18,160
Lowe's Cos., Inc. ....................................... 130,400 9,461
Target Corp. ............................................ 62,400 2,159
TJX Cos., Inc. .......................................... 153,100 4,879
Wal-Mart Stores, Inc. ................................... 272,500 13,298
---------
78,765
Retail - Drug Stores - 1.1%
CVS Corp. ............................................... 89,400 3,451
Walgreen Co. ............................................ 171,800 5,867
---------
9,318
Telecommunication Equipment - 2.8%
Comverse Technology, Inc. * ............................. 55,100 3,146
Linear Technology Corp. ................................. 156,400 6,916
Micron Technology, Inc. ................................. 70,200 2,885
Nokia Oyj - ADR ......................................... 87,400 1,927
Qualcomm, Inc. .......................................... 161,700 9,456
---------
24,330
Telecommunication Services - 1.7%
Broadwing, Inc. ......................................... 182,300 4,457
Sprint PCS (PCS Group) .................................. 310,200 7,492
Verizon Communications .................................. 53,700 2,873
---------
14,822
Telephone - 1.7%
AT&T Corp. - Liberty Media Group - Cl. A * ............. 216,500 $ 3,787
Qwest Communications International, Inc. * ............. 344,700 10,985
---------
14,772
U.S. Government Agencies - 1.1%
Federal National Mortgage Assoc. ....................... 117,400 9,997
---------
TOTAL COMMON STOCK-99.5% 873,273
---------
SHORT-TERM INVESTMENTS
Investment in joint trading account - 2.0%
Investment in joint trading account
3.97% due 07/02/01 .......................... $ 17,658 17,658
Cash Equivalents - 2.3%
Navigator Securities Lending Prime
Portfolio ** ................................ 22,023,031 20,023
------------- ---------
TOTAL SHORT-TERM INVESTMENTS 4.3% 37,681
------------- ---------
TOTAL INVESTMENTS- 103.8% 910,954
Other Assets & Liabilities, Net- (3.8)% (33,072)
------------- ---------
NET ASSETS- 100.0% $ 877,882
============= =========
ADR-American Depository Receipts.
* Non-income producing security.
** Represents investment of security lending collateral.
See notes to financial statements.
70
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
FUNDAMENTAL GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Bank - 1.6%
M&T Bank Corp. .................................. 3,750 $ 283
Zions Bancorp ................................... 6,400 378
---------
661
Brokerage & Investment Management - 2.1%
Investment Technology Group, Inc. ............... 7,500 377
Legg Mason, Inc. ................................ 9,700 483
---------
860
Business Services - 1.6%
Interpublic Group Cos., Inc. .................... 22,800 669
Commercial Services - 7.2%
Cintas Corp. .................................... 10,700 495
Concord EFS, Inc. ............................... 8,100 421
Convergys Corp. * .............................. 23,500 711
Ecolab, Inc. .................................... 9,600 393
Lamar Advertising Co.* .......................... 11,100 489
The Dun & Bradstreet Corp. * .................... 11,800 395
---------
2,904
Computer Equipment - 1.6%
Brocade Communications Systems, Inc. * .......... 8,600 378
McData Corp. .................................... 3,900 69
Network Appliance, Inc. ......................... 13,800 189
---------
636
Computer Software & Services - 11.8%
Adobe Systems, Inc. ............................. 6,800 319
Fiserv, Inc. .................................... 10,300 659
i2 Technologies, Inc. ........................... 6,600 131
Informatica Corp. ............................... 9,400 163
Internet Security System, Inc. .................. 5,555 270
Manugistics Group, Inc. ......................... 6,400 160
Micromuse, Inc. * .............................. 12,100 339
Peregrine Systems, Inc. ......................... 42,500 1,232
Retek, Inc. ..................................... 11,800 566
SunGard Data Systems, Inc. ...................... 2,000 60
Synopsys, Inc. .................................. 3,550 172
VeriSign, Inc. .................................. 10,050 603
WebMethods, Inc. ................................ 4,000 85
---------
4,759
Consumer Miscellaneous - 2.3%
Harley-Davidson, Inc. ........................... 20,000 942
Cosmetic & Personal Care - 1.6%
Estee Lauder Cos., Inc. - Cl. A ................. 14,800 638
Electric Power - 2.1%
Calpine Corp. * ................................ 8,350 316
CMS Energy Corp. ................................ 10,700 298
Mirant Corp.* .................................. 6,600 227
---------
841
Electronic Products & Services - 15.0%
Applera Corporation - Applied Biosystems
Group .......................................... 14,600 390
Atmel Corp. * .................................. 41,500 560
Celestica, Inc. ................................. 9,150 471
Emulex Corp. * .................................. 7,000 283
GlobeSpan, Inc. ................................. 10,250 150
Integrated Device Technology, Inc. .............. 8,400 266
Jabil Circuit, Inc. ............................. 11,200 346
KLA-Tencor Corp. * .............................. 4,150 243
Lam Research Corp. .............................. 6,000 178
LSI Logic Corp. ................................. 14,800 278
Maxim Integrated Products, Inc. * .............. 4,600 203
Micrel, Inc. .................................... 8,500 280
PerkinElmer, Inc. ............................... 26,000 716
PMC-Sierra, Inc. ................................ 14,600 454
QLogic Corp. * .................................. 13,200 851
Waters Corp. * .................................. 14,000 386
---------
6,055
Energy - Alternative Source - 0.9%
Dynegy, Inc. - Cl.A ............................. 7,470 347
Financial Services - 1.0%
Providian Financial Corp.* ...................... 6,600 391
Food, Beverage & Tobacco - 1.0%
Sysco Corp. ..................................... 15,400 418
Health Care Products - 17.9%
Abgenix, Inc.* .................................. 5,550 250
Allergan, Inc. .................................. 9,250 791
Andrx Corp.* .................................... 8,600 662
Diversa Corp. ................................... 4,300 87
Forest Laboratories, Inc.* ...................... 550 39
Genzyme Corp. ................................... 3,800 232
Gilead Sciences, Inc. * ........................ 5,850 340
Human Genome Sciences, Inc. ..................... 3,950 238
IDEXX Laboratories, Inc. * ...................... 7,900 247
Inhale Therapeutic Systems, Inc. * .............. 10,300 237
Invitrogen Corp. ................................ 1,500 108
Ivax Corp. ...................................... 23,025 898
King Pharmaceuticals, Inc. ...................... 8,000 430
MedImmune, Inc. * .............................. 23,000 1,086
Millennium Pharmaceuticals, Inc. * .............. 14,700 523
Protein Design Labs, Inc. * .................... 2,800 243
Shire Pharmaceuticals Group Place
ADR ............................................ 6,100 338
Stryker Corp. ................................... 8,350 458
---------
7,207
Health Care Services - 2.5%
AmeriSource Health Corp. - Cl. A ................ 7,600 420
Idec Pharmaceuticals Corp. ...................... 3,700 251
Quest Diagnostics, Inc. * ...................... 4,800 359
---------
1,030
71
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
FUNDAMENTAL GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Insurance - 2.6%
Ace, Ltd.* ...................................... 14,600 $ 571
XL Capital, Ltd. - Cl. A ........................ 6,100 501
--------
1,072
Leisure & Recreation - 1.0%
Four Seasons Hotels, Inc. ....................... 3,800 210
International Game Technology ................... 3,200 201
--------
411
Media - TV / Radio - 2.4%
BEA Systems, Inc. ............................... 11,200 344
Radio One, Inc. ................................. 3,100 71
Radio One, Inc. - Cl. D* ........................ 4,600 101
Time Warner Telecom, Inc. - Cl. A ............... 6,340 213
Univision Communications, Inc. - Cl. A* ......... 5,700 244
--------
973
Oil & Natural Gas Exploration & Production - 4.1%
Devon Energy Corp. .............................. 5,400 284
Global Marine, Inc.* ............................ 21,600 402
Murphy Oil Corp. ................................ 3,750 276
Transocean Sedco Forex, Inc. .................... 16,900 697
--------
1,659
Oil - Equipment & Service - 2.1%
Cooper Cameron Corp.* ........................... 4,900 273
Smith International, Inc. ....................... 9,300 557
--------
830
Personal & Commercial Lending - 2.1%
AmeriCredit Corp. ............................... 3,900 202
Capital One Financial Corp. ..................... 8,100 486
Metris Cos., Inc. ............................... 4,500 152
--------
840
Real Estate Investment Trust - 0.8%
Boston Properties, Inc. ......................... 7,700 315
Real Estate Operations - 0.6%
HomeStore.com, Inc. ............................. 7,000 245
Retail - Department Stores - 3.6%
Family Dollar Stores, Inc. ...................... 21,400 549
RadioShack Corp. ................................ 12,300 375
Talbots, Inc. ................................... 4,300 188
Tiffany & Co. ................................... 9,167 332
--------
1,444
Retail - Food - 3.3%
Darden Restaurants, Inc. ........................ 14,650 409
Starbucks Corp. * .............................. 39,500 908
--------
1,317
Telecommunication Equipment - 3.6%
Comverse Technology, Inc.* ...................... 3,950 226
Linear Technology Corp. ......................... 2,900 128
Sonus Networks, Inc.* ........................... 13,000 304
Symbol Technologies, Inc. ....................... 35,550 789
--------
1,447
Telecommunication Services - 0.8%
Crown Castle International Corp. ................ 19,000 312
Telephone - 1.0%
Telephone and Data Systems, Inc. ................ 3,600 391
--------
TOTAL COMMON STOCK- 98.2% 39,614
--------
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 2.9%
Investment in joint trading account
3.97% due 07/02/01 .............................. $ 1,186 1,186
-------- --------
TOTAL INVESTMENTS- 101.1% 40,800
Other Assets & Liabilities, Net- (1.1)% (458)
-------- --------
NET ASSETS- 100.0% $ 40,342
======== ========
ADR-American Depository Receipts.
*Non-income producing security.
See notes to financial statements.
72
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
AGGRESSIVE BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 1.5%
Boeing Co. ...................................... 800 $ 44
General Dynamics Corp. .......................... 1,300 101
United Technologies Corp. ....................... 2,100 154
--------
299
Automobile - 1.4%
Ford Motor Co. .................................. 4,900 120
General Motors Corp. ............................ 1,800 116
General Motors Corp. - Cl. H .................... 2,400 49
--------
285
Bank - 4.3%
Bank of America Corp. ........................... 2,100 126
Bank of New York Co., Inc. ...................... 2,400 115
Comerica, Inc. .................................. 900 52
FleetBoston Financial Corp. ..................... 1,700 67
JP Morgan Chase & Co. ........................... 3,200 143
US Bancorp ...................................... 8,200 187
Washington Mutual, Inc. ......................... 5,100 191
--------
881
Chemical - 1.8%
Air Products & Chemicals, Inc. .................. 2,100 96
Dow Chemical Co. ................................ 5,500 183
Praxair, Inc. ................................... 2,100 99
--------
378
Commercial Services - 0.7%
Avery Dennison Corp. ............................ 1,700 87
Concord EFS, Inc. ............................... 900 47
--------
134
Computer Equipment - 4.7%
Apple Computer, Inc. ............................ 2,600 61
Dell Computer Corp. ............................. 4,100 107
Intel Corp. ..................................... 11,100 325
International Business Machines Corp. ........... 2,800 316
Lexmark International Group, Inc. - Cl. A ....... 2,200 148
--------
957
Computer Software & Services - 6.4%
Adobe Systems, Inc. ............................. 1,100 52
Cadence Design Systems, Inc. .................... 4,600 86
Electronic Data Systems Corp. ................... 1,500 94
First Data Corp. ................................ 2,800 180
Intuit, Inc. .................................... 1,000 40
Microsoft Corp. ................................. 8,400 613
Oracle Corp. .................................... 6,400 121
Peoplesoft, Inc. ................................ 700 34
SunGard Data Systems, Inc. ...................... 2,600 78
--------
1,298
Consumer Miscellaneous - 0.7%
Black & Decker Corp. ............................ 2,200 87
Parker-Hannifin Corp. ........................... 1,300 55
--------
142
Cosmetic & Personal Care - 1.1%
Avon Products, Inc. ............................. 2,200 102
Colgate-Palmolive Co. ........................... 1,000 59
Unilever NV - NY Shares ......................... 900 53
--------
214
Diversified Operations - 5.6%
Danaher Corp. ................................... 1,300 73
General Electric Co. ............................ 17,100 834
Tyco International, Ltd. ........................ 4,300 234
--------
1,141
Electric Power - 2.1%
AES Corp. ....................................... 700 30
Allegheny Energy, Inc. .......................... 1,800 87
Duke Energy Co. ................................. 3,400 133
Exelon Corp. .................................... 2,700 173
--------
423
Electronic Products & Services - 2.6%
Analog Devices, Inc. ............................ 1,600 69
Applied Materials, Inc. ......................... 1,200 59
Cisco Systems, Inc. ............................. 3,500 64
KLA-Tencor Corp. ................................ 900 53
LSI Logic Corp. ................................. 2,300 43
Maxim Integrated Products, Inc. ................. 1,200 53
Tektronix, Inc. ................................. 1,700 46
Texas Instruments, Inc. ......................... 3,000 95
Xilinx, Inc. .................................... 1,200 49
--------
531
Energy - Alternative Source - 0.7%
Dynegy, Inc. - Cl. A ............................ 1,800 83
El Paso Corp. ................................... 1,100 58
--------
141
Food, Beverage & Tobacco - 3.5%
Anheuser-Busch Cos., Inc. ....................... 1,900 78
Archer Daniels Midland Co. ...................... 4,000 52
Coca-Cola Co. ................................... 1,900 86
General Mills, Inc. ............................. 2,200 97
Kraft Foods, Inc. - Cl. A ...................... 1,300 40
PepsiCo, Inc. ................................... 1,500 66
Philip Morris Cos., Inc. ........................ 4,900 249
Sara Lee Corp. .................................. 2,280 43
--------
711
Health Care Products - 8.9%
Abbott Laboratories ............................. 2,000 96
Allergan, Inc. .................................. 1,400 120
American Home Products Corp. .................... 1,800 105
Bristol-Myers Squibb Co. ........................ 4,100 215
73
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
AGGRESSIVE BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Health Care Products - Continued
Invitrogen Corp. ................................ 600 $ 43
Johnson & Johnson ............................... 4,700 235
Laboratory Corporation of America Holdings ...... 1,200 92
Merck & Co., Inc. ............................... 4,200 268
Millipore Corp. ................................. 700 43
Pfizer, Inc. .................................... 13,300 533
Schering-Plough Corp. ........................... 2,000 73
--------
1,823
Health Care Services - 0.7%
First Health Group Corp. ........................ 1,400 34
Lincare Holdings, Inc. .......................... 2,000 60
Trigon Healthcare, Inc. ......................... 800 52
--------
146
Insurance - 3.4%
American International Group, Inc. .............. 1,400 121
Hartford Financial Services Group, Inc. ......... 2,400 164
Lincoln National Corp. .......................... 2,500 129
St. Paul Cos., Inc. ............................. 2,000 101
Torchmark, Inc. ................................. 2,300 93
XL Capital, Ltd. - Cl. A ........................ 1,000 82
--------
690
Leisure & Recreation - 0.4%
Sabre Group Holdings, Inc. ...................... 1,500 75
Media - TV & Radio - 3.5%
AOL Time Warner, Inc. ........................... 8,100 429
Clear Channel Communications, Inc. .............. 700 44
The Walt Disney Co. ............................. 3,400 98
Viacom, Inc. - Cl. B ............................ 2,800 145
--------
716
Metals & Mining - 1.1%
Alcan Aluminum, Ltd. ............................ 1,200 51
Alcoa, Inc. ..................................... 1,500 59
Minnesota Mining & Manufacturing Co. ............ 1,000 114
--------
224
Natural Gas Distribution - 0.3%
Enron Corp. ..................................... 1,800 88
Oil - 1.3%
Baker Hughes, Inc. .............................. 1,800 60
Royal Dutch Petroleum Co. - NY Shares ........... 3,700 216
--------
276
Oil & Natural Gas Exploration & Production - 3.5%
BP Amoco PLC - ADR .............................. 800 40
Chevron Corp. ................................... 1,500 136
Exxon Mobil Corp. ............................... 4,900 428
Kerr-McGee Corp. ................................ 700 46
Noble Drilling Corp. ............................ 800 26
USX-Marathon Group .............................. 1,600 47
--------
723
Paper & Forest Products - 0.5%
Kimberly-Clark Corp. ............................ 1,800 101
Personal & Commercial Lending - 2.9%
Citigroup, Inc. ................................. 11,100 586
Retail - Department Stores - 5.7%
Abercrombie & Fitch Co. ......................... 1,400 62
Bed Bath & Beyond, Inc. ......................... 2,100 65
Home Depot, Inc. ................................ 3,200 149
Kohl's Corp. .................................... 2,100 132
Lowe's Cos., Inc. ............................... 3,100 225
May Department Stores Co. ....................... 1,900 65
Target Corp. .................................... 2,300 80
TJX Cos., Inc. .................................. 3,600 115
Toys "R" Us, Inc. ............................... 1,500 37
Wal-Mart Stores, Inc. ........................... 4,900 239
--------
1,169
Retail - Drug Stores - 0.7%
CVS Corp. ....................................... 2,100 81
Walgreen Co. .................................... 1,500 51
--------
132
Retail - Food - 0.2%
Brinker International, Inc. ..................... 1,200 31
Steel - 0.2%
Nucor Corp. ..................................... 1,000 49
Telecommunication Equipment - 1.1%
Comverse Technology, Inc. ....................... 700 40
Linear Technology Corp. ......................... 1,600 71
Qualcomm, Inc. .................................. 1,900 111
--------
222
Telecommunication Services - 3.2%
Broadwing, Inc. ................................. 3,000 73
Sprint PCS (PCS Group) .......................... 4,500 109
Verizon Communications .......................... 7,100 380
WorldCom, Inc. .................................. 7,000 99
--------
661
Telephone - 1.7%
AT&T Corp. - Liberty Media Group -
Cl. A ........................................ 5,500 96
Qwest Communications International, Inc. ........ 5,300 169
Telephone and Data Systems, Inc. ................ 700 76
--------
341
Transportation Services - 0.2%
Union Pacific Corp. ............................. 600 33
74
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
AGGRESSIVE BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
U.S. Government Agencies - 1.4%
Federal National Mortgage Assoc. ................ 3,300 $ 281
----------
TOTAL COMMON STOCK- 78.0% 15,902
----------
Par
Value
(000's)
PUBLICLY-TRADED-BONDS
Aerospace & Defense - 0.1%
Lockheed Martin Corp. - Bonds
8.5% due 12/01/29 ............................... $ 15 17
Automobile - 0.3%
Ford Motor Co. - Bonds
6.625% due 10/01/28 ............................. 60 52
Bank - 0.7%
Bank of America Corp.
7.4% due 01/15/11 ............................... 80 83
BankBoston Corp. - Sr. Notes
6.125% due 03/15/02 ............................. 50 51
----------
134
Brokerage & Investment Management - 0.4%
Lehman Brothers Holdings, Inc. - Notes
6.625% due 04/01/04 ............................. 50 51
Morgan Stanley Group, Inc.
6.75% due 04/15/11 .............................. 30 30
----------
81
Computer Equipment - 0.1%
International Business Machines Corp. - Notes
5.625% due 04/12/04 ............................. 30 30
Electric Power - 0.1%
Exelon Corp. - Sr. Notes
6.75% due 05/01/11 .............................. 25 24
Financial Services - 0.8%
Associates Corp. of North America - Sr. Notes
6.25% due 11/01/08 .............................. 45 44
General Electric Capital Corp.
7.5% due 05/15/05 ............................... 30 32
Goldman Sachs Group, Inc.
6.875% due 01/15/11 ............................. 25 25
Green Tree Financial Corp. - Ser. 1996-8
Cl. A6
7.6% due 10/15/27 ............................... 50 53
----------
154
Foreign Governmental - 0.4%
Province of Quebec - Debs.
5.5% due 04/11/06 ............................... 35 34
7.5% due 09/15/29 ............................... 45 48
----------
82
Health Care Services - 0.4%
Columbia/HCA Healthcare Corp.
6.91% due 06/15/05 .............................. 30 30
HCA-The Healthcare Co. - Sr. Notes
7.875% due 02/01/11 ............................. 50 50
----------
80
Media - TV & Radio - 0.3%
News America, Inc. - Debs.
7.125% due 04/08/28 ............................. 20 17
Time Warner, Inc.
6.625% due 05/15/29 ............................. 20 18
Viacom, Inc.
7.7% due 07/30/10 ............................... 30 32
----------
67
Natural Gas Distribution - 0.2%
Enron Corp. - Debs.
9.125% due 04/01/03 ............................. 30 32
Personal & Commercial Lending - 1.7%
Citigroup, Inc.
6.5% due 01/18/11 ............................... 60 60
Citigroup, Inc. - Notes
6.5% due 02/07/06 ............................... 30 30
Ford Motor Credit Co. - Notes
6.875% due 02/01/06 ............................. 60 61
General Motors Acceptance Corp.
7.5% due 07/15/05 ............................... 40 42
Household Financial Corp. - Notes
6.0% due 05/01/04 ............................... 30 30
6.5% due 01/24/06 ............................... 75 76
6.75% due 05/15/11 .............................. 50 49
----------
348
Retail - Department Stores - 0.5%
Target Corp.
6.35% due 01/15/11 .............................. 60 59
Wal Mart Stores, Inc.
7.55% due 02/15/30 .............................. 40 44
----------
103
Retail - Food - 0.2%
The Kroger Co.
6.8% due 04/01/11 ............................... 50 49
Telecommunication Equipment - 0.1%
BellSouth Capital Funding - Debs.
7.875% due 02/15/30 ............................. 10 11
Telecommunication Services - 0.2%
Worldcom, Inc. - Notes
7.5% due 05/15/11 ............................... 45 44
Telephone - 0.3%
AT&T Corp. - Notes
6.5% due 03/15/29 ............................... 15 13
75
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
AGGRESSIVE BALANCED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED-BONDS - Continued
Telephone - Continued
Sprint Capital Corp.
7.625% due 01/30/11 ............................. $ 40 $ 39
U.S. West Capital Funding, Inc.
6.875% due 07/15/28 ............................. 10 9
--------
61
U.S. Government Agencies - 11.2%
Federal National Mortgage Assoc.
6.0% due 07/25/16 ............................... 150 148
6.0% due 07/25/31 ............................... 220 211
6.625% due 11/15/30 ............................. 168 169
6.75% due 08/15/02 .............................. 110 113
7.0% due 07/25/31 ............................... 240 241
7.125% due 06/15/10 ............................. 160 171
7.5% due 07/25/16 ............................... 300 308
7.5% due 07/25/31 ............................... 279 285
Federal National Mortgage Assoc. - Notes
4.75% due 11/14/03 .............................. 400 400
7.0% due 07/15/05 ............................... 220 232
--------
2,278
U.S. Governmental - 3.1%
U.S. Treasury - Bonds
5.875% due 11/15/04 ............................. 310 321
8.875% due 08/15/17 ............................. 90 118
U.S. Treasury - Notes
5.75% due 08/15/10 .............................. 65 67
6.5% due 02/15/10 ............................... 20 21
6.625% due 05/15/07 ............................. 100 107
--------
634
TOTAL PUBLICLY-TRADED BONDS ..................... 21.1% 4,281
-------- --------
SHORT-TERM INVESTMENTS - 7.3%
Investment in joint trading account
3.97% due 07/02/01 ............................. 1,495 1,495
-------- --------
TOTAL INVESTMENTS- 106.4% 21,678
Other Assets & Liabilities, Net- (6.4)% (1,300)
-------- --------
NET ASSETS- 100.0% $ 20,378
======== ========
ADR-American Depository Receipts.
See notes to financial statements.
76
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.0%
Boeing Cap. Corp. - Sr. Notes
6.1% due 03/01/11 ............................... $ 2,480 $ 2,417
Jet Equipment Trust
10.91% due 08/15/14 ............................. 2,100 2,268
Lockheed Martin Corp. - Bonds
8.5% due 12/01/29 ............................... 3,305 3,665
---------
8,350
Agricultural Operations - 0.5%
Cargill, Inc.
6.25% due 05/01/06 .............................. 1,870 1,867
Marlin Water Trust - Sr. Notes 144A
7.09% due 12/15/01 .............................. 2,553 2,570
---------
4,437
Automobile - 0.7%
Delphi Automotive Systems Corp. - Notes
6.55% due 06/15/06 .............................. 3,100 3,104
Ford Motor Co. - Bonds
7.45% due 07/16/31 .............................. 2,675 2,567
---------
5,671
Bank - 4.0%
Abbey National First Capital - Sr. Sub. Notes
8.2% due 10/15/04 ............................... 4,000 4,281
Bank One Corp.
7.875% due 08/01/10 ............................. 1,575 1,686
Barclays Bank PLC 144A
7.375% due 12/15/49 ............................. 2,070 2,056
BNP Paribus Capital Trust - Sub. 144A
9.003% due 12/29/49 ............................. 1,625 1,779
Capital One Bank - Sr. Notes
6.875% due 02/01/06 ............................. 1,905 1,860
Colonial Bank Montgomery Al -
Sub. Notes
9.375% due 06/01/11 ............................. 1,555 1,589
HSBC Holdings PLC
7.5% due 07/15/09 ............................... 2,115 2,210
International Bank of
Reconstruction & Development - Debs.
8.25% due 09/01/16 .............................. 2,150 2,523
RBSG Capital Corp. - Notes
10.125% due 03/01/04 ............................ 5,000 5,500
Royal Bank of Scotland Group PLC
8.817% due 03/31/05 ............................. 1,870 2,006
Sanwa Bank , Ltd. - Sub. Notes
7.4% due 06/15/11 ............................... 1,650 1,591
Skandinaviska Enskida Banken -
Sub. Notes STEP UP 144A
6.5% due 12/29/49 ............................... 1,935 1,947
Standard Chartered Bank - Sub. Notes 144A
8.0% due 05/30/31 ............................... 1,685 1,712
Zions Financial Corp. - GTD 144A
6.95% due 05/15/11 .............................. 2,255 2,255
---------
32,995
Brokerage & Investment Management - 0.4%
Salomon Brothers Mortgage Securities VII
6.75% due 07/25/24 .............................. 1,890 1,897
Salomon, Inc. - Notes
5.875% due 03/15/06 ............................. 1,540 1,530
---------
3,427
Chemical - 0.7%
Akzo Nobel, Inc. - Bonds 144A
6.0% due 11/15/03 ............................... 1,630 1,644
Equistar Chemical - Notes
8.5% due 02/15/04 ............................... 1,650 1,596
Millenium America, Inc. 144A
9.25% due 06/15/08 .............................. 790 790
NOVA Chemicals Corp. - Notes
7.0% due 05/15/06 ............................... 1,665 1,658
---------
5,688
Computer Software & Services - 0.4%
Systems 2001 LLC - Cl. B 144A
7.156% due 12/15/11 ............................. 3,120 3,117
Container - 0.3%
Sealed Air Corp.
8.75% due 07/01/08 .............................. 985 959
Stone Container Corp.
9.75% due 02/01/11 .............................. 1,315 1,338
---------
2,297
Cosmetic & Personal Care - 0.2%
International Flavors & Fragrances,
Inc.- Notes 144A
6.45% due 05/15/06 .............................. 1,980 1,977
Electric Power - 8.4%
AES Corp.
9.375% due 09/15/10 ............................. 725 730
AES Corp. - Sr. Notes
9.5% due 06/01/09 ............................... 1,645 1,678
AES Corp. - Sr. Sub. Notes
10.25% due 07/15/06 ............................. 2,243 2,254
AES Eastern Energy
9.0% due 01/02/17 ............................... 2,130 2,180
77
SCHEDULE OF INVESTMENTS - Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Electric Power - Continued
Beaver Valley Funding Corp. - Debs.
9.0% due 06/01/17 ............................... $ 2,365 $ 2,486
BVPS II Funding Corp. - Coll. Lease Bonds
8.89% due 06/01/17 .............................. 2,464 2,620
CalEnergy Co., Inc. - Bonds
8.48% due 09/15/28 .............................. 2,685 2,893
Calpine Canada Energy
8.5% due 05/01/08 ............................... 1,600 1,536
Calpine Corp.
8.25% due 08/15/05 .............................. 1,460 1,449
Calpine Corp. - Sr. Notes
8.5% due 02/15/11 ............................... 1,595 1,534
10.5% due 05/15/06 .............................. 1,920 1,958
Cleveland Electric Illuminating Co.
7.88% due 11/01/17 .............................. 480 489
Cleveland Electric Illuminating Co. - 1st Mtge.
9.5% due 05/15/05 ............................... 5,775 5,949
CMS Energy Corp.
9.875% due 10/15/07 ............................. 730 765
CMS Energy Corp. - Sr. Notes
6.75% due 01/15/04 .............................. 2,040 1,960
8.125% due 05/15/02 ............................. 2,650 2,655
CMS Energy Corp - Sr. Notes
8.5% due 04/15/11 ............................... 310 301
Exelon Generation Co. LLC - Sr. Notes 144A
6.95% due 06/15/11 .............................. 3,090 3,070
Long Island Lighting Co. - Debs.
8.2% due 03/15/23 ............................... 3,235 3,279
Mirant Corp.
8.3% due 05/01/11 ............................... 1,940 1,954
Monterrey Power SA de CV - Sec. Bonds 144A
9.625% due 11/15/09 ............................. 650 684
Niagara Mohawk Power Corp. - Debs.
8.77% due 01/01/18 .............................. 3,909 3,984
Pinnacle West Capital Corp. - Sr. Notes
6.4% due 04/01/06 ............................... 2,345 2,299
PNPP II Funding Corp. - Debs.
9.12% due 05/30/16 .............................. 2,455 2,629
Progress Energy, Inc. - Sr. Notes
7.1% due 03/01/11 ............................... 1,555 1,575
PSEG Energy Holdings, Inc. - Sr. Notes 144A
8.625% due 02/15/08 ............................. 1,665 1,673
PSEG Power LLC
8.625% due 04/15/31 ............................. 1,665 1,794
Sierra Pacific Resources - Notes
8.75% due 05/15/05 .............................. 1,125 1,151
System Energy Resources, Inc. - 1st Mtge.
7.71% due 08/01/01 .............................. 2,590 2,596
TXU Electric & Gas
8.175% due 01/30/37 ............................. 1,810 1,781
Waterford Funding Corp. - Bonds
8.09% due 01/02/17 .............................. 4,136 4,073
XCEL Energy, Inc. - Sr. Notes
7.0% due 12/01/10 ............................... 2,470 2,478
---------
68,457
Electrical Equipment - 0.3%
HQI Transelec Chile
7.875% due 04/15/11 ............................. 2,500 2,509
Financial Services - 4.0%
American Express Credit Corp.
7.2% due 09/17/07 ............................... 2,000 2,119
Bank of New York Institution Capital 144A
7.78% due 12/01/26 .............................. 3,350 3,282
ERAC USA Finance Co.
7.95% due 12/15/09 .............................. 1,675 1,707
ERAC USA Finance Co. - Notes 144A
6.625% due 02/15/05 ............................. 900 892
ERAC USA Finance Co. - Notes GTD 144A
7.35% due 06/15/08 .............................. 1,550 1,536
Fosters Finance Corp. - Notes 144A
6.875% due 06/15/11 ............................. 1,490 1,476
Goldman Sachs Group, Inc.
6.875% due 01/15/11 ............................. 2,385 2,372
Heller Financial, Inc. - Notes
6.375% due 03/15/06 ............................. 1,490 1,501
ING Capital Funding Trust III
8.439% due 12/31/49 ............................. 1,770 1,878
Pemex Project
9.125% due 10/13/10 ............................. 2,500 2,639
Qwest Capital Funding - Bonds 144A
7.75% due 02/15/31 .............................. 3,215 3,154
Sun Canada Financial Co. - Bonds 144A
6.625% due 12/15/07 ............................. 3,345 3,247
The MONY Group, Inc. - Sr. Notes
7.45% due 12/15/05 .............................. 2,395 2,444
UBS Preferred Funding
8.622% due 10/29/49 ............................. 1,805 1,951
URC Holdings Corp. - Sr. Notes 144A
7.875% due 06/30/06 ............................. 1,840 1,991
---------
32,189
78
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Food, Beverage & Tobacco - 0.9%
Archer Daniels Midland Co.
7.0% due 02/01/31 ............................... $ 2,145 $ 2,074
Canandaigua Brands, Inc. - Sr. Sub.
Notes
8.75% due 12/15/03 .............................. 2,365 2,383
Earthgrains Co.
8.375% due 08/01/03 ............................. 2,500 2,569
----------
7,026
Foreign Governmental - 0.9%
Hydro-Quebec - Debs. Ser. IF
7.375% due 02/01/03 ............................. 1,000 1,037
Province of Quebec - Debs
7.5% due 09/15/29 ............................... 610 646
Republic of Brazil
8.0% due 04/15/14 ............................... 4,107 3,029
Republic of Columbia
9.75% due 04/09/11 .............................. 2,280 2,331
----------
7,043
Health Care Products - 0.4%
Fresenius Medical Capital Trust II
7.875% due 02/01/08 ............................. 1,740 1,727
Fresenius Medical Capital Trust IV
TR PFD Secs 144A
7.875% due 06/15/11 ............................. 1,360 1,326
----------
3,053
Health Care Services - 1.2%
Dynacare, Inc. - Sr. Notes
10.75% due 01/15/06 ............................. 2,125 2,157
HCA-The Healthcare Corp. - Notes
7.125% due 06/01/06 ............................. 2,350 2,318
8.75% due 09/01/10 .............................. 1,150 1,225
Healthsouth Corp. - Sr. Notes
8.5% due 02/01/08 ............................... 1,240 1,252
Quest Diagnostics, Inc. - Sr. Notes
6.75% due 07/12/06 .............................. 1,665 1,648
Tenet Healthcare Corp. - Sr. Notes
8.0% due 01/15/05 ............................... 545 561
Triad Hospitals
8.75% due 05/01/09 .............................. 830 842
----------
10,003
Insurance - 1.7%
AXA - Sub Notes
8.6% due 12/15/30 ............................... 2,510 2,757
Equitable Life Assurance Society
USA - Notes 144A
6.95% due 12/01/05 .............................. 1,240 1,274
Hartford Life, Inc. - Sr. Notes
7.375% due 03/01/31 ............................. 1,655 1,663
Mass. Mutual Life Insurance Co. -
Notes 144A
7.625% due 11/15/23 ............................. 2,640 2,671
New York Life Insurance Co. - Sr.
Notes 144A
7.5% due 12/15/23 ............................... 5,970 5,661
----------
14,026
Leisure & Recreation - 0.7%
Harrah's Operating Co., Inc.
7.875% due 12/15/05 ............................. 1,270 1,289
Harrah's Operating, Inc. - Sr. Notes
144A
7.125% due 06/01/07 ............................. 2,320 2,299
MGM Mirage, Inc.
8.5% due 09/15/10 ............................... 1,430 1,483
Station Casinos, Inc. - Sr. Notes
8.375% due 02/15/08 ............................. 675 679
----------
5,750
Media - TV & Radio - 4.5%
Adelphia Communications Corp.
10.25% due 06/15/11 ............................. 940 921
Adelphia Communications Corp. -
Sr. Notes
8.125% due 07/15/03 ............................. 1,270 1,232
9.25% due 10/01/02 .............................. 2,460 2,472
AOL Time Warner, Inc.
7.625% due 04/15/31 ............................. 2,510 2,520
British Sky Broadcasting
8.2% due 07/15/09 ............................... 1,845 1,834
Charter Communications Holdings
LLC - Sr. Notes
11.125% due 01/15/11 ............................ 605 638
Charter Communications Holdings
LLC - Sr. Notes 144A
10.0% due 05/15/11 .............................. 630 639
Clear Channel Communications,
Inc. - Sr. Notes
7.875% due 06/15/05 ............................. 3,115 3,272
Continental Cablevision - Sr. Notes
8.3% due 05/15/06 ............................... 2,940 3,156
CSC Holdings, Inc. - Sr. Notes
Ser.144A
7.625% due 04/01/11 ............................. 2,780 2,647
EchoStar DBS Corp. - Sr. Notes
9.375% due 02/01/09 ............................. 965 963
Lenfest Communications, Inc.
8.375% due 11/01/05 ............................. 1,690 1,810
Mediacom LLC
9.5% due 01/15/13 ............................... 1,340 1,280
News America Holdings, Inc. -
Debs.
8.25% due 08/10/18 .............................. 1,095 1,090
79
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Media - TV & Radio - Continued
News America, Inc. - Sr. Debs
7.3% due 04/30/28 ............................... $ 1,585 $ 1,409
Rogers Cablesystems - Sr. Notes
10.0% due 03/15/05 .............................. 1,205 1,265
TCI Communications, Inc. - Debs.
7.875% due 02/15/26 ............................. 1,780 1,800
Time Warner, Inc. - Debs.
9.125% due 01/15/13 ............................. 2,108 2,409
Viacom, Inc. 144A
6.4% due 01/30/06 ............................... 1,305 1,324
7.875% due 07/30/30 ............................. 2,430 2,560
Viacom, Inc. - Sr. Notes 144A
6.4% due 01/30/06 ............................... 1,225 1,243
Viacom, Inc.
---------
36,484
Metal Production & Fabrication - 0.2%
Yanacocha Receivables - Pass thru
Certs. 144A
8.4% due 06/15/05 ............................... 1,335 1,308
Metals & Mining - 0.4%
Newmont Mining Corp.- Notes
8.625% due 05/15/11 ............................. 1,575 1,555
Phelps Dodge Corp. - Notes
8.75% due 06/01/11 .............................. 2,005 1,987
---------
3,542
Municipals - 0.4%
New Hampshire State - Taxable
Pease Dev. Auth.
7.7% due 07/01/12 ............................... 3,000 3,157
Natural Gas Distribution - 0.7%
Enron Corp. - Notes 144A
8.0% due 08/15/05 ............................... 2,510 2,588
Keyspan Corp. - Sr. Notes
8.0% due 11/15/30 ............................... 1,660 1,782
Louis Dreyfus Natural Gas Corp.
6.875% due 12/01/07 ............................. 1,690 1,683
---------
6,053
Oil & Natural Gas Exploration & Production - 2.4%
Alberta Energy, Ltd. - Notes
8.125% due 09/15/30 ............................. 1,800 1,940
Chesapeake Energy Corp.
8.125% due 04/01/11 ............................. 920 865
Forest Oil Corp. - Sr. Notes 144A
8.0% due 06/15/08 ............................... 1,010 985
NRG Energy, Inc.
7.75% due 04/01/11 .............................. 2,445 2,474
Occidental Petroleum Corp. - Sr.
Debs.
10.125% due 09/15/09 ............................ 3,000 3,498
Ocean Energy, Inc.
8.875% due 07/15/07 ............................. 1,325 1,404
Petroleum Geo-Services ASA - Sr.
Notes
7.125% due 03/30/28 ............................. 2,165 1,772
Snyder Oil Corp.
8.75% due 06/15/07 .............................. 805 853
Transocean Forex, Inc. - Notes
144A
7.5% due 04/15/31 ............................... 2,460 2,463
Union Pacific Resources Group,
Inc. - Debs.
7.15% due 05/15/28 .............................. 2,685 2,570
Valero Energy Corp. - Notes
8.375% due 06/15/05 ............................. 1,005 1,077
---------
19,901
Oil - Equipment & Service - 0.3%
Humpuss Funding Corp. - 144A
7.72% due 12/15/09 .............................. 998 805
TOSCO Corp.
8.125% due 02/15/30 ............................. 1,840 2,006
---------
2,811
Paper & Forest Products - 0.7%
Georgia Pacific Corp. - Notes
7.5% due 05/15/06 ............................... 1,550 1,558
8.875% due 05/15/31 ............................. 1,635 1,637
International Paper Co.
8.125% due 07/08/05 ............................. 2,540 2,689
---------
5,884
Paper Products - 0.3%
Stora Enso Corp. - Notes
7.375% due 05/15/11 ............................. 2,545 2,578
Personal & Commercial Lending - 7.4%
Citigroup, Inc.
6.5% due 01/18/11
1,645 1,633
Commercial Mortgage
Acceptance Corp. -
Ser. 1991-C1 A1
6.79% due 06/15/31 .............................. 3,157 3,232
CS First Boston
Mortgage Securities
Corp. - Ser. 1998-C1
A1A
6.26% due 04/11/30 .............................. 5,095 5,153
Deutsche Mortgage &
Asset Receiving
Corp. - Ser. 1998-C1
Cl. C
6.861% due 03/15/08 ............................. 2,170 2,155
EQCC Home Equity Loan
Trust
6.57% due 02/15/29 .............................. 2,120 2,142
Ford Motor Credit Co.
- Notes
6.875% due 02/01/06 ............................. 2,095 2,122
80
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Personal & Commercial Lending - Continued
General Motors
Acceptance Corp.
7.5% due 07/15/05 ............................... $ 2,535 $ 2,651
GMAC Commercial
Mortgage Securities,
Inc. - 1997-C1 A2
6.853% due 09/15/06 ............................. 7,325 7,540
Household Financial
Corp.
6.5% due 01/24/06 ............................... 1,620 1,642
Household Financial
Corp. - Notes
8.0% due 05/09/05 ............................... 3,175 3,387
Household Financial
Corp. - Notes
8.0% due 07/15/10 ............................... 1,650 1,767
LB Commercial Conduit
Mortgage Trust -
Ser. 1999-C1
6.41% due 08/15/07 .............................. 3,264 3,311
Midland Funding Corp.
II - Debs.
11.75% due 07/23/05 ............................. 4,665 5,132
Money Store Home
Equity Trust - Ser.
1997-C1 DAF7
6.485% due 12/15/28 ............................. 3,791 3,843
Standard Credit Card
Master Trust
8.25% due 01/07/07 .............................. 2,535 2,745
Takefuji Corp.
9.2% due 04/15/11 ............................... 2,110 2,178
Tiers Fixed Rate
Certificates Ser.
2001 144A
7.2% due 06/15/04 ............................... 3,095 3,095
UCFC Home Equity Loan
7.18% due 02/15/25 .............................. 1,115 1,149
UCFC Home Equity Loan
- Ser.
1997-A1 A8
7.22% due 06/15/28 .............................. 5,660 5,841
----------
60,718
Pollution Control - 0.1%
Waste Management,
Inc. - Sr. Notes
7.375% due 08/01/10 ............................. 875 876
Real Estate Development - 0.1%
EOP Operating LP
6.625% due 02/15/05 ............................. 985 991
Real Estate Investment Trust - 2.6%
American Health
Properties, Inc. -
Notes
7.5% due 01/15/07 ............................... 1,350 1,332
Amresco Residential
Securities - Mtge.
Loan
6.51% due 08/25/27 .............................. 7,496 7,583
Cabot Industrial
Properties LP -
Notes
7.125% due 05/01/04 ............................. 1,975 2,014
Camden Property Trust
- Sr. Notes
7.0% due 04/15/04 ............................... 2,170 2,205
Healthcare Realty
Trust IN - Sr. Notes
8.125% due 05/01/11 ............................. 1,570 1,563
IMC Home Equity Loan
Trust - Ser. 1998-1
A4
6.6% due 03/20/25 ............................... 3,280 3,346
Liberty Property LP -
Notes
6.6% due 06/05/02 ............................... 1,675 1,708
Mack-Cali Realty LP -
Notes
7.75% due 02/15/11 .............................. 1,655 1,673
----------
21,424
Real Estate Operations - 0.3%
HMH Properties, Inc.
- Ser. A
7.875% due 08/01/05 ............................. 2,075 2,002
Retail - Department Stores - 0.2%
Kingdom MART Corp. -
Notes 144A
9.875% due 06/15/08 ............................. 1,540 1,498
Retail - Food - 0.3%
Delhaize America,
Inc.
8.125% due 04/15/11 ............................. 2,330 2,430
Telecommunication Equipment - 1.0%
BellSouth Capital
Funding - Debs.
7.875% due 02/15/30 ............................. 1,740 1,853
Deutsche Telekom
International
Finance
7.75% due 06/15/05 .............................. 3,100 3,241
8.25% due 06/15/30 .............................. 1,680 1,728
Vulcan Materials -
Notes
6.4% due 02/01/06 ............................... 1,190 1,195
----------
8,017
Telecommunication Services - 3.5%
AT&T Wireless Group -
Sr. Notes 144A
8.75% due 03/01/31 .............................. 3,195 3,319
Citizens
Communications Co. -
Notes
8.5% due 05/15/06 ............................... 1,555 1,597
9.25% due 05/15/11 .............................. 1,555 1,617
Cox Communications,
Inc. - Notes
7.75% due 11/01/10 .............................. 1,785 1,864
Crown Castle
International Corp.
- Sr. Notes
9.0% due 05/15/11 ............................... 645 561
Crown Castle
International Corp.
- Sr. Notes 144A
9.375% due 08/01/11 ............................. 435 385
Dominion Resources,
Inc.
8.125% due 06/15/10 ............................. 2,680 2,886
France Telecom SA -
Notes 144A
8.5% due 03/01/31 ............................... 2,490 2,611
81
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Telecommunication Services - Continued
Telefonos De Mexico,
SA - Sr. Notes 144A
8.25% due 01/26/06 .............................. $ 3,400 $ 3,494
Tellus Corp. NT
8.0% due 06/01/11 ............................... 2,490 2,545
Triton PCS, Inc. -
Sr. Sub Notes
9.375% due 02/01/11 ............................. 730 708
Verizon Global
Funding Corp. -
Bonds 144A
7.75% due 12/01/30 .............................. 1,740 1,790
Voicestream Wireless
Corp.
11.5% due 09/15/09 .............................. 1,540 1,771
Worldcom, Inc.
8.0% due 05/15/06 ............................... 3,125 3,240
---------
28,388
Telephone - 1.5%
LCI International,
Inc. - Sr. Notes
7.25% due 06/15/07 .............................. 2,205 2,267
Metronet
Communications Corp.
- Sr. Disc. Notes
0.0% due 11/01/07 ............................... 1,695 1,593
MetroNet
Communications Corp.
- Sr. Notes
12.0% due 08/15/07 .............................. 1,770 1,950
Pinnacle Partners
8.83% due 08/15/04 .............................. 2,355 2,422
Sprint Capital Corp.
6.875% due 11/15/28 ............................. 2,450 2,080
Sprint Capital Corp.
- Notes
7.125% due 01/30/06 ............................. 1,550 1,564
---------
11,876
Transportation Services - 2.6%
America West
Airlines, Inc. -
Pass through Certs.
6.93% due 01/02/08 .............................. 1,522 1,519
Burlington Northern
Santa Fe Corp.
7.95% due 08/15/30 .............................. 3,305 3,478
Continental Airlines,
Inc. - Pass thru
Certs.
7.206% due 06/30/04 ............................. 2,634 2,671
Delta Air lines, Inc.
7.7% due 12/15/05 ............................... 1,935 1,916
Northwest Airlines
Corp.
8.375% due 03/15/04 ............................. 1,350 1,319
Northwest Airlines
Corp. - Ser. 1996-1
8.97% due 01/02/15 .............................. 203 214
Northwest Airlines
Corp. - Sr. Notes
8.875% due 06/01/06 ............................. 1,555 1,491
NWA Trust - Sr. Notes
9.25% due 06/21/14 .............................. 2,198 2,377
Railcar Trust - Pass
thru Notes - Ser.
1992-1
7.75% due 06/01/04 .............................. 1,304 1,354
U.S. Air, Inc. - Pass
thru Certs. - Ser.
1990-A1
11.2% due 03/19/05 .............................. 984 1,018
United Air Lines
Corp.
7.032% due 04/01/12 ............................. 2,339 2,393
Wisconsin Central
Transportation Corp.
- Notes
6.625% due 04/15/08 ............................. 1,360 1,360
---------
21,110
U.S. Government Agencies - 29.1%
Federal National
Mortgage Assoc.
5.5% due 12/01/14 ............................... 11,774 11,369
6.0% due 09/01/14 ............................... 8,669 8,561
6.0% due 05/01/16 ............................... 4,135 4,073
6.0% due 02/01/31 ............................... 4,231 4,060
6.0% due 04/01/31 ............................... 3,268 3,136
6.0% due 05/01/31 ............................... 3,463 3,411
6.5% due 09/01/13 ............................... 102 102
6.5% due 07/01/14 ............................... 7,685 7,724
6.5% due 11/01/14 ............................... 115 116
6.5% due 01/01/15 ............................... 56 56
6.5% due 02/01/15 ............................... 91 92
6.5% due 06/01/15 ............................... 430 431
6.5% due 11/01/28 ............................... 9,358 9,226
7.0% due 09/01/10 ............................... 3,574 3,645
7.0% due 11/01/14 ............................... 5,162 5,249
7.0% due 03/01/31 ............................... 8,257 8,293
7.385% due 03/25/21 ............................. 920 959
7.5% due 02/01/31 ............................... 13,870 14,151
8.0% due 04/01/30 ............................... 6,310 6,517
8.0% due 06/01/30 ............................... 6,259 6,465
Federal National
Mortgage Assoc. Ser.
1997-M8 Cl.A
6.94% due 01/25/22 .............................. 1,372 1,414
Federal National
Mortgage Assoc. -
Notes
7.0% due 02/01/16 ............................... 4,845 4,926
Government National
Mortgage Assoc.
6.0% due 05/15/31 ............................... 9,376 9,074
6.5% due 07/15/28 ............................... 13,622 13,482
6.5% due 01/15/29 ............................... 2,725 2,697
6.5% due 02/15/29 ............................... 3,634 3,595
6.5% due 06/15/29 ............................... 25,069 24,794
6.5% due 08/15/29 ............................... 6,296 6,227
7.0% due 09/15/25 ............................... 1,891 1,914
7.0% due 08/15/28 ............................... 5,609 5,659
7.0% due 09/15/29 ............................... 13,878 14,000
82
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
7.0% due 06/15/31 ............................... $ 3,480 $ 3,510
7.0% due 09/15/31 ............................... 4,060 4,095
7.5% due 09/15/29 ............................... 13,549 13,892
7.5% due 12/15/29 ............................... 6,977 7,154
8.0% due 05/15/25 ............................... 244 254
8.0% due 06/15/25 ............................... 208 216
8.0% due 09/15/25 ............................... 444 461
8.0% due 01/15/26 ............................... 231 240
8.0% due 08/15/27 ............................... 1,207 1,252
8.0% due 07/15/30 ............................... 5,253 5,441
8.5% due 09/15/21 ............................... 450 476
8.5% due 01/15/31 ............................... 12,999 13,584
9.0% due 05/15/21 ............................... 396 425
9.0% due 08/15/21 ............................... 375 402
9.5% due 06/15/16 ............................... 317 347
----------
237,167
U.S. - Governmental - 7.2%
U.S. Treasury - Bonds
6.25% due 05/15/30 .............................. 15,783 16,392
8.875% due 08/15/17 ............................. 2,919 3,832
U.S. Treasury - Notes
5.625% due 05/15/08 ............................. 1,195 1,242
5.75% due 08/15/03 .............................. 9,005 9,261
5.75% due 08/15/10 .............................. 9,670 9,894
7.0% due 07/15/06 ............................... 1,124 1,219
7.5% due 02/15/05 ............................... 15,816 17,212
----------
59,052
----------
TOTAL PUBLICLY-TRADED 92.5% 750,418
BONDS- ----------
Shares
PREFERRED STOCK
Media - TV & Radio - 7.2%
CSC Holdings, Inc. .............................. 27 2,874
----------
TOTAL PREFERRED STOCK- 0.4% 2,874
----------
WARRANTS
Telephone - 0.0%
Metronet Communications Corp. -
CW 144A Expires 08/15/07 ....................... 2 239
----------
TOTAL WARRANTS- 0.0% 239
----------
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 6.6%
Investment in joint trading account
3.97% due 07/02/01 .............................. $ 53,840 53,840
Market
Name of Issuer Shares Value
(000's)
SHORT-TERM INVESTMENTS - Continued
Navigator Securities Lending
Prime Portfolio ** 247,040,782 $ 247,041
----------- ----------
TOTAL SHORT-TERM INVESTMENTS 36.9% 300,881
----------- ----------
TOTAL INVESTMENTS- 129.8% 1,059,276
Other Assets & Liabilities, Net- (29.8)% (242,979)
----------- ----------
NET ASSETS- 100.0% $ 816,297
=========== ==========
(a) Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At June 30, 2001, securities aggregated
$84,516 or 10.4% of net assets of the Portfolio.
** Represents investment of security lending collateral.
See notes to financial statements.
83
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND II FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.5%
Boeing Cap. Corp. - Sr. Notes
6.1% due 03/01/11 ............................... $ 20 $ 19
Lockheed Martin Corp.
8.2% due 12/01/09 ............................... 50 54
Lockheed Martin Corp. - Bonds
8.5% due 12/01/29 ............................... 25 28
-------
101
Agricultural Operations - 0.5%
Cargill, Inc.
6.25% due 05/01/06 .............................. 15 15
Potash Corp. of Saskatchewan - Notes
7.75% due 05/31/11 .............................. 20 20
-------
35
Automobile - 0.4%
Delphi Automotive Systems Corp. - Notes
6.55% due 06/15/06 .............................. 25 25
Bank - 3.2%
Bank One Corp.
7.875% due 08/01/10 ............................. 10 11
Barclays Bank PLC - Bonds 144A
8.55% due 09/29/49 .............................. 75 81
Barclays Bank PLC Perpetual Revs - 144A
7.375% due 12/15/49 ............................. 15 15
BNP Paribus Capital Trust - Sub 144A
9.003% due 12/29/49 ............................. 20 22
Capital One Bank - Sr. Notes
6.875% due 02/01/06 ............................. 10 10
Colonial Bank Montgomery Al - Sub Notes
9.375% due 06/01/11 ............................. 10 10
Sanwa Bank , Ltd. - Sub Notes
7.4% due 06/15/11 ............................... 15 14
Skandinaviska Enskida Banken - Sub.
Notes 144A
6.5% due 12/29/49 ............................... 15 15
Standard Chartered Bank - Sub Notes 144A
8.0% due 05/30/31 ............................... 15 15
Zions Financial Corp. - GTD 144A
6.95% due 05/15/11 .............................. 20 20
-------
213
Brokerage & Investment Management - 0.2%
Salomon, Inc. - Notes
5.875% due 03/15/06 ............................. 10 10
Chemical - 0.4%
Equistar Chemical - Notes
8.5% due 02/15/04 ............................... 15 14
Millenium America, Inc. 144A
9.25% due 06/15/08 .............................. 5 5
NOVA Chemicals Corp. - Notes
7.0% due 05/15/06 ............................... 10 10
-------
29
Computer Software & Services - 0.4%
Systems 2001 LLC - Cl. B 144A
7.156% due 12/15/11 ............................. 25 25
Container - 0.2%
Sealed Air Corp.
8.75% due 07/01/08 .............................. 5 5
Stone Container Corp.
9.75% due 02/01/11 .............................. 10 10
-------
15
Cosmetic & Personal Care - 0.2%
International Flavors & Fragrances, Inc.
- Notes 144A
6.45% due 05/15/06 .............................. 15 15
Electric Power - 1.7%
Calpine Canada Energy
8.5% due 05/01/08 ............................... 10 10
Calpine Corp. - Sr. Notes
8.5% due 02/15/11 ............................... 10 10
Exelon Generation Co. LLC - Sr. Notes
144A
6.95% due 06/15/11 .............................. 25 25
Mirant Corp.
8.3% due 05/01/11 ............................... 15 15
Pinnacle West Capital Corp. - Sr. Notes
6.4% due 04/01/06 ............................... 15 14
Progress Energy, Inc. - Sr. Notes
7.1% due 03/01/11 ............................... 15 15
PSEG Energy Holdings, Inc. - Sr. Notes
144A
8.625% due 02/15/08 ............................. 10 10
PSEG Power LLC
8.625% due 04/15/31 ............................. 15 16
-------
115
Electrical Equipment - 0.3%
HQI Transelec Chile
7.875% due 04/15/11 ............................. 20 20
Electronic Products & Services - 0.1%
CMS Energy Corp - Sr. Notes
8.5% due 04/15/11 ............................... 10 10
Financial Services - 5.4%
American Express Credit Corp.
7.2% due 09/17/07 ............................... 20 21
Amvescap PLC
6.6% due 05/15/05 ............................... 75 75
ERAC USA Finance Co.
7.95% due 12/15/09 .............................. 20 20
ERAC USA Finance Co. - GTD Notes 144A
7.35% due 06/15/08 .............................. 10 10
84
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND II FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Financial Services - Continued
Fosters Finance Corp. - Notes 144A
6.875% due 06/15/11 ............................. $ 10 $ 10
General Electric Capital Corp.
6.65% due 09/03/02 .............................. 100 102
Goldman Sachs Group, Inc.
6.875% due 01/15/11 ............................. 15 15
Heller Financial, Inc. - Notes
6.375% due 03/15/06 ............................. 10 10
Pemex Project
9.125% due 10/13/10 ............................. 20 21
Qwest Capital Funding - Bonds 144A
7.75% due 02/15/31 .............................. 25 25
The MONY Group, Inc. - Sr. Notes
7.45% due 12/15/05 .............................. 25 25
UBS Preferred Funding TRI
8.622% due 10/29/49 ............................. 20 22
--------
356
Food, Beverage & Tobacco - 0.2%
Archer Daniels Midland Co.
7.0% due 02/01/31 ............................... 15 14
Foreign Governmental - 1.0%
Province of Quebec - Debs
7.5% due 09/15/29 ............................... 25 26
Republic of Brazil
8.0% due 04/15/14 ............................... 31 23
Republic of Columbia
9.75% due 04/09/11 .............................. 15 15
--------
64
Health Care Products - 0.2%
Fresenius Medical Capital Trust IV TR PFD
Secs. 144A
7.875% due 06/15/11 ............................. 10 10
Health Care Services - 0.7%
HCA-The Healthcare Corp. - Notes
7.125% due 06/01/06 ............................. 20 20
Healthsouth Corp. - Sr. Notes
8.5% due 02/01/08 ............................... 10 10
Quest Diagnostics, Inc. Sr. Notes
6.75% due 07/12/06 .............................. 10 10
Triad Hospitals
8.75% due 05/01/09 .............................. 5 5
--------
45
Insurance - 0.4%
AXA - Sub Notes
8.6% due 12/15/30 ............................... 15 17
Hartford Life, Inc. - Sr. Notes
7.375% due 03/01/31 ............................. 10 10
--------
27
Leisure & Recreation - 2.1%
Harrah's Operating Co., Inc.
7.875% due 12/15/05 ............................. 10 10
Harrah's Operating, Inc. - Sr. Notes 144A
7.125% due 06/01/07 ............................. 20 20
International Speedway Corp.
7.875% due 10/15/04 ............................. 100 103
Station Casinos, Inc. - Sr. Notes
8.375% due 02/15/08 ............................. 5 5
--------
138
Media - TV & Radio - 3.7%
Adelphia Communications Corp.
10.25% due 06/15/11 ............................. 10 10
AOL Time Warner, Inc.
7.625% due 04/15/31 ............................. 20 20
Charter Communications Holdings LLC - Sr.
Notes
11.125% due 01/15/11 ............................ 5 5
Charter Communications Holdings LLC - Sr.
Notes 144A
10.0% due 05/15/11 .............................. 5 5
Clear Channel Communications, Inc.
7.65% due 09/15/10 .............................. 50 52
Clear Channel Communications, Inc. - Sr.
Notes
7.875% due 06/15/05 ............................. 25 26
Continental Cablevision - Sr. Notes
8.3% due 05/15/06 ............................... 5 5
CSC Holdings, Inc. - Sr. Notes Ser.144A
7.625% due 04/01/11 ............................. 20 19
EchoStar DBS Corp. - Sr. Notes
9.375% due 02/01/09 ............................. 5 5
Mediacom LLC
9.5% due 01/15/13 ............................... 10 10
News America Holdings, Inc. - Debs.
8.25% due 08/10/18 .............................. 15 15
News America, Inc. - GTD Sr. Debs
7.3% due 04/30/28 ............................... 10 9
TCI Communications, Inc. - Debs.
7.875% due 02/15/26 ............................. 20 20
Viacom, Inc.
7.875% due 07/30/30 ............................. 20 21
Viacom, Inc. - 144A
6.4% due 01/30/06 ............................... 5 5
Viacom, Inc. - Sr. Notes 144A
6.4% due 01/30/06 ............................... 15 15
--------
242
Metals & Mining - 1.0%
Inco, Ltd. - Debs.
9.6% due 06/15/22 ............................... 40 41
Newmont Mining Corp. - Notes
8.625% due 05/15/11 ............................. 10 10
85
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND II FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Metals & Mining - Continued
Phelps Dodge Corp. - Notes
8.75% due 06/01/11 .............................. $ 15 $ 15
-------
66
Natural Gas Distribution - 0.2%
Keyspan Corp. - Sr. Notes
8.0% due 11/15/30 ............................... 10 11
Oil & Natural Gas Exploration & Production - 2.2%
Alberta Energy, Ltd. - Notes
8.125% due 09/15/30 ............................. 25 27
Anadarko Petroleum Corp.
7.0% due 10/15/06 ............................... 50 51
Chesapeake Energy Corp.
8.125% due 04/01/11 ............................. 5 4
Forest Oil Corp. - Sr. Notes 144A
8.0% due 06/15/08 ............................... 10 10
NRG Energy, Inc.
7.75% due 04/01/11 .............................. 20 20
Transocean Forex, Inc. - Notes 144A
7.5% due 04/15/31 ............................... 20 20
Valero Energy Corp. - Notes
8.375% due 06/15/05 ............................. 10 11
-------
143
Oil - Equipment & Service - 1.6% TOSCO Corp.
8.125% due 02/15/30 ............................. 95 104
Paper & Forest Products - 0.8%
Georgia Pacific Corp. - Notes
7.5% due 05/15/06 ............................... 10 10
8.875% due 05/15/31 ............................. 15 15
International Paper Co.
8.125% due 07/08/05 ............................. 25 27
-------
52
Paper Products - 0.3%
Stora Enso Corp. - Notes
7.375% due 05/15/11 ............................. 20 20
Personal & Commercial Lending - 5.7%
Citigroup, Inc.
6.5% due 01/18/11 ............................... 20 20
CS First Boston Mortgage Securities Corp. -
Ser. 1998-C1 A1A
6.26% due 04/11/30 .............................. 19 19
Ford Motor Credit Co. - Notes
6.875% due 02/01/06 ............................. 15 15
General Motors Acceptance Corp.
7.5% due 07/15/05 ............................... 100 105
Household Financial Corp.
6.5% due 01/24/06 ............................... 20 20
Household Financial Corp. - Notes
8.0% due 05/09/05 ............................... 20 21
Household Financial Corp. - Notes. -
Continued
8.0% due 07/15/10 ............................... 10 11
Midland Funding Corp. II - Debs.
11.75% due 07/23/05 ............................. 30 33
Prime Credit Card Master Trust
6.7% due 11/15/05 ............................... 50 52
Standard Credit Card Master Trust
8.25% due 01/07/07 .............................. 35 38
Takefuji Corp.
9.2% due 04/15/11 ............................... 15 16
Tiers Fixed Rate Certificates - Ser. Mir
2001 14 Tr Ctf 144A
7.2% due 06/15/04 ............................... 25 25
-------
375
Pollution Control - 0.1%
Waste Management, Inc. - Sr. Notes
7.375% due 08/01/10 ............................. 5 5
Real Estate Development - 0.7%
EOP Operating LP
6.625% due 02/15/05 ............................. 20 20
EOP Operating LP - Notes
7.375% due 11/15/03 ............................. 25 26
-------
46
Real Estate Investment Trust - 0.5%
Healthcare Realty Trust - Sr. Notes
8.125% due 05/01/11 ............................. 10 10
Mack-Cali Realty LP - Notes
7.75% due 02/15/11 .............................. 25 25
-------
35
Retail - Department Stores - 1.8%
Kingdom Mart Corp. - Notes 144A
9.875% due 06/15/08 ............................. 10 10
Target Corp.
7.5% due 02/15/05 ............................... 100 106
-------
116
Retail - Food - 0.3%
Delhaize America, Inc.
8.125% due 04/15/11 ............................. 20 21
Telecommunication Equipment - 1.1%
BellSouth Capital Funding - Debs.
7.875% due 02/15/30 ............................. 15 16
Deutsche Telekom International Finance
7.75% due 06/15/05 .............................. 25 26
8.25% due 06/15/30 .............................. 15 16
Vulcan Materials - Notes
6.4% due 02/01/06 ............................... 15 15
-------
73
86
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND II FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Telecommunication Services - 2.8%
AT&T Wireless Group - Sr. Notes Ser.144A
8.75% due 03/01/31 .............................. $ 25 $ 26
Citizens Communications Co. - Notes
8.5% due 05/15/06 ............................... 10 10
9.25% due 05/15/11 .............................. 10 10
Cox Communications, Inc. - Notes
7.75% due 11/01/10 .............................. 20 21
Crown Castle International Corp. - Sr.
Notes
9.0% due 05/15/11 ............................... 5 4
Crown Castle International Corp. - Sr
Notes 144A
9.375% due 08/01/11 ............................. 5 4
France Telecom SA - Notes 144A
8.5% due 03/01/31 ............................... 20 21
Telefonos De Mexico, SA - Sr. Notes 144A
8.25% due 01/26/06 .............................. 25 26
Tellus Corp. - Notes
8.0% due 06/01/11 ............................... 20 21
Triton PCS, Inc. - Sr. Sub Notes
9.375% due 02/01/11 ............................. 5 5
Verizon Global Funding Corp. - Bonds 144A
7.75% due 12/01/30 .............................. 10 10
Worldcom, Inc. .
8.0% due 05/15/06 ............................... 25 26
--------
184
Telephone - 0.9%
Metronet Communications Corp. - Sr. Disc.
Notes
0.0% due 11/01/07 ............................... 15 14
Pinnacle Partners
8.83% due 08/15/04 .............................. 15 16
Sprint Capital Corp.
6.875% due 11/15/28 ............................. 20 17
Sprint Capital Corp. - Notes
7.125% due 01/30/06 ............................. 10 10
--------
57
Transportation Services - 2.4%
Burlington Northern Santa Fe Corp.
7.95% due 08/15/30 .............................. 25 26
Delta Air Lines, Inc.
7.7% due 12/15/05 ............................... 15 15
Northwest Airlines Corp. - Sr. Notes
8.875% due 06/01/06 ............................. 10 10
United Airlines
7.73% due 07/01/10 .............................. 100 105
--------
156
U.S. Government Agencies - 35.6%
Federal Home Loan Mortgage Corp.
6.0% due 01/01/29 ............................... 183 176
7.5% due 01/01/30 ............................... 82 84
Federal National Mortgage Assoc.
5.125% due 02/13/04 ............................. 350 352
5.5% due 04/01/16 ............................... 99 96
6.0% due 04/01/16 ............................... 119 117
6.0% due 11/01/28 ............................... 119 114
6.5% due 04/01/31 ............................... 177 178
7.0% due 07/01/30 .............................. 61 62
7.0% due 12/01/30 ............................... 15 15
7.5% due 06/01/30 .............................. 99 101
7.5% due 07/01/30 ............................... 79 80
7.5% due 02/01/31 ............................... 10 10
8.0% due 12/01/29 .............................. 115 119
8.5% due 01/01/31 ............................... 85 89
Federal National Mortgage Assoc. - Notes
7.0% due 02/01/16 ............................... 120 123
7.125% due 01/15/30 ............................. 55 59
Government National Mortgage Assoc.
6.0% due 02/15/29 ............................... 99 96
7.0% due 01/15/31 ............................... 25 25
7.0% due 03/15/31 .............................. 119 120
7.0% due 06/15/31 ............................... 50 50
7.0% due 09/15/31 ............................... 35 35
7.5% due 12/15/29 ............................... 103 106
7.5% due 07/15/30 ............................... 41 42
8.0% due 06/15/30 ............................... 90 94
--------
2,343
U.S. Governmental - 11.8%
U.S. Treasury - Bills
3.435% due 09/13/01 ............................. 43 43
U.S. Treasury - Bonds ........................... 45 59
6.25% due 05/15/30 .............................. 55 58
8.875% due 08/15/17 ............................. 45 59
U.S. Treasury - Notes
3.375% due 01/15/07 ............................ 56 56
5.625% due 05/15/08 ............................. 10 10
5.75% due 08/15/03 .............................. 205 211
5.75% due 08/15/10 .............................. 225 230
7.0% due 07/15/06 .............................. 65 71
7.5% due 02/15/05 ............................... 30 33
--------
771
--------
TOTAL PUBLICLY-TRADED BONDS- 91.8% 5,976
--------
Shares
PREFERRED STOCK
Media - TV& Radio - 0.3%
CSC Holdings, Inc. .............................. 0 23
--------
TOTAL PREFERRED STOCK- 0.3% 23
--------
87
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
ACTIVE BOND II FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 8.3%
3.97% due 07/02/01 .............................. $ 547 $ 547
--------- --------
TOTAL INVESTMENTS- 101.1% 6,657
Other Assets & Liabilities, Net- (1.1)% (74)
--------- --------
NET ASSETS- 100.0% $6,583
========= ========
144A-Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At June 30, 2000, securities aggregated
$519 or 7.8% of net assets of the Portfolio.
See notes to financial statements.
88
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
Brazil - 6.0%
Brasil Telecom Participacoes S.A. (TELS) ........ 5,985 $ 251
Centrais Electricas Brasileiras SA (UTIE) ....... 1,446,000 19
Centrais Electricas Brasileirias SA - ADR
(ELEQ) ......................................... 200 1
Companhia De Bebidas ADR (FOOD) ................. 6,860 159
Companhia Energetica de Minas Gerias - ADR
(UTIE) ......................................... 4,640 55
Companhia Vale do Rio Doce - ADR (META) ......... 815 19
Embraer - Empresa Brasileira de Aeronautica SA
(AERO) ......................................... 3,410 133
Embratel Participacoes SA - ADR (UTIT) .......... 100 1
Petroleo Brasileiro SA *(OILX) .................. 12,950 337
Petroleo Brasileiro SA - ADR (OILX) ............. 4,125 96
Tele Celular Sul Participacoes SA - ADR (TELS) .. 2,798 57
Tele Norte Leste Participacoes SA - ADR (TELS) .. 6,832 104
Telecomunicacoes Brasileiras SA - ADR (UTIT) .... 2,383 111
Telemig Celular Participacoes SA - ADR (TELS) ... 897 37
Telesp Celular Participacoes SA - ADR (TELS) .... 3,164 48
Unibanco - Uniao de Bancos Brasileiros SA -
GDR (BANK) ..................................... 6,731 171
Votorantim Celulose e Papel SA - ADR (PAPR) ..... 4,500 68
-------
1,667
Chile - 0.2%
Companhia de Telecomunicaciones de Chile Sa
(TELS) ......................................... 815 19
Enersis SA - ADR (UTIE) ......................... 1,900 28
-------
47
Czech Republic - 0.1%
Cesky Telecom - GDR *(TELS) ..................... 2,940 26
SPT Telecom AS (TELS) ........................... 1,410 13
-------
39
Egypt - 0.1%
Egypt Gas Co. (OILX) ............................ 500 9
Egypt Mobile Phone (TELS) ....................... 975 15
-------
24
Hong Kong - 9.1%
Asia Satellite Telecommunications Holdings,
Ltd. (TELS) .................................... 17,000 29
Beijing Capital International (FINL) ............ 151,000 47
Brilliance China Automotive Holdings, Ltd.
(AUTO) ......................................... 135,000 33
China Merchants Holdings International Co.,
Ltd. (CNSU) .................................... 155,000 118
China Overseas and Land Invest (TRAN) ........... 162,000 29
China Petroleum (OILX) .......................... 174,000 35
China Rare Earth (OILX) ......................... 17,000 6
China Res Beijing (UTIE) ........................ 103,000 29
China Resources Enterprise, Ltd. (UTIE) ......... 54,000 91
China Southern Airlines Company Limited (TRAN) .. 193,000 60
China Telecom (Hong Kong), Ltd. (TELS) .......... 204,000 1,075
China Unicom, Ltd. *(TELS) ...................... 32,000 56
Citic Pacific, Ltd. (DIOP) ...................... 49,000 152
CNOOC, Ltd. (OILX) .............................. 160,000 153
CNOOC, Ltd. - ADR*(OILX) ........................ 1,700 32
Cosco Pacific, Ltd. (COMM) ...................... 39,000 26
Denway Motors, Ltd. (AUTO) ...................... 304,300 109
Greencooltechnology (TELE) ...................... 159,000 63
Legend Holdings (COMP) .......................... 121,000 68
Nanjing Panda Electric (UTIE) ................... 168,000 73
New World China Ltd. (ENER) ..................... 44,000 21
Sun Television Cybernetworks Holdings, Ltd.
(MEDI) ......................................... 269,000 5
Travelesky Technology, Ltd. (SOFT) .............. 64,000 65
Yanzhou Coal Mining (META) ...................... 132,000 61
Yanzhou Coal Mining Co., Ltd. - ADR (META) ...... 2,160 52
-------
2,488
Hungary - 1.3%
Gedeon Richter Rt. ((HEAL) ...................... 1,924 107
Gedeon Richter, Ltd. - GDR (HEAL) ............... 690 38
Magyar Tavkozlesi Rt. (UTIT) .................... 3,604 11
Magyar Tavkozlesi Rt. - ADR (UTIT) .............. 4,834 72
MOL Magyar Olaj-es Gazipari Rt. (OILX) .......... 3,653 52
OTP Bank Rt. (BANK) ............................. 1,742 91
-------
371
India - 7.0%
Bharat Heavy Electricals, Ltd. (ELEQ) ........... 33,200 125
Bharat Petroleum Corp., Ltd. (OILS) ............. 16,300 65
BSES, Ltd.* (UTIE) .............................. 15,500 65
Cipla, Ltd. ((HEAL) ............................. 3,000 73
Colgate Palmolive (HNBA) ........................ 8,500 29
Container Corp. of India, Ltd. (TRAN) ........... 24,092 65
Dabur India, Ltd. (DIOP) ........................ 22,000 29
89
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
India - Continued
Dr. Reddy's Laboratories, Ltd. (HEAL) ........... 2,050 $ 70
Gujarat Ambuja Cements Ltd. (CONS) .............. 18,500 73
HCL Technologies, Ltd. *(SOFT) .................. 4,500 28
HDFC Bank Ltd. (BANK) ........................... 12,250 55
Hero Honda Motors, Ltd.* (CNSU) ................. 20,750 64
Hindustan Lever Ltd. (CNSU) ..................... 52,750 230
Hindustan Petroleum Corp., Ltd. (OILX) .......... 18,000 60
Housing Development Financing Corp., Ltd.
(LEND) ......................................... 11,880 174
Indialnfo, Ltd. (SOFT) .......................... 10,639 5
Infosys Technologies, Ltd. *(SOFT) .............. 1,690 135
ITC, Ltd. (FOOD) ................................ 1,250 20
ITC, Ltd. - GDR* (FOOD) ......................... 2,000 36
Lupin Laboratories, Ltd. (HEAL) ................. 4,600 7
Mahanagar Telephone Nigam, Ltd. (TELS) .......... 45,250 137
Nestle India, Ltd. (FOOD) ....................... 2,550 30
Ranbaxy Laboratories, Ltd. *(HEAL) .............. 5,250 54
Reliance Industries, Inc. (UTIE) ................ 13,500 106
State Bank of India*(BANK) ...................... 16,600 78
State Bank of India - GDR (BANK) ................ 3,500 39
Strides Arcolab, Ltd. (CNSU) .................... 2,500 3
Tata Ironsteel (STEE) ........................... 10,000 25
Wipro, Ltd.*(DIOP) .............................. 1,050 29
Zee Telefilms Ltd. (MEDI) ....................... 10,800 27
-------
1,936
Indonesia - 0.4%
Hampshire M Sampoerna (DIOP) .................... 71,500 101
Israel - 4.0%
Breezecom, Ltd.*(TELS) .......................... 10,260 45
Ceragon Networks, Ltd. (TELS) ................... 5,490 17
Check Point Software Technologies, Ltd. (SOFT) .. 4,282 217
ECI Telecommunications, Ltd. (MEDI) ............. 28,973 145
RADVision, Ltd. *(SOFT) ......................... 5,407 33
Radware, Ltd. *(SOFT) ........................... 7,989 144
Teva pharmaceutical Industries, Ltd. ((HEAL) .... 1,490 93
Teva Pharmaceutical Industries, Ltd. - ADR
(HEAL) ......................................... 4,398 274
TTI Team Telecom International, Ltd. *(TELS) .... 6,556 127
-------
1,095
Malaysia - 2.1%
British American Tobacco (Malaysia) Berhad
(FOOD) ......................................... 14,000 128
Digi Swisscom (TELS) ............................ 40,000 58
Malayan Banking Berhad (BANK) ................... 38,000 103
Malaysian Pacific Industries (ETRN) ............. 10,000 35
Public Bank Berhad (BANK) ....................... 123,300 73
Resorts World Berhad (LEIS) ..................... 19,000 26
Telekom Malaysia Berhad (TELS) .................. 36,000 83
Tenaga Nasional Berhad (UTIE) ................... 38,000 87
-------
593
Mexico - 13.6%
Alfa, S.A. *(DIOP) .............................. 42,690 59
America Movil SA de CV - ADR Ser. L 8(TELS) ..... 21,400 446
Cemex SA de CV - CPO (CONS) ..................... 53,598 285
Cemex SA de CV - ADR Participation
Certificates *(CONS) ........................... 749 20
Cifra SA de CV - Ser V (RETS) ................... 55,050 150
Fomento Economico Mexicano SA de CV (FOOD) ...... 6,899 29
Fomento Economico Mexicano SA de CV - ADR
(FOOD) ......................................... 9,173 393
Grupo Aeroportuario del Sureste SA de CV*
(TRAN) ......................................... 18,100 22
Grupo Aeroportuario Sur - ADR* (TRAN) ........... 5,600 105
Grupo Carso SA de CV - Ser. A1 (DIOP) ........... 15,700 47
Grupo Financiero Banamex Accival, SA de CV
(FINL) ......................................... 139,000 360
Grupo Financiero Bancomer SA de CV - Cl. O
(FINL) ......................................... 154,150 153
Grupo Financiero BBVA Bancomer, SA de CV
(FINL) ......................................... 8,300 164
Grupo Modelo SA de CV - Ser. C (FOOD) ........... 8,200 22
Grupo Sanborns SA - Ser. B1* (RETS) ............. 2,625 4
Grupo Televisa SA - GDR* (MEDI) ................. 6,386 256
Kimberly-Clark de Mexico SA de CV (PAPR) ........ 64,630 191
Telefonos de Mexico SA - ADR (UTIT) ............. 25,950 911
Wal-Mart de Mexico SA de CV - Ser. C (RETS) ..... 16,700 41
Wal-Mart de Mexico SA de CV - ADR* (RETS) ....... 3,216 87
-------
3,745
Poland - 1.5%
Bank Polska Kasa Opieki SA* (BANK) .............. 6,323 109
Elektrim Spolka Akcyjna SA (ETRN) ............... 3,777 24
Telekomunikacja (TELS) .......................... 2,707 12
90
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Poland - Continued
Telekomunikacja Polska - GDR* (TELS) ............ 63,565 $ 284
-------
429
Russia - 3.9%
LuKoil Holding - ADR (OILS) ..................... 5,950 285
Norilsk Nickel - ADR (PMET) ..................... 1,400 25
OAO Gazprom - ADR (UTIG) ........................ 4,500 50
RAO Unified Energy Systems - GDR (UTIE) ......... 29,496 336
Surgutneftegaz (OILS) ........................... 1,270 20
Surgutneftegaz - ADR (OILS) ..................... 28,527 365
-------
1,081
Singapore - 0.1%
Total Access Communication Public Co., Ltd
(TELS) ......................................... 14,000 31
South Africa - 9.1%
ABSA Group, Ltd. (BANK) ......................... 30,000 141
Anglo American Platinum Corp., Ltd. (PMET) ...... 5,248 234
Anglo American PLC (META) ....................... 15,777 234
Bidvest Group, Ltd. (DIOP) ...................... 16,598 103
Dimension Data Holdings PLC (SOFT) .............. 5,412 21
FirstRand, Ltd. (FINL) .......................... 215,960 231
Impala Platinum Holdings, Ltd. (META) ........... 3,109 156
Liberty Life Association of Africa, Ltd.
(INSU) ......................................... 15,920 115
M-Cell, Ltd. (TELS) ............................. 18,570 43
Nedcor, Ltd. (BANK) ............................. 6,940 135
Old Mutual PLC (OILX) ........................... 3,500 8
Remgro, Ltd.* (DIOP) ............................ 16,190 116
Sanlam, Ltd.* (INSU) ............................ 156,050 213
Sappi, Ltd. (READ) .............................. 6,600 58
Sasol, Ltd. (OILX) .............................. 20,103 184
South African Breweries PLC (FOOD) .............. 48,170 365
Standard Bank Investment Corp., Ltd. (BANK) ..... 35,500 155
-------
2,512
South Korea - 14.1%
Cheil Communications,
Inc. (MEDP) .................................... 1,830 159
Hana Bank (BANK) ................................ 8,600 63
Housing & Commercial
Bank (BANK) .................................... 3,130 70
Humax Co., Ltd.* (APPL) ......................... 10,485 154
Hyundai Mobis (AUTO) ............................ 11,410 123
Hyundai Motor Co., Ltd. (AUTO) .................. 16,680 363
Kookmin Bank (BANK) ............................. 17,263 232
Kookmin Credit Card Co. (LEND) .................. 2,020 58
Korea Electric Power Corp. (UTIE) ............... 7,850 146
Korea Electric Power Corp. - ADR (UTIE) ......... 1,950 19
Korea Telecom Corp.* (TELS) ..................... 6,850 274
Korea Telecom Corp. -ADR* (TELS) ................ 11,900 262
Korea Telecom Freetel* (TELS) ................... 1,540 44
LG Construction Co. (CONS) ...................... 6,920 58
LG Household & health (HEAL) .................... 2,610 59
Pohang Iron & Steel Co., Ltd. (STEE) ............ 3,730 298
Samsung Electro-Mechanics Co. (ETRN) ............ 840 30
Samsung Electronics (ETRN) ...................... 4,900 723
Samsung Securities Co., Ltd. (FUND) ............. 4,300 122
Shinhan Bank (BANK) ............................. 22,930 235
SK Telecom Co., Ltd. (TELS) ..................... 2,450 361
Tongyang Cement Co. (CONS) ...................... 1,850 32
-------
3,885
Taiwan - 11.2%
Ambit Microsystems Corp. (COMP) ................. 15,600 65
Ase Test, Ltd. 8 (ETRN) ......................... 3,300 42
Asustek Computer (COMP) ......................... 43,750 185
Bank Sinopac* (BANK) ............................ 121,000 56
Cathay Life Insurance (INSU) .................... 32,000 39
China Steel Corp. (STEE) ........................ 158,000 158
China Unicom, Ltd. (TELS) ....................... 300 5
Chinatrust Commercial Bank (BANK) ............... 212,000 148
Compal Electronics Inc. (COMP) .................. 20,750 22
Delta Electronics Inc. (ETRN) ................... 66,000 163
Elan Microelectronics Corp (ETRN) ............... 17,000 33
Far East Textile (DIOP) ......................... 44,000 25
Far Eastern Textile, Ltd. - GDR* (APPA) ......... 2,848 16
Faraday Tech (ETRN) ............................. 4,000 32
Formosa Chemical & Fibre (CHEM) ................. 88,560 62
Fubon Insurance Co. (INSU) ...................... 95,000 79
Hon Hai Precision Insustry Co.,Ltd. Cl.
G* (ETRN) ...................................... 36,000 189
Hon Hai Precision Industry Co.,Ltd. - GDR (ETRN). 8,990 110
Macronix International Co.,Ltd.* (COMP) ......... 8,100 9
Nan Ya Plastic Corp. (CHEM) ..................... 25,000 25
President Chain Store Corp. (RETS) .............. 29,000 63
Quanta Computer, Inc. (COMP) .................... 40,000 136
Realtek Semiconductor Corp.(ETRN) ............... 6,000 27
Siliconware Precision (SOFT) .................... 102,000 58
Sunplus Technology (TELE) ....................... 7,000 30
Taipei Bank (BANK) .............................. 105,000 57
Taishin International Bank (BANK) ............... 102,000 46
Taiwan Cellular Corp.* (TELS) ................... 50,168 65
Taiwan Semiconductor (ETRN) ..................... 345,800 643
Taiwan Semiconductor Manufacturing Co., Ltd.
- ADR (ETRN) ................................... 2,887 44
91
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Taiwan - Continued
Uni-President Enterprises Co.* (FOOD) ........... 100,000 $ 42
United Microelectronics Corp. (COMP) ............ 245,000 325
Winbond Electronic (ETRN) ....................... 88,675 74
Winbond Electronics Corp. - GDR* (ETRN) ......... 982 8
-------
3,081
Thailand - 1.6%
Advanced Info Service Public Co., Ltd. (TELS) ... 16,300 174
BEC World Public Co.,Ltd. (MEDI) ................ 15,900 78
Delta Electronics (Thailand) Public Co., Ltd.
(ETRN) ......................................... 18,622 90
Shin Corp. Public Co., Ltd. (COMP) .............. 15,800 60
Thai Farmers Bank Public Co., Ltd. (BANK) ....... 86,400 38
-------
440
Turkey - 2.6%
Akbank T.A.S. (BANK) ............................ 12,176,000 51
Aksigorta (INSU) ................................ 3,417,000 27
Anadolu Efes Biracilik ve Malt Sanayii A.S.
(FOOD) ......................................... 1,175,995 45
Migros Turk T.A.S. (RETF) ....................... 466,000 29
Netas Northern Electric Telekomunikasyon A.S.
(TELS) ......................................... 1,369,639 56
Tupras-Turkiye Petrol Rafinerileri A.S. (OILX) .. 3,684,000 94
Turkcell Iletisim Hizmetleri A.S. (TELS) ........ 4,735 13
Turkiye Garanti Bankasi AS (BANK) ............... 7,124,000 36
Vestel Elektronik Sanayi ve Ticaret A.S. (ETRN) . 21,836,620 53
Yapi ve Kredi Bankasi AS (BANK) ................. 100,949,567 314
Yapi ve Kredi Bankasi A.S. - GDR* (BANK) ........ 1,568 5
-------
723
United Kingdom - 1.7%
Anglo American PLC (META) ....................... 18,537 278
Dimension Data Holdings PLC (SOFT) .............. 13,588 52
DSP Group, Inc. (ETRN) .......................... 1,500 32
Old Mutual PLC (OILX) ........................... 9,700 22
South African Breweries PLC* (FOOD) ............. 9,853 75
-------
459
United States - 0.5%
Zoran Corp. *(ETRN) ............................. 4,805 143
-------
TOTAL COMMON STOCK- 90.1% 24,890
-------
PREFERRED STOCK
Brazil - 5.4%
Banco Itau SA (BANK) ............................ 2,401,969 210
Brasil Telecom SA (TELS) ........................ 21,169,819 125
Celular CRT Participacoes *(TELS) ............... 1,039,321 430
Centrais Electricas Brasileires SA - Cl. B (UTIE) 2,581,000 30
Compahnia de Bebidas das Americas* (FOOD) ....... 34,000 8
Companhia Energetica de Minas Gerais (UTIE) ..... 4,944,400 59
Companhia Vale do Rio Doce -Cl.A*(META) ......... 13,797 314
Embratel Participacoes SA (UTIT) ................ 8,459,000 65
Petroleo Brasileiro SA - Petrobras (OILS) ....... 4,201 98
Tele Celular Sul Participacoes SA (TELS) ........ 5,894,000 12
Tele Centro Sul Participacoes SA (UTIT) ......... 9,565,000 80
Tele Norte Leste Participacoes SA (UTIT) ........ 845,000 13
Telemig Celular Participacoes SA (TELS) ......... 10,962,227 23
Telesp Celular Participacoes SA* (TELS) ......... 5,365,286 33
-------
1,500
South Korea - 0.3%
Samsung Electronics (ETRN) ...................... 1,100 68
-------
TOTAL PREFERRED STOCK- 5.7% 1,568
-------
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 4.0%
Investments in joint
trading accounts
3.97% due 07/02/01 ............................ $ 1,094 1,094
----------- ---------
TOTAL INVESTMENTS- 99.8% 27,552
Other Assets & Liabilities, Net 0.2% 54
----------- ---------
NET ASSETS- 100.0% $ 27,606
=========== =========
ADR- American Depository Receipts.
GDR- Global Depository Receipts.
* Non-income producing security.
See notes to financial statements.
92
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Telecommunication Services ......... TELS $ 4,890 18.5%
Bank ............................... BANK 2,711 10.2
Electronic Products & Services ..... ETRN 2,563 9.7
Food, Beverage & Tobacco ........... FOOD 1,352 5.1
Telephone .......................... UTIT 1,264 4.8
Electric Power ..................... UTIE 1,143 4.3
Metals & Mining .................... META 1,114 4.2
Oil & Natural Gas Exploration &
Production ........................ OILX 1,088 4.1
Financial Services ................. FINL 955 3.6
Computer Equipment ................. COMP 870 3.3
Computer Software & Services ....... SOFT 833 3.1
Health Care Products ............... HEAL 775 2.9
Oil ................................ OILS 758 2.9
Diversified Operations ............. DIOP 661 2.4
Automobile ......................... AUTO 628 2.4
Media - TV & Radio ................. MEDI 511 1.9
Steel .............................. STEE 481 1.8
Insurance .......................... INSU 473 1.8
Construction ....................... CONS 468 1.8
Consumer Miscellaneous ............. CNSU 415 1.6
Retail - Department Stores ......... RETS 345 1.3
Transportation Services ............ TRAN 281 1.1
Precious Metals/Gems/Stones ........ METP 259 1.0
Paper & Forest Products ............ PAPR 259 1.0
Personal & Commercial Lending ...... LEND 232 0.9
Media - Publishing ................. MEDP 159 0.6
Household Appliances & Furnishings . APPL 154 0.6
Aerospace & Defense ................ AERO 133 0.5
Electrical Equipment ............... ELEQ 126 0.5
Brokerage & Investment Management .. FUND 122 0.5
Telecommunication Equipment ........ TELE 93 0.3
Chemical ........................... CHEM 87 0.3
Real Estate Development ............ READ 58 0.2
Natural Gas Distribution ........... UTIG 50 0.2
Cosmetic & Personal Care ........... HNBA 29 0.1
Retail - Food ...................... RETF 29 0.1
Commercial Services ................ COMM 26 0.1
Leisure & Recreation ............... LEIS 26 0.1
Energy - Alternative Sources ....... ENER 21 0.1
Shoe & Apparel Manufacturing ....... APPA 16 0.1
------- -----
$26,458 100.0%
======= =====
93
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Argentina - 0.2%
Banco Frances SA (BANK) ......................... 10,000 83
GPO Finance Galicia (FINL) ...................... 40,460 60
IRSA Inversiones y Representaciones SA (READ) ... 29,022 46
PC Holdings SA - Cl. B (FINL) ................... 53,132 72
Siderca S.A.I.C. (STEE) ......................... 35,000 68
-------
329
Australia - 2.8%
AMP Diversified Property Trust (REIT) ........... 106,700 132
AMP, Ltd. *(INSU) ............................... 28,800 323
Aristocrat Leisure Limited (LEIS) ............... 18,500 67
BHP, Inc.(DIOP) ................................. 37,385 203
Brambles Industries, Ltd. (DIOP) ................ 7,200 176
Broken Hill Proprietary Co., Ltd. (DIOP) ........ 35,100 186
Coles Myer, Ltd. (RETS) ......................... 39,400 127
CSL, Ltd. (HEAL) ................................ 2,600 63
CSR, Ltd. (CONS) ................................ 37,900 137
Foster's Brewing Group, Ltd. (FOOD) ............. 70,100 196
General Property Trust (REIT) ................... 53,300 76
Lend Lease Corp. (FINL) ......................... 13,200 85
National Australia Bank, Ltd. (BANK) ............ 30,600 547
News Corp., Ltd. (MEDI) ......................... 42,300 389
Onesteel. Ltd. (STEE) ........................... 8,775 4
Orica, Ltd. (DIOP) .............................. 15,500 35
Pacific Dunlop, Ltd. (DIOP) ..................... 59,000 25
Paperlinx (PAPR) ................................ 4,800 10
QBE Insurance Group, Ltd. (INSU) ................ 11,200 67
Rio Tinto, Ltd. (METP) .......................... 6,900 120
Santos, Ltd. (OILX) ............................. 22,300 74
Tabcorp Holdings, Ltd. (LEIS) ................... 16,400 79
Telstra Corp., Ltd. (TELS) ...................... 166,200 456
Westfield Trust (REIT) .......................... 54,000 93
Westpac Banking Corp., Ltd.(BANK) ............... 46,600 344
WMC, Ltd. (DIOP) ................................ 26,300 129
Woolworth's, Ltd. (RETS) ........................ 30,300 170
-------
4,313
Austria - 1.0%
Austria Tabak AG (FOOD) ......................... 3,700 259
Austrian Airlines (TRAN) ........................ 5,550 53
BBAG Oesterreichische Brau Beteiligungs AG (FOOD) 2,150 79
Bohler-Uddeholm AG (STEE) ....................... 1,500 56
BWT AG (POLL) ................................... 2,000 57
EA-Generali AG (INSU) ........................... 1,050 135
Flughafen Wien AG (TRAN) ........................ 4,000 129
Mayr-Melnhof Karton AG (PAPR) ................... 1,800 80
Oesterreichische Elektrizitaetswirtschafts AG
(UTIE) ......................................... 3,900 324
OMV AG (OILX) ................................... 3,000 252
VA Technologie AG (ENGI) ........................ 2,100 68
Wienerberger Baustoffindustrie AG (CONS) ........ 7,200 122
-------
1,614
Belgium - 1.6%
Barco NV (ETRN) ................................. 559 25
BarcoNet NV* (ETRN) ............................. 1,118 3
Bekaert NV (METP) ............................... 1,390 50
Colruyt NV (RETF) ............................... 1,870 63
Compagnie Maritime Belge SA (TRAN) .............. 1,921 119
D'Ieteren SA (AUTO) ............................. 190 30
Delhaize SA (RETF) .............................. 1,255 74
Electrabel SA (UTIE) ............................ 1,536 304
Fortis (B) (INSU) ............................... 30,692 741
GPE Bruxelles LAM (DIOP) ........................ 5,094 286
Heidelberger Zement AG (CONS) ................... 1,048
KBC Bancassurance Holding NV (BANK) ............. 10,840 386
N.V. Union Miniere SA* (META) ................... 1,461 58
Solvay SA (FINL) ................................ 2,115 105
UCB SA (HEAL) ................................... 4,800 167
-------
2,411
Brazil - 0.3%
Centrais Electricas Brasileiras SA (UTIE) ....... 10,577,000 135
Companhia de Bebidas das Americas* (FOOD) ....... 482,000 108
Tele Norte Leste Participacoes SA (UTIT) ........ 11,096,000 148
-------
391
Chile - 0.5%
Banco Santiago SA - ADR (BANK) .................. 2,900 66
Compania Cervecerias Unidas SA - ADR (FOOD) ..... 3,900 86
Compania de Telecomunicaciones de Chile SA
(UTIT) ......................................... 8,000 113
Embotelladora Andina SA - ADR (FOOD) ............ 6,100 82
Empresa Nacional de Electricidad SA - ADR
(UTIE) ......................................... 10,100 114
Enersis SA - ADR (UTIE) ......................... 3,700 56
Laboratorio Chile SA - ADR (HEAL) ............... 5,700 142
Madeco SA - ADR (META) .......................... 13,000 63
-------
722
China - 0.1%
Huaneng Power International, Inc. - ADR*
(UTIE) ........................................ 3,700 89
94
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Czech Republic - 0.2%
Ceska Sporitelna AS (BANK) ...................... 9,500 63
Ceske Energeticke Zavody AS -(UTIE) ............. 21,600 48
Komercni Banka AS (BANK) ........................ 2,200 60
SPT Telecom AS (TELS) ........................... 6,300 57
-------
228
Denmark - 1.2%
A/S Dampskibsselskabet Svendborg - Cl. B (TRAN) . 27 243
Dampskibsselskabet AF 1912 - Cl. B (TRAN) ....... 40 278
Danisco A/S (FOOD) .............................. 1,650 60
Danske Bank (BANK) .............................. 11,500 207
ISS A/S (COMM) .................................. 1,650 97
Novo Nordisk AS (HEAL) .......................... 11,750 520
Novozymes A/S - Ser. B* (OILX) .................. 2,350 49
Tele Danmark A/S (TELS) ......................... 6,550 236
Vestas Wind Systems AS (ENER) ................... 2,500 117
-------
1,807
Finland - 0.4%
Nokia Oyj (TELE) ................................ 22,000 499
Sampo Insurance Co. PLC (INSU) .................. 4,700 40
Sonera Oyj (TELS) ............................... 5,432 42
UPM-Kymmene Corp.* (PAPR) ....................... 2,100 60
-------
641
France - 8.4%
Accor SA (LEIS) ................................. 4,890 207
Air Liquide (CHEM) .............................. 1,306 188
Alcatel (TELE) .................................. 18,887 395
AXA SA (INSU) ................................... 25,968 741
Banque Nationale de Paris (BANK) ................ 6,348 553
Bouygues SA (CONS) .............................. 6,110 207
Cap Gemini SA (COMM) ............................ 1,622 118
Carrefour SA (RETF) ............................. 11,715 620
Casino Guichard-Perrachon SA (RETF) ............. 2,053 173
Club Mediterranee SA (LEIS) ..................... 838 46
Compagnie de St. Gobain (CONS) .................. 1,572 214
Dassault Systemes SA (SOFT) ..................... 1,995 77
Eridania Beghin-Say SA (FOOD) ................... 98 8
Essilor International SA (HEAL) ................. 188 54
France Telecom (TELS) ........................... 16,363 781
Groupe Danone (FOOD) ............................ 1,897 261
Imercys (CONS) .................................. 794 79
L'Oreal SA (HNBA) ............................... 9,987 645
Lafarge SA (CONS) ............................... 2,526 216
Lagardere S.C.A. (DIOP) ......................... 2,436 115
LVMH (Louis Vuitton Moet Hennessy)(FOOD) ........ 7,719 389
Michelin (PART) ................................. 1,649 52
Pernod Ricard (FOOD) ............................ 1,441 101
Pinault-Printemps-Redoute SA (RETS) ............. 1,891 274
PSA Peugeot Citroen (AUTO) ...................... 818 222
Rhone-Poulenc SA (BANK) ......................... 11,637 930
Sagem SA (ETRN) ................................. 627 31
Sanofi-Synthelabo SA* (HEAL) .................... 12,280 806
Schneider SA (MACH) ............................. 2,599 144
Societe BIC SA (COMM) ........................... 1,234 45
Societe Eurafrance SA (FINL) .................... 1,026 60
Societe Generale - Cl. A (BANK) ................. 6,189 367
STMicroelectronics (ETRN) ....................... 14,283 496
Suez Lyonnaise des Faux (FOOD) .................. 19,520 629
Thomson CFS (ETRN) .............................. 3,072 111
Total Fina SA - Cl. B (OILX) .................... 11,680 1,637
Unibail SA (REAL) ............................... 2,100 114
Usinor SA (STEE) ................................ 3,397 36
Valeo SA (PART) ................................. 1,712 69
Vivendi Universal SA (DIOP) ..................... 15,051 878
-------
13,089
Germany - 12.7%
Adidas-Salomon AG (APPA) ........................ 1,920 118
Allianz AG - Reg. (INSU) ........................ 7,680 2,244
BASF AG (CHEM) .................................. 18,710 739
Bayer AG (CHEM) ................................. 21,930 861
Bayerische Vereinsbank AG (BANK) ................ 16,522 818
Beiersdorf AG (HNBA) ............................ 2,220 232
Continental AG (PART) ........................... 1,100 15
DaimlerChrysler AG (AUTO) ....................... 30,799 1,416
Deutsche Bank AG (BANK) ......................... 19,000 1,363
Deutsche Telekom AG (UTIT) ...................... 90,590 2,067
Douglas Holding AG (HNBA) ....................... 1,090 29
Dresdner Bank AG (BANK) ......................... 17,210 787
E.On AG (DIOP) .................................. 23,048 1,210
Fresenius Medical Care AG (HEAL) ................ 2,350 165
Heidelberg Zement *(CONS) ....................... 2,528 109
Hochtief AG (CONS) .............................. 3,810 64
Kamps AG (FOOD) ................................. 2,666 24
Karstadt AG (RETS) .............................. 4,100 122
Linde AG (ENGI) ................................. 3,300 140
Lufthansa AG (TRAN) ............................. 9,730 153
MAN AG (DIOP) ................................... 4,400 94
Merck KGAA (HEAL) ............................... 6,110 213
Metro AG* (RETS) ................................ 9,200 344
Muenchener
Rueckversicherungs-Gesellschaft AG -
Reg. (INSU) .................................... 5,410 1,509
Preussag AG (DIOP) .............................. 6,400 194
RWE AG (UTIE) ................................... 14,500 577
SAP AG (SOFT) ................................... 9,880 1,372
Schering AG (HEAL) .............................. 4,890 257
SGL Carbon AG (CHEM) ............................ 1,190 42
Siemens AG (DIOP) ............................... 27,540 1,692
Thyssen Krupp AG (CONS) ......................... 15,660 206
Volkswagen AG (AUTO) ............................ 10,119 476
95
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Germany - Continued
WCM Beteiligungs-und Grundbesitz AG (DIOP) ...... 9,509 102
-------
19,754
Greece - 0.1%
Alpha Credit Bank (BANK) ........................ 190 4
Commercial Bank of Greece (BANK) ................ 389 14
EFG Eurobank* (BANK) ............................ 3,211 41
Hellenic Bottling Co. SA (FOOD) ................. 63 1
Hellenic Telecommunication Organization SA
(TELS) ......................................... 2,254 29
Intracom SA (TELE) .............................. 1,062 15
Titan Cement Co. SA (CONS) ...................... 1,400 46
-------
150
Hong Kong - 1.6%
Beijing Datang Power Generation Co.,
Ltd. (UTIE) .................................... 287,000 97
Cathay Pacific Airways (TRAN) ................... 32,000 43
China Southern Airlines Co., Ltd.* (TRAN) ....... 225,000 70
China Telecom (Hong Kong), Ltd. (TELS) .......... 107,000 564
CLP Holdings, Ltd. (UTIE) ....................... 30,600 129
Guangshen Railway Co., Ltd. (TRAN) .............. 395,000 72
Hang Seng Bank, Ltd. (BANK) ..................... 22,700 233
Henderson Land Development Co., Ltd. (READ) ..... 22,000 97
HSBC Holdings PLC (BANK) ........................ 8,900 105
Hutchison Whampoa, Ltd. (COMM) .................. 28,500 288
Legend Holdings (COMP) .......................... 122,000 68
Li & Fung, Ltd. (COMM) .......................... 36,000 59
New World Development Co., Ltd. (READ) .......... 48,000 58
Pacific Century Cyberworks, Ltd.* (TELE) ........ 202,380 58
Sun Hung Kai Properties, Ltd. (REIT) ............ 31,000 279
Swire Pacific, Ltd. - Cl. A (DIOP) .............. 23,500 122
Wharf (Holdings), Ltd. (DIOP) ................... 44,000 92
-------
2,434
Hungary - 0.3%
Danubius Hotel and Spa Rt. (LEIS) ............... 3,600 49
Gedeon Richter Rt. (HEAL) ....................... 900 50
Magyar Tavkozlesi Rt. (UTIT) .................... 36,200 106
MOL Magyar Olaj-es Gazipari Rt. (OILX) .......... 7,500 107
OTP Bank Rt. (BANK) ............................. 2,300 120
-------
432
India - 0.7%
Bajaj Auto, Ltd. - GDR (AUTO) ................... 14,300 88
EIH, Ltd. - GDR (REAL) .......................... 9,000 51
Grasim Industries, Ltd. - GDR (DIOP) ............ 7,100 55
Gujarat Ambuja Cements, Ltd. - GDR (CONS) ....... 23,800 91
Hindalco Industries, Ltd. - GDR (META) .......... 4,900 95
Indian Hotels Co., Ltd. - GDR (REAL) ............ 16,700 92
ITC, Ltd. - GDR *(FOOD) ......................... 10,900 196
Larsen & Toubro, Ltd. - GDR (DIOP) .............. 13,500 135
Ranbaxy Laboratories, Ltd. - GDR (HEAL) ......... 5,700 63
Reliance Industries, Ltd. - GDR* (CHEM) ......... 13,100 204
Tata Engineering and Locomotive Co., Ltd. - GDR
(AUTO) ......................................... 34,600 50
-------
1,120
Ireland - 0.7%
Allied Irish Banks PLC (BANK) ................... 26,800 300
CRH PLC (CONS) .................................. 13,300 223
Eircom PLC* (TELS) .............................. 69,432 76
Greencore Group PLC (FOOD) ...................... 26,000 56
Irish Life & Permanent PLC (FINL) ............... 9,553 112
Jefferson Smurfit Group PLC (CONT) .............. 47,000 87
Kerry Group PLC (FOOD) .......................... 8,400 96
Ryanair Holdings PLC* (TRAN) .................... 11,421 119
-------
1,069
Israel - 0.6%
Bank Hapoalim (BANK) ............................ 43,700 107
Bezeq Israeli Telecommunication Corp.,
Ltd. (UTIT) .................................... 84,900 127
Check Point Software Technologies, Ltd. *(SOFT) . 4,200 212
IDB Holding Corp., Ltd. (FUND) .................. 5,700 156
Industrial Building Corp. (CONS) ................ 45,100 60
Makteshim-Agan Industries, Ltd.* (CHEM) ......... 26,900 55
Teva pharmaceutical Industries, Ltd. (HEAL) ..... 2,900 182
-------
899
Italy - 7.2%
Alitalia SpA (TRAN) ............................. 60,000 73
Assicurazioni Generali (INSU) ................... 43,382 1,305
Autogrill SpA (RETF) ............................ 10,001 108
Banca Di Roma (BANK) ............................ 15,000 46
Banca Intesa SpA (BANK) ......................... 178,800 632
Banca Intesa SpA (BANK) ......................... 37,400 86
Banca Popolare di Milano (BANK) ................. 18,100 71
Benetton Group SPA (RETS) ....................... 10,397 140
Bulgari SpA (RETS) .............................. 8,900 93
96
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Italy - Continued
Enel SpA* (UTIE) ................................ 248,583 $ 760
ENI SpA (OILS) .................................. 135,900 1,658
Fiat SpA (AUTO) ................................. 13,040 255
Fiat SpA (AUTO) ................................. 2,310 30
Fiat SpA - RNC (AUTO) ........................... 720 9
Italcementi SpA (CONS) .......................... 10,920 86
Italgas (UTIG) .................................. 12,650 111
La Rinascente SpA (CONS) ........................ 10,500 45
Mediaset SpA (MEDI) ............................. 44,200 372
Mediobanca SpA (FUND) ........................... 24,000 257
Mondadori (Arnoldo) Editore SpA (MEDP) .......... 10,800 77
Parmalat Finanziaria SpA (FOOD) ................. 40,352 108
Pirelli SpA (DIOP) .............................. 71,100 198
Riunione Adriatica di Sicorta SpA (INSU) ........ 22,129 272
Riunione Adriatica di Sicorta SpA - RNC (INSU) .. 2,920 27
SAI SpA (INSU) .................................. 4,300 66
San Paolo-IMI SpA (BANK) ........................ 56,097 720
Sirti SpA (TELE) ................................ 11,100 14
Telecom Italia Mobile SpA (TELS) ................ 240,100 1,225
Telecom Italia Mobile SpA - RNC (TELS) .......... 48,200 153
Telecom Italia SpA (TELS) ....................... 131,500 1,181
Telecom Italia SpA - RNC (TELS) ................. 47,300 226
UniCredito Italiano SpA (BANK) .................. 184,100 791
-------
11,195
Japan - 28.5%
77 Bank, Ltd. (BANK) ............................ 18,000 102
Acom Co., Ltd. (LEND) ........................... 3,800 335
Ajinomoto Co., Inc. (FOOD) ...................... 18,000 193
Alps Electric Co. (ETRN) ........................ 6,000 56
Amada Co., Ltd (MACH) ........................... 13,000 66
Asahi Bank, Ltd. (BANK) ......................... 73,000 158
Asahi Breweries, Ltd. (FOOD) .................... 13,000 146
Asahi Chemical Industry Co., Ltd. (CHEM) ........ 39,000 164
Asahi Glass Co., Ltd. (APPL) .................... 36,000 299
Bank of Yokohama, Ltd. (BANK) ................... 22,000 90
Benesse Corp. (COMM) ............................ 2,600 82
Bridgestone Corp. (PART) ........................ 21,000 220
Canon, Inc. (COMM) .............................. 22,000 889
Casio Computer Co. (ETRN) ....................... 9,000 52
Central Japan Railway Co. (TRAN) ................ 61 379
Chugai Pharmaceutical Co., Ltd. (HEAL) .......... 4,000 61
Citizen Watch Co., Ltd. (RETS) .................. 10,000 61
Cosmo Oil Co., Ltd. (OILX) ...................... 19,000 47
Credit Saison Co., Ltd. (FINL) .................. 5,600 136
CSK Corp. (SOFT) ................................ 3,200 100
Dai-Ichi Pharmaceutical Co., Ltd. (HEAL) ........ 7,000 162
Dai-Nippon Ink & Chemicals, Inc. (CHEM) ......... 28,000 79
Dai-Nippon Printng Co., Ltd. (COMM) ............. 19,000 232
Daicel Chemical Industries, Ltd. (CHEM) ......... 16,000 56
Dainippon Screen Manufacturing Co., Ltd. (ELEQ) . 11,000 46
Daito Trust Construction Co., Ltd. (REAL) ....... 3,600 61
Daiwa House Industry Co., Ltd. (HOUS) ........... 17,000 133
Daiwa Securities Group, Inc. (FUND) ............. 33,000 345
Denso Corp. (ETRN) .............................. 19,000 363
East Japan Railway Co. (TRAN) ................... 104 600
Ebara Corp. (MACH) .............................. 9,000 74
Eisai Co., Ltd. (HEAL) .......................... 9,000 202
Fanuc, Ltd. (ELEQ) .............................. 6,300 314
FUJI Machine Manufacturing Co., Ltd. (MACH) ..... 1,000 18
Fuji Photo Film (LEIS) .......................... 13,000 561
Fuji Soft ABC, Inc. (SOFT) ...................... 1,000 59
Fujikura (ELEQ) ................................. 11,000 67
Fujitsu, Ltd. (ELEQ) ............................ 51,000 536
Furukawa Electric Co. (TELE) .................... 16,000 128
Hankyu Corp. (TRAN) ............................. 10,000 33
Hirose Electric Co., Ltd. (ETRN) ................ 1,200 91
Hitachi, Ltd. (ETRN) ............................ 83,000 815
Honda Motor Co. (AUTO) .......................... 24,000 1,055
Hoya Corp. (ETRN) ............................... 3,000 190
Isetan Co., Ltd. (RETS) ......................... 7,000 74
Ishikawajima-Harima Heavy Industries Co., Ltd.
(DIOP) ......................................... 28,000 69
Ito-Yokado Co., Ltd. (RETS) ..................... 11,000 507
Itochu Corp. (DIOP) ............................. 34,000 138
Japan Energy Corp. (OILX) ....................... 26,000 55
Japan Tobacco, Inc. (FOOD) ...................... 45 310
Joyo Bank, Ltd. (BANK) .......................... 29,000 87
Jusco Co., Ltd.* (RETS) ......................... 8,000 176
Kajima Corp. (CONS) ............................. 35,000 89
Kaneka Corp. (CHEM) ............................. 5,000 45
KAO Corp. (HNBA) ................................ 16,000 398
Kawasaki Heavy Industry, Ltd. (DIOP) ............ 46,000 76
Kawasaki Steel Corp. (STEE) ..................... 100,000 119
Keihin Electric Express Railway Co., Ltd. (TRAN). 17,000 74
Kinden Corp. (ENGI) ............................. 12,000 75
Kinki Nippon Railway (TRAN) ..................... 36,050 145
Kirin Brewery Co. (FOOD) ........................ 21,000 179
Kokuyo Co. (COMM) ............................... 6,000 63
Komatsu, Ltd. (MACH) ............................ 30,000 138
Komori Corp. (MACH) ............................. 4,000 55
Konami Co., Ltd. (COMP) ......................... 3,700 169
97
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Japan - Continued
Konica Corp. (LEIS) ............................. 11,000 $ 81
Kubota Corp. (MACH) ............................. 40,000 159
Kuraray Co., Ltd. (APPA) ........................ 10,000 74
Kurita Water Industries, Ltd. (POLL) ............ 4,000 55
Kyocera Corp. (ETRN) ............................ 4,700 415
Kyowa Hakko Kogyo Co., Ltd. (HEAL) .............. 9,000 60
Makita Corp. (CNSU) ............................. 8,000 50
Marubeni Corp. (DIOP) ........................... 31,000 60
Marui Co., Ltd. (RETS) .......................... 13,000 188
Matsushita Electric Industrial Co. (ETRN) ....... 51,000 798
Minebea Co., Ltd. (CHEM) ........................ 4,000 26
Mitsubishi Chemical Corp. (CHEM) ................ 61,000 163
Mitsubishi Corp. (DIOP) ......................... 34,000 274
Mitsubishi Electric Corp. (ETRN) ................ 52,000 258
Mitsubishi Estate Co., Ltd. (REAL) .............. 37,000 340
Mitsubishi Heavy Industries, Ltd. (MACH) ........ 87,000 397
Mitsubishi Logistics Corp. (TRAN) ............... 7,000 64
Mitsubishi Materials Corp. (PMET) ............... 39,000 83
Mitsubishi Rayon Co., Ltd. (APPA) ............... 23,000 82
Mitsubishi Tokyo Finance (FINL) ................. 153 1,275
Mitsui & Co., Ltd. (DIOP) ....................... 31,000 209
Mitsui Fudosan Co., Ltd. (REAL) ................. 24,000 259
Mitsui Marine & Fire Insurance Co., Ltd.
(INSU) ......................................... 14,000 72
Mitsui Mining & Smelting Co., Ltd. (META) ....... 17,000 75
Mitsukoshi, Ltd. (RETS) ......................... 14,000 58
Mizuho Holdings, Inc.* (BANK) ................... 160 744
Mori Seiki Co., Ltd. (MACH) ..................... 5,000 41
Murata Manufacturing Co., Ltd. (ETRN) ........... 6,100 405
Mycal Corp. (RETS) .............................. 20,000 22
NAMCO, Ltd. (LEIS) .............................. 3,800 68
NEC Corp. (COMP) ................................ 43,000 581
NGK Insulators (ETRN) ........................... 11,000 97
NGK Spark Plug Co. (PART) ....................... 7,000 66
Nidec Corp. (MACH) .............................. 2,000 104
Nikon Corp. (LEIS) .............................. 11,000 104
Nintendo Corp., Ltd. (LEIS) ..................... 3,500 637
Nippon Comsys Corp. (ENGI) ...................... 6,000 81
Nippon Express Co., Ltd. (TRAN) ................. 31,000 140
Nippon Mitsubishi Oil Co., Ltd. (OILX) .......... 27,000 152
Nippon Sheet Glass Co., Ltd. (DIOP) ............. 14,000 82
Nippon Steel Co. (STEE) ......................... 133,000 202
Nippon Telegraph & Telephone Corp. (UTIT) ....... 315 1,642
Nippon Unipac Holding, Co. *(PAPR) .............. 25 140
Nippon Yusen Kabushiki Kaisha (TRAN) ............ 40,000 158
Nissan Motor Acceptance Corp. (FINL) ............ 95,000 656
Nitto Denko Corp. (ETRN) ........................ 4,000 115
Nomura Securities Co., Ltd. (FUND) .............. 42,000 805
NSK, Ltd. (META) ................................ 16,000 69
NTN Corp. (METP) ................................ 13,000 36
Obayashi Corp. (CONS) ........................... 18,000 70
Oji Paper Co. (PAPR) ............................ 27,000 134
Olympus Optical Co. (LEIS) ...................... 9,000 144
Omron Corp. (ETRN) .............................. 8,000 145
Onward Kashiyama Co., Ltd. (APPA) ............... 7,000 76
Oriental Land Co., Ltd. (LEIS) .................. 2,000 148
Orix Corp. (FINL) ............................... 2,400 233
Osaka Gas Co. (UTIG) ............................ 65,000 210
Pioneer Corp. (ETRN) ............................ 4,000 122
Promise Co., Ltd. (LEND) ........................ 2,600 214
Rohm Co., Ltd. (ETRN) ........................... 3,000 466
Sankyo Co., Ltd. (HEAL) ......................... 13,000 235
Sanrio Co., Ltd. *(CNSU) ........................ 3,000 39
Sanyo Electric Co. (ETRN) ....................... 42,000 265
Secom Co. (ETRN) ................................ 7,000 391
Sega Enterprises (CNSU) ......................... 4,300 76
Sekisui Chemical Co. (CHEM) ..................... 20,000 83
Sekisui House, Ltd. (CONS) ...................... 23,000 195
Sharp Corp. (ETRN) .............................. 28,000 382
Shimamura Co., Ltd. (RETS) ...................... 1,000 52
Shimano, Inc. (LEIS) ............................ 5,000 74
Shimizu Corp. (CONS) ............................ 22,000 90
Shin-Etsu Chemical Co. (CHEM) ................... 9,000 331
Shionogi & Co., Ltd. (HEAL) ..................... 12,000 250
Shiseido Co., Ltd. (CHEM) ....................... 14,000 131
Shizuoka Bank, Ltd. (BANK) ...................... 19,000 159
Showa Shell Sekiyu K.K. (OILX) .................. 12,000 70
Skylark Co., Ltd. (FOOD) ........................ 3,000 85
SMC Corp. (MACH) ................................ 2,000 214
Softbank Corp. (SOFT) ........................... 8,500 279
Sony Corp. (ETRN) ............................... 22,300 1,466
Sumitomo Bank (BANK) ............................ 136,000 1,123
Sumitomo Chemical Co. (CHEM) .................... 44,000 199
Sumitomo Corp. (DIOP) ........................... 22,000 154
Sumitomo Electric Industries (TELE) ............. 19,000 215
Sumitomo Heavy Industry (MACH) .................. 31,000 43
Sumitomo Marine & Fire Insurance Co., Ltd. (INSU) 15,000 84
Sumitomo Metal Industries (STEE) ................ 102,000 61
Sumitomo Metal Mining Co. (PMET) ................ 17,000 79
Taisho Pharmaceutical Co., Ltd. (HEAL) .......... 10,000 188
Taiyo Yuden Co., Ltd. (ELEQ) .................... 4,000 106
Takara Shuzo Co., Ltd. (FOOD) ................... 4,000 53
Takashimaya Co. (RETS) .......................... 12,000 84
Takeda Chemical Industries (HEAL) ............... 23,000 1,070
Takefuji Corp. (LEND) ........................... 5,000 454
Teijin, Ltd. (APPA) ............................. 27,000 152
98
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Japan - Continued
Teikoku Oil Co., Ltd. (OILX) .................... 15,000 $ 74
Terumo Corp. (HEAL) ............................. 4,000 73
The Bank of Fukuoka, Ltd. (BANK) ................ 8,000 36
The Chuo Mitsui Trust and Banking Co., Ltd.
(BANK) ......................................... 17,000 30
The Daiwa Bank, Ltd. (BANK) ..................... 52,000 68
Tobu Railway Co., Ltd. (TRAN) ................... 29,000 93
Toho Co., Ltd. (MEDI) ........................... 1,200 143
Tohoku Electric Power (UTIE) .................... 9,100 148
Tokio Marine & Fire Insurance Co. (INSU) ........ 37,000 346
Tokyo Broadcasting (MEDI) ....................... 4,000 77
Tokyo Electric Power (UTIE) ..................... 32,600 844
Tokyo Electron, Ltd. (ETRN) ..................... 4,500 272
Tokyo Gas Co. (OILX) ............................ 27,000 82
Tokyu Corp. (TRAN) .............................. 26,000 142
Toppan Printing Co. (CNSU) ...................... 20,000 206
Toray Industries, Inc. (APPA) ................... 33,000 132
Toshiba Corp. (ETRN) ............................ 78,000 412
Tostem Corp. (CONS) ............................. 8,000 131
Toto, Ltd. (APPL) ............................... 13,000 91
Toyo Seikan Kaisha, Ltd. (CONT) ................. 8,000 115
Toyota Motor Corp. (AUTO) ....................... 88,300 3,108
Trans Cosmos, Inc. (SOFT) ....................... 700 28
UFJ Holdings, Inc. (FINL) ....................... 1 5
Uni-Charm Corp. (PAPR) .......................... 3,000 97
UNY Co., Ltd. (RETS) ............................ 8,000 82
Wacoal Corp. (APPA) ............................. 8,000 86
World Co., Ltd. (APPA) .......................... 1,400 45
Yamaha Corp. (LEIS) ............................. 6,000 60
Yamanouchi Pharmaceutical Co., Ltd. (HEAL) ...... 10,000 281
Yamato Transport Co., Ltd. (TRAN) ............... 12,000 252
Yokogawa Electric (ETRN) ........................ 8,000 71
-------
44,143
Malaysia - 0.7%
Berjaya Sports Toto Berhad (LEIS) ............... 47,000 48
Commerce Asset Holdings (BANK) .................. 40,000 63
Gamuda Berhad (CONS) ............................ 52,000 53
IJM Corporation Berhad (CONS) ................... 49,000 45
Magnum Corp. Berhad (LEIS) ...................... 158,000 58
Malayan Banking Berhad (BANK) ................... 48,000 130
Malaysia International Shipping Berhad (TRAN) ... 61,000 109
Public Bank Berhad (FINL) ....................... 75,400 52
Resorts World Berhad (LEIS) ..................... 35,000 47
RHB Capital Berhad (BANK) ....................... 63,000 33
Sime Darby Berhad (FINL) ........................ 68,000 71
Telekom Malaysia Berhad (TELS) .................. 60,000 139
Tenaga Nasional Berhad (UTIE) ................... 61,000 140
YTL Corp., Berhad (DIOP) ........................ 65,000 65
-------
1,053
Mexico - 1.3%
Cemex SA de CV - CPO*(CONS) ..................... 27,000 144
Cifra SA de CV - Ser. V (RETS) .................. 90,000 245
Fomento Economico Mexicano SA de CV (FOOD) ...... 20,000 85
Grupo Carso SA de CV - Ser. A1 (DIOP) ........... 24,000 71
Grupo Financiero Banamex Accival, SA de CV (FINL) 105,000 272
Grupo Financiero Bancomer SA de CV - Cl. O (FINL) 157,000 156
Grupo Modelo SA de CV - Ser. C (FOOD) ........... 62,000 167
Grupo Televisa SA* (MEDI) ....................... 60,000 119
Kimberly-Clark de Mexico SA de CV (PAPR) ........ 47,000 139
Nuevo Grupo Mexico (META) ....................... 18,000 47
Telephonos de Mexico SA - Ser. L (UTIT) ......... 326,000 572
Wal-Mart de Mexico SA de CV - Ser. C (RETS) ..... 25,000 61
-------
2,078
Netherlands - 2.8%
ABN Amro Holding NV (BANK) ...................... 18,400 346
Aegon NV (INSU) ................................. 14,500 409
Akzo Nobel NV (CHEM) ............................ 3,850 163
ASM Lithography Holding NV (COMP) ............... 5,900 132
Elsevier NV (MEDP) .............................. 10,500 131
Heineken NV EUR2 (FOOD) ......................... 5,468 221
ING Groep NV (BANK) ............................. 8,500 556
Koninklijke Ahold NV (RETF) ..................... 7,000 220
Koninklijke KPN NV (TELS) ....................... 11,420 65
Koninklijke (Royal) Philips Electronics N.V.
(ETRN) ......................................... 13,656 362
Royal Dutch Petroleum Co. (OILS) ................ 21,250 1,224
TNT Post Group NV (TRAN) ........................ 5,610 117
Unilever NV - CVA (CNSU) ........................ 5,819 349
Wolters Kluwer NV - CVA (MEDP) .................. 4,400 118
-------
4,413
New Zealand - 0.4%
Carter Holt Harvey, Ltd. (PAPR) ................. 75,200 52
Contact Energy, Ltd. (UTIE) ..................... 62,600 76
Fisher & Paykel Industries, Inc. (APPL) ......... 23,000 110
Fletcher Building (CONS) ........................ 73,900 71
Telecom Corp. of New Zealand, Ltd. (TELS) ....... 111,100 253
The Warehouse Group, Ltd. (RETS) ................ 29,000 64
-------
626
Norway - 1.2%
Bergesen d.y. ASA - Cl. A (TRAN) ................ 4,300 79
99
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Norway - Continued
Den Norske Bank (BANK) .......................... 43,960 $ 191
Elkem ASA (META) ................................ 4,400 73
Kvaerner PLC (CONS) ............................. 7,600 53
Merkantildata ASA (SOFT) ........................ 9,800 16
Norsk Hydro ASA (DIOP) .......................... 11,140 472
Norske Skogindustrier ASA - Cl. A (PAPR) ........ 7,600 115
Orkla ASA (DIOP) ................................ 23,420 424
Petroleum Geo-Services ASA (OILX) ............... 6,240 63
Smedvig (OILS) .................................. 7,000 64
Smedvig ASA - B Shares (OILS) ................... 7,600 61
Storebrand ASA (INSU) ........................... 16,140 115
Tomra Systems ASA (POLL) ........................ 11,200 177
-------
1,903
Philippines - 0.1%
Ayala Land, Inc. (READ) ......................... 36,460 4
Metropolitan Bank & Trust Co. (BANK) ............ 13,090 50
Petron Corp. (OILS) ............................. 468,400 20
Philippine Long Distance Telephone Co. (UTIT) ... 3,200 44
SM Prime Holdings, Inc. (READ) .................. 545,000 65
-------
183
Portugal - 0.5%
Banco Comercial Portgues, SA (BANK) ............. 33,000 123
BPI-SGPS, SA - Registered Shares (FUND) ......... 32,490 76
Brisa-Auto Estradas de Portugal, SA (CONS) ...... 8,375 71
Electricidade de Portugal, SA (UTIE) ............ 67,500 161
Jeronimo Martins, SGPS, SA (RETF) ............... 3,600 23
Portugal Telecom, SA (TELS) ..................... 46,000 321
Sonae S.G.P.S., SA (RETS) ....................... 87,600 64
-------
839
Singapore - 0.5%
Brierley Investments, Ltd. (DIOP) ............... 147,650 41
Chartered Semiconductor Manufacturing *(ETRN) ... 12,000 30
City Developments, Ltd. (READ) .................. 29,000 112
Cycle & Carriage, Ltd. (AUTO) ................... 14,000 25
DBS Group Holdings, Ltd. (BANK) ................. 17,000 125
Oversea-Chinese Banking Corp., Ltd. (BANK) ...... 16,000 104
Singapore Airlines (TRAN) ....................... 12,000 83
Singapore Telecommunications, Ltd. (TELS) ....... 114,000 119
United Overseas Bank, Ltd. (BANK) ............... 13,448 85
-------
724
South Africa - 1.1%
ABSA Group, Ltd. (BANK) ......................... 24,600 116
Anglo American Platinum Corp., Ltd. (PMET) ...... 5,400 241
Barlow, Ltd. (DIOP) ............................. 11,700 87
Dimension Data Holdings PLC (SOFT) .............. 28,883 110
FirstRand, Ltd. (FINL) .......................... 164,400 176
Foschini, Ltd.* (RETS) .......................... 37,100 32
Impala Platinum Holdings, Ltd. (META) ........... 2,600 130
Imperial Holdings, Ltd. (DIOP) .................. 10,091 85
Investec Group, Ltd. (FUND) ..................... 2,300 68
Liberty Life Association of Africa, Ltd. (INSU) . 12,400 89
M-Cell, Ltd. (TELS) ............................. 40,200 92
Nampak, Ltd. (CONT) ............................. 25,500 37
Nedcor, Ltd. (BANK) ............................. 6,600 129
Remgro, Ltd.* (DIOP) ............................ 15,300 110
Sappi, Ltd. (PAPR) .............................. 10,900 96
Sasol, Ltd. (OILX) .............................. 12,800 117
-------
1,715
South Korea - 1.2%
Cheil Jedang Corp. (FOOD) ....................... 1,246 41
Hyundai Motor Co., Ltd. (AUTO) .................. 6,490 141
Kookmin Bank (BANK) ............................. 8,310 111
Korea Electric Power Corp. (UTIE) ............... 11,760 219
Korea Telecom Corp.* (TELS) ..................... 920 37
LG Chemical (CHEM) .............................. 3,056 41
LG Chemicals, Ltd. (CHEM) ....................... 833 7
LG Electronics (ETRN) ........................... 3,990 51
LG Household & Health (HEAL) .................... 741 17
Pohang Iron & Steel Co., Ltd. (STEE) ............ 1,230 98
Samsung Corp. (ETRN) ............................ 6,120 35
Samsung Display Devices Co. (ETRN) .............. 1,410 68
Samsung Electro-Mechanics Co. (ETRN) ............ 2,760 99
Samsung Electronics (ETRN) ...................... 3,190 471
Samsung Fire & Marine Insurance (INSU) .......... 2,272 73
Shinhan Bank (BANK) ............................. 7,310 75
SK Telecom Co., Ltd. (TELS) ..................... 1,530 225
-------
1,809
Spain - 3.9%
ACS, Actividades de Construccion y Servicios,
S.A.* (CONS) ................................... 2,419 67
Autopistas Concesionaria Espanola SA (TRAN) ..... 13,503 123
Banco Bilbao Vizcaya SA (BANK) .................. 90,135 1,167
Banco Santander Central Hispano SA (BANK) ....... 118,400 1,074
Endesa SA (UTIE) ................................ 28,100 449
100
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Spain - Continued
Fomento de Construcciones y Contratas SA (CONS) . 4,600 $ 88
Gas Natural SDG SA - E Shares (UTIG) ............ 13,800 223
Grupo Dragados SA (CONS) ........................ 8,400 106
Iberdrola SA (UTIE) ............................. 27,500 353
Repsol SA (OILX) ................................ 30,000 496
Sociedad General de Aguas de Barcelona SA (FOOD) 8,484 117
Sol Melia SA (LEIS) ............................. 5,700 50
Tabacalera SA - Cl. A (FOOD) .................... 7,714 110
Telefonica SA (UTIT) ............................ 103,779 1,280
TelePizza SA* (RETF) ............................ 7,559 14
Union Electrica Fenosa SA (UTIE) ................ 12,200 228
Vallehermoso SA (READ) .......................... 8,700 55
Zardoya Otis SA (MACH) .......................... 9,752 88
-------
6,088
Supra National - 0.0%
Mahindra & Mahindra, Ltd. - GDR (AUTO) .......... 16,500 30
Sweden - 1.2%
Drott AB - B Shares (REAL) ...................... 8,300 87
Hennes & Mauritz AB - B Shares (RETS) ........... 10,300 177
NetCom Systems, Inc. - Cl. B (TELS) ............. 1,732 56
Nordic Baltic Holding AB (BANK) ................. 34,928 199
SANDVIK AB (MACH) ............................... 4,350 87
Securitas AB - B Shares (COMM) .................. 8,250 144
Skand Enskilda Banken - Cl. A (BANK) ............ 10,200 97
Skandia Forsakrings AB (INSU) ................... 13,900 128
Skanska AB (CONS) ............................... 4,400 42
Svenska Cellulosa AB - Cl. B (PAPR) ............. 3,100 66
Svenska Handelsbanken, Inc. - A Shares (BANK) ... 6,350 91
Telefonaktiebolaget LM Ericsson AB*(TELE) ....... 79,300 434
Telia AB (TELS) ................................. 17,050 86
Volvo AB (AUTO) ................................. 5,750 86
-------
1,780
Switzerland - 1.8%
ABB, Ltd. *(ENGI) ............................... 8,672 131
Adecco SA Reg. (COMM) ........................... 600 28
Credit Suisse Group Reg. (BANK) ................. 1,970 324
Givaudan (HNBA) ................................. 55 15
Nestle SA Reg. (FOOD) ........................... 2,100 447
Novartis AG Reg. (HEAL) ......................... 15,200 550
Roche Holdings AG (HEAL) ........................ 5,500 406
Schweizerische Rueckversicherungs-Gesellschaft
(INSU) ......................................... 30 60
Swisscom AG Reg. (UTIT) ......................... 400 95
Syngenta AG *(CHEM) ............................. 547 29
UBS AG (BANK) ................................... 2,906 417
Zurich Finance (FINL) ........................... 633 216
-------
2,718
Thailand - 0.2%
ABN Amro Asia Secuities Public Co., Ltd. (FINL) . 23,000 13
Advanced Info Service Public Co., Ltd. (TELS) ... 7,700 82
PTT Exploration & Production Public Co., Ltd.
(OILX) ......................................... 22,200 61
Siam Cement Public Co., Ltd. (CONS) ............. 4,000 43
TelecomAsia Corp. Public Co., Ltd.* (UTIT) ...... 113,200 47
-------
246
Turkey - 0.2%
Arcelik AS (APPL) ............................... 3,934,500 32
Kartonsan Karton Sanayi Ve Ticaret AS (PAPR) .... 365,000 14
Migros Turk T.A.S. (RETF) ....................... 387,000 24
Tupras-Turkiye Petrol Rafinerileri AS (OILX) .... 1,009,000 26
Turkiye Garanti Bankasi AS (BANK) ............... 12,113,000 61
Turkiye Is Bankasi (Isbank) - Cl. C (BANK) ...... 14,914,592 106
Yapi ve Kredi Bankasi AS (BANK) ................. 18,317,805 57
-------
320
United Kingdom - 10.7%
Abbey National First Capital BV (BANK) .......... 16,000 281
Airtours PLC (LEIS) ............................. 11,300 46
Amvescap PLC (BANK) ............................. 5,300 92
Arm Holdings PLC *(ETRN) ........................ 9,700 37
AstraZeneca Group PLC (HEAL) .................... 18,239 851
Barclay's PLC (BANK) ............................ 16,300 500
Barratt Developments PLC (CONS) ................. 10,100 51
Bass PLC (FOOD) ................................. 17,200 180
Berkeley Group (The) PLC (READ) ................. 4,700 48
BG Group PLC (UTIG) ............................. 37,866 149
BOC Group PLC (CHEM) ............................ 7,000 103
Boots Co. PLC (RETD) ............................ 13,800 117
BP Amoco PLC (OILX) ............................. 218,800 1,801
British Aerospace PLC (AERO) .................... 32,263 155
British Airport Authority PLC (TRAN) ............ 11,700 109
British Airways PLC (TRAN) ...................... 11,300 55
British American Tobacco PLC* (FOOD) ............ 23,300 177
British Land Co. PLC (REAL) ..................... 11,000 75
British Sky Broadcast PLC (MEDI) ................ 19,900 192
101
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
United Kingdom - Continued
British Telecommunications PLC (TELS) ........... 68,700 $ 432
Cadbury Schweppes PLC (FOOD) .................... 26,600 180
Canary Wharf Finance PLC* (REIT) ................ 11,700 91
Carlton Communications PLC (MEDI) ............... 16,300 77
Centrica PLC *(UTIG) ............................ 58,900 189
CGU PLC (INSU) .................................. 22,700 314
Compass Group PLC* (FOOD) ....................... 25,122 201
Diageo PLC (FOOD) ............................... 30,200 332
Dixons Group PLC* (TELE) ........................ 23,200 76
EMI Group PLC (LEIS) ............................ 12,400 70
GKN plc (PART) .................................. 9,200 88
GlaxoSmithKline PLC* (HEAL) ..................... 62,892 1,771
Granada Compass PLC (LEIS) ...................... 25,122 53
Halifax Group PLC (LEND) ........................ 24,700 286
Hanson PLC (CONS) ............................... 8,990 66
Hays PLC (DIOP) ................................. 14,400 37
Hilton Group PLC (LEIS) ......................... 27,700 93
HSBC Holdings PLC (BANK) ........................ 90,100 1,069
Imperial Chemical Industries PLC (CHEM) ......... 7,100 42
Invensys PLC (DIOP) ............................. 38,785 74
J Sainsbury PLC (RETF) .......................... 24,100 150
Kingfisher PLC (RETS) ........................... 18,500 100
Land Securities PLC (REAL) ...................... 8,400 103
Lattice Group *(ETRN) ........................... 37,866 85
Legal & General Group PLC (INSU) ................ 62,800 143
Lloyds TSB Group PLC (BANK) ..................... 58,900 590
Logica PLC (SOFT) ............................... 6,700 81
Marconi PLC (TELE) .............................. 28,600 102
Marks & Spencer PLC (RETS) ...................... 39,600 146
Misys PLC (COMP) ................................ 6,300 44
National Grid Group PLC (UTIE) .................. 22,500 166
National Power PLC (UTIE) ....................... 16,500 70
Nycomed Amersham PLC (HEAL) ..................... 5,700 41
P&O Princess Cruises PLC *(LEIS) ................ 12,900 67
Pearson PLC (MEDP) .............................. 8,100 134
Peninsular & Oriental Steam Navigation Co.
(TRAN).......................................... 6,800 25
Prudential Corp. (INSU) ......................... 22,500 273
Rank Group PLC (DIOP) ........................... 30,800 94
Reed International PLC (MEDP) ................... 15,400 137
Rentokil Initial PLC (DIOP) ..................... 29,600 100
Reuters Group PLC (BUSI) ........................ 15,900 207
Rio Tinto PLC - Reg. (DIOP) ..................... 12,700 226
Royal Bank of Scotland Group (BANK) ............. 11,500 254
Schroders (BANK) ................................ 4,050 47
Scottish Power PLC (UTIE) ....................... 17,100 126
Slough Estates Finance PLC*(READ) ............... 9,900 48
Tesco PLC (RETF) ................................ 76,800 277
The Great Universal Stores PLC (RETS) ........... 15,500 133
The Sage Group PLC (MEDI) ....................... 22,100 79
Unilever PLC (CNSU) ............................. 26,703 225
United Utilities PLC (AGRI) ..................... 10,400 99
Vodafone AirTouch PLC (TELS) .................... 681,722 1,512
WPP Group PLC *(COMM) ........................... 7,500 74
-------
16,518
United States - 0.1%
Great Eastern Shipping Co. - GDR* (TRAN) ........ 25,120 78
-------
TOTAL COMMON STOCK- 96.7% 149,951
-------
PREFERRED STOCK
Australia - 0.3%
News Corp., Ltd. (MEDI) ......................... 48,100 387
Brazil - 0.7%
Aracruz Celulose SA (TELS) ...................... 38,000 85
Banco Bradesco SA (BANK) ........................ 26,392,800 86
Banco Itau SA (BANK) ............................ 1,380,000 85
Centrais Electricas Brasileires SA (UTIE) ....... 8,637,000 85
Compahnia de Bebidas das Americas (FOOD) ........ 505,000 85
Companhia Energetica de Minas Gerais (UTIE) ..... 6,565,000 85
Companhia Vale do Rio Doce (META) ............... 8,000 86
Embratel Participacoes SA (UTIT) ................ 6,417,000 85
Tele Centro Sul Participacoes SA (UTIT) ......... 6,634,000 85
Tele Norte Leste Participacoes SA (UTIT) ........ 7,080,500 85
Telefonica Data Bearer (BUSI) ................... 3,000,000 85
Telesp Celular Participacoes SA (TELS) .......... 8,056,387 85
Telesp Participacoes SA (TELS) .................. 3,000,000 85
Germany - 0.1%
Dyckerhoff AG (CONS) ............................ 2,600 73
Volkswagen AG (AUTO) ............................ 3,212 73
-------
TOTAL PREFERRED STOCK- 1.1% 1,640
-------
WARRANTS - 1.2%
Mexico - 0.0%
Cemex SA de CV (CONS) expires 12/12/02
(Cost $1) ..................................... 2,000 1
United States - 1.2%
Morgan Stanley Capital LLC (FINL)
expires 04/07/07 ............................... 23,600 1,853
-------
TOTAL WARRANTS- 1.2% 1,854
-------
102
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
RIGHTS
Portugal - 0.0%
Portugal Telecom (TELS)
expires 07/09/01 ................................ 46,000 $ 6
--------
TOTAL RIGHTS- 0.0% 6
--------
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 0.4%
Investment in joint trading account
3.97% due 07/02/01 .............................. $ 756 756
U.S. Treasury Bills - 0.3%
3.43% due 09/13/01# ............................. 410 407
Shares
Cash Equivalents - 16.6%
Navigator Securities Lending Prime
Portfolio ** 25,718,447 25,718
---------- --------
TOTAL SHORT-TERM INVESTMENTS 17.3% 26,881
---------- --------
TOTAL INVESTMENTS- 116.3% 180,332
Other Assets & Liabilities, Net- (16.3)% (25,238)
---------- --------
NET ASSETS- 100.0% $155,094
========== ========
ADR-American Depository Receipts.
GDR-Global Depository Receipts.
* Non-income producing securities.
** Represents investment of security lending collateral.
# All or a portion of the principle amount of this security was pledged to
cover initial margin requirements for open future contracts.
See notes to financial statements.
103
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Bank .................................. BANK $21,303 13.9%
Insurance ............................. INSU 9,576 6.2
Electronic Products & Services ........ ETRN 9,523 6.2
Health Care Products .................. HEAL 9,232 6.0
Diversified Operations ................ DIOP 8,875 5.8
Telecommunication Services ............ TELS 7,299 4.8
Automobile ............................ AUTO 7,094 4.6
Telephone ............................. UTIT 6,496 4.2
Electric Power ........................ UTIE 5,783 3.8
Food, Beverage & Tobacco .............. FOOD 5,716 3.7
Transportation Services ............... TRAN 5,617 3.7
Financial Services .................... FINL 5,608 3.6
Oil & Natural Gas Exploration &
Production ........................... OILX 5,163 3.4
Chemical .............................. CHEM 3,751 2.4
Retail - Department Stores ............ RETS 3,596 2.3
Construction .......................... CONS 3,454 2.2
Oil ................................... OILS 3,027 2.0
Leisure & Recreation .................. LEIS 2,857 1.9
Computer Software & Services .......... SOFT 2,334 1.5
Commercial Services ................... COMM 2,119 1.4
Telecommunication Equipment ........... TELE 1,936 1.3
Media - TV & Radio .................... MEDI 1,835 1.2
Retail - Food ......................... RETF 1,746 1.1
Brokerage & Investment Management ..... FUND 1,707 1.1
Machinery ............................. MACH 1,628 1.1
Cosmetic & Personal Care .............. HNBA 1,319 0.9
Personal & Commercial Lending ......... LEND 1,289 0.8
Real Estate Operations ................ REAL 1,182 0.8
Electrical Equipment .................. ELEQ 1,069 0.7
Paper & Forest Products ............... PAPR 1,003 0.6
Computer Equipment .................... COMP 994 0.6
Consumer Miscellaneous ................ CNSU 945 0.6
Natural Gas Distribution .............. UTIG 882 0.6
Shoe & Apparel Manufacturing .......... APPA 765 0.5
Metals & Mining ....................... META 696 0.5
Real Estate Investment Trust .......... REIT 671 0.4
Steel ................................. STEE 644 0.4
Precious Metals ....................... METP 609 0.4
Media - Publishing .................... MEDP 597 0.4
Real Estate Development ............... READ 533 0.4
Household Appliances & Furnishings .... APPL 532 0.3
Auto & Truck Parts .................... AUTO 510 0.3
Engineering & Construction ............ ENGI 495 0.3
Business Services ..................... BUSI 292 0.2
Pollution Control ..................... POLL 289 0.2
Container ............................. CONT 239 0.2
Aerospace & Defense ................... AERO 155 0.1
Housing ............................... HOUS 133 0.1
Energy ................................ ENER 117 0.1
Retail - Department Stores ............ RETD 117 0.1
Agriculture Operations ................ AGRI 99 0.1
-------- -----
$153,451 100.0%
======== =====
104
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Australia - 2.6%
BHP, Ltd (DIOP) ................................. 27,926 $ 152
Brambles Industries, Ltd. (DIOP) ............... 2,110 52
Broken Hill Proprietary Co., Ltd.
(DIOP) .......................................... 26,220 139
Tabcorp Holdings, Ltd. (LEIS) .................. 6,933 33
Woolworth's, Ltd. (RETS) ....................... 32,164 180
--------
556
Finland - 1.3%
Nokia Oyj (TELS) ............................... 11,772 267
France - 7.6%
Air Liquide (CHEM) ............................. 1,368 197
Alcatel (TELS) ................................. 2,259 47
AXA SA (INSU) ................................... 7,685 219
Castorama Dubois Investisse (RETS) ............. 290 62
France Telecom (TELS) .......................... 997 48
Lafarge SA (CONS) .............................. 2,366 203
Rhone-Poulenc SA (BANK) ........................ 556 44
Schneider SA (MACH) ............................ 3,368 186
Total Fina SA - Cl. B (OILX) .................... 1,156 162
Vivendi Environment (POLL) ..................... 3,340 141
Vivendi Universal SA (DIOP) .................... 5,004 292
--------
1,601
Germany - 6.1%
Allianz AG - Reg. (INSU) ........................ 606 177
Bayerische Motoren Werke AG (AUTO) ............. 6,656 221
Deutsche Bank AG (BANK) ........................ 3,476 249
Deutsche Telekom AG (UTIT) ..................... 3,539 81
Infineon Technologies AG (ETRN) ................ 2,790 66
Muenchener
Rueckversicherungs-Gesellschaft AG -
Reg. (INSU) .................................... 474 132
SAP AG (SOFT) .................................. 1,557 216
Siemens AG (DIOP) .............................. 2,188 134
--------
1,276
Hong Kong - 1.4%
Giordano International Ltd. (APPA) ............. 48,000 25
Hang Seng Bank, Ltd. (BANK) .................... 9,400 96
Hutchison Whampoa, Ltd. (COMM) ................. 4,700 48
Li & Fung, Ltd. (COMM) ......................... 60,000 99
Sun Hung Kai Properties, Ltd. (REIT) ........... 4,000 36
--------
304
Ireland - 0.9%
Bank of Ireland (BANK) ......................... 19,442 193
Italy - 3.4%
San Paolo-IMI SpA (BANK) ....................... 12,300 158
Telecom Italia Mobile SpA (TELS) ............... 11,500 59
Telecom Italia SpA (TELS) ...................... 26,983 242
UniCredito Italiano SpA (BANK) ................. 60,500 260
--------
719
Japan - 23.2%
Advantest (ETRN) ............................... 400 34
Asahi Chemical Industry Co., Ltd.
(CHEM) ........................................ 22,000 92
Banyu Pharmaceutical Co., Ltd. (HEAL) .......... 4,000 73
Canon, Inc. (COMM) ............................. 7,000 283
Chiba Bank, Ltd. (BANK) ........................ 10,000 36
Circle K Japan Co., Ltd. (RETF) ................ 2,900 84
Daiwa Securities Group, Inc. (FUND) ............ 18,000 188
Fuji Photo Film (LEIS) ......................... 5,000 216
Honda Motor Co. (AUTO) ......................... 2,000 88
KAO Corp. (HNBA) ............................... 9,000 224
Keyence Corp. (OILX) ........................... 600 119
Kirin Brewery Co. (FOOD) ....................... 13,000 111
Konami Co., Ltd. (COMP) ........................ 1,300 59
Mitsui Marine & Fire Insurance Co.,
Ltd. (INSU) ................................... 22,000 113
Mizuho Holdings, Inc. *(BANK) .................. 26 121
Murata Manufacturing Co., Ltd. (ETRN) .......... 1,300 86
NGK Insulators (PART) .......................... 10,000 88
Nippon Telegraph & Telephone Corp.
(UTIT) ........................................ 33 172
Nomura Securities Co., Ltd. (FUND) ............. 4,000 77
Ricoh Co., Ltd. (ETRN) ......................... 7,000 151
Rohm Co., Ltd. (ETRN) .......................... 1,200 186
Sanyo Electric Co. (ETRN) ...................... 36,000 227
Secom Co. (ETRN) ............................... 2,000 112
Sharp Corp. (ETRN) ............................. 14,000 191
Shin-Etsu Chemical Co. (CHEM) .................. 2,000 73
Skylark Co., Ltd. (FOOD) ....................... 6,000 171
SMC Corp. (MACH) ............................... 1,400 150
Sony Corp. (ETRN) .............................. 1,400 92
Sumitomo Bank (BANK) ........................... 3,000 25
Sumitomo Corp. (DIOP) .......................... 20,000 140
Takeda Chemical Industries (HEAL) .............. 7,000 326
Takefuji Corp. (LEND) .......................... 2,600 236
Tokyo Electric Power (UTIE) .................... 7,300 189
Toppan Forms Co., Ltd. (COMM) .................. 6,000 101
Toyota Motor Corp. (AUTO) ...................... 6,500 229
UFJ Holdings, Inc. (FINL) ...................... 5 27
--------
4,890
Netherlands - 7.5%
Aegon NV (INSU) ................................ 5,132 145
ASM Lithography Holding NV (COMP) .............. 6,255 140
ING Groep NV (BANK) ............................ 5,680 372
Koninklijke (Royal) Philips Electronics
N.V. (ETRN) ................................... 7,510 199
Royal Dutch Petroleum Co. (OILE) ............... 10,053 579
Unilever NV - CVA (CONS) ........................ 454 27
VNU NV (MEDP) .................................. 3,614 123
--------
1,585
Portugal - 0.2%
Electricidade de Portugal, SA (UTIE) ........... 17,717 42
105
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Singapore - 0.6%
Singapore Technology Engineering, Ltd.
(ENGI) ........................................ 92,000 $ 130
Spain - 2.9%
Acerinox SA (STEE) ............................. 4,439 124
Banco Santander Central Hispano SA
(BANK) ........................................ 10,471 95
Inditex (FUSI) ................................. 6,648 106
Tabacalera S.A. - Cl. A (FOOD) .................. 4,920 70
Telefonica SA (UTIT) ........................... 16,606 205
Union Electrica Fenosa SA (UTIE) ............... 218 4
--------
604
Sweden - 3.5%
Investor AB - B Shares (FUND) ................... 12,183 155
Nordic Baltic Holding AB (BANK) ................ 23,695 135
Securitas AB - B Shares (COMM) .................. 11,074 194
Skandia Forsakrings AB (INSU) .................. 17,002 156
Telefonaktiebolaget LM Ericsson AB *
(TELS) ........................................ 17,614 97
--------
737
Switzerland - 8.7%
Adecco SA (COMM) ................................ 3,586 169
Credit Suisse Group - Reg. (BANK) ............... 1,513 249
Nestle SA (FOOD) ................................ 2,213 471
NovartisS AG (HEAL) ............................. 6,292 228
Roche Holdings AG (HEAL) ........................ 4,387 316
Schweizerische
Rueckversicherungs-Gesellschaft
(INSU) ........................................ 92 184
UBS AG (BANK) .................................. 1,207 173
Zurich Finance (FINL) .......................... 136 46
--------
1,836
United Kingdom - 25.0%
Amvescap PLC (BANK) ............................ 15,375 267
AstraZeneca Group PLC (HEAL) ................... 1,599 75
Barclay's PLC (BANK) ........................... 11,774 361
Bass PLC (FOOD) ................................ 5,938 62
BP Amoco PLC (OILX) ............................ 50,616 417
British Telecommunications PLC (TELS) .......... 44,070 277
CGU PLC (INSU) ................................. 9,546 132
Diageo PLC (FOOD) .............................. 30,407 334
Elan Corp. PLC - ADR (HEAL) .................... 1,400 86
Exel (ETRN) ..................................... 10,828 116
GlaxoSmithKline PLC *(HEAL) .................... 24,243 683
GlaxoSmithKline PLC - ADR (HEAL) ................ 2,300 129
HSBC Holdings PLC (BANK) ....................... 25,108 298
National Grid Group PLC (UTIE) ................. 10,848 80
P&O Princess Cruises PLC *(LEIS) ................ 39,239 204
Reckitt Benckiser PLC (HNBA) ................... 7,177 104
Reuters Group PLC (BUSI) ....................... 8,712 113
Shell Transport & Trading Co. PLC
(OILX) ........................................ 3,111 26
Smiths Group PLC (DIOP) ........................ 21,021 244
Tesco PLC (RETF) ............................... 116,272 420
Unilever PLC (CNSU) ............................ 38,239 323
Vodafone AirTouch PLC (TELS) ................... 231,703 513
--------
5,264
--------
TOTAL COMMON STOCK- 94.9% 20,004
--------
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 5.7%
Investment in joint repurchase
agreement with Goldman Sachs & Co.,
4.11% due 07/02/01. (Secured by
various U.S. Treasury obligations and
U.S. Government Agency Bonds) $ 1,200 1,200
-------- --------
TOTAL INVESTMENTS- 100.6% 21,204
Other Assets & Liabilities, Net- (0.6)% (118)
-------- --------
NET ASSETS- 100.0% $ 21,086
======== ========
ADR-America Depository Receipt
* Non-income producing security.
See notes to financial statements.
106
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Bank ............................ BANK $ 3,132 15.7%
Health Care Products ............ HEAL 1,916 9.6
Telecommunication Services ...... TELS 1,550 7.7
Electronic Products & Services .. ETRN 1,460 7.3
Oil ............................. OILX 1,303 6.5
Insurance ....................... INSU 1,258 6.3
Food, Beverage & Tobacco ........ FOOD 1,219 6.1
Diversified Operations .......... DIOP 1,153 5.8
Commercial Sevices .............. COMM 894 4.5
Automobile ...................... AUTO 538 2.7
Retail - Food ................... RETF 504 2.5
Telephone ....................... UTIT 458 2.3
Leisure & Recreation ............ LEIS 453 2.3
Brokerage & Investment
Management ..................... FUND 420 2.1
Chemical ........................ CHEM 362 1.8
Machinery ....................... MACH 336 1.7
Consumer Miscellaneous .......... CNSU 323 1.6
Cosmetic & Personal Care ........ HNBA 328 1.6
Electric Power .................. UTIE 315 1.6
Retail - Department Stores ...... RETS 242 1.2
Personal & Commercial Lending ... LEND 236 1.2
Construction .................... CONS 230 1.1
Business Services ............... BUSI 219 1.1
Computer Software & Services .... SOFT 216 1.1
Computer Equipment .............. COMP 199 1.0
Pollution Control ............... POLL 141 0.7
Engineering & Construction ...... ENGI 130 0.6
Steel ........................... STEE 124 0.6
Media - Publishing .............. MEDP 123 0.6
Auto & Truck Parts .............. PART 88 0.4
Financial Services .............. FINL 73 0.4
Real Estate Investment Trust .... REIT 36 0.2
Shoe & Apparel Manufacturing .... APPA 25 0.1
------- -----
$20,004 100.0%
======= =====
107
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Apparel - 0.5%
Skechers USA, Inc. .............................. 35,100 $ 1,026
Auto & Truck Parts - 0.4%
O'Reilly Automotive,
Inc ............................................ 27,200 781
Bank - 2.4%
Greater Bay Bancorp ............................. 53,400 1,334
Southwest
Bancorporation of
Texas, Inc. * .................................. 51,500 1,556
Sterling Bancshares,
Inc ............................................ 105,400 2,021
---------
4,911
Brokerage & Investment Management - 1.1%
Affiliated Managers
Group, Inc.* .................................. 36,900 2,269
Business Services - 5.0%
Corporate Executive
Board Co.* .................................... 67,100 2,818
Education Management
Corp ........................................... 63,100 2,527
EFunds Corp. .................................... 47,400 882
Expedia, Inc. - Cl. A ........................... 14,900 694
Forrester Research,
Inc. * ........................................ 41,700 942
Management Network
Group, Inc.* ................................... 121,350 740
On Assignment, Inc. * ........................... 80,000 1,440
---------
10,043
Commercial Services - 3.4%
Corinthian Colleges,
Inc ............................................ 42,700 2,010
Plexus Corp.* ................................... 26,000 858
Profit Recovery Group
International, Inc. * .......................... 41,500 476
Quanta Services,
Inc.* .......................................... 23,749 523
Veritas DGC, Inc.* .............................. 41,100 1,141
Waste Connections,
Inc ............................................ 51,950 1,870
---------
6,878
Computer Equipment - 2.0%
Cerner Corp.* ................................... 32,700 1,374
M-Systems Flash Disk Pioneers,
Ltd. * ...................................... 128,500 912
PRI Automation, Inc. * .......................... 95,700 1,773
---------
4,059
Computer Software & Services - 4.6%
Advent Software, Inc. * ......................... 20,900 1,327
Avocent Corp. ................................... 37,746 859
Data Return Corp.* .............................. 88,400 155
Embarcadero
Technologies, Inc. * ........................... 54,900 1,225
Intranet Solutions,
Inc. * ........................................ 36,200 1,377
Macromedia, Inc. * .............................. 55,700 1,003
Secure Computing
Corp.* ........................................ 119,500 1,877
Skillsoft Corp. ................................. 35,900 1,229
TeleCommunication
Systems, Inc. .................................. 110,200 331
---------
Construction - 0.7%
Ryland Group, Inc. .............................. 27,800 1,407
Consumer Miscellaneous - 4.1%
DigitalThink, Inc. * ............................ 70,600 495
GoTo.com, Inc. .................................. 67,100 1,305
NetRatings, Inc. * .............................. 101,400 1,460
ScanSource, Inc. * .............................. 36,900 1,750
Strayer Education,
Inc ............................................ 26,300 1,282
University of Phoenix
Online ......................................... 45,500 1,934
---------
8,226
Diversified Operations - 0.6%
CoorsTek, Inc. .................................. 31,900 1,196
Electric Power - 1.6%
Beacon Power Corp. .............................. 129,350 893
Wilson Greatbatch
Technologies, Inc.* ............................ 79,800 2,314
---------
3,207
Electrical Equipment - 0.7%
LTX Corp. * .................................... 57,700 1,475
Electronic Products & Services - 12.7%
Aeroflex, Inc. * ................................ 109,000 1,144
Alpha Industries,
Inc ............................................ 45,600 1,347
Atmi, Inc. * .................................... 59,600 1,788
Brooks Automation,
Inc. * ........................................ 29,100 1,342
Credence Systems
Corp. * ........................................ 51,200 1,241
Cree, Inc. * .................................... 34,000 889
Cytyc Corp. * .................................. 38,000 876
DDI Corp. ....................................... 74,200 1,484
DuPont Photomasks,
Inc. * ........................................ 30,700 1,481
Elantec
Semiconductor, Inc.
* .............................................. 32,400 1,095
Electro Scientific
Industries, Inc. * ............................ 42,700 1,627
FEI Co. ......................................... 4,800 197
FMC Technologies,
Inc ............................................ 1,800 37
Microsemi Corp. ................................. 38,700 2,748
Nanometrics, Inc. * ............................. 38,000 1,045
Pixelworks, Inc. * .............................. 48,350 1,728
PLX Technology, Inc. * .......................... 127,200 1,080
Rudolph Technologies,
Inc. * ........................................ 45,000 2,115
Semtech Corp. * ................................ 51,200 1,536
Silicon Storage
Technology, Inc. * ............................ 88,400 895
---------
25,695
Energy - Alternative Source - 0.2%
Evergreen Solar, Inc. ........................... 52,300 502
Financial Services - 0.6%
Actrade Financial
Technologies, Ltd. * ........................... 20,455 484
Medallion Financial
Corp ........................................... 66,100 677
---------
1,161
Food, Beverage & Tobacco - 2.5%
American Italian
Pasta Co. ...................................... 38,800 1,800
Dean Foods Co. .................................. 25,000 1,005
108
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Food, Beverage & Tobacco - Continued
Performance Food
Group Co. ...................................... 73,800 $ 2,231
---------
5,036
Health Care Products - 6.5%
Alkermes, Inc. .................................. 41,200 1,446
Charles River
Laboratories ................................... 3,387 118
Cima Labs, Inc. ................................. 15,400 1,209
Exelixis, Inc. .................................. 34,400 653
Inhale Therapeutic
Systems, Inc.* ................................. 64,400 1,481
Inspire
Pharmaceuticals,
Inc ............................................ 20,500 287
Mid Atlantic Medical
Services, Inc. * .............................. 62,600 1,122
Noven
Pharmaceuticals,
Inc ............................................ 37,300 1,462
Regeneron
Pharmaceuticals ................................ 25,400 880
Renal Care Group,
Inc. * ........................................ 79,700 2,621
Salix
Pharmaceuticals,
Ltd ............................................ 19,800 488
Unilab Corp. .................................... 2,300 58
Urologix, Inc. * ................................ 71,100 1,302
---------
13,127
Health Care Services - 8.1%
Accredo Health, Inc. ............................ 64,100 2,384
AmeriSource Health
Corp. - Cl. A* ................................. 25,900 1,432
Apria Healthcare
Group, Inc. * .................................. 32,400 935
Covance, Inc. * ................................ 75,800 1,717
DaVita, Inc.* .................................. 89,021 1,810
Gene Logic, Inc. ................................ 18,100 395
LifePoint Hospitals,
Inc. * ........................................ 48,900 2,165
Lincare Holdings,
Inc. * ........................................ 36,800 1,104
Rightchoice Manage
Care, Inc. ..................................... 35,000 1,554
Ventiv Health, Inc. * ........................... 67,400 1,391
Visible Genetics,
Inc. * ........................................ 61,200 1,521
---------
16,408
Household Appliances / Furnishings - 0.5%
Ethan Allen
Interiors, Inc. ................................ 31,300 1,017
Insurance - 3.3%
Fidelity National
Financial, Inc. ................................ 57,600 1,415
HCC Insurance
Holdings, Inc. ................................. 61,900 1,517
Philadelphia
Consolidated Holding
Corp. * ........................................ 25,900 901
Renaissancere
Holdings, Ltd. ................................. 19,000 1,408
Stancorp Financial
Group, Inc. .................................... 28,300 1,341
---------
6,582
Machinery - 0.6%
Global Power
Equipment Group,
Inc ......................................... 20,077 588
SureBeam Corporation
- Cl. A * ...................................... 40,300 690
---------
1,278
Media - Publishing - 0.8%
Scholastic Corp.* ............................... 35,000 1,575
Media - TV & Radio - 5.2%
Entercom
Communications Corp. * ......................... 32,500 1,742
Getty Images, Inc. .............................. 57,200 1,502
Insight
Communications
Company, Inc. .................................. 40,200 1,005
Pegasus
Communications
Corp.* ........................................ 40,900 920
Radio One, Inc. * .............................. 42,500 978
Radio One, Inc. - Cl. D ......................... 61,200 1,349
Regent
Communications, Inc. * ......................... 190,600 2,285
Sinclair Broadcast
Group, Inc. .................................... 62,000 639
---------
10,420
Oil & Natural Gas Exploration & Production - 5.4%
Encore Acquisition
Co. * .......................................... 17,000 196
Evergreen Resources,
Inc ............................................ 28,000 1,064
Fuelcell Energy, Inc. ........................... 27,800 642
Newfield Exploration
Co. * .......................................... 41,400 1,327
NPS Pharmaceuticals,
Inc ............................................ 59,300 2,384
Patterson Uti Energy,
Inc. * ........................................ 55,500 992
Pride International,
Inc. * ........................................ 56,300 1,070
Spinnaker Exploration
Co.* .......................................... 40,900 1,630
Stone Energy Corp. * ............................ 35,200 1,559
---------
10,864
Oil - Equipment & Service - 4.7%
Dril Quip, Inc. * .............................. 61,300 1,320
Horizon Offshore,
Inc. * ........................................ 65,200 880
Hydril Co. * .................................... 73,000 1,662
Lone Star
Technologies, Inc. * ........................... 38,100 1,379
Marine Drilling
Companies, Inc. * .............................. 53,700 1,026
Natco Group, Inc. -
Cl. A .......................................... 65,500 577
Oceaneering
International, Inc. * .......................... 51,800 1,075
Torch Offshore, Inc. ............................ 12,600 125
Universal Compression
Holdings * .................................... 52,100 1,480
---------
9,524
Personal & Commercial Lending - 0.6%
Metris Cos., Inc. ............................... 37,400 1,261
Real Estate Investment Trust - 0.5%
Extended Stay
America, Inc. .................................. 64,300 964
Retail - 0.1%
Galyans Trading, Inc. ........................... 8,400 171
Retail - Department Stores - 5.5%
AnnTaylor Stores
Corp ........................................... 8,200 294
99 Cents Only Stores * .......................... 62,698 1,878
Bebe Stores, Inc. ............................... 39,200 1,143
Cost Plus, Inc.* ................................ 59,050 1,771
Hot Topic, Inc. ................................. 45,700 1,421
Rare Hospitality
International, Inc. * .......................... 48,000 1,085
Too, Inc. * .................................... 44,000 1,206
Tweeter Home
Entertainment Group,
Inc ............................................ 67,100 2,369
---------
11,167
109
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Retail - Drug Stores - 0.7%
Duane Reade, Inc.* .............................. 43,400 $ 1,410
Retail - Food - 4.6%
Applebee's
International, Inc. ............................ 51,000 1,632
Buca, Inc. * .................................... 59,700 1,299
California Pizza
Kitchen, Inc. .................................. 47,500 1,104
Krispy Kreme
Doughnuts, Inc. ................................ 46,200 1,848
P.F. Chang's China
Bistro, Inc.* .................................. 40,600 1,539
Whole Foods Market,
Inc. * ........................................ 70,000 1,897
---------
9,319
Shoe & Apparel Manufacturing - 2.1%
Columbia Sportswear
Co. * .......................................... 45,000 2,294
Nautica Enterprises,
Inc ............................................ 10,600 217
Tommy Hilfiger Corp. * .......................... 117,400 1,644
---------
4,155
Telecommunication Equipment - 0.6%
Brightpoint, Inc. * ............................ 166,400 483
SBA Communications
Corp. * ........................................ 28,500 705
---------
1,188
Telecommunication Services - 3.0%
Airgate PCS, Inc. * ............................ 40,800 2,122
Alamosa Holdings,
Inc. * ........................................ 64,300 1,048
CTC Communications
Group, Inc. .................................... 87,000 266
Dobson Communications
Corp. * ........................................ 34,100 581
Metro One Telecom,
Inc ............................................ 31,300 2,031
---------
6,048
Transportation Services - 0.7%
Forward Air Corp. * ............................ 46,500 1,393
---------
TOTAL COMMON STOCK- ........................... 96.6% 195,126
---------
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 3.6%
Investment in joint trading account
3.97% due 07/02/01 .............................. $ 7,290 7,290
Shares
Cash Equivalents - 7.6%
Navigator Securities
Lending Prime
Portfolio ** 15,318,473 15,318
---------- ---------
TOTAL SHORT-TERM INVESTMENTS 11.2% 22,608
---------- ---------
TOTAL INVESTMENTS- 107.8% 217,734
Other Assets & Liabilities, Net- (7.8)% (15,681)
---------- ---------
NET ASSETS- 100.0% $ 202,053
========== =========
* Non-income producing securities.
** Represents investment of security lending collateral.
See notes to financial statements.
110
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Bank - 2.4%
Rhone-Poulenc SA ................................ 6,800 $ 543
Business Services - 0.4%
Express Scripts, Inc. - Cl. A* .................. 1,800 99
Diversified Operations - 1.4%
Amgen, Inc. ..................................... 5,000 303
Electronic Products & Services - 1.8%
Applera Corporation - Applied
Biosystems Group ............................... 5,700 152
Cytyc Corp. * ................................... 6,400 147
Waters Corp. * ................................. 3,650 101
-------
400
Health Care Products - 78.4%
Abbott Laboratories ............................. 7,400 355
Alkermes, Inc. .................................. 5,500 193
Allergan, Inc. .................................. 6,800 581
American Home Products Corp. .................... 16,600 970
Andrx Corp. ..................................... 2,600 200
Angiotech Pharmaceuticals, Inc. ................. 1,000 52
Apogent Technologies, Inc. ...................... 4,900 121
AstraZeneca Group PLC - ADR ..................... 16,400 767
Aviron .......................................... 2,400 137
Barr Laboratories, Inc. ......................... 1,600 113
Bristol-Myers Squibb Co. ........................ 5,800 303
Cardinal Health, Inc. ........................... 7,500 517
Cephalon, Inc. * ............................... 2,400 169
Cerus Corp. ..................................... 1,880 136
Charles River Laboratories * ................... 4,800 167
COR Therapeutics, Inc. * ....................... 4,900 149
Elan Corp. PLC - ADR ............................ 6,100 372
Eli Lilly & Co. ................................. 7,200 533
Enzon , Inc. .................................... 2,200 138
Forest Laboratories, Inc. * ..................... 2,000 142
Genetech, Inc.* ................................. 4,900 270
Genzyme Corp.* .................................. 2,150 131
Gilead Sciences, Inc.* .......................... 6,000 349
Glaxo SmithKline PLC - ADR 8 ................... 19,300 1,085
Guilford Pharmaceuticals, Inc. .................. 1,800 61
Inhale Therapeutic Systems, Inc.* .............. 4,400 101
Intermune, Inc. * ............................... 700 25
Invitrogen Corp. * ............................. 2,600 187
Ivax Corp. ...................................... 7,200 281
Johnson & Johnson ............................... 19,200 960
King Pharmaceuticals, Inc. * ................... 3,900 210
Laboratory Corp. of America Holdings ............ 1,200 92
McKesson HBOC, Inc. ............................. 6,900 256
Medicis Pharmaceutical Corp. - Cl. A ............ 2,700 143
MedImmune, Inc. * ............................... 7,900 373
Medtronic, Inc. ................................. 14,900 686
Merck & Co., Inc. ............................... 13,600 869
NPS Pharmaceuticals, Inc. * ..................... 3,600 145
Pfizer, Inc. .................................... 31,400 1,258
Pharmacia Corp. ................................. 19,700 905
Priority Healthcare Corp. - Cl. B ............... 2,500 71
Protein Design Labs, Inc.* ..................... 1,670 145
Qiagen NV ....................................... 2,700 60
Sankyo Co., Ltd. ................................ 3,000 54
Sanofi-Synthelabo SA * ......................... 5,300 348
Schering-Plough Corp. ........................... 17,900 649
Scios, Inc. ..................................... 3,300 83
Sepracor, Inc. 8 ............................... 3,850 153
Serono SA ....................................... 120 119
Shire Pharmaceuticals Group Place - ADR ......... 5,100 283
Stryker Corp. * ................................. 3,600 198
Takeda Chemical Industries ...................... 4,000 186
Tanox, Inc. ..................................... 2,500 79
Teva Pharmaceutical Industries, Ltd. - ADR ...... 2,400 150
Trigon Healthcare, Inc. ......................... 2,800 182
Trimeris, Inc. .................................. 2,700 135
-------
17,397
Health Care Services - 8.0%
AmeriSource Health Corp. - Cl. A * ............. 2,000 111
Biovail Corp. ................................... 2,400 104
HCA-The Healthcare Corp. ........................ 15,000 678
IDEC Pharmaceuticals Corp. ...................... 950 64
Lincare Holdings, Inc. .......................... 3,400 102
Quest Diagnostics, Inc. * ....................... 1,800 135
St. Jude Medical, Inc. 8 ....................... 3,400 204
Triad Hospitals, Inc. * ......................... 3,200 94
UnitedHealth Group, Inc. ........................ 4,470 276
-------
1,768
Insurance - 1.8%
Cigna Corp. ..................................... 4,000 383
Retailers - Food & Drug - 0.9%
CVS Corp. ....................................... 4,000 154
Rite Aid Corp. .................................. 5,350 48
-------
202
-------
TOTAL COMMON STOCK- 95.1% 21,095
-------
111
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS - 5.5%
Investment in joint trading account
3.97% due 07/02/01 ............................ $ 1,218 $ 1,218
------- ----------
TOTAL INVESTMENTS- 100.6% 22,313
Other Assets & Liabilities, Net- (0.6)% (124)
------- ----------
NET ASSETS- 100.0% $ 22,189
======= ==========
ADR-American Depository Receipts.
* Non-income producing security.
See notes to financial statements.
112
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Australia - 2.0%
Australia & New Zealand Banking Group,
Ltd. (FINL) .................................... 5,000 $ 43
BHP, Inc. (DIOP) ................................ 9,905 54
Broken Hill Proprietary Co., Ltd. (DIOP) ........ 9,300 49
CSL, Ltd. (HEAL) ................................ 6,900 168
National Australia Bank, Ltd. (BANK) ............ 2,100 38
Publishing & Broadcasting, Ltd. (MEDP) .......... 15,400 71
QBE Insurance Group, Ltd. (INSU) ............... 7,212 43
WMC, Ltd. (DIOP) ................................ 18,200 89
-------
555
Canada - 1.6%
Alcan Aluminum, Ltd. (META) ..................... 1,700 72
ATI Technologies, Inc. (ETRN) .................. 6,500 61
Bombardier Inc. - Cl. B (DIOP) ................. 4,600 69
Investors Group, Inc. (FINL) ................... 6,400 90
Magna International, Inc. (AUTO) ............... 1,300 80
The Thomson Corp. (SOFT) ........................ 2,500 84
-------
456
Finland - 1.4%
Nokia Oyj (TELE) ................................ 11,800 268
Nokia Oyj - ADR (TELE) .......................... 5,200 115
-------
383
France - 1.8%
Accor SA (LEIS) ................................. 800 34
Bouygues SA (CONT) .............................. 2,500 85
Groupe Danone (FOOD) ............................ 300 41
JC Decauxsa International NPV (BUSI) ............ 1,600 21
LVMH (Louis Vuitton Moet Hennessy) (FOOD) ....... 1,300 66
Sanofi-Synthelabo SA (HEAL) ..................... 2,400 158
Schneider SA (MACH) ............................. 200 11
Societe Television Francaise (MEDI) ............. 2,100 61
STMicroelectronics (ETRN) ....................... 1,100 38
-------
515
Germany - 1.2%
DaimlerChrysler AG (AUTO) ....................... 3,400 157
Deutsche Bank AG (BANK) ......................... 500 36
Infineon Technologies AG (ETRN) ................ 2,700 63
Metro AG (RETS) ................................. 1,100 41
Siemens AG (DIOP) ............................... 750 46
-------
343
Hong Kong - 1.6%
Cheung Kong (Holdings), Ltd. (READ) ............. 7,000 76
China Telecom (Hong Kong), Ltd. (TELS) .......... 13,500 71
Hutchison Whampoa, Ltd. (COMM) ................. 5,000 50
Johnson Electric Holdings, Ltd. (ETRN) .......... 44,000 60
Li & Fung, Ltd. (COMM) .......................... 48,000 79
Sun Hung Kai Properties, Ltd. (REIT) ............ 3,000 27
Swire Pacific, Ltd. - Cl. A (DIOP) ............. 18,500 96
-------
459
Italy - 0.4%
Assicurazioni Generali (INSU) .................. 2,000 60
ENI SpA (OILS) .................................. 2,850 35
Olivetti SpA (COMM) ............................. 16,600 29
-------
124
Japan - 7.1%
Advantest (ETRN) ................................ 800 69
Enplas Corp. (ETRN) ............................. 1,800 40
Fuji Television Network, Inc. (MEDI) ............ 6 34
Hirose Electric Co., Ltd. (ETRN) ............... 400 30
Hoya Corp. (ETRN) ............................... 600 38
Jusco Co., Ltd. (RETS) .......................... 2,000 44
Keyence Corp. (UTIE) ............................ 200 40
Matsumotokiyoshi Co., Ltd. (RETD) .............. 1,000 39
Mitsubishi Heavy Industries, Ltd. (MACH) ........ 10,000 46
Mitsui Fudosan Co., Ltd. (REAL) ................ 4,000 43
Mitsui Marine & Fire Insurance Co.,
Ltd. (INSU) .................................... 16,000 82
Murata Manufacturing Co., Ltd. (ETRN) ........... 900 60
NEC Corp. (COMP) ................................ 7,000 95
Nintendo Corp., Ltd. (LEIS) ..................... 700 127
Nippon Television Network Corp. (MEDP) .......... 100 24
Nissan Motor Acceptance Corp. (FINL) ............ 12,000 83
Nomura Securities Co., Ltd. (FUND) ............. 4,000 77
NTT Mobile Communications Network, Inc. (TELS) .. 10 174
Orix Corp. (FINL) ............................... 400 39
Rohm Co., Ltd. (ETRN) ........................... 500 78
Shionogi & Co., Ltd. (HEAL) ..................... 5,000 104
Sony Corp. (ETRN) ............................... 1,500 99
Sumitomo Bank (BANK) ............................ 5,000 41
Suzuki Motor Corp. (AUTO) ....................... 7,000 93
Taiyo Yuden Co., Ltd. (ELEQ) .................... 2,000 53
Tokyo Electron, Ltd. (ETRN) ..................... 900 54
Tokyo Seimitsu Co., Ltd. (ETRN) ................. 2,400 123
Toray Industries, Inc. (HOUS) ................... 18,000 72
UFJ Holdings, Inc. (FINL) ....................... 15 81
-------
1,982
Mexico - 0.8%
America Movil SA de CV -
ADR Ser. L (TELS) .............................. 4,100 86
Telefonos de Mexico SA - ADR (UTIT) ............. 4,100 144
-------
230
Netherlands - 2.0%
ABN Amro Holding NV (BANK) ...................... 1,532 29
113
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Netherlands - Continued
Aegon NV (INSU) ................................. 6,555 $ 185
ASM Lithography Holding NV (COMP) ............... 3,700 83
Heineken NV (FOOD) .............................. 2,500 101
ING Groep NV (BANK) ............................. 1,100 72
Koninklijke (Royal) Philips
Electronics N.V. (ETRN) ........................ 2,000 53
United Pan Europe (TELS) ........................ 4,300 11
Vedior CVA (BUSI) ............................... 3,000 27
------
561
Norway - 0.5%
Norsk Hydro ASA (DIOP) .......................... 1,800 76
Statoil ASA (OILX) .............................. 7,500 56
------
132
Panama - 0.3%
Carnival Corp. (LEIS) ........................... 2,300 71
Russia - 0.3%
LuKoil Holding - ADR (OILS) ..................... 1,600 77
Singapore - 0.7%
DBS Group Holdings, Ltd. (BANK) ................. 4,000 29
Singapore Technology Engineering, Ltd. (ENGI) ... 53,000 75
Singapore Telecom Reg.(TELS) ................... 108,000 101
------
205
South Korea - 0.4%
Samsung Electronics 144A (ETRN) ................ 1,300 102
Spain - 0.6%
Banco Bilbao Vizcaya SA (BANK) ................. 6,900 90
Inditex (APPA) .................................. 1,700 27
Telefonica SA (UTIT) ............................ 5,202 64
------
181
Sweden - 0.5%
ASSA ABLOY (METP) ............................... 3,400 49
ForeningsSparbanken AB (BANK) .................. 5,400 63
Telefonaktiebolaget LM Ericsson AB (TELE) ....... 7,200 39
------
151
Switzerland - 2.3%
Compagnie Financiere Richemont AG (RETS) ........ 50 128
Credit Suisse Group - Reg. (BANK) .............. 300 49
Holcim (CONS) ................................... 528 108
Nestle SA Reg. (FOOD) ........................... 180 38
Novartis AG Reg.(HEAL) .......................... 4,940 179
Schweizerische Rueckversicherungs-Gesellschaft
(INSU) ........................................ 50 100
Synthes-Stratec, Inc. (HEAL) ................... 70 43
------
645
Taiwan - 0.4%
Taiwan Semiconductor
Manufacturing Co., Ltd. - ADR (ETRN) ........... 6,920 105
United Kingdom - 7.1%
Applera Corporation - Applied Biosystems Group
(HEAL) ........................................ 1,100 29
AstraZeneca Group PLC (HEAL) ................... 12,200 569
Asustek Computer, Inc. - GDR (COMP) ............. 9,750 42
British Aerospace PLC (AERO) ................... 11,000 53
Chevron Corp. (OILX) ............................ 900 81
Corus Group (STEE) .............................. 59,000 50
Dimension Data Holdings PLC (SOFT) ............. 8,900 34
Halifax Group plc (LEND) ........................ 4,800 56
Juniper Networks, Inc. (SOFT) .................. 800 25
Linear Technology Corp. (ETRN) ................. 800 35
Marks & Spencer PLC (RETS) ...................... 7,000 26
PartnerRe, Ltd. (INSU) .......................... 700 39
Pearson PLC (MEDP) .............................. 2,900 48
Prudential Corp. (INSU) ......................... 3,000 36
Reuters Group PLC (BUSI) ........................ 5,500 72
Robert Half International, Inc. (BUSI) .......... 1,400 35
Shell Transport & Trading Co. PLC (OILX) ........ 27,300 227
Smiths Group PLC (DIOP) ......................... 3,700 43
The PMI Group, Inc. (INSU) ...................... 1,700 124
Unilever PLC (CNSU) ............................. 9,400 79
Vodafone AirTouch PLC (TELS) ................... 128,238 284
------
1,987
United States - 25.9%
Advanced Micro Devices, Inc. (COMP) ............. 2,800 81
AES Corp. (UTIE) ................................ 3,100 133
Agere Systems, Inc. - Cl. A (ETRN) ............. 4,400 33
Agilent Technologies, Inc. (ETRN) .............. 2,000 65
Air Products & Chemicals, Inc. (CHEM) ........... 900 41
Alcoa, Inc. (META) .............................. 1,800 71
Allstate Corp. (INSU) ........................... 1,300 57
American Greetings Corp. - Cl. A (COMM) ......... 5,200 57
AOL Time Warner, Inc. (MEDI) ................... 2,100 111
Applied Materials, Inc. (ETRN) ................. 3,500 172
AT&T Corp. (UTIT) ............................... 2,000 44
AT&T Corp. - Liberty Media Group -
Cl. A (MEDP) ................................... 7,000 122
Baker Hughes, Inc. (OILX) ....................... 2,700 90
Bank of America Corp. (BANK) ................... 4,700 282
Berkshire Hathaway Inc. - Cl. A (DIOP) .......... 2 139
Brocade Communications Systems, Inc. (COMP) ..... 1,500 66
Cablevision Systems Corp. (MEDI) ............... 3,550 92
Cablevision Systems Corp. - Cl. A (MEDI) ........ 2,700 158
Cadence Design Systems, Inc. (SOFT) ............. 2,000 37
Campbell Soup Co. (FOOD) ........................ 3,300 85
114
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
United States - Continued
Charter Communications, Inc. - Cl. A (MEDI) ..... 3,000 $ 70
CheckFree Corp. (SOFT) .......................... 1,900 67
Circuit City Stores, Inc. (RETS) ............... 6,900 124
Cisco Systems, Inc. (ETRN) ...................... 8,800 160
Compaq Computer Corp. (COMP) ................... 4,300 67
Cox Communications, Inc. - Cl. A (TELS) ......... 1,300 58
DoubleClick, Inc. (SOFT) ........................ 3,100 43
Dover Corp. (MACH) .............................. 900 34
Ecolab, Inc. (COMM) ............................. 1,300 53
Edison International (UTIT) ..................... 3,000 33
Exxon Mobil Corp. (OILE) ........................ 400 35
FleetBoston Financial Corp. (BANK) ............. 4,200 166
Fluor Corp. (ENGI) .............................. 2,100 95
General Mills, Inc. (FOOD) ...................... 1,000 44
General Motors Corp. (PART) ..................... 1,000 64
General Motors Corp. - Cl. H (AUTO) ............. 1,800 36
Genetech, Inc. (HEAL) ........................... 1,200 66
H.J. Heinz Co. (FOOD) ........................... 1,300 53
Hewlett-Packard Co. (COMP) ...................... 4,500 129
Household International, Inc. (LEND) ............ 2,500 167
Illinois Tool Works, Inc. (DIOP) ............... 2,400 152
IMC Global, Inc. (CHEM) ......................... 7,200 73
Intel Corp. (COMP) .............................. 2,100 61
International Paper Co. (PAPR) ................. 1,300 46
Intersil Holding Corp. (ETRN) .................. 1,700 62
Kellogg Co. (FOOD) .............................. 4,000 116
KLA-Tencor Corp. (ETRN) ......................... 2,400 140
Kraft Foods, Inc. CL A (FOOD) .................. 2,300 71
Limited, Inc. (RETS) ............................ 2,900 48
Lowe's Cos., Inc. (RETS) ........................ 3,000 218
Macromedia, Inc. (SOFT) ......................... 3,900 70
Medtronic, Inc. (HEAL) .......................... 1,800 83
Microsoft Corp. (SOFT) .......................... 1,100 80
Motorola, Inc. (ETRN) ........................... 3,800 63
Navistar International Corp., Inc.
- Cl. B (AUTO) ................................. 1,200 34
Nike, Inc. - Cl. B (HOUS) ....................... 900 38
Nortel Networks Corp. (TELE) ................... 4,000 36
Novellus Systems, Inc. (ETRN) .................. 700 40
NRG Energy, Inc. (OILX) ......................... 1,400 31
Peoplesoft, Inc. (SOFT) ......................... 900 44
PepsiCo, Inc. (FOOD) ............................ 2,200 97
Pfizer, Inc. (HEAL) ............................. 5,000 200
PMC-Sierra, Inc. (ETRN) ......................... 1,500 47
Raytheon Co. (AERO) ............................. 3,400 90
Siebel Systems, Inc. (SOFT) ..................... 800 38
Sprint Corp. (UTIT) ............................. 1,600 34
Sprint PCS (PCS Group) (TELS) .................. 3,500 85
Teradyne, Inc. (ETRN) ........................... 3,000 99
Texas Instruments, Inc. (ETRN) ................. 2,700 85
The Walt Disney Co. (MEDI) ...................... 1,000 29
TMP Worldwide, Inc. (BUSI) ...................... 1,100 66
Transocean Sedco Forex, Inc. (OILS) ............. 1,000 41
Tyco International, Ltd. (DIOP) ................ 2,100 114
TyCom, Ltd. (TELE) .............................. 2,700 46
UAL Corp. (TRAN) ................................ 2,700 95
United Parcel Service, Inc. - Cl. B (TRAN) ...... 700 41
United Technologies Corp. (AERO) ............... 1,800 132
USA Education, Inc. (LEND) ...................... 1,900 139
USA Networks, Inc. (MEDI) ....................... 4,500 126
VeriSign, Inc. (SOFT) ........................... 1,000 60
Viacom, Inc. - Cl. B (MEDI) ..................... 1,000 52
W.W. Grainger, Inc. (DIOP) ...................... 900 37
Washington Mutual, Inc. (BANK) ................. 7,350 276
Weatherford International, Inc. (OILS) .......... 1,200 58
Wells Fargo & Co. (BANK) ........................ 2,000 93
Williams Communication Group (TELE) ............. 2,220 7
Williams Cos., Inc. (OILX) ...................... 2,700 89
--------
7,282
--------
TOTAL COMMON STOCK- 58.9% 16,546
--------
PREFERRED STOCK - 0.1%
Supra National - 0.1%
UFJ International Finance
(BERMUDA) 144A (FINL) .......................... 2,000,000 17
--------
TOTAL PREFERRED STOCK- 0.1% 17
--------
Par
Value
(000's)
PUBLICLY-TRADED BONDS
Canada - 1.0%
Government of Canada (GOVF)
7.25% due 06/01/07 .............................. 405 286
Denmark - 0.5%
Kingdom of Denmark - Bullet Bond (GOVF)
8.0% due 03/15/06 ............................... 1,100 141
Finland - 0.8%
Republic of Finland - Bonds (GOVF)
5.75% due 02/23/11 .............................. 250 218
France - 1.0%
Government of France - Debs. (GOVF)
4.0% due 10/25/09 ............................... 370 289
Germany - 3.4%
Federal Republic of Germany - Bonds (GOVF)
5.25% due 01/04/08 .............................. 1,000 869
Kredit Fur Wiederaufbau (BANK)
5.0% due 07/04/11 ............................... 100 82
--------
951
115
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Japan - 1.8%
Government of Japan - Bonds (GOVF)
0.9% due 12/22/08 ............................... 30,000 $ 242
Government of Japan (GOVF)
1.8% due 03/22/10 ............................... 30,000 257
--------
499
Luxembourg - 0.9%
KFW International Finance (BANK)
1.0% due 12/20/04 ............................... 30,000 247
Netherlands - 6.3%
Netherlands Government - Bonds Series 1 & 2 (GOVF)
6.0% due 01/15/06 ............................... 2,000 1,782
Supra National - 6.7%
Asian Development Bank (BANK)
5.625% due 02/18/02 ............................. 40,000 332
Bank of Ireland (BANK)
6.45% due 02/10/10 .............................. 250 215
British Telecommunications PLC (TELS)
6.875% due 02/15/11 ............................. 125 107
FIixed Link Finance BV (FINL)
6.3% due 08/28/25 ............................... 100 141
International Bank of Reconstruction &
Development - Debs. (BANK)
4.75% due 12/20/04 .............................. 30,000 278
International-American Development
Bank - Bonds (BANK)
1.9% due 07/08/09 ............................... 40,000 349
Kingdom of Spain - Notes (GOVF)
3.1% due 09/20/06 ............................... 50,000 458
--------
1,880
United Kingdom - 0.5%
U.K. Treasury (GOVF)
7.25% due 12/07/07 .............................. 100 154
United States - 12.7%
Federal National Mortgage Assoc. (GOVA)
5.25% due 01/15/09 .............................. 340 325
Federal National Mortgage Assoc. - Sr. Notes
(GOVA)
2.125% due 10/09/07 ............................. 40,000 352
Nortel Networks, Ltd. - Notes (TELE)
6.125% due 02/15/06 ............................. 125 108
U.S. Treasury Bills (GOVE)
3.435% due 09/13/01 ............................ 62 62
U.S. Treasury - Bonds (GOVE)
7.25% due 05/15/16 .............................. 250 285
8.0% due 11/15/21 ............................... 635 791
U.S. Treasury - Notes (GOVE)
5.75% due 08/15/03 .............................. 1,115 1,147
6.625% due 05/31/02 ............................. 489 501
--------
3,571
--------
TOTAL PUBLICLY-TRADED BONDS- 35.6% 10,018
--------
SHORT-TERM INVESTMENTS - 3.3%
Investment in joint trading account
3.97% due 07/02/01 .............................. $ 931 931
---------- --------
TOTAL INVESTMENTS- 97.9% 27,512
Other Assets & Liabilities, Net 2.1% 594
---------- --------
NET ASSETS- 100.0% $ 28,106
========== ========
ADR - American Depository Receipts.
GDR - Global Depository Receipts.
(a) Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At June 30, 2001, securities aggregated
$119 or 42% of net assets of the Portfolio.
See notes to financial statements.
116
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GLOBAL BALANCED FUND
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Foreign Governmental ................. GOVF $4,696 17.7%
Bank ................................. BANK 2,767 10.4
U.S. Governmental .................... GOVE 2,786 10.5
Electronic Products & Services ....... ETRN 2,076 7.8
Health Care Products ................. HEAL 1,599 6.0
Telecommunication Services ........... TELS 977 3.7
Diversified Operations ............... DIOP 964 3.6
Media - TV / Radio ................... MEDI 733 2.8
Insurance ............................ INSU 726 2.7
Food, Beverage & Tobacco ............. FOOD 712 2.7
U.S. Government Agencies ............. GOVA 677 2.5
Financial Services ................... FINL 661 2.5
Retail - Department Stores ........... RETS 629 2.4
Telecommunication Equipment .......... COMP 619 2.3
Computer Software & Services ......... SOFT 582 2.2
Oil & Natural Gas Exploration &
Production .......................... OILX 574 2.2
Computer Equipment ................... TELE 494 1.9
Automobile ........................... AUTO 400 1.5
Personal & Commercial Lending ........ LEND 362 1.4
Aerospace & Defense .................. AERO 351 1.3
Telephone ............................ UTIT 319 1.2
Commercial Sevices ................... COMM 268 1.0
Media - Publishing ................... MEDP 265 1.0
Leisure & Recreation ................. LEIS 232 0.9
Business Services .................... BUSI 221 0.8
Oil .................................. OILS 211 0.8
Electric Power ....................... UTIE 173 0.7
Engineering & Construction ........... ENGI 170 0.6
Metals & Mining ...................... META 143 0.5
Transportation Services .............. TRAN 136 0.5
Chemical ............................. CHEM 114 0.4
Housing .............................. HOUS 110 0.4
Construction ......................... CONS 108 0.4
Machinary ............................ MACH 91 0.3
Container ............................ CONT 85 0.3
Consumer-Miscellaneous ............... CNSU 79 0.3
Brokerage & Investment Management .... FUND 77 0.3
Auto & Truck Parts ................... PART 64 0.2
Electric Equipment ................... ELEQ 53 0.2
Steel ................................ STEE 50 0.2
Precious Metals ...................... METP 49 0.2
Paper & Forset Products .............. PAPR 46 0.2
Real Estate Operations ............... REAL 43 0.2
Oil Eequipment & Service ............. OILE 35 0.1
Shoe & Apparel Manufacturing ......... APPA 27 0.1
Real Estate Investment Trust ......... REIT 27 0.1
------- ------
$26,581 100.0%
======= ======
117
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Bank - 0.9%
North Fork Bancorp, Inc. ..................... 93,430 $ 2,896
Brokerage & Investment Management - 1.0%
E*Trade Group, Inc. * ........................ 454,265 2,930
Commercial Services - 12.1%
Apollo Group, Inc. - Cl. A * ................. 239,178 10,153
Cendant Corp. ................................ 212,900 4,152
Concord EFS, Inc. ............................ 96,030 4,994
Lamar Advertising Co. * ...................... 145,515 6,403
Plexus Corp. * ............................... 53,275 1,758
TMP Worldwide, Inc. * ........................ 154,895 9,294
--------
36,754
Consumer Miscellaneous - 1.6%
University of Phoenix Online * ............... 114,805 4,879
Electric Power - 2.8%
AES Corp. .................................... 104,260 4,489
Calpine Corp. * .............................. 29,955 1,132
Reliant Resources, Inc. ..................... 111,040 2,743
--------
8,364
Electrical Equipment - 1.1%
Flextronics International Ltd. ............... 125,030 3,265
Electronic Products & Services - 11.5%
Celestica, Inc. .............................. 32,995 1,699
Cree, Inc. * ................................. 387,525 10,132
Integrated Device Technology, Inc. * ......... 252,640 8,006
Intersil Holding Corp. * ..................... 176,175 6,413
Semtech Corp. * .............................. 104,415 3,132
Vitesse Semiconductor Corp. * ................ 259,070 5,451
--------
34,833
Financial Services - 4.0%
Paychex, Inc. ................................ 299,393 11,978
Health Care Products - 22.2%
Abgenix, Inc. * .............................. 143,710 6,467
Andrx Corp. * ................................ 86,855 6,688
Cardinal Health, Inc. ........................ 56,392 3,891
CuraGen Corp. * .............................. 150,995 5,496
Enzon, Inc. .................................. 88,360 5,522
Human Genome Sciences, Inc. * ................ 88,300 5,320
Laboratory Corporation of America Holdings ... 72,450 5,571
McKesson HBOC, Inc. .......................... 101,680 3,774
Medarex, Inc. * .............................. 238,320 5,601
Millennium Pharmaceuticals, Inc. * ........... 160,790 5,721
OSI Pharmaceuticals, Inc. .................... 106,155 5,583
Priority Healthcare Corp. - Cl B ............. 68,125 1,927
Sepracor, Inc. * ............................. 138,080 5,494
--------
67,055
Health Care Services - 3.9%
Community Health Systems, Inc. ............... 100,310 2,959
Manor Care, Inc. ............................. 101,915 3,236
Quest Diagnostics, Inc. ...................... 76,305 5,711
--------
11,906
Media - TV & Radio - 6.0%
Charter Communications, Inc. - Cl. A ......... 451,835 10,550
Cox Radio, Inc. - Cl. A * .................... 101,080 2,815
Entercom Communications Corp. * .............. 53,380 2,862
Hispanic Broadcasting Corp. * ................ 68,100 1,954
--------
18,181
Oil & Natural Gas Exploration & Production - 5.6%
EOG Resources, Inc. .......................... 72,910 2,592
Kinder Morgan, Inc. .......................... 211,335 10,620
NRG Energy, Inc. ............................. 53,275 1,176
Valero Energy Corp. .......................... 72,335 2,660
--------
17,048
Oil - Equipment & Service - 4.1%
Hanover Compressor Co. * ..................... 265,055 8,771
Universal Compression Holdings * ............. 127,510 3,621
--------
12,392
Retail - Department Stores - 1.4%
eBay, Inc. ................................... 61,590 4,218
Retail - Drug Stores - 1.2%
Walgreen Co. ................................. 103,115 3,521
Telecommunication Equipment - 8.0%
American Tower Corp. - Cl. A ................. 480,275 9,927
SBA Communications Corp. ..................... 172,680 4,274
Sonus Networks, Inc. ......................... 289,590 6,765
TriQuint Semiconductor, Inc. ................. 143,640 3,232
--------
24,198
Telecommunication Services - 7.3%
Crown Castle International Corp. * ........... 565,955 9,282
EchoStar Communications Corp. - Cl. A * ...... 100,200 3,248
Western Wireless Corp. - Cl. A * ............. 221,470 9,523
--------
22,053
Transportation Services - 2.4%
C.H. Robinson Worldwide, Inc. ................ 3,060 86
Expeditors International of
Washington, Inc. ............................ 24,570 1,474
Ryanair Holdings PLC - ADR ................... 110,760 5,754
--------
7,314
--------
TOTAL COMMON STOCK- 97.1% 293,785
--------
118
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MID CAP GROWTH FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS
Commercial Paper - 2.8%
CIT Group Holdings, Inc.
4.14% due 07/02/01 .......................... $ 8,398 $ 8,398
Shares
Cash Equivalents - 4.0%
Navigator Securities Lending Prime
Portfolio ** 12,189,354 12,189
----------- ------------
TOTAL SHORT-TERM INVESTMENTS 6.8% 20,587
----------- ------------
TOTAL INVESTMENTS- 103.9% 314,372
Other Assets & Liabilities, Net- (3.9)% (11,825)
----------- ------------
NET ASSETS- 100.0% $ 302,547
=========== ============
ADR-American Depository Receipts
* Non-income producing security.
** Represents investment of security lending collateral.
See notes to financial statements.
119
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MID CAP BLEND FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Auto & Truck Parts - 2.6%
Johnson Controls, Inc. ....................... 3,200 $ 232
Lear Corp. ................................... 3,400 119
Visteon Corp. ................................ 13,300 244
------
595
Bank - 6.7%
Charter One Financial, Inc. .................. 7,300 233
M&T Bank Corp. ............................... 2,100 158
National Commerce Financial Corp. ............ 10,500 256
SouthTrust Corp. ............................. 12,000 312
Synovus Financial Corp. ...................... 7,700 242
TCF Financial Corp. .......................... 6,700 310
------
1,511
Chemical - 3.8%
Air Products & Chemicals, Inc. ............... 6,000 275
Ashland, Inc. ................................ 2,800 112
Eastman Chemical Co. ......................... 2,100 100
Praxair, Inc. ................................ 6,300 296
Rohm & Haas Co. .............................. 2,300 76
------
859
Commercial Services - 2.9%
Avery Dennison Corp. ......................... 3,900 199
Concord EFS, Inc. ............................ 5,700 297
Ecolab, Inc. ................................. 2,000 82
Sybase, Inc. ................................. 4,100 67
------
645
Computer Equipment - 3.5%
Advanced Micro Devices, Inc. ................. 4,900 141
Apple Computer, Inc. ......................... 6,500 151
Lexmark International Group, Inc. - Cl. A .... 7,402 498
------
790
Computer Software & Services - 5.9%
Adobe Systems, Inc. .......................... 1,300 61
BMC Software, Inc. ........................... 3,000 68
Cadence Design Systems, Inc. ................. 8,100 151
Citrix Systems, Inc. ......................... 3,600 126
Fiserv, Inc. ................................. 1,800 115
Intuit, Inc. ................................. 3,500 140
NCR Corp. .................................... 4,600 216
SunGard Data Systems, Inc. ................... 9,900 297
Synopsys, Inc. ............................... 3,100 150
------
1,324
Consumer Miscellaneous - 2.2%
Black & Decker Corp. ......................... 7,500 296
Parker-Hannifin Corp. ........................ 5,000 212
------
508
Cosmetic & Personal Care - 1.2%
Avon Products, Inc. .......................... 5,700 264
Diversified Operations - 2.6%
Danaher Corp. ................................ 5,700 319
ITT Industries, Inc. ......................... 2,500 111
Pall Corp. ................................... 4,800 113
Reynolds & Reynolds Co. - Cl. A .............. 2,300 50
------
593
Electric Power - 10.1%
Allegheny Energy, Inc. ....................... 12,800 618
Calpine Corp. ................................ 2,400 91
Energy East Corp. ............................ 15,700 328
Exelon Corp. ................................. 4,600 295
Mirant Corp. ................................. 9,900 340
UtiliCorp United, Inc. ....................... 19,700 602
------
2,274
Electrical Equipment - 0.7%
Cooper Industries, Inc. ...................... 3,900 154
Electronic Products & Services - 5.1%
Applera Corporation - Applied Biosystems
Group ....................................... 6,500 174
Atmel Corp. .................................. 8,400 113
LSI Logic Corp. .............................. 5,400 102
Maxim Integrated Products, Inc. .............. 1,100 49
Novellus Systems, Inc. ....................... 2,500 142
QLogic Corp. ................................. 1,200 77
Rockwell International Corp. ................. 4,300 164
Tektronix, Inc. .............................. 5,200 141
Teradyne, Inc. ............................... 2,700 89
Waters Corp. ................................. 3,300 91
------
1,142
Financial Services - 2.3%
First Tennessee National Corp. ............... 5,800 201
Stillwell Financial, Inc. .................... 9,700 326
------
527
Food, Beverage & Tobacco - 3.0%
Archer Daniels Midland Co. ................... 29,047 378
Hormel Foods Corp. ........................... 3,700 90
UST, Inc. .................................... 7,500 216
------
684
Health Care Products - 4.7%
Allergan, Inc. ............................... 3,500 299
Cephalon, Inc. ............................... 2,500 176
Invitrogen Corp. ............................. 2,700 194
King Pharmaceuticals, Inc. ................... 2,800 151
Laboratory Corporation of America Holdings ... 1,900 146
Millipore Corp. .............................. 1,600 99
------
1,065
Health Care Services - 4.5%
Lincare Holdings, Inc. ....................... 10,200 306
120
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MID CAP BLEND FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Health Care Services - Continued
St. Jude Medical, Inc. ....................... 1,100 $ 66
Trigon Healthcare, Inc. ...................... 9,271 601
Universal Health Services, Inc. - Cl. B ...... 900 41
-------
1,014
Housing - 1.5%
Centex Corp. ................................. 8,100 330
Insurance - 7.2%
Everest Re Group, Ltd. ....................... 1,000 75
Hartford Financial Services Group, Inc. ...... 2,000 137
Lincoln National Corp. ....................... 7,800 403
PartnerRe, Ltd. .............................. 3,100 172
St. Paul Cos., Inc. .......................... 7,700 390
Torchmark, Inc. .............................. 5,900 237
XL Capital, Ltd. - Cl. A ..................... 2,700 222
-------
1,636
Leisure & Recreation - 2.0%
Mattel, Inc. ................................. 7,000 133
Sabre Group Holdings, Inc. ................... 6,600 330
-------
463
Media - Publishing - 0.9%
Knight-Ridder, Inc. .......................... 2,100 125
New York Times Co. - Cl. A ................... 1,700 71
-------
196
Media - TV & Radio - 1.0%
Westwood One, Inc. ........................... 5,900 217
Metals & Mining - 0.5%
Alcan Aluminum, Ltd. ......................... 2,600 109
Oil - 0.7%
Conoco, Inc. - Cl. A ......................... 5,300 150
Oil & Natural Gas Exploration & Production - 4.8%
Amerada Hess Corp. ........................... 2,900 234
Apache Corp. ................................. 1,800 91
Noble Drilling Corp. ......................... 5,000 164
Sempra Energy ................................ 4,000 110
Sunoco, Inc. ................................. 4,400 161
USX-Marathon Group ........................... 11,100 328
-------
1,088
Oil - Equipment & Service - 2.1%
BJ Services Co. .............................. 16,700 474
Paper & Forest Products - 1.1%
Abitibi-Consolidated, Inc. ................... 18,800 144
Westvaco Corp. ............................... 4,800 116
-------
260
Precious Metals/Gems/Stones - 0.3%
Freeport-McMoRan Copper & Gold, Inc. - Cl. B . 6,500 72
Retail - Department Stores - 5.3%
Abercrombie & Fitch Co. ...................... 3,400 $ 151
Bed Bath & Beyond, Inc. ...................... 11,200 350
BJ's Wholesale Club, Inc. .................... 900 48
Family Dollar Stores, Inc. ................... 6,100 156
J.C. Penney Co., Inc. ........................ 1,700 45
Kohl's Corp. ................................. 700 44
TJX Cos., Inc. ............................... 7,500 239
Toys "R" Us, Inc. ............................ 6,800 168
-------
1,201
Retail - Food - 1.6%
Brinker International, Inc. .................. 3,300 85
Darden Restaurants, Inc. ..................... 2,300 64
Starbucks Corp. .............................. 6,000 138
Wendy's International, Inc. .................. 2,800 72
-------
359
Shoe & Apparel Manufacturing - 0.8%
Nike, Inc. - Cl. B ........................... 2,500 105
V.F. Corp. ................................... 1,900 69
-------
174
Steel - 0.6%
Nucor Corp. .................................. 2,800 137
Telecommunication Equipment - 0.6%
Comverse Technology, Inc. .................... 1,200 69
Linear Technology Corp. ...................... 1,700 75
-------
144
Telecommunication Services - 1.9%
Broadwing, Inc. .............................. 11,700 286
EchoStar Communications Corp. - Cl. A ........ 4,700 153
-------
439
Telephone - 1.1%
Telephone and Data Systems, Inc. ............. 2,300 250
Transportation Services - 3.8%
AMR Corp. .................................... 2,400 87
Canadian Pacific, Ltd. ....................... 3,100 120
CSX Corp. .................................... 5,700 207
Norfolk Southern Corp. ....................... 9,900 205
Northwest Airlines Corp. ..................... 2,700 68
Southwest Airlines Co. ....................... 9,100 168
-------
855
-------
TOTAL COMMON STOCK- 99.6% 22,503
------
121
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MID CAP BLEND FUND
Par Market
Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS - 0.0%
Investment in joint trading account
3.97% due 07/02/01 .......................... $ 5 $ 5
------- -------
TOTAL INVESTMENTS- 99.6% 22,508
Other Assets & Liabilities, Net- 0.4% 91
------- -------
NET ASSETS- 100.0% $22,599
======= =======
See notes to financial statements.
122
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 3.1%
Honeywell International, Inc. ................ 83,500 $ 2,922
Lockheed Martin Corp. ........................ 111,000 4,112
-------
7,034
Auto & Truck Parts - 1.1%
Dana Corp. ................................... 7,400 173
Genuine Parts Co. ............................ 59,200 1,865
TRW, Inc. .................................... 10,400 426
-------
2,464
Automobile - 0.5%
Ford Motor Co. ............................... 47,500 1,166
Bank - 9.7%
Bank of America Corp. ........................ 37,200 2,233
Bank One Corp. ............................... 75,100 2,689
FleetBoston Financial Corp. .................. 87,972 3,471
JP Morgan Chase & Co. ........................ 63,230 2,820
Mellon Financial Corp. ....................... 108,400 4,986
Mercantile Bankshares Corp. .................. 34,900 1,366
National City Corp. .......................... 44,100 1,357
US Bancorp ................................... 43,700 996
Wells Fargo & Co. ............................ 40,900 1,899
-------
21,817
Business Services - 1.0%
Dun & Bradstreet Corp. ....................... 23,500 663
H&R Block, Inc. .............................. 23,400 1,510
-------
2,173
Chemical - 3.1%
Dow Chemical Co. ............................. 46,500 1,546
E.I. du Pont de Nemours & Co. ................ 63,700 3,073
Great Lakes Chemical Corp. ................... 47,000 1,450
Hercules, Inc. ............................... 71,700 810
-------
6,879
Commercial Services - 1.3%
R.R. Donnelley & Sons Co. .................... 50,100 1,488
The Dun & Bradstreet Corp. * ................. 46,100 1,544
-------
3,032
Computer Equipment - 1.8%
Compaq Computer Corp. ........................ 54,600 845
Hewlett-Packard Co. .......................... 58,000 1,659
Intel Corp. .................................. 33,400 977
Xerox Corp. .................................. 63,000 603
-------
4,084
Computer Software & Services - 1.2%
BMC Software, Inc.* .......................... 3,000 68
Microsoft Corp. .............................. 28,500 2,080
Unisys Corp. * ............................... 38,600 568
-------
2,716
Construction - 0.8%
Armstrong Holdings, Inc. ..................... 18,400 $ 65
Stanley Works ................................ 41,700 1,747
-------
1,812
Consumer Miscellaneous - 2.0%
Black & Decker Corp. ......................... 17,700 698
Clorox Co. ................................... 38,400 1,300
Fortune Brands, Inc. ......................... 57,500 2,206
Newell Rubbermaid, Inc. ...................... 8,000 201
-------
4,405
Cosmetic & Personal Care - 2.7%
Gillette Co. ................................. 82,500 2,392
International Flavors & Fragrances, Inc ...... 59,300 1,490
Procter & Gamble Co. ......................... 32,800 2,092
-------
5,974
Diversified Operations - 1.7%
Corning, Inc. ................................ 38,900 650
Eaton Corp. .................................. 16,300 1,143
Pall Corp. ................................... 85,100 2,002
-------
3,795
Electric Power - 3.0%
Duke Energy Co. .............................. 25,200 983
Exelon Corp. ................................. 36,375 2,332
Firstenergy Corp. ............................ 38,800 1,248
Mirant Corp. ................................. 3,902 134
Niagara Mohawk Holdings, Inc. ................ 39,100 692
Southern Co. ................................. 60,900 1,416
-------
6,805
Electrical Equipment - 0.3%
Cooper Industries, Inc. ...................... 17,000 673
Electronic Products & Services - 3.5%
Agere Systems, Inc. - Cl. A .................. 137,700 1,033
Axcelis Technologies, Inc. ................... 3,800 56
Hubbell, Inc. - Cl. B ........................ 54,100 1,569
Motorola, Inc. ............................... 94,400 1,563
Rockwell International Corp. ................. 55,600 2,119
Texas Instruments, Inc. ...................... 48,500 1,528
-------
7,868
Food, Beverage & Tobacco - 7.3%
Brown-Forman Corp. - Cl. B ................... 28,000 1,790
Campbell Soup Co. ............................ 52,300 1,347
General Mills, Inc. .......................... 51,200 2,241
H.J. Heinz Co. ............................... 38,100 1,558
Hershey Foods Corp. .......................... 46,000 2,839
Kellogg Co. .................................. 33,900 983
McCormick & Co., Inc. ........................ 32,600 1,370
Philip Morris Cos., Inc. ..................... 45,200 2,294
UST, Inc. .................................... 72,100 2,081
-------
16,503
123
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Health Care Products - 5.3%
Abbott Laboratories .......................... 46,600 $ 2,237
American Home Products Corp. ................. 63,500 3,711
Becton, Dickinson & Co. ...................... 41,200 1,475
Bristol-Myers Squibb Co. ..................... 38,300 2,003
Pharmacia Corp. .............................. 14,675 674
Schering-Plough Corp. ........................ 47,600 1,725
-------
11,825
Insurance - 6.4%
American General Corp. ....................... 69,300 3,219
Aon Corp. .................................... 36,000 1,260
Chubb Corp. .................................. 33,700 2,610
Lincoln National Corp. ....................... 31,800 1,646
Safeco Corp. ................................. 53,700 1,584
St. Paul Cos., Inc. .......................... 28,652 1,452
UnumProvident Corp. .......................... 82,700 2,656
-------
14,427
Leisure & Recreation - 3.4%
Eastman Kodak Co. ............................ 47,400 2,213
Hasbro, Inc. ................................. 103,900 1,501
Hilton Hotels Corp. .......................... 113,200 1,313
Starwood Hotels & Resorts Worldwide, Inc. .... 67,300 2,509
-------
7,536
Media - Publishing - 1.9%
Dow Jones & Co., Inc. ........................ 26,100 1,558
Knight-Ridder, Inc. .......................... 39,300 2,331
Readers Digest Association, Inc. - Cl. A ..... 16,500 474
-------
4,363
Media - TV & Radio - 1.0%
The Walt Disney Co. .......................... 78,700 2,274
Metals & Mining - 1.7%
Minnesota Mining & Manufacturing Co. ......... 27,400 3,126
Phelps Dodge Corp. ........................... 17,100 710
-------
3,836
Oil - 1.7%
Baker Hughes, Inc. ........................... 37,100 1,243
Royal Dutch Petroleum Co. - NY Shares ........ 44,500 2,593
-------
3,836
Oil & Natural Gas Exploration & Production - 9.8%
Amerada Hess Corp. ........................... 26,000 2,101
BP Amoco PLC - ADR ........................... 82,332 4,104
Chevron Corp. ................................ 34,400 3,113
Exxon Mobil Corp. ............................ 64,267 5,614
Texaco, Inc. ................................. 53,400 3,556
Unocal Corp. ................................. 66,400 2,268
USX-Marathon Group ........................... 42,500 1,254
-------
22,010
Paper & Forest Products - 2.4%
International Paper Co. ...................... 87,170 3,112
Kimberly-Clark Corp. ......................... 28,800 1,610
Mead Corp. ................................... 23,100 627
-------
5,349
Personal & Commercial Lending - 1.2%
Citigroup, Inc. .............................. 51,566 2,725
Pollution Control - 1.4%
Waste Management, Inc. ....................... 101,290 3,122
Real Estate Investment Trust - 0.9%
Simon Property Group, Inc. ................... 64,700 1,939
Real Estate Operations - 0.5%
Rouse Co. .................................... 42,300 1,212
Retail - Department Stores - 2.4%
J.C. Penney Co., Inc. ........................ 28,000 738
May Department Stores Co. .................... 57,650 1,975
Toys "R" Us, Inc. * ......................... 108,500 2,686
-------
5,399
Retail - Food - 1.1%
Albertson's, Inc. ............................ 15,400 462
McDonald's Corp. ............................. 72,200 1,954
-------
2,416
Telecommunication Equipment - 0.1%
Lucent Technologies, Inc. .................... 46,900 291
Telecommunication Services - 1.6%
Verizon Communications ....................... 68,716 3,676
Telephone - 4.9%
Alltel Corp. ................................. 45,300 2,775
AT&T Corp. ................................... 77,400 1,703
BellSouth Corp. .............................. 52,500 2,114
SBC Communications, Inc. ..................... 73,355 2,939
Sprint Corp. ................................. 71,500 1,527
-------
11,058
Transportation Services - 2.6%
Norfolk Southern Corp. ....................... 81,900 1,695
Union Pacific Corp. .......................... 74,300 4,080
-------
5,775
U.S. Government Agencies - 1.6%
Federal National Mortgage Assoc .............. 41,400 3,525
-------
TOTAL COMMON STOCK- 96.0% 215,794
-------
124
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 3.8%
Investment in joint trading account
3.97% due 07/02/01 ........................... $ 8,673 $ 8,673
Shares
Cash Equvalents - 2.6%
Navigator Securities Lending Prime
Portfolio ** 5,765,047 5,765
---------- --------
TOTAL SHORT-TERM INVESTMENTS 6.4% 14,438
---------- --------
TOTAL INVESTMENTS- 102.4% 230,232
Other Assets & Liabilities, Net- (2.4)% (5,506)
---------- --------
NET ASSETS- 100.0% $224,726
========== ========
ADR-American Depository Receipts
* Non-income producing security.
** Represents investment of security lending collateral.
See notes to financial statements.
125
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.4%
Boeing Co. ................................... 2,110 $ 117
General Dynamics Corp ........................ 4,130 321
Honeywell International, Inc. ................ 4,450 156
Lockheed Martin Corp. ........................ 7,370 273
Raytheon Co. ................................. 790 21
United Technologies Corp ..................... 2,040 150
------
1,038
Auto & Truck Parts - 0.8%
Goodyear Tire & Rubber Co. ................... 870 24
Johnson Controls, Inc ........................ 4,260 309
Visteon Corp. ................................ 100 2
------
335
Automobile - 1.3%
Ford Motor Co. ............................... 4,280 105
General Motors Corp. ......................... 7,110 458
General Motors Corp. - Cl. H ................. 1,400 28
------
591
Bank - 10.6%
Bank of America Corp. ........................ 13,780 827
Bank of New York Co., Inc. ................... 7,040 338
Bank One Corp. ............................... 4,110 147
BB&T, Corp. .................................. 3,150 116
Comerica, Inc. ............................... 2,200 127
Fifth Third Bancorp .......................... 1,980 119
FleetBoston Financial Corp ................... 6,270 247
Hudson City Bancorp, Inc ..................... 3,120 72
Investors Financial Services Corp. ........... 1,740 117
JP Morgan Chase & Co. ........................ 6,020 268
M&T Bank Corp. ............................... 3,480 263
Mellon Financial Corp ........................ 3,610 166
National City Corp. .......................... 3,180 98
Northern Trust Corp. ......................... 2,110 132
PNC Bank Corp. ............................... 4,070 268
Popular, Inc. ................................ 610 20
Regions Financial Corp ....................... 1,140 36
SouthTrust Corp. ............................. 530 14
State Street Corp. ........................... 100 5
Suntrust Banks, Inc. ......................... 6,300 408
TCF Financial Corp. .......................... 700 32
US Bancorp ................................... 3,260 74
Washington Mutual, Inc ....................... 11,420 429
Wells Fargo & Co. ............................ 7,070 328
Zions Bancorp ................................ 440 26
------
4,677
Brokerage & Investment Management - 0.4%
Morgan Stanley, Dean Witter,
Discover & Co. .......................... 2,800 180
Building Materials - 0.1%
Monsanto Co. ................................. 910 34
Business Services - 0.1%
Express Scripts, Inc. - Cl. A * .............. 540 30
Chemical - 1.6%
Ashland, Inc. ................................ 5,090 204
Cabot Corp. .................................. 790 29
Dow Chemical Co. ............................. 4,540 151
Engelhard Corp. .............................. 2,380 61
Sigma-Aldrich Corp. .......................... 6,210 240
------
685
Coal - 0.0%
Arch Coal, Inc. .............................. 100 3
Commercial Services - 1.0%
Apollo Group, Inc. - Cl. A .................. 2,090 89
Avery Dennison Corp. ......................... 610 31
Cendant Corp. * .............................. 440 8
Ecolab, Inc. ................................. 2,630 108
Omnicom Group, Inc. .......................... 2,500 215
------
451
Computer Equipment - 1.6%
Dell Computer Corp. .......................... 100 3
EMC Corp. .................................... 520 15
Hewlett-Packard Co. .......................... 2,300 66
International Business Machines Corp. ........ 5,180 585
Tech Data Corp. * ............................ 700 23
Xerox Corp. .................................. 200 2
------
694
Computer Software & Services - 1.9%
3Com Corp.* .................................. 610 3
Affiliated Computer Services, Inc.
- Cl. A * .................................... 3,460 249
At Home Corp. - Ser A ........................ 610 1
EarthLink, Inc. .............................. 100 2
Electronic Data Systems Corp. ................ 1,300 81
First Data Corp. ............................. 2,960 190
Intuit, Inc. * ............................... 350 14
Pixar, Inc. .................................. 1,400 57
Progressive Corp. ............................ 1,830 247
------
844
Consumer Miscellaneous - 0.5%
Harley-Davidson, Inc. ........................ 2,510 118
Ingram Micro, Inc. - Cl. A * ................. 3,860 56
Sherwin-Williams Co. ......................... 2,410 54
------
228
Cosmetic & Personal Care - 3.4%
Alberto-Culver Co. - Cl. B ................... 1,580 66
Avon Products, Inc. .......................... 3,190 148
Colgate-Palmolive Co. ........................ 5,310 313
Estee Lauder Cos., Inc. - Cl. A .............. 1,310 57
Procter & Gamble Co. ......................... 13,310 849
126
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Cosmetic & Personal Care - Continued
Unilever NV - NY Shares ...................... 700 $ 42
------
1,475
Diversified Operations - 1.1%
Danaher Corp. ................................ 1,050 59
General Electric Co. ......................... 2,460 120
ITT Industries, Inc. ......................... 610 27
Tyco International, Ltd ...................... 4,330 236
W.W. Grainger, Inc. .......................... 1,500 61
------
503
Electric Power - 2.8%
Consolidated Edison, Inc ..................... 270 11
Dominion Resources, Inc ...................... 1,150 69
Emerson Electric Co. ......................... 960 58
Energy East Corp. ............................ 1,400 29
Entergy Corp. ................................ 3,430 132
Exelon Corp. ................................. 1,180 76
Firstenergy Corp. ............................ 440 14
Mirant Corp.* ................................ 3,550 122
PG&E Corp. ................................... 2,980 33
PPL Corp. .................................... 2,090 115
Reliant Energy, Inc. ......................... 6,410 207
TXU Corp. .................................... 1,310 63
UtiliCorp United, Inc ........................ 10,180 311
------
1,240
Electronic Products & Services - 0.8%
Agilent Technologies, Inc .................... 100 3
Avnet, Inc. .................................. 700 16
AVX Corp. .................................... 1,050 22
Ball Corp. ................................... 1,940 92
KLA-Tencor Corp. ............................. 700 41
Motorola, Inc. ............................... 300 5
PerkinElmer, Inc. ............................ 940 26
Sanmina Corp. * ............................. 3,390 79
Solectron Corp. * ........................... 3,800 70
------
354
Energy - Alternative Source - 0.7%
Dynegy, Inc. - Cl.A .......................... 4,550 211
Massey Energy Co. ............................ 5,860 116
------
327
Financial Services - 3.6%
American Express Co. ......................... 960 37
CNA Financial Corp. * ........................ 8,390 331
Federated Investments, Inc. - Cl. B .......... 790 25
Heller Financial, Inc ........................ 5,970 239
Internet Capital Group, Inc. * ............... 350 1
Lehman Brothers Holdings, Inc. ............... 5,530 430
Merrill Lynch & Co., Inc. .................... 5,850 347
SEI Investments Co. .......................... 1,920 91
Wesco Financial Corp. ........................ 200 69
------
1,570
Food, Beverage & Tobacco - 3.9%
IBP, Inc. .................................... 260 7
Pepsi Bottling Group, Inc .................... 1,760 71
PepsiCo, Inc. ................................ 4,110 182
Philip Morris Cos., Inc ...................... 10,980 557
Quaker Oats Co. .............................. 350 32
R.J. Reynolds Tobacco Holdings, Inc. * ...... 3,150 172
Ralston-Ralston Purina Group ................. 2,520 76
Sara Lee Corp. ............................... 6,820 129
Smithfield Foods, Inc. ....................... 3,260 131
Sysco Corp. .................................. 11,910 323
Tyson Foods, Inc. - Cl. A .................... 960 9
UST, Inc. .................................... 1,160 33
------
1,722
Health Care Products - 7.6%
Abbott Laboratories .......................... 7,340 353
American Home Products Corp. ................. 7,670 448
Baxter International, Inc. ................... 2,280 112
Bristol-Myers Squibb Co. ..................... 2,090 109
Cardinal Health, Inc. ........................ 5,510 380
Eli Lilly & Co. .............................. 1,900 141
Johnson & Johnson ............................ 13,200 660
McKesson HBOC, Inc. .......................... 10,920 405
Medtronic, Inc. .............................. 1,400 65
Merck & Co., Inc. ............................ 4,370 279
Patterson Dental Co. * ....................... 960 29
UnitedHealth Group, Inc. ..................... 5,480 338
------
3,319
Health Care Services - 0.3%
AmeriSource Health Corp. - Cl. A * ........... 1,100 61
Caremark Rx, Inc. ............................ 3,020 50
PacifiCare Health Systems, Inc. * ............ 1,490 24
WebMD Corp. * ................................ 270 2
------
137
Housing - 0.3%
Pulte Corp. .................................. 2,630 112
Insurance - 4.9%
Allstate Corp. ............................... 5,230 230
American General Corp. ....................... 2,280 106
American International Group, Inc. ........... 10,960 942
Cigna Corp. .................................. 910 87
Everest Re Group, Ltd. ....................... 610 46
Hartford Financial Services Group, Inc. ...... 790 54
Metlife, Inc. ................................ 9,610 298
Nationwide Financial Services - Cl. A ........ 7,440 325
The MONY Group, Inc. ......................... 1,170 47
------
2,135
127
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Leisure & Recreation - 1.7%
Blockbuster, Inc. - Cl. A .................... 1,330 $ 24
Brunswick Corp. .............................. 1,460 35
International Game Technology ................ 4,450 279
Loews Corp. .................................. 6,060 391
Sabre Group Holdings, Inc. * ................ 690 35
------
764
Machinery - 0.1%
Dover Corp. .................................. 100 4
Thermo Electron Corp. * ...................... 1,850 41
------
45
Media - Publishing - 0.4%
McClatchy Newspapers, Inc. - Cl. A ........... 750 29
New York Times Co. - Cl. A ................... 700 29
Tribune Co. .................................. 3,150 127
------
185
Media - TV / Radio - 2.2%
AOL Time Warner, Inc. * ...................... 1,910 101
BHC Communications, Inc. - Cl. A * ........... 310 43
Charter Communications, Inc. - Cl. A * ....... 2,250 52
Comcast Corp. - Cl. A ........................ 3,320 144
Fox Entertainment Group, Inc. - Cl. A * ...... 1,400 39
The Walt Disney Co. .......................... 7,890 228
USA Networks, Inc.* .......................... 270 8
Viacom, Inc. - Cl. B * ....................... 7,030 364
------
979
Metals & Mining - 1.8%
Alcan Aluminum, Ltd. ......................... 700 29
Alcoa, Inc. .................................. 2,640 104
Inco, Ltd. ................................... 2,550 44
Minnesota Mining & Manufacturing Co. ......... 5,350 611
------
788
Natural Gas Distribution - 0.4%
Enron Corp. .................................. 440 21
KeySpan Corp. ................................ 2,380 87
Nicor, Inc. .................................. 1,310 51
------
159
Oil - 0.4%
ONEOK, Inc. .................................. 7,180 141
Tosco Corp. .................................. 610 27
------
168
Oil & Natural Gas Exploration & Production - 9.4%
Amerada Hess Corp. ........................... 1,490 120
Chevron Corp. ................................ 6,010 544
Conoco, Inc. - Cl. B ......................... 9,780 283
Exxon Mobil Corp. ............................ 26,370 2,303
Helmerich & Payne, Inc. ...................... 1,490 46
Kerr-McGee Corp. ............................. 1,050 69
Occidental Petroleum Corp. ................... 6,380 170
Phillips Petroleum Co. ....................... 3,670 209
Sunoco, Inc. ................................. 890 33
Texaco, Inc. ................................. 3,450 230
Ultramar Diamond Shamrock Corp. .............. 420 20
USX-Marathon Group ........................... 3,500 103
------
4,130
Oil - Equipment & Service - 0.0%
BJ Services Co. * ........................... 540 15
Paper & Forest Products - 0.3%
Boise Cascade Corp. .......................... 100 4
Georgia-Pacific Corp. ........................ 200 7
International Paper Co. ...................... 700 25
Kimberly-Clark Corp. ......................... 1,420 79
Weyerhaeuser Co. ............................. 440 24
------
139
Personal & Commercial Lending - 5.3%
Citigroup, Inc. .............................. 36,670 1,938
Countrywide Credit Industries, Inc. .......... 8,430 387
MBNA Corp. ................................... 610 20
------
2,345
Pollution Control - 1.0%
Republic Services, Inc. - Cl. A .............. 2,460 49
Waste Management, Inc. ....................... 12,530 386
------
435
Real Estate Development - 0.3%
Lennar Corp. ................................. 3,410 142
Real Estate Investment Trust - 1.1%
Archstone Communities Trust .................. 960 25
Avalonbay Communities, Inc. .................. 2,300 108
Equity Office Properties Trust ............... 4,150 131
Equity Residential Properties Trust .......... 3,240 183
Marriott International, Inc. - Cl. A ......... 540 26
Simon Property Group, Inc. ................... 440 13
------
486
Retail - Department Stores - 2.2%
BJ's Wholesale Club, Inc. .................... 6,850 365
Dillard's, Inc. - Cl. A ...................... 2,670 41
Federated Department Stores, Inc. * ......... 520 22
Kohl's Corp. ................................. 960 60
Payless ShoeSource, Inc. * .................. 2,560 166
Sears, Roebuck & Co. ......................... 2,550 108
Target Corp. ................................. 4,200 145
Wal-Mart Stores, Inc. ........................ 1,050 51
------
958
128
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Retail - Drug Stores - 0.9%
CVS Corp. .................................... 5,450 $ 210
Walgreen Co. ................................. 5,190 177
------
387
Retail - Food - 0.2%
Brinker International, Inc. * ............... 1,250 32
Darden Restaurants, Inc. ..................... 810 23
Safeway, Inc. * ............................. 690 33
------
88
Shoe & Apparel Manufacturing - 0.2%
Liz Claiborne, Inc. .......................... 440 22
Nike, Inc. - Cl. B ........................... 440 18
Reebok International, Ltd. ................... 1,580 51
------
91
Telecommunication Equipment - 0.7%
Comverse Technology, Inc. .................... 700 40
Covad Communications Group, Inc. * ........... 80
L-3 Communications Holdings, Corp. * ........ 1,050 80
Linear Technology Corp. ...................... 1,400 62
Lucent Technologies, Inc. .................... 300 2
Micron Technology, Inc. ...................... 1,500 62
Nortel Networks Corp. ........................ 120 1
Scientific-Atlanta, Inc. ..................... 1,360 55
Tellabs, Inc. * ............................. 790 15
------
317
Telecommunication Services - 4.1%
BCE, Inc. .................................... 3,250 85
Cox Communications, Inc. - Cl. A ............. 6,780 300
United States Cellular Corp. * .............. 1,320 76
Verizon Communications ....................... 23,650 1,265
WorldCom, Inc. * ............................. 5,921 85
XO Communications, Inc. ...................... 440 1
------
1,812
Telephone - 6.2%
Alltel Corp. ................................. 5,380 330
AT&T Corp. ................................... 22,430 493
AT&T Corp. - Liberty Media Group - Cl. A ..... 23,560 412
AT&T Wireless Group .......................... 6,800 111
BellSouth Corp. .............................. 7,510 302
Constellation Energy Group ................... 100 4
Level 3 Communications, Inc. * ............... 270 1
Qwest Communications International , Inc. .... 3,910 125
SBC Communications, Inc. ..................... 16,740 671
Telephone and Data Systems, Inc. ............. 2,360 257
------
2,706
Transportation Services - 1.3%
Burlington Northern Santa Fe Corp. ........... 610 18
Canadian National Railway Co. ................ 3,410 138
CSX Corp. .................................... 3,410 124
Expeditors International of Washington,
Inc. ........................................ 1,640 98
Southwest Airlines Co. ....................... 1,180 22
UAL Corp. .................................... 2,580 91
Union Pacific Corp. .......................... 800 44
United Parcel Service, Inc. - Cl. B * ........ 990 57
------
592
U.S. Government Agencies - 2.8%
Federal Home Loan Mortgage Corp. ............. 5,920 414
Federal National Mortgage Assoc. ............. 9,850 839
------
1,253
------
TOTAL COMMON STOCK- ........................ 94.7% 41,668
------
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 7.3%
Investment in joint repurchase agreement
with Goldman Sachs & Co., 4.11% due
07/02/01. (Secured by various U.S.
Treasury obligations and U.S. Government
Agency Bonds) $3,200 3,200
---------- ------------
TOTAL INVESTMENTS- 102.0% 44,868
Other Assets & Liabilities, Net- (2.0)% (881)
---------- ------------
NET ASSETS- 100.0% $ 43,987
========== ============
* Non-income producing security.
See notes to financial statements.
129
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE II FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.8%
Boeing Co. ................................... 410 $ 23
General Dynamics Corp. ....................... 730 57
Honeywell International, Inc. ................ 690 24
Lockheed Martin Corp. ........................ 1,310 49
Raytheon Co. ................................. 160 4
United Technologies Corp. .................... 370 27
------
184
Auto & Truck Parts - 0.9%
Goodyear Tire & Rubber Co. ................... 180 5
Johnson Controls, Inc. ....................... 780 57
------
62
Automobile - 1.6%
Ford Motor Co. ............................... 850 21
General Motors Corp. ......................... 1,230 79
General Motors Corp. - Cl. H ................. 280 6
------
106
Bank - 12.4%
Bank of America Corp. ........................ 2,500 150
Bank of New York Co., Inc. ................... 1,240 60
Bank One Corp. ............................... 770 28
BB&T Corp .................................... 570 21
Comerica, Inc. ............................... 430 25
Fifth Third Bancorp .......................... 380 23
FleetBoston Financial Corp. .................. 1,090 43
Hudson City Bancorp, Inc. .................... 610 14
Investors Financial Services Corp. ........... 90 6
JP Morgan Chase & Co. ........................ 970 43
M&T Bank Corp. ............................... 600 45
Mellon Financial Corp. ....................... 670 31
National City Corp. .......................... 630 19
Northern Trust Corp. ......................... 410 26
PNC Bank Corp. ............................... 540 36
Popular, Inc. ................................ 130 4
Regions Financial Corp. ...................... 230 7
SouthTrust Corp. ............................. 110 3
Suntrust Banks, Inc. ......................... 1,090 70
TCF Financial Corp. .......................... 140 6
US Bancorp ................................... 640 15
Washington Mutual, Inc. ...................... 2,060 77
Wells Fargo & Co. ............................ 1,250 58
Zions Bancorp ................................ 90 5
------
815
Brokerage & Investment Management - 0.5%
Morgan Stanley, Dean Witter, Discover & Co. .. 530 34
Building Materials - 0.1%
Monsanto Co. ................................. 190 7
Business Services - 0.1%
Express Scripts, Inc. - Cl. A. * ............. 100 5
Chemical - 1.4%
Ashland, Inc. ................................ 420 17
Cabot Corp. .................................. 160 6
Dow Chemical Co. ............................. 860 28
Engelhard Corp. .............................. 460 12
Sigma-Aldrich Corp. .......................... 810 31
------
94
Commercial Services - 1.4%
Apollo Group, Inc. - Cl. A ................... 400 17
Avery Dennison Corp. ......................... 130 7
Cendant Corp. * .............................. 90 2
Ecolab, Inc. ................................. 520 21
Omnicom Group, Inc. .......................... 510 44
------
91
Computer Equipment - 1.2%
EMC Corp. .................................... 110 3
Hewlett-Packard Co. .......................... 430 12
International Business Machines Corp. ........ 510 58
Tech Data Corp. * ............................ 140 5
------
78
Computer Software & Services - 2.3%
3Com Corp. * ................................. 130 1
Affiliated Computer Services, Inc. - Cl. A. * 640 46
At Home Corp. - Ser. A ....................... 130
Electronic Data Systems Corp. ................ 260 16
First Data Corp. ............................. 550 35
Intuit, Inc. ................................. 70 3
Progressive Corp. ............................ 370 50
------
151
Consumer Miscellaneous - 0.4%
Harley-Davidson, Inc. ........................ 130 6
Ingram Micro, Inc. - Cl. A. * ................ 770 11
Sherwin-Williams Co. ......................... 470 11
------
28
Cosmetic & Personal Care - 3.2%
Alberto-Culver Co. - Cl. B ................... 320 13
Avon Products, Inc. .......................... 370 17
Colgate-Palmolive Co. ........................ 910 54
Estee Lauder Cos., Inc. - Cl. A .............. 270 12
Procter & Gamble Co. ......................... 1,700 109
Unilever NV - NY Shares ...................... 140 8
------
213
Diversified Operations - 1.0%
Danaher Corp. ................................ 210 12
General Electric Co. ......................... 480 23
ITT Industries, Inc. ......................... 130 6
Tyco International, Ltd. ..................... 240 13
130
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE II FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Diversified Operations - Continued
W.W. Grainger, Inc. .......................... 300 $ 12
-----
66
Electric Power - 3.0%
Consolidated Edison, Inc. .................... 50 2
Dominion Resources, Inc. ..................... 210 13
Emerson Electric Co. ......................... 200 12
Energy East Corp. ............................ 280 6
Entergy Corp. ................................ 590 23
Exelon Corp. ................................. 220 14
Firstenergy Corp. ............................ 90 3
Mirant Corp. * ............................... 140 5
PG&E Corp. ................................... 590 6
PPL Corp. .................................... 400 22
Reliant Energy, Inc. ......................... 1,110 36
TXU Corp. .................................... 270 13
UtiliCorp United, Inc. ....................... 1,480 45
-----
200
Electronic Products & Services - 0.8%
Avnet, Inc. .................................. 140 3
AVX Corp. .................................... 210 4
Ball Corp. ................................... 370 18
PerkinElmer, Inc. ............................ 200 5
Sanmina Corp. * .............................. 300 7
Solectron Corp. * ............................ 750 14
-----
51
Energy - Alternative Source - 0.6%
Dynegy, Inc. - Cl. A ......................... 430 20
Massey Energy Co. ............................ 1,050 21
-----
41
Financial Services - 3.7%
American Express Co. ......................... 200 8
CNA Financial Corp. * ........................ 1,350 53
Federated Investments, Inc. - Cl. B .......... 160 5
Heller Financial, Inc. ....................... 1,020 41
Internet Capital Group, Inc. ................. 70
Lehman Brothers Holdings, Inc. ............... 870 68
Merrill Lynch & Co., Inc. .................... 1,000 59
SEI Investments Company ...................... 250 12
-----
246
Food, Beverage & Tobacco - 4.6%
IBP, Inc. .................................... 50 1
Pepsi Bottling Group, Inc. ................... 340 14
PepsiCo, Inc. ................................ 770 34
Philip Morris Cos., Inc. ..................... 1,610 82
Quaker Oats Co. .............................. 70 6
R.J. Reynolds Tobacco Holdings, Inc. * ....... 570 31
Ralston-Ralston Purina Group ................. 780 23
Sara Lee Corp. ............................... 1,250 24
Smithfield Foods, Inc. ....................... 590 24
Sysco Corp. .................................. 2,060 56
Tyson Foods, Inc. - Cl. A .................... 200 2
UST, Inc. .................................... 240 7
-----
304
Health Care Products - 8.0%
Abbott Laboratories .......................... 1,300 63
American Home Products Corp. ................. 1,020 60
Baxter International, Inc. ................... 460 23
Bristol-Myers Squibb Co. ..................... 400 21
Cardinal Health, Inc. ........................ 890 61
Johnson & Johnson ............................ 2,480 124
McKesson HBOC, Inc. .......................... 1,190 44
Medtronic, Inc. .............................. 280 13
Merck & Co., Inc. ............................ 820 52
Patterson Dental Co. * ....................... 200 6
UnitedHealth Group, Inc. ..................... 960 59
-----
526
Health Care Services - 0.4%
AmeriSource Health Corp. - Cl. A * ........... 230 13
Caremark Rx, Inc. ............................ 600 10
PacifiCare Health Systems, Inc. * ............ 300 5
WebMD Corp. * ................................ 50
-----
28
Housing - 0.3%
Pulte Corp. .................................. 510 22
Insurance - 4.9%
Allstate Corp. ............................... 870 38
American General Corp. ....................... 460 21
American International Group, Inc. ........... 1,420 122
Cigna Corp. .................................. 190 18
Everest Re Group, Ltd. ....................... 130 10
Hartford Financial Services Group, Inc. ...... 160 11
Metlife, Inc. ................................ 1,700 53
Nationwide Financial Services - Cl. A ........ 960 42
The MONY Group, Inc. ......................... 240 10
-----
325
Leisure & Recreation - 1.9%
Blockbuster, Inc. - Cl. A .................... 270 5
Brunswick Corp. .............................. 300 7
International Game Technology ................ 830 52
Loews Corp. .................................. 840 54
Sabre Group Holdings, Inc. * ................. 140 7
-----
125
Machinery - 0.1%
Thermo Electron Corp. * ...................... 360 8
Media - Publishing - 0.5%
McClatchy Newspapers, Inc. - Cl. A ........... 150 6
New York Times Co. - Cl. A ................... 140 6
131
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE II FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Media - Publishing - Continued
Tribune Co. .................................. 570 $ 23
-----
35
Media - TV & Radio - 2.7%
AOL Time Warner, Inc. * ...................... 330 17
BHC Communications, Inc. - Cl. A. * .......... 90 13
Charter Communications, Inc. - Cl. A. * ...... 210 5
Comcast Corp. - Cl. A ........................ 610 26
Fox Entertainment Group, Inc. - Cl. A * ...... 280 8
The Walt Disney Co. .......................... 1,440 42
USA Networks, Inc. * ......................... 50 1
Viacom, Inc. - Cl. B. * ...................... 1,220 63
-----
175
Metals & Mining - 1.0%
Alcan Aluminum, Ltd. ......................... 140 6
Alcoa, Inc. .................................. 520 20
Inco, Ltd. ................................... 500 9
Minnesota Mining & Manufacturing Co. ......... 280 32
-----
67
Natural Gas Distribution - 0.5%
Enron Corp. .................................. 90 4
KeySpan Corp. ................................ 460 17
Nicor, Inc. .................................. 270 11
-----
32
Oil - 0.5%
ONEOK, Inc. .................................. 1,320 26
Tosco Corp. .................................. 130 6
-----
32
Oil & Natural Gas Exploration & Production - 10.1%
Amerada Hess Corp. ........................... 300 24
Chevron Corp. ................................ 620 56
Conoco, Inc. - Cl. B ......................... 1,690 49
Exxon Mobil Corp. ............................ 3,830 334
Helmerich & Payne, Inc. ...................... 300 9
Kerr-McGee Corp. ............................. 210 14
Occidental Petroleum Corp. ................... 1,160 31
Phillips Petroleum Co. ....................... 680 39
Sunoco, Inc. ................................. 160 6
Texaco, Inc. ................................. 550 37
Ultramar Diamond Shamrock Corp. .............. 1,000 47
USX-Marathon Group ........................... 640 19
-----
665
Oil - Equipment & Service - 0.0%
BJ Services Co. * ............................ 100 3
Paper & Forest Products - 0.4%
International Paper Co. ...................... 140 5
Kimberly-Clark Corp. ......................... 290 16
Weyerhaeuser Co. ............................. 90 5
-----
26
Personal & Commercial Lending - 4.3%
Citigroup, Inc. .............................. 4,440 234
Countrywide Credit Industries, Inc. .......... 1,060 49
MBNA Corp. ................................... 130 4
-----
287
Pollution Control - 1.2%
Republic Services, Inc. - Cl. A .............. 480 9
Waste Management, Inc. ....................... 2,270 70
-----
79
Real Estate Development - 0.4%
Lennar Corp. ................................. 620 26
Real Estate Investment Trust - 1.0%
Archstone Communities Trust .................. 200 5
Equity Office Properties Trust ............... 800 25
Equity Residential Properties Trust .......... 530 30
Marriott International, Inc. - Cl. A ......... 90 4
Simon Property Group, Inc. ................... 90 3
-----
67
Retail - Department Stores - 1.5%
Dillard's, Inc. - Cl. A ...................... 530 8
Federated Department Stores, Inc. * .......... 110 5
Kohl's Corp. ................................. 200 13
Payless ShoeSource, Inc. * ................... 190 12
Sears, Roebuck & Co. ......................... 500 21
Target Corp. ................................. 780 27
Wal-Mart Stores, Inc. ........................ 210 10
-----
96
Retail - Drug Stores - 1.0%
CVS Corp. .................................... 940 36
Walgreen Co. ................................. 900 31
-----
67
Retail - Food - 0.2%
Brinker International, Inc. * ................ 210 5
Darden Restaurants, Inc. ..................... 130 4
Safeway, Inc. * .............................. 140 7
-----
16
Shoe & Apparel Manufacturing - 0.3%
Liz Claiborne, Inc. .......................... 90 5
Nike, Inc. - Cl. B ........................... 90 4
Reebok International, Ltd. ................... 320 10
-----
19
Telecommunication Equipment - 1.0%
Comverse Technology, Inc. .................... 140 8
L-3 Communications Holdings, Corp. * ......... 210 16
132
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE II FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Telecommunication Equipment - Continued
Linear Technology Corp. ...................... 280 $ 13
Micron Technology, Inc. ...................... 300 12
Scientific-Atlanta, Inc. ..................... 280 11
Tellabs, Inc. * .............................. 160 3
------
63
Telecommunication Services - 4.2%
BCE, Inc. .................................... 640 17
Cox Communications, Inc. - Cl. A ............. 700 31
United States Cellular Corp. ................. 270 15
Verizon Communications ....................... 3,680 197
WorldCom, Inc. * ............................. 967 13
XO Communications, Inc. ...................... 90 1
------
274
Telephone - 6.5%
Alltel ....................................... 440 27
AT&T Corp. ................................... 3,820 84
AT&T Corp. - Liberty Media Group - Cl. A ..... 4,250 74
BellSouth Corp. .............................. 1,340 54
Qwest Communications International, Inc. ..... 620 20
SBC Communications, Inc. ..................... 2,950 118
Telephone and Data Systems, Inc. ............. 460 50
------
427
Transportation Services - 1.5%
Burlington Northern Santa Fe Corp. ........... 130 4
Canadian National Railway Co. ................ 620 25
CSX Corp. .................................... 620 23
Expeditors International of Washington, Inc. . 90 5
Southwest Airlines Co. ....................... 240 4
UAL Corp. .................................... 510 18
Union Pacific Corp. .......................... 140 8
United Parcel Service, Inc. - Cl. B. * ....... 160 9
------
96
U.S. Government Agencies - 3.1%
Federal Home Loan Mortgage Corp. ............. 1,060 74
Federal National Mortgage Assoc. ............. 1,500 128
------
202
------
TOTAL INVESTMENTS- 99.5% 6,564
Other Assets & Liabilities, Net- 0.5% 32
------- ------
NET ASSETS- 100.0% $6,596
======= ======
* Non-income producing security
See notes to financial statements.
133
SCHEDULE OF INVESTMENTS
(Unaudited)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE/MID CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.0%
Boeing Co. ................................... 4,100 $ 228
Lockheed Martin Corp. ........................ 4,600 171
United Technologies Corp. .................... 4,400 322
------
721
Automobile - 1.6%
Ford Motor Co. ............................... 15,270 375
General Motors Corp. ......................... 2,600 167
General Motors Corp. - Cl. H ................. 2,196 45
------
587
Bank - 14.2%
Australia & New Zealand
Banking Group, Ltd. - ADR ................... 10,200 434
Bank of Montreal ............................. 13,400 346
JP Morgan Chase & Co. ........................ 32,300 1,441
UnionBanCal Corp. ............................ 14,300 482
US Bancorp ................................... 31,661 721
Wachovia Corp. ............................... 2,900 206
Washington Mutual, Inc. ...................... 32,950 1,237
Westpac Banking Corp., Ltd. .................. 8,600 315
------
5,182
Chemical - 1.4%
Air Products & Chemicals, Inc. ............... 4,300 197
E.I. du Pont de Nemours & Co. ................ 6,900 333
------
530
Commercial Services - 0.3%
Avery Dennison Corp. ......................... 1,800 92
Computer Equipment - 2.2%
Compaq Computer Corp. ........................ 5,900 91
Hewlett-Packard Co. .......................... 8,900 255
International Business Machines Corp. ........ 3,700 418
Palm, Inc. ................................... 9,200 56
------
820
Computer Software & Services - 1.1%
First Data Corp. ............................. 6,200 398
Container - 0.2%
Smurfit-Stone Container Corp. ................ 3,700 60
Cosmetic & Personal Care - 2.6%
International Flavors & Fragrances, Inc. ..... 7,600 191
Leggett & Platt, Inc. ........................ 6,200 137
Procter & Gamble Co. ......................... 9,800 625
------
953
Diversified Operations - 2.4%
Eaton Corp. .................................. 2,500 175
General Electric Co. ......................... 8,600 419
Tyco International, Ltd. ..................... 5,000 273
------
867
Electric Power - 3.7%
Calpine Corp. ................................ 7,300 276
Duke Energy Co. .............................. 6,000 234
Exelon Corp. ................................. 8,712 559
Montana Power Co. ............................ 3,400 39
Pinnacle West Capital Corp. .................. 3,400 161
PPL Corp. .................................... 1,800 99
------
1,368
Electronic Products & Services - 1.2%
Cisco Systems, Inc. .......................... 7,300 133
Motorola, Inc. ............................... 18,500 306
------
439
Energy - Alternative Source - 0.9%
El Paso Corp. ................................ 6,500 341
Financial Services - 1.7%
Merrill Lynch & Co., Inc. .................... 8,800 521
Pitney Bowes, Inc. ........................... 2,700 114
------
635
Food, Beverage & Tobacco - 4.2%
ConAgra, Inc. ................................ 18,700 370
PepsiCo, Inc. ................................ 8,700 385
Philip Morris Cos., Inc. ..................... 5,100 259
R.J. Reynolds Tobacco Holdings, Inc. ......... 9,200 502
------
1,516
Health Care Products - 5.8%
Abbott Laboratories .......................... 9,900 475
American Home Products Corp. ................. 3,600 210
Baxter International, Inc. ................... 4,600 225
Bristol-Myers Squibb Co. ..................... 1,500 78
Eli Lilly & Co. .............................. 1,000 74
McKesson HBOC, Inc. .......................... 2,600 97
Merck & Co., Inc. ............................ 3,400 217
Mylan Laboratories, Inc. ..................... 4,500 127
Pharmacia Corp. .............................. 10,047 462
Schering-Plough Corp. ........................ 4,600 167
------
2,132
Health Care Services - 0.1%
WebMD Corp. .................................. 4,000 28
Insurance - 6.8%
American International Group, Inc. ........... 6,250 537
Cigna Corp. .................................. 4,400 422
Marsh & McLennan Cos., Inc. .................. 3,600 364
MBIA, Inc. ................................... 13,300 740
XL Capital, Ltd. - Cl. A ..................... 5,200 427
------
2,490
Leisure & Recreation - 1.0%
Eastman Kodak Co. ............................ 1,900 89
Sabre Group Holdings, Inc. ................... 5,500 275
134
SCHEDULE OF INVESTMENTS--Continued
(Unaudited)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE/MID CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Leisure & Recreation - Continued
Six Flags, Inc. .............................. 900 $ 19
------
383
Machinery - 1.0%
Caterpillar, Inc. ............................ 4,100 205
Thermo Electron Corp. ........................ 8,000 176
------
381
Media - Publishing - 0.5%
Gannett Co., Inc. ............................ 2,800 185
Media - TV & Radio - 2.2%
Adelphia Communications Corp. - Cl. A ........ 7,000 287
AOL Time Warner, Inc. ........................ 2,600 138
E.W. Scripps Co. - Cl. A ..................... 2,600 179
USA Networks, Inc. ........................... 7,700 216
------
820
Metals & Mining - 1.4%
Alcoa, Inc. .................................. 8,300 327
Minnesota Mining & Manufacturing Co. ......... 1,600 183
------
510
Oil & Natural Gas Exploration & Production - 9.0%
Chevron Corp. ................................ 8,600 778
Conoco, Inc. - Cl. B ......................... 1,900 55
Exxon Mobil Corp. ............................ 23,250 2,030
Helmerich & Payne, Inc. ...................... 5,000 154
Rowan Cos., Inc. ............................. 8,500 188
Sunoco, Inc. ................................. 600 22
Ultramar Diamond Shamrock Corp. .............. 500 24
USX-Marathon Group ........................... 900 26
------
3,277
Oil - Equipment & Service - 0.2%
Halliburton Co. .............................. 1,600 57
Paper & Forest Products - 1.4%
Bowater, Inc. ................................ 4,500 201
Kimberly-Clark Corp. ......................... 3,500 196
Weyerhaeuser Co. ............................. 2,000 110
------
507
Personal & Commercial Lending - 4.4%
Citigroup, Inc. .............................. 30,766 1,626
Real Estate Investment Trust - 1.6%
Equity Office Properties Trust ............... 13,100 415
Kimco Realty Corp. ........................... 3,700 175
------
590
Real Estate Operations - 0.1%
Security Capital Group, Inc. - Cl. B ......... 2,200 47
Retail - Department Stores - 2.2%
Family Dollar Stores, Inc. ................... 17,600 451
Intimate Brands, Inc. ........................ 2,200 33
Wal-Mart Stores, Inc. ........................ 6,500 317
------
801
Retail - Food - 2.3%
Brinker International, Inc. .................. 3,700 96
McDonald's Corp. ............................. 10,000 271
Safeway, Inc. ................................ 10,200 489
------
856
Shoe & Apparel Manufacturing - 0.9%
Jones Apparel Group, Inc. .................... 3,100 134
Nike, Inc. - Cl. B ........................... 4,400 185
------
319
Telecommunication Services - 4.9%
Broadwing, Inc. .............................. 6,800 166
Verizon Communications ....................... 26,600 1,423
WorldCom, Inc. ............................... 13,200 188
------
1,777
Telephone - 5.5%
AT&T Corp. ................................... 12,600 277
AT&T Corp. - Liberty Media Group - Cl. A ..... 35,000 612
Constellation Energy Group ................... 5,400 230
Qwest Communications International, Inc. ..... 12,337 393
SBC Communications, Inc. ..................... 12,095 485
------
1,997
Transportation Services - 1.0%
Canadian National Railway Co. ................ 2,800 113
Continental Airlines, Inc. - Cl. B ........... 1,300 64
Delta Air Lines, Inc. ........................ 900 40
Southwest Airlines Co. ....................... 8,750 162
------
379
U.S. Government Agencies - 3.0%
Federal Home Loan Mortgage Corp. ............. 4,000 280
Federal National Mortgage Assoc. ............. 9,400 800
------
1,080
------
TOTAL COMMON STOCK- 95.0% 34,751
------
135
SCHEDULE OF INVESTMENTS--Continued
(Unaudited)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE/MID CAP VALUE FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 5.4%
Investment in joint trading account
3.97% due 07/02/01 ........................... $ 1,977 $ 1,977
U.S. Treasury Bills - 0.2%
U.S. Treasury Bills
3.79% due 11/01/01 #.......................... 50 50
3.56% due 08/16/01 #.......................... 10 10
---------- ----------
60
----------
TOTAL SHORT-TERM INVESTMENTS- 5.6% 2,037
---------- ----------
TOTAL INVESTMENTS- 100.6% 36,788
Other Assets & Liabilities, Net- (0.6)% (219)
---------- ----------
NET ASSETS- 100.0% $ 36,569
========== ==========
ADR-American Depository Receipts.
# All or a portion of the principle amount of this security was pledged to
cover initial margin requirements for open future contracts.
See notes to financial statements.
136
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
COMMERCIAL PAPER
Bank - 22.6%
Abbey National of America
4.63% due 07/12/01 ........................... $ 5,000 $ 4,994
American Centurian Bank
3.96% due 07/10/01 ........................... 11,000 11,000
ANZ Delaware, Inc.
4.2% due 07/23/01 ............................ 5,000 4,988
Bank America NA Charlotte
5.102% due 09/06/01 .......................... 5,000 5,001
Branch Banking & Trust Co.
3.97% due 07/03/01 ........................... 15,000 15,000
Citibank Canada DTC MMI CD
4.23% due 07/25/01 ........................... 8,000 8,000
Credit Suisse First Boston, Inc.
4.7% due 07/02/01 ............................ 2,000 2,000
5.052% due 08/09/01 .......................... 5,000 5,000
Credit Suisse First Boston NY
4.605% due 07/09/01 .......................... 4,000 3,997
Deutsche Bank AG
5.38% due 07/24/01 ........................... 4,000 4,000
Firststar Bank NA Milwaukee WI
3.98% due 08/01/01 ........................... 10,000 10,000
Fleet National Bank
5.13% due 09/07/01 ........................... 3,000 3,000
LaSalle Bank NA
3.75% due 09/05/01 ........................... 14,000 14,000
National Bank of Canada
4.67% due 07/11/01 ........................... 6,000 6,000
National City Bank
5.51% due 08/01/01 ........................... 2,000 2,000
6.34% due 09/21/01 ........................... 5,000 5,017
--------
103,997
Cosmetic & Personal Care - 0.5%
Unilever Capital Corp.
5.11% due 09/07/01 ........................... 2,500 2,500
Diversified Operations - 3.3%
Ciesco Puerto
4.65% due 07/03/01 ........................... 6,000 5,999
Diageo Capital PLC
3.92% due 07/18/01 ........................... 9,000 8,984
--------
14,983
Electric Power - 0.7%
National Rural Utilities Cooperative Finance
Corp.
4.2% due 07/19/01 ............................ 3,000 2,994
Financial Services - 25.8%
Alpine Securitization Corp.
4.25% due 07/19/01 ........................... 5,000 4,990
Apreco, Inc.
3.7% due 09/17/01 ............................ 12,500 12,401
Centric Capital Corp.
4.22% due 07/05/01 ........................... 3,600 3,599
4.68% due 07/09/01 ........................... 4,000 3,996
Chevron Investment PLC
4.63% due 07/06/01 ........................... 8,000 7,996
Corporate Recievables Corp.
3.6% due 09/07/01 ............................ 8,000 7,946
Eureka Securitization, Inc.
3.78% due 08/31/01 ........................... 10,000 9,937
Falcon Asset Securitization
3.7% due 08/03/01 ............................ 13,000 12,957
4.2% due 07/20/01 ............................ 1,793 1,789
General Electric Capital Corp.
3.72% due 10/31/01 ........................... 14,000 13,825
4.22% due 07/18/01 ........................... 3,700 3,693
Goldman Sachs Group, Inc.
5.485% due 11/26/01 .......................... 2,000 2,001
4.56% due 07/10/01 ........................... 5,000 4,995
Greenwich Funding Corp.
4.2% due 07/26/01 ............................ 1,669 1,664
4.65% due 07/05/01 ........................... 1,490 1,489
International Lease Finance Corp.
4.24% due 07/18/01 ........................... 3,977 3,970
Merrill Lynch & Co., Inc.
5.605% due 11/01/01 .......................... 2,000 2,001
National Rural Utilities Cooperative Finance
Corp.
4.797% due 07/20/01 .......................... 2,000 2,000
Sigma Finance Corp.
5.05% due 08/14/01 ........................... 3,500 3,479
UBS Finance , Inc.
3.85% due 08/08/01 ........................... 3,800 3,785
Variable Funding Capital
3.95% due 07/12/01 ........................... 10,000 9,989
--------
118,502
Food Beverage & Tobacco - 5.6%
Anheuser Busch, Inc.
3.6% due 09/21/01 ............................ 14,000 13,886
Coca Cola Enterprises, Inc.
3.71% due 09/26/01 ........................... 12,000 11,894
--------
25,780
Healthcare Products - 3.1%
Merck & Co., Inc.
3.8% due 07/05/01 ............................ 14,000 13,996
Media - Publishing - 1.8%
Washington Post Co.
3.68% due 09/14/01 ........................... 8,500 8,436
137
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
COMMERCIAL PAPER - CONTINUED
Media - TV & Radio - 3.0%
Gannett, Inc.
3.95% due 07/06/01 ........................... $ 14,000 $ 13,994
Paper Products - 1.8%
Park Avenue Receivables Corp.
3.75% due 07/11/01 ........................... 8,406 8,398
Personal & Commercial Lending - 12.7%
Greyhawk Fund Corp.
3.7% due 09/10/01 ............................ 14,000 13,899
Halifax PLC
3.6% due 09/17/01 ............................ 14,000 13,892
Household Finance Corp.
5.675% due 08/01/01 .......................... 4,000 4,000
President & Fellows Harvard Co.
3.86% due 07/16/01 ........................... 14,000 13,979
Windmill Funding Corp.
3.75% due 09/12/01 ........................... 9,400 9,330
4.23% due 07/05/01 ........................... 3,000 2,999
--------
58,099
Retail-Department Stores - 3.0%
Wal Mart Stores, Inc.
3.6% due 07/31/01 ............................ 14,000 13,959
Telecommunications Services - 0.7%
Verizon Network Fund
4.25% due 07/10/01 ........................... 3,000 2,997
U.S. Governement Agencies - 10.3%
Federal Home Loan Bank Note
3.66% due 09/07/01 ........................... 22,340 23,181
3.91% due 07/11/01 ........................... 9,528 9,519
Federal National Mortgage Assoc.
3.54% due 09/13/01 ........................... 14,750 14,644
--------
47,344
--------
TOTAL COMMERCIAL PAPER- ................. 94.9% 435,979
--------
JOINT REPURCHASE AGREEMENT - 5.0%
Investment in joint repurchase
agreement with SBC Warburg,
Ltd., 3.295% due 07/02/01
(Secured by Various
U.S. Treasury obligations and U.S.
Government Agency Bonds) .................... 22,825 22,825
-------- --------
TOTAL INVESTMENTS- 99.9% 458,804
Other Assets & Liabilities, Net- 0.1% 565
-------- --------
NET ASSETS- 100.0% $459,369
======== ========
See notes to financial statements.
138
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE/MID CAP VALUE II FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 2.1%
Boeing Co. ................................... 15,100 $ 839
Lockheed Martin Corp. ........................ 15,600 578
United Technologies Corp. .................... 15,000 1,099
-------
2,516
Automobile - 1.7%
Ford Motor Co. ............................... 52,400 1,286
General Motors Corp. ......................... 10,500 676
General Motors Corp. - Cl. H ................. 7,500 152
-------
2,114
Bank - 15.1%
Australia & New Zealand Banking
Group, Ltd. - ADR ........................... 33,000 1,404
Bank of Montreal ............................. 44,000 1,136
JP Morgan Chase & Co. ........................ 108,700 4,848
Mercantile Bankshares Corp. .................. 2,500 98
UnionBanCal Corp. ............................ 49,600 1,672
US Bancorp ................................... 108,373 2,470
Wachovia Corp. ............................... 10,000 711
Washington Mutual, Inc. ...................... 127,500 4,788
Westpac Banking Corp., Ltd. .................. 30,200 1,105
-------
18,232
Chemical - 1.5%
Air Products & Chemicals, Inc. ............... 14,800 677
E.I. du Pont de Nemours & Co. ................ 23,300 1,124
-------
1,801
Commercial Services - 0.3%
Avery Dennison Corp. ......................... 6,100 311
Computer Equipment - 2.4%
Compaq Computer Corp. ........................ 32,800 508
Hewlett-Packard Co. .......................... 30,400 869
International Business Machines
Corp. ...................................... 11,900 1,345
Palm, Inc. ................................... 31,600 192
-------
2,914
Computer Software & Services - 1.1%
First Data Corp. ............................. 19,800 1,272
Cosmetic & Personal Care - 2.7%
International Flavors & Fragrances,
Inc. ....................................... 25,800 648
Leggett & Platt, Inc. ........................ 22,500 496
Procter & Gamble Co. ......................... 32,600 2,080
-------
3,224
Diversified Operations - 2.5%
Eaton Corp. .................................. 8,700 610
General Electric Co. ......................... 29,300 1,428
Tyco International, Ltd. ..................... 17,200 938
-------
2,976
Electric Power - 3.5%
Calpine Corp. * .............................. 29,800 1,126
Duke Energy Co. .............................. 20,200 788
Exelon Corp. ................................. 28,100 1,802
Montana Power Co. ............................ 16,900 196
PPL Corp. .................................... 6,100 336
-------
4,248
Electronic Products & Services - 1.2%
Cisco Systems, Inc. .......................... 25,100 457
Motorola, Inc. ............................... 64,100 1,061
-------
1,518
Energy - Alternative Source - 0.9%
El Paso Corp. ................................ 21,800 1,145
Financial Services - 1.7%
Merrill Lynch & Co., Inc. .................... 28,700 1,700
Pitney Bowes, Inc. ........................... 9,200 388
-------
2,088
Food, Beverage & Tobacco - 4.8%
ConAgra, Inc. ................................ 60,600 1,200
PepsiCo, Inc. ................................ 29,800 1,317
Philip Morris Cos., Inc. ..................... 22,800 1,157
R.J. Reynolds Tobacco Holdings,
Inc. * ...................................... 39,700 2,168
-------
5,842
Health Care Products - 6.0%
Abbott Laboratories .......................... 33,700 1,618
American Home Products Corp. ................. 12,100 707
Baxter International, Inc. ................... 16,000 784
Bristol-Myers Squibb Co. ..................... 5,000 262
Eli Lilly & Co. .............................. 3,200 237
McKesson HBOC, Inc. .......................... 9,000 334
Merck & Co., Inc. ............................ 11,300 722
Mylan Laboratories, Inc. ..................... 15,400 433
Pharmacia Corp. .............................. 34,100 1,567
Schering-Plough Corp. ........................ 16,000 580
-------
7,244
Health Care Services - 0.1%
WebMD Corp. .................................. 13,100 92
Insurance - 7.1%
American International Group, Inc. ........... 22,800 1,961
Cigna Corp. .................................. 15,200 1,456
Marsh & McLennan Cos., Inc. .................. 13,000 1,313
MBIA, Inc. ................................... 43,650 2,430
XL Capital, Ltd. - Cl. A ..................... 17,500 1,437
-------
8,597
Leisure & Recreation - 1.1%
Eastman Kodak Co. ............................ 6,400 299
Sabre Group Holdings, Inc. ................... 20,400 1,020
139
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE/MID CAP VALUE II FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Leisure & Recreation - Continued
Six Flags, Inc. .............................. 3,000 $ 63
-------
1,382
Machinery - 1.1%
Caterpillar, Inc. ............................ 14,100 706
Thermo Electron Corp. * ...................... 27,900 614
-------
1,320
Media - Publishing - 0.5%
Gannett Co., Inc. ............................ 9,800 646
Media - TV / Radio - 2.6%
Adelphia Communications Corp.
- Cl. A ................................. 23,900 980
AOL Time Warner, Inc. * ...................... 9,000 477
E.W. Scripps Co. - Cl. A ..................... 13,400 924
USA Networks, Inc. * ........................ 26,700 748
-------
3,129
Metals & Mining - 1.7%
Alcoa, Inc. .................................. 35,500 1,399
Minnesota Mining & Manufacturing
Co. ......................................... 5,400 616
-------
2,015
Oil & Natural Gas Exploration & Production - 9.1%
Chevron Corp. ................................ 27,700 2,507
Conoco, Inc. - Cl. B ......................... 9,000 260
Exxon Mobil Corp. ............................ 78,700 6,874
Helmerich & Payne, Inc. ...................... 17,100 527
Rowan Cos., Inc. ............................. 30,300 670
Sunoco, Inc. ................................. 1,900 70
Ultramar Diamond Shamrock Corp. .............. 1,600 76
USX-Marathon Group ........................... 3,000 88
-------
11,072
Oil - Equipment & Service - 0.2%
Halliburton Co. .............................. 8,000 285
Paper & Forest Products - 1.1%
Bowater, Inc. ................................ 15,400 689
Kimberly-Clark Corp. ......................... 12,000 671
-------
1,360
Personal & Commercial Lending - 5.1%
Citigroup, Inc. .............................. 116,700 6,166
Real Estate Investment Trust - 1.6%
Equity Office Properties Trust ............... 42,500 1,344
Kimco Realty Corp. ........................... 12,800 606
-------
1,950
Real Estate Operations - 0.1%
Security Capital Group, Inc. -
Cl. B ....................................... 8,300 178
Retail - Department Stores - 2.2%
Family Dollar Stores, Inc. ................... 57,700 1,479
Intimate Brands, Inc. ........................ 12,600 190
Wal-Mart Stores, Inc. ........................ 20,500 1,000
-------
2,669
Retail - Food - 2.5%
Brinker International, Inc. .................. 13,600 352
McDonald's Corp. ............................. 34,300 928
Safeway, Inc. * .............................. 35,500 1,704
-------
2,984
Shoe & Apparel Manufacturing - 1.1%
Jones Apparel Group, Inc. * .................. 11,300 488
Nike, Inc. - Cl. B ........................... 19,200 806
-------
1,294
Telecommunication Services - 4.9%
Broadwing, Inc. .............................. 23,200 567
Verizon Communications ....................... 87,600 4,687
WorldCom, Inc. * ............................ 45,300 643
-------
5,897
Telephone - 5.5%
AT&T Corp. ................................... 44,700 983
AT&T Corp. - Liberty Media Group
- Cl. A ..................................... 115,200 2,015
Constellation Energy Group ................... 18,700 797
Qwest Communications
International, Inc. ......................... 39,800 1,269
SBC Communications, Inc. ..................... 38,800 1,554
-------
6,618
Transportation Services - 1.1%
Canadian National Railway Co. ................ 9,700 393
Continental Airlines, Inc. - Cl. B * ........ 5,200 256
Delta Air Lines, Inc. ........................ 3,700 163
Southwest Airlines Co. ....................... 29,850 552
-------
1,364
U.S. Government Agencies - 3.0%
Federal Home Loan Mortgage Corp. ............. 13,700 959
Federal National Mortgage Assoc .............. 32,200 2,742
-------
3,701
-------
TOTAL COMMON STOCK- ............. 99.2% 120,164
-------
140
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE/MID CAP VALUE II FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 1.2%
Investment in joint trading account
3.97% due 07/02/01 .......................... $1,473 $1,473
U.S. Treasury Bills - 0.1%
U.S. Treasury Bills
3.54% due 09/06/01 # ........................ 25 25
3.96% due 07/12/01 .......................... 35 35
3.62% due 07/09/01 .......................... 35 35
------
95
Shares
Cash Equivalents - 5.3%
Navigator Securities Lending Prime
Portfolio ** 6,460,592 6,461
---------- --------
TOTAL SHORT-TERM INVESTMENTS 6.6% 8,029
---------- --------
TOTAL INVESTMENTS- 105.8% 128,193
Other Assets & Liabilities, Net- (5.8)% (7,091)
---------- --------
NET ASSETS- 100.0% $121,102
========== ========
ADR-American Depository Receipts.
* Non-income producing security.
** Represents investment of security lending collateral.
# All or a portion of the principle amount of this security was pledged to
cover initial margin requirements for open future contracts.
See notes to financial statements.
141
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Automobile - 1.8%
United Rentals, Inc. * ....................... 126,900 $ 3,293
Bank - 2.1%
Mercantile Bankshares Corp. .................. 35,800 1,401
Westamerica Bancorp .......................... 35,600 1,397
Wilmington Trust Trust Corp. ................. 16,900 1,059
-------
3,857
Brokerage & Investment Management - 4.3%
Investment Technology Group, Inc. ............ 77,400 3,893
Legg Mason, Inc. ............................. 78,400 3,901
-------
7,794
Business Services - 1.2%
G&K Services, Inc. - Cl. A ................... 83,000 2,233
Chemical - 1.6%
MacDermid, Inc. .............................. 66,800 1,202
NOVA Corp. ................................... 53,800 1,692
-------
2,894
Chemicals - 0.7%
Dionex Corp. ................................. 38,600 1,283
Commercial Services - 1.3%
TMP Worldwide, Inc. * ....................... 39,300 2,358
Computer Equipment - 2.2%
Brocade Communications Systems, Inc. ......... 17,500 770
Lexmark International Group, Inc. -
Cl. A .................................... 47,200 3,174
-------
3,944
Computer Software & Services - 12.5%
Acxiom Corp. ................................. 85,500 1,119
Affiliated Computer Services, Inc. -
Cl. A * .................................. 21,400 1,539
Black Box Corp. .............................. 49,200 3,314
CheckFree Corp. .............................. 10,200 358
DST Systems, Inc. * ......................... 46,000 2,424
IMS Health, Inc. ............................. 110,900 3,161
Macromedia, Inc. * ........................... 83,600 1,505
Mercury Interactive Corp.* ................... 3,900 234
Openwave Systems, Inc. * ..................... 4,000 139
Peoplesoft, Inc. ............................. 16,500 812
Radiant Systems, Inc. * ..................... 8,000 129
Rational Software Corp. * ................... 66,900 1,816
SunGard Data Systems, Inc. ................... 60,600 1,819
Systems & Computer Technology
Corp. .................................... 84,200 762
Trizetto Group, Inc. * ....................... 33,500 310
Verity, Inc. * ............................... 142,200 2,837
Vignette Corp. * ............................. 39,500 350
-------
22,628
Consumer Miscellaneous - 0.9%
Catalina Marketing Corp. ..................... 55,000 1,678
Container - 2.6%
Bemis Co., Inc. .............................. 62,500 2,511
Pactiv Corp. ................................. 162,800 2,181
-------
4,692
Diversified Operations - 1.9%
AptarGroup, Inc. ............................. 40,200 1,304
Ionics, Inc. * ............................... 65,200 2,054
-------
3,358
Electric Power - 2.7%
Calpine Corp. * .............................. 47,700 1,803
Montana Power Co. ............................ 113,100 1,312
Pinnacle West Capital Corp. .................. 38,500 1,825
-------
4,940
Electronic Products & Services - 7.0%
Atmi, Inc. * ................................. 9,200 276
Emulex Corp. ................................. 8,400 339
Littelfuse, Inc. * ........................... 92,700 2,483
Optimal Robotics Corp. * ..................... 73,200 2,782
QLogic Corp. * .............................. 20,500 1,321
Sensormatic Electronics Corp. ................ 202,800 3,448
Varian Semiconductor Equipment
Associates, Inc. ............................ 10,000 420
Veeco Instruments Inc. * ..................... 41,100 1,634
-------
12,703
Food, Beverage & Tobacco - 2.0%
Pepsi Bottling Group, Inc. ................... 91,800 3,681
Health Care Products - 14.0%
Becton, Dickinson & Co. ...................... 103,500 3,704
Biomet, Inc. ................................. 49,550 2,381
Cephalon, Inc. * ............................. 16,000 1,128
COR Therapeutics, Inc.8 ..................... 7,200 220
CV Therapeutics, Inc. * ..................... 21,000 1,197
Edwards Lifesciences Corp. ................... 187,600 4,945
Genzyme Corp. * ............................. 37,000 2,257
Gilead Sciences, Inc. * ..................... 18,000 1,048
Immunex Corp. ................................ 97,200 1,725
Laboratory Corporation of America
Holdings .................................... 21,900 1,684
Millipore Corp. .............................. 37,100 2,300
NPS Pharmaceuticals, Inc. * ................. 12,500 503
Patterson Dental Co. ......................... 70,800 2,124
Regeneron Pharmaceuticals .................... 1,700 589
-------
25,805
Health Care Services - 7.6%
Gene Logic, Inc. ............................. 31,000 676
Health Management Associates, Inc. -
Cl. A * ..................................... 176,200 3,707
Idec Pharmaceuticals Corp. ................... 20,000 1,354
Trigon Healthcare, Inc. ...................... 69,200 4,487
142
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Health Care Services - Continued
Wellpoint Health networks, Inc. .............. 37,000 $ 3,487
--------
13,771
Household Appliances & Furnishings - 2.1%
Herman Miller, Inc. .......................... 154,600 3,741
Insurance - 4.3%
Ambac Financial Group, Inc. .................. 66,900 3,893
Reinsurance Group of America ................. 104,900 3,976
--------
7,869
Leisure & Recreation - 1.7%
Speedway Motorsports, Inc. * ................. 121,700 3,068
Oil & Natural Gas Exploration &
Production- 3.9%
Atwood Oceanics, Inc.* ....................... 38,800 1,362
Helmerich & Payne, Inc. ...................... 94,300 2,906
Murphy Oil Corp. ............................. 29,600 2,179
Suncor Energy, Inc. .......................... 3,400 87
--------
6,534
Oil - Equipment & Service - 2.9%
Hanover Compressor Co. * ..................... 85,800 2,839
Swift Energy Co. ............................. 77,500 2,335
--------
5,174
Retail - Department Stores - 5.2%
Bed Bath & Beyond, Inc.* ..................... 24,300 758
Family Dollar Stores, Inc. ................... 129,200 3,312
Fastenal Co. ................................. 28,900 1,791
Staples, Inc. * ............................. 227,900 3,644
--------
9,505
Retail - Food - 3.3%
Darden Restaurants, Inc. ..................... 123,400 3,443
Whole Foods Market, Inc.* .................... 94,300 2,555
--------
5,998
Shoe & Apparel Manufacturing - 2.0%
Liz Claiborne, Inc. .......................... 70,900 3,577
Telecommunication Equipment - 5.0%
CommScope, Inc.* ............................. 138,700 3,260
DMC Stratex Networks, Inc. - Notes* ......... 145,800 1,458
Symbol Technologies, Inc. .................... 110,650 2,456
Tekelec, Inc. ................................ 51,400 1,393
TriQuint Semiconductor, Inc.* ................ 24,400 549
--------
9,116
Telecommunication Services - 0.3%
Broadwing, Inc. .............................. 25,500 623
Transportation Services - 2.0%
Atlas Air Worldwide Hldgs, Inc. * ........... 77,000 1,090
EGL, Inc. * ................................. 139,500 2,436
--------
3,526
--------
TOTAL COMMON STOCK- 99.1% 179,643
--------
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 0.6%
Investment in joint trading account
3.97% due 07/02/01 ......................... $ 1,010 1,010
Shares
Cash Equvalents - 15.6%
Navigator Securities Lending Prime
Portfolio ** 28,338,513 28,339
----------- ---------
TOTAL SHORT-TERM INVESTMENTS 16.2% 29,349
----------- ---------
TOTAL INVESTMENTS- 115.3% 208,992
Other Assets & Liabilities, Net- (15.3)% (27,678)
----------- ---------
NET ASSETS- 100.0% $ 181,314
=========== =========
* Non-income producing security.
** Represents investment of security lending collateral.
See notes to financial statements.
143
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.1%
Lockheed Martin Corp.
8.2% due 12/01/09 ............................ $ 200 $ 215
Northrop-Grumman Corp. - Debs.
7.75% due 03/01/16 ........................... 75 77
Raytheon Co. - Notes
6.75% due 08/15/07 ........................... 200 195
Safeway, Inc. - Notes
7.5% due 09/15/09 ............................ 150 156
United Technology Corp.
6.625% due 11/15/04 .......................... 200 207
United Technologies Corp. - Debs.
8.875% due 11/15/19 .......................... 50 59
--------
909
Auto & Truck Parts - 0.5%
TRW, Inc.
7.125% due 06/01/09 .......................... 150 147
Visteon Corp.
7.95% due 08/01/05 ........................... 250 261
--------
408
Automobile - 0.9%
Daimler Chrysler Auto Trust - Notes
6.7% due 03/08/06 ............................ 400 415
Delphi Automotive Systems Corp. - Debs.
7.125% due 05/01/29 .......................... 50 46
Delphi Automotive Systems Corp. - Notes
6.5% due 05/01/09 ............................ 200 192
Ford Motor Co. - Bonds
6.625% due 02/15/28 .......................... 50 43
--------
696
Bank - 3.3%
African Development Bank - Sub. Notes
6.875% due 10/15/15 .......................... 35 36
Asian Development Bank - Bonds
5.5% due 04/23/04 ............................ 270 269
Bank of America Corp. - Sub. Notes
7.8% due 02/15/10 ............................ 150 159
Bank One Corp. - Sr. Notes
5.625% due 02/17/04 .......................... 150 151
BankAmerica Corp. - Sub. Notes
6.5% due 03/15/06 ............................ 150 152
Chase Manhattan Corp. - Sub. Notes
7.125% due 02/01/07 .......................... 225 233
First Union Corp. - Sub. Notes
8.125% due 06/24/02 .......................... 230 238
Fleet Boston Corp. - Sub. Notes
7.375% due 12/01/09 .......................... 100 105
Fleet Financial Group, Inc. - Sub. Debs.
6.7% due 07/15/28 ............................ 75 70
Golden West Financial Corp. - Sub. Notes
6.7% due 07/01/02 ............................ 150 153
HSBC Holdings PLC
7.5% due 07/15/09 ............................ 150 157
InterAmerican Development Bank - Debs.
8.5% due 03/15/11 ............................ 200 233
Korea Development Bank - Bonds
7.375% due 09/17/04 .......................... 120 125
National City Bank of Pennsylvania - Sub.
Notes
7.25% due 10/21/11 ........................... 50 51
Royal Bank of Scotland PLC - Sub. Notes
6.4% due 04/01/09 ............................ 150 148
Wachovia Corp. - Sub. Notes
5.625% due 12/15/08 .......................... 75 70
Wells Fargo Co. - Notes
6.625% due 07/15/04 .......................... 175 181
Wells Fargo Co. - Sub. Notes
6.875% due 04/01/06 .......................... 150 155
--------
2,686
Brokerage & Investment Management - 2.3%
Bear Stearns Co., Inc.
7.625% due 02/01/05 .......................... 250 262
Merrill Lynch & Co., Inc. - Notes
8.0% due 06/01/07 ............................ 200 214
Morgan Stanley Capital, Inc. - CTF 1998 WF1
Cl. A 1
6.25% due 07/15/07 ........................... 1,187 1,206
Morgan Stanley Dean Witter
7.75% due 06/15/05 ........................... 170 181
--------
1,863
Business Services - 0.4%
Electronic Data Systems Corp.
7.125% due 10/15/09 .......................... 100 102
Financing Corp.
8.6% due 09/26/19 ............................ 150 184
--------
286
Chemical - 0.2%
Eastman Chemical - Debs.
7.6% due 02/01/27 ............................ 50 43
Morton International, Inc. - Debs.
9.25% due 06/01/20 ........................... 40 47
Rohm & Haas Co. - Notes
7.4% due 07/15/09 ............................ 80 83
--------
173
Computer Equipment - 0.4%
Hewlett - Packard Co. - Notes
7.15% due 06/15/05 ........................... 200 207
International Business Machines Corp. -
Debs.
7.0% due 10/30/25 ............................ 100 100
--------
307
144
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Consumer Miscellaneous - 0.2%
Fortune Brands, Inc. - Debs.
7.875% due 01/15/23 .......................... $ 100 $ 101
United Utilities PLC - Notes
6.875% due 08/15/28 .......................... 100 88
--------
189
Cosmetic & Personal Care - 0.1%
Procter & Gamble Co. - Debs.
6.45% due 01/15/26 ........................... 100 96
Diversified Operations - 0.3%
Honeywell International, Inc. - Notes
7.5% due 03/01/10 ............................ 75 80
John Deere Capital Corp. - Notes
6.0% due 02/15/09 ............................ 60 57
Tyco International Group SA
6.375% due 06/15/05 .......................... 80 81
--------
218
Electric Power - 1.1%
CalEnergy Co., Inc. - Bonds
8.48% due 09/15/28 ........................... 60 65
Duke Energy Co. - 1st Ref. Mtg.
6.75% due 08/01/25 ........................... 100 92
Florida Power & Light Co.
7.75% due 02/01/23 ........................... 50 49
Niagara Mohawk Power Corp.
7.75% due 10/01/08 ........................... 200 204
Ontario Hydro - Local Govt. GTD.
6.1% due 01/30/08 ............................ 100 100
Philadelphia Electric Co. - 1st Ref. Mtg.
7.125% due 09/01/02 .......................... 100 103
Tennessee Valley Authority
6.75% due 11/01/25 ........................... 100 102
Virginia Electric Power Co. - 1st Mtg.
7.625% due 07/01/07 .......................... 150 158
--------
873
Entertainment & Recreation - 0.1%
TCI Communciations, Inc. - Sr. Notes
7.125% due 02/15/28 .......................... 70 65
Financial Services - 2.4%
Ameritech Capital Funding Corp.
6.875% due 10/15/27 .......................... 60 58
Anardarko Finance Co. - Sr. Notes 144A
6.75% due 05/01/11 ........................... 200 199
Associates Corp. of North America
5.5% due 02/15/04 ............................ 675 677
Citicorp Capital II
8.015% due 02/15/27 .......................... 100 103
GATX Capital Corp. - Notes
6.875% due 12/15/06 .......................... 100 94
Goldman Sachs Group, Inc. - Notes
7.35% due 10/01/09 ........................... 100 103
Hartford Financial Services Group, Inc. -
Sr. Notes
7.75% due 06/15/05 ........................... 150 159
Morgan Stanley, Dean Witter, Discover & Co.
- Notes
6.875% due 03/01/03 .......................... 200 206
Newcourt Credit Group, Inc. - Ser. B
6.875% due 02/16/05 .......................... 100 103
Qwest Capital Funding - GTD Notes
7.9% due 08/15/10 ............................ 90 93
Sumitomo Bank International Finance NV -
Notes
8.5% due 06/15/09 ............................ 100 107
Washington Mutual Capital I
8.375% due 06/01/27 .......................... 60 61
--------
1,963
Food, Beverage & Tobacco - 1.2%
Archer Daniels Midland Co. - Notes
6.25% due 05/15/03 ........................... 275 282
Coca-Cola Enterprises, Inc. - Debs.
8.5% due 02/01/22 ............................ 100 115
Conagra, Inc. - Debs.
9.75% due 03/01/21 ........................... 75 90
Kellogg Co. - Bonds
7.45% due 04/01/31 ........................... 100 100
Pepsi Bottling Group, Inc. - Sr. Notes Ser. B
7.0% due 03/01/29 ............................ 100 100
Philip Morris Cos., Inc. - Debs.
8.25% due 10/15/03 ........................... 100 106
SuperValu, Inc. - Notes
7.625% due 09/15/04 .......................... 150 148
--------
941
Foreign Governmental - 2.2%
Government of Canada
5.25% due 11/05/08 ........................... 125 120
Government of New Zealand - Debs.
8.75% due 12/15/06 ........................... 120 136
Hydro-Quebec
8.4% due 01/15/22 ............................ 100 115
Kingdom of Spain
7.0% due 07/19/05 ............................ 250 264
Kingdom of Sweden - Debs.
12.0% due 02/01/10 ........................... 75 104
Malaysia - Bonds
8.75% due 06/01/09 ........................... 50 54
Province of Manitoba - Debs.
6.875% due 09/15/02 .......................... 200 205
Province of Newfoundland - Debs.
9.0% due 10/15/21 ............................ 60 73
Province of Ontario
8.0% due 10/17/01 ............................ 200 202
145
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Foreign Governmental - Continued
Province of Ontario - Bonds
6.0% due 02/21/06 ............................ $ 300 $ 304
Province of Quebec - Debs.
7.5% due 07/15/23 ............................ 100 105
Republic of Korea - Unsub.
8.75% due 04/15/03 ........................... 85 90
--------
1,772
Health Care Products - 0.1%
Eli Lilly & Co. - Notes
7.125% due 06/01/25 .......................... 80 83
Insurance - 0.6%
Aetna Inc.
7.625% due 08/15/26 .......................... 100 104
Allstate Corp.
7.2% due 12/01/09 ............................ 150 156
Hartford Life, Inc. - Debs.
7.65% due 06/15/27 ........................... 50 52
Torchmark, Inc. - Debs.
8.25% due 08/15/09 ........................... 100 104
Travelers Property Casualty Corp. - Sr. Notes
7.75% due 04/15/26 ........................... 50 52
--------
468
Machinery - 0.3%
Caterpillar, Inc. - Debs.
8.0% due 02/15/23 ............................ 50 55
Reliance Electric Co. - Notes
6.8% due 04/15/03 ............................ 200 208
--------
263
Media - TV / Radio - 0.5%
News America Holdings, Inc. - Debs.
7.7% due 10/30/25 ............................ 100 93
Time Warner Entertainment, Inc. - Sr. Notes
8.375% due 07/15/33 .......................... 200 217
Viacom, Inc.
7.875% due 07/30/30 .......................... 50 53
--------
363
Metals & Mining - 0.2%
Noranda, Inc. - Debs.
7.0% due 07/15/05 ............................ 200 199
Natural Gas Distribution - 0.2%
Enron Corp. - Notes
6.75% due 09/15/04 ........................... 100 101
Tennessee Gas Pipeline - Bonds
7.5% due 04/01/17 ............................ 100 98
--------
199
Oil - 0.4%
Atlantic Richfield Co. - Notes
5.55% due 04/15/03 ........................... 75 76
Conoco, Inc. - Sr. Notes
6.95% due 04/15/29 ........................... 90 86
Occidental Petroleum Corp. - Debs.
7.2% due 04/01/28 ............................ 40 39
Tosco Corp. - Notes
7.625% due 05/15/06 .......................... 115 122
--------
323
Oil & Natural Gas Exploration & Production - 0.5%
Burlington Resources, Inc - Debs.
9.125% due 10/01/21 .......................... 90 106
Norsk Hydro A/S
7.25% due 09/23/27 ........................... 75 74
Phillips Petroleum Co. - Debs.
6.65% due 07/15/18 ........................... 50 47
Trans-Canada Pipelines
7.7% due 06/15/29 ............................ 100 101
Union Oil Co. of California
7.5% due 02/15/29 ............................ 60 61
--------
389
Oil - Equipment & Service - 0.1%
Coastal Corp. - Debs.
6.5% due 06/01/08 ............................ 100 95
Paper & Forest Products - 0.2%
Bowater, Inc. - Debs.
9.0% due 08/01/09 ............................ 100 107
Champion International Corp. - Debs.
7.35% due 11/01/25 ........................... 50 46
Westvaco Corp. - Notes
7.1% due 11/15/09 ............................ 35 34
--------
187
Personal & Commercial Lending - 2.8%
Aristar, Inc. - Sr. Notes
6.5% due 11/15/03 ............................ 200 204
CitiFinancial Credit Co. - Notes
5.9% due 09/01/03 ............................ 150 152
Ford Motor Credit Co.
6.125% due 01/09/06 .......................... 300 295
General Motors Acceptance Corp.
5.85% due 01/14/09 ........................... 500 465
General Motors Acceptance Corp. - Notes
9.625% due 12/15/01 .......................... 350 358
Household Finance Corp. - Notes
6.5% due 11/15/08 ............................ 280 274
LB Commercial Conduit Mortgage Trust
7.325% due 09/15/09 .......................... 400 417
Toyota Motor Credit Corp. - Notes
5.5% due 12/15/08 ............................ 60 57
--------
2,222
146
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Real Estate Investment Trust - 0.1%
Spieker Properties, Inc. - Debs.
7.5% due 10/01/27 ............................ $ 40 $ 37
Retail - Department Stores - 0.6%
Dayton Hudson Corp. - Debs.
6.75% due 01/01/28 ........................... 25 23
Federated Department Stores
6.625% due 04/01/11 .......................... 200 193
Gap, Inc. - Notes
6.9% due 09/15/07 ............................ 100 100
Target Corp.
6.35% due 01/15/11 ........................... 100 99
Wal-Mart Stores, Inc. - Debs.
6.75% due 10/15/23 ........................... 100 100
--------
515
Retail - Food - 0.3%
Albertson's, Inc. - Notes
6.625% due 06/01/28 .......................... 50 42
McDonald's Corp. - Sub. Debs.
7.31% due 09/15/27 ........................... 60 59
Safeway, Inc.
7.25% due 09/15/04 ........................... 150 156
--------
257
Telecommunication Equipment - 0.2%
Deutsche Telekom International Finance
8.25% due 06/15/30 ........................... 100 103
GTE Corp. - Debs.
6.94% due 04/15/28 ........................... 100 93
--------
196
Telecommunication Services - 2.1%
AT&T WirelessGroup - Sr. Notes 144A
7.875% due 03/01/11 .......................... 200 200
AT&T Canada, Inc. - Sr. Notes
7.65% due 09/15/06 ........................... 150 148
Bell Canada
7.75% due 04/01/06 ........................... 125 130
BellSouth Telecommunications, Inc. - Debs.
7.0% due 10/01/25 ............................ 100 98
British Telecommunications PLC - Notes
8.125% due 12/15/10 .......................... 200 212
Dominion Resources, Inc.
8.125% due 06/15/10 .......................... 200 216
France Telecom - Notes Sr. 144A
7.2% due 03/01/06 ............................ 350 360
Telefonica Europe BV - Notes
8.25% due 09/15/30 ........................... 100 106
Vodafone Group PLC
7.75% due 02/15/10 ........................... 100 105
Worldcom, Inc. - Notes
8.25% due 05/15/31 ........................... 150 147
--------
1,722
Telephone - 0.8%
Alltel Corp. - Sr. Notes
7.6% due 04/01/09 ............................ 100 103
Comcast Cable Communications - Notes
8.875% due 05/01/17 .......................... 75 85
New York Telephone Co. - Debs.
7.25% due 02/15/24 ........................... 100 95
SBC Communications Capital Corp. - Debs.
5.875% due 06/01/03 .......................... 100 100
South Carolina Electric & Gas - 1st Mtg.
7.5% due 06/15/23 ............................ 100 96
Sprint Capital Corp.
6.875% due 11/15/28 .......................... 150 127
--------
606
Transportation Services - 0.7%
American Airlines, Inc. - Pass Through
Certificates
7.024% due 04/15/11 .......................... 60 61
Burlington Northern Railroad Co.
6.125% due 03/15/09 .......................... 150 144
CSX Corp. - Debs.
7.45% due 05/01/07 ........................... 125 130
Norfolk Southern Corp. - Notes
7.35% due 05/15/07 ........................... 125 129
Union Pacific Corp. - Debs.
6.625% due 02/01/29 .......................... 85 76
--------
540
U.S. Government Agencies - 44.9%
Federal Home Loan Bank
5.58% due 08/17/01 ........................... 300 300
6.75% due 02/15/02 ........................... 1,600 1,626
Federal Home Loan Bank Disc. Note
5.125% due 03/06/06 .......................... 600 590
Federal Home Loan Mortgage Corp.
5.5% due 06/01/16 ............................ 500 483
5.75% due 04/15/08 ........................... 300 298
6.5% due 01/01/21 ............................ 431 429
6.5% due 05/01/31 ............................ 599 590
7.0% due 07/15/05 ............................ 655 692
7.0% due 02/01/16 ............................ 371 378
7.0% due 05/01/31 ............................ 250 251
8.0% due 09/01/30 ............................ 500 516
Federal Home Loan Mortgage Corp. - Bonds
7.1% due 04/10/07 ............................ 500 534
Federal Home Loan Mortgage Corp. - Deb.
5.0% due 01/15/04 ............................ 800 802
Federal Home Loan Mortgage Corp. - Notes
5.75% due 07/15/03 ........................... 1,000 1,022
6.0% due 10/01/14 ............................ 572 564
6.0% due 08/01/29 ............................ 995 957
6.5% due 11/01/15 ............................ 587 590
6.5% due 09/01/28 ............................ 474 467
6.5% due 06/01/29 ............................ 87 85
147
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
U.S. Government Agencies - Continued
Federal Home Loan Mortgage Corp. - Notes
6.5% due 07/01/29 ............................ $ 983 $ 968
6.5% due 12/01/30 ............................ 399 393
6.875% due 01/15/05 .......................... 150 158
7.0% due 02/01/30 ............................ 1,397 1,404
7.5% due 02/01/16 ............................ 141 145
7.5% due 11/01/30 ............................ 1,012 1,034
8.0% due 02/01/30 ............................ 363 375
Federal Home Loan Mortgage Corp. - Sr. Notes
5.8% due 09/02/08 ............................ 225 223
Federal National Mortgage Assoc.
5.375% due 03/15/02 .......................... 450 455
5.5% due 03/01/16 ............................ 200 193
5.5% due 04/01/16 ............................ 100 96
6.0% due 05/01/14 ............................ 238 235
6.0% due 06/01/31 ............................ 700 672
6.25% due 05/15/29 ........................... 965 924
6.375% due 06/15/09 .......................... 600 612
6.5% due 04/29/09 ............................ 200 199
6.5% due 11/01/29 ............................ 700 690
7.0% due 05/01/31 ............................ 600 603
7.5% due 11/01/30 ............................ 238 243
Federal National Mortgage Assoc. - Notes
4.75% due 11/14/03 ........................... 175 175
6.0% due 02/01/16 ............................ 589 580
6.0% due 01/01/29 ............................ 994 958
6.19% due 02/19/09 ........................... 120 118
6.5% due 02/01/15 ............................ 279 280
6.5% due 12/01/30 ............................ 469 462
6.5% due 01/01/31 ............................ 114 112
6.5% due 02/01/31 ............................ 1,795 1,768
7.0% due 01/01/08 ............................ 199 202
7.0% due 03/01/16 ............................ 292 297
7.0% due 01/01/30 ............................ 1,726 1,734
7.125% due 01/15/30 .......................... 159 170
7.5% due 10/01/15 ............................ 398 409
7.5% due 09/01/30 ............................ 1,187 1,212
8.0% due 08/01/30 ............................ 492 508
8.5% due 09/01/30 ............................ 339 356
Government National Mortgage Assoc.
6.5% due 05/15/31 ............................ 300 296
7.0% due 06/15/31 ............................ 500 504
7.5% due 01/15/31 ............................ 195 200
8.5% due 09/15/30 ............................ 347 363
Government National Mortgage Assoc. - Notes.
6.0% due 07/15/29 ............................ 325 314
6.5% due 01/15/16 ............................ 196 198
Government National Mortgage Assoc. - Notes
6.5% due 05/15/29 ............................ 1,176 1,164
7.0% due 12/15/30 ............................ 1,382 1,394
7.5% due 09/15/30 ............................ 1,121 1,149
8.0% due 02/15/31 ............................ 772 800
--------
36,519
U.S. Governmental - 24.5%
U.S. Treasury-Bill
3.435% due 09/13/01 .......................... 842 842
U.S. Treasury Bond
5.0% due 02/15/11 ............................ 1,000 970
5.5% due 08/15/28 ............................ 700 663
6.5% due 11/15/26 ............................ 535 576
6.75% due 08/15/26 ........................... 775 859
8.125% due 08/15/21 .......................... 1,100 1,382
8.75% due 08/15/20 ........................... 1,100 1,457
9.125% due 05/15/09 .......................... 750 837
10.75% due 08/15/05 .......................... 600 728
11.25% due 02/15/15 .......................... 260 393
11.75% due 02/15/10 .......................... 250 306
11.75% due 11/15/14 .......................... 465 659
U.S. Treasury - Notes
5.625% due 05/15/08 .......................... 2,000 2,079
5.75% due 10/31/02 .......................... 2,000 2,044
5.75% due 08/15/03 ........................... 1,000 1,028
6.75% due 05/15/05 ........................... 2,500 2,662
7.875% due 11/15/04 .......................... 2,000 2,190
United Mexican States - Notes
9.875% due 02/01/10 .......................... 220 242
--------
19,917
--------
TOTAL PUBLICLY-TRADED BONDS - 96.8% 78,545
--------
SHORT-TERM INVESTMENTS - 2.0%
Investment in joint trading account
3.97% due 07/02/01 ........................... 1,626 1,626
-------- --------
TOTAL INVESTMENTS- 98.8% 80,171
Other Assets & Liabilities, Net- 1.2% 990
-------- --------
NET ASSETS- 100.0% $ 81,161
======== ========
144A-Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At June 30, 2001, securities aggregated
$759 or .94% of net assets of the Portfolio.
See notes to financial statements.
148
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP AGGRESSIVE GROWTH FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 0.8%
Honeywell International, Inc. ................ 7,600 $ 266
Brokerage & Investment Management - 0.4%
Goldman Sachs Group, Inc. .................... 1,800 154
Commercial Services - 1.5%
Concord EFS, Inc. ............................ 5,900 307
Omnicom Group, Inc. .......................... 2,700 232
--------
539
Computer Equipment - 0.4%
Veritas Software Corp. * .................... 2,300 153
Computer Software & Services - 7.9%
Check Point Software Technologies, Ltd. ...... 2,100 106
Electronic Data Systems Corp. ................ 11,000 688
First Data Corp. ............................. 5,000 321
Microsoft Corp. .............................. 20,500 1,496
Siebel Systems, Inc. ......................... 4,600 216
--------
2,827
Cosmetic & Personal Care - 1.5%
Colgate-Palmolive Co. ........................ 8,900 525
Diversified Operations - 7.3%
General Electric Co. ......................... 30,000 1,463
Tyco International, Ltd. ..................... 21,200 1,155
--------
2,618
Electronic Products & Services - 3.7%
Cisco Systems, Inc. * ........................ 48,600 884
Maxim Integrated Products, Inc. .............. 6,200 274
Texas Instruments, Inc. ...................... 4,500 142
--------
1,300
Energy - Alternative Source - 0.9%
Dynegy, Inc. - Cl. A ......................... 6,600 307
Financial Services - 3.1%
Household International, Inc. ................ 11,200 747
Merrill Lynch & Co., Inc. .................... 6,000 356
--------
1,103
Food, Beverage & Tobacco - 1.1%
Anheuser-Busch Cos., Inc. .................... 9,500 391
Health Care Products - 14.1%
Johnson & Johnson ............................ 9,900 495
Medtronic, Inc. .............................. 14,400 663
Pfizer, Inc. ................................. 50,300 2,014
Pharmacia Corp. .............................. 23,700 1,089
Schering-Plough Corp. ........................ 21,300 772
--------
5,033
Health Care Services - 1.0%
Tenet Healthcare Corp. ....................... 6,700 346
Insurance - 3.7%
American International Group, Inc. ........... 15,500 1,333
Media - TV & Radio - 11.9%
AOL Time Warner, Inc. * ...................... 43,100 2,284
Comcast Corp. - Cl. A * ...................... 27,900 1,211
Viacom, Inc. - Cl. B * ...................... 14,600 756
--------
4,251
Oil - 1.1%
Baker Hughes, Inc. ........................... 11,700 392
Oil & Natural Gas Exploration & Production - 3.0%
BP Amoco PLC - ADR ........................... 8,500 424
Chevron Corp. ................................ 4,000 362
Transocean Sedco Forex, Inc. ................. 7,000 289
--------
1,075
Personal & Commercial Lending - 9.1%
Citigroup, Inc. .............................. 31,008 1,638
MBNA Corp. ................................... 49,100 1,618
--------
3,256
Retail - Department Stores - 8.7%
Home Depot, Inc. ............................. 24,200 1,126
Kohl's Corp. ................................. 19,400 1,217
Target Corp. ................................. 10,600 367
Wal-Mart Stores, Inc. ........................ 7,800 381
--------
3,091
Retail - Drug Stores - 1.6%
Walgreen Co. ................................. 16,200 553
Telecommunication Equipment - 3.4%
Micron Technology, Inc. ...................... 6,700 275
Nokia Oyj - ADR .............................. 42,200 930
--------
1,205
Telecommunication Services - 1.3%
Vodafone Group PLC ........................... 21,200 474
Telephone - 3.3%
AT&T Corp. - Liberty Media Group - Cl. A ..... 33,900 593
AT&T Wireless Group * ........................ 34,600 566
--------
1,159
U.S. Government Agencies - 6.8%
Federal Home Loan Mortgage Corp. ............. 24,200 1,694
Federal National Mortgage Assoc. ............. 8,400 715
--------
2,409
--------
TOTAL COMMON STOCK- 97.6% 34,760
--------
149
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
LARGE CAP AGGRESSIVE GROWTH FUND
Par Market
Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS - 2.8%
Investment in joint trading account
3.97% due 07/02/01 .......................... $ 1,006 $ 1,006
------- -------
TOTAL INVESTMENTS- 100.4% 35,766
Other Assets & Liabilities, Net- (0.4)% (137)
------- -------
NET ASSETS- 100.0% $35,629
======= =======
ADR-American Depository Receipts
* Non-income producing security.
See notes to financial statements.
150
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 0.3%
Kaman Corp. - Cl. A ........................................ 1,600 $ 28
Memberworks, Inc. .......................................... 1,400 32
Teledyne Technologies, Inc. * .............................. 1,000 15
The Titan Corp. * .......................................... 900 21
------
96
Apparel - 0.1%
Skechers USA, Inc. ......................................... 1,400 41
Auto & Truck Parts - 1.1%
Autoliv, Inc. .............................................. 1,400 24
AutoZone, Inc. * ........................................... 1,400 53
Cummins Engine Company, Inc. ............................... 700 27
Goodyear Tire & Rubber Co. ................................. 3,000 84
Polaris Industries Inc. .................................... 1,000 46
Visteon Corp. .............................................. 3,400 62
------
296
Automobile - 0.4%
Oshkosh Truck Corp. ........................................ 900 40
United Auto Group, Inc. * .................................. 4,100 72
------
112
Bank - 7.4%
Associated Banc-Corp ....................................... 2,800 101
BancorpSouth, Inc. ......................................... 675 11
Bancwest Corp. ............................................. 5,200 179
Banknorth Group, Inc. ...................................... 2,625 59
Capitol Federal Financial .................................. 2,100 41
Cathay Bancorp, Inc. ....................................... 700 38
City National Corp. ........................................ 2,000 89
Commerce Bancorp, Inc. ..................................... 1,000 70
Commerce Bancshares, Inc. .................................. 2,280 84
Corus Bankshares, Inc. ..................................... 1,600 96
Cullen/Frost Bankers, Inc. ................................. 2,900 98
Dime Bancorp, Inc. ......................................... 2,300 86
Downey Financial Corp. ..................................... 500 24
F&M National Corp. ......................................... 1,000 40
First Citizens BancShares, Inc. - Cl. A .................... 800 87
First Sentinel Bancorp, Inc. ............................... 1,400 19
First Virginia Banks, Inc. ................................. 1,400 66
GBC Bancorp ................................................ 800 23
Golden State Bancorp, Inc. * ............................... 2,300 71
Hancock Holding Co. ........................................ 1,400 60
Investors Financial Services Corp. ......................... 1,000 67
M&T Bank Corp. ............................................. 2,100 159
Mercantile Bankshares Corp. ................................ 2,500 98
Net.B@nk, Inc. * ........................................... 500 6
North Fork Bancorporation, Inc. ............................ 1,200 37
OceanFirst Financial Corp. ................................. 1,400 36
Omega Financial Corp. ...................................... 600 19
PFF Bancorp, Inc. * ........................................ 1,200 30
Royal Bank of Canada ....................................... 1,952 62
Silicon Valley Bancshares * ................................ 900 20
TCF Financial Corp. ........................................ 1,300 60
United Community Financial Corp. ........................... 1,900 17
Zions Bancorp .............................................. 1,600 94
------
2,047
Brokerage & Investment Management - 1.8%
Affiliated Managers Group, Inc. * .......................... 2,300 141
Investment Technology Group, Inc. .......................... 600 30
Jefferies Group, Inc. ...................................... 1,900 61
John Nuveen Co. - Cl. A .................................... 3,700 210
Raymond James Financial, Inc. .............................. 1,000 31
Southwest Securities Group, Inc. ........................... 1,160 24
------
497
Building Materials - 0.4%
Interactive Data Corp. ..................................... 1,200 11
The Scotts Co. - Cl A ...................................... 2,700 112
------
123
Business Services - 1.5%
Career Education Corp. ..................................... 700 42
Comdisco, Inc. ............................................. 2,200 3
Corporate Executive Board Co. .............................. 1,200 50
DiamondCluster, Inc. * ..................................... 900 12
Education Management Corp. ................................. 700 28
Express Scripts, Inc. - Cl. A * ............................ 2,600 143
Forrester Research, Inc. * ................................. 900 20
Global Payments, Inc. * .................................... 880 27
Harris Corp. ............................................... 1,900 52
TotalSystem Services, Inc. ................................. 1,000 28
------
405
Chemical - 2.2%
Albemarle Corp. ............................................ 2,300 53
Arch Chemicals, Inc. ....................................... 1,800 39
Ashland, Inc. .............................................. 2,900 116
Cabot Corp. ................................................ 1,700 61
ChemFirst, Inc. ............................................ 1,300 34
Crompton Corp. ............................................. 1,300 14
Cytec Industries, Inc. * ................................... 1,200 46
Engelhard Corp. ............................................ 1,800 47
IMC Global, Inc. ........................................... 1,200 12
Lubrizol Corp. ............................................. 1,600 50
Sigma-Aldrich Corp. ........................................ 3,700 143
W.R. Grace & Co. ........................................... 2,900 5
------
620
Commercial Services - 3.5%
ADVO, Inc. ................................................. 1,400 48
Apollo Group, Inc. - Cl. A ................................. 2,400 102
Brady Corp. - Cl. A ........................................ 1,300 47
Coinstar, Inc. * ........................................... 2,100 47
CSG Systems International, Inc. * .......................... 800 45
F.Y.I., Inc. * ............................................. 800 33
Fair Issac & Co., Inc. ..................................... 1,600 99
151
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Commercial Services - Continued
Galileo International, Inc. ................................ 1,500 $ 49
Identix, Inc. * ............................................ 400 2
Informix Corp. * ........................................... 3,150 18
Lamar Advertising Co. * .................................... 1,000 44
Macrovision Corp. * ........................................ 1,000 68
Paxar Corp. * .............................................. 1,500 22
Plexus Corp. * ............................................. 1,200 40
Power One, Inc. * .......................................... 700 12
Rent A Car * ............................................... 1,500 79
Standard Register Co. ...................................... 1,700 31
Steelcase, Inc. - Cl. A .................................... 3,900 47
Sybase, Inc. * ............................................. 2,100 35
Sylvan Learning Systems, Inc. * ............................ 1,400 34
TeleTech Holdings, Inc. 8 .................................. 1,700 15
Wackenhut Corp. - Cl. A .................................... 600 10
Waste Connections, Inc. .................................... 800 29
------
956
Computer Equipment - 0.9%
CACI International, Inc. - Cl A ............................ 1,200 56
Cerner Corp. * ............................................. 800 34
Extreme Networks, Inc. 8 ................................... 700 21
Intergraph Corp. ........................................... 800 12
Mentor Graphics Corp. * .................................... 1,800 31
Mercury Computer Systems, Inc. ............................. 1,200 53
Predictive Systems, Inc. * ................................. 1,900 8
Quantum Corp. - DLT & Storage * ............................ 1,400 14
Tech Data Corp. * .......................................... 700 23
------
252
Computer Software & Services - 7.6%
Actuate Software Corp. ..................................... 1,200 11
Acxiom Corp. ............................................... 1,400 18
Advent Software, Inc. ...................................... 500 32
Affiliated Computer Services, Inc. - Cl. A * ............... 3,500 252
Agile Software Corp. * ..................................... 200 3
Art Technology Group, Inc.* ................................ 1,000 6
Aspen Technologies, Inc. ................................... 300 7
Autodesk, Inc. ............................................. 1,500 56
Avant! Corp. * ............................................. 1,600 21
Barra, Inc. * .............................................. 850 33
Black Box Corp. ............................................ 500 34
CacheFlow, Inc. * .......................................... 300 2
Cadence Design Systems, Inc. * ............................. 3,600 67
Ceridian Corp. * ........................................... 1,400 27
CheckFree Corp. ............................................ 900 32
Clarent Corp. * ............................................ 600 6
CNet Networks, Inc. ........................................ 1,200 16
Cognizant Technology Solutions Corp. ....................... 500 21
Digex, Inc. * .............................................. 500 7
Digital Insight Corp.* ..................................... 400 9
E.Piphany, Inc. * .......................................... 1,100 11
EarthLink, Inc. * .......................................... 1,161 16
Echelon Corp. * ............................................ 200 6
Factset Research Systems, Inc. ............................. 700 25
GTech Holdings Corp. ....................................... 1,900 67
Informatica Corp. * ........................................ 900 16
Internap Network Services Corp.* ........................... 1,000 3
Internet Security System, Inc. ............................. 400 19
Intertrust Technologies Corp. * ............................ 1,200 1
Interwoven, Inc. * ......................................... 1,100 19
Intranet Solutions, Inc. * ................................. 300 11
J.D. Edwards & Co.* ........................................ 1,200 17
Jack Henry & Associates, Inc. .............................. 1,200 37
Kana Communications, Inc. * ................................ 2,150 4
Liberate Technologies, Inc. ................................ 900 10
LookSmart, Ltd. * .......................................... 500 1
Macromedia, Inc. * ......................................... 900 16
Manugistics Group, Inc. * .................................. 500 13
MCSi, Inc. * ............................................... 1,400 21
Micromuse, Inc. * .......................................... 1,900 53
Multex.com, Inc. * ......................................... 300 5
National Data Corp. ........................................ 1,200 39
NCR Corp. * ................................................ 1,900 89
Netegrity, Inc. * .......................................... 400 12
NetIQ Corp. * .............................................. 984 31
Network Associates, Inc. ................................... 1,700 21
NextCard, Inc. * ........................................... 200 2
NVIDIA Corp. * ............................................. 1,300 121
Packeteer, Inc. * .......................................... 400 5
Parametric Technology Corp. * .............................. 2,100 29
Peoplesoft, Inc. ........................................... 3,000 148
Peregrine Systems, Inc. * .................................. 2,500 73
Pixar, Inc. ................................................ 1,300 53
PurchasePro.com, Inc. * .................................... 500 1
Radiant Systems, Inc.* ..................................... 1,100 18
Rainbow Technologies, Inc. * ............................... 1,500 8
Red Hat, Inc. * ............................................ 800 3
Renaissance Learning, Inc. ................................. 600 30
Retek, Inc. * .............................................. 745 36
RSA Security, Inc. * ....................................... 750 23
Safeguard Scientifics, Inc. * .............................. 3,600 19
SCM Microsystems, Inc. * ................................... 200 2
Secure Computing Corp. * ................................... 300 5
SonicWall, Inc. * .......................................... 500 13
Symantec Corp. * ........................................... 2,100 92
Synopsys, Inc. * ........................................... 1,200 58
THQ, Inc. .................................................. 1,000 60
Trizetto Group, Inc.* ...................................... 200 2
Unigraphics Solutions, Inc. * .............................. 1,400 44
Verity, Inc. * ............................................. 600 12
VerticalNet, Inc. * ........................................ 1,400 4
Viant Corp. * .............................................. 600 1
WebMethods, Inc. * ......................................... 305 6
152
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Computer Software & Services - Continued
Wind River Systems * ..................................... 1,200 $ 21
------
2,112
Construction - 1.5%
Dycom Industries, Inc. * .................................. 1,600 37
Emcor Group, Inc. * ....................................... 2,200 80
Hughes Supply, Inc. ....................................... 1,700 40
Jacobs Engineering Group, Inc. ............................ 800 52
NVR, Inc. * ............................................... 1,200 178
Stanley Works ............................................. 700 29
USG Corp. * ............................................... 1,300 5
------
421
Consumer Miscellaneous - 1.6%
Central Garden & Pet Co. * ............................... 2,700 26
Concord Camera Corp. * ................................... 900 5
GoTo.com, Inc. * .......................................... 500 10
Herbalife International, Inc. - Cl. A ..................... 1,100 11
Ingram Micro, Inc. - Cl. A * ............................. 2,800 40
JAKKS Pacific, Inc. ....................................... 2,300 43
Nu Skin Enterprises, Inc. - Cl. A * ...................... 2,800 24
Russ Berrie & Co., Inc. ................................... 800 23
Sherwin-Williams Co. ...................................... 2,100 47
Toro Co. .................................................. 4,600 207
------
436
Container - 0.2%
Chesapeake Corp. .......................................... 2,800 69
Cosmetic & Personal Care - 0.2%
Alberto-Culver Co. - Cl. B ................................ 1,600 67
Diversified Operations - 2.3%
A.O. Smith Corp. .......................................... 1,400 25
Coherent, Inc. * ......................................... 1,300 47
GenTek, Inc. .............................................. 2,000 11
Henry Schein, Inc. * ..................................... 3,000 120
ITT Industries, Inc. ...................................... 2,400 106
National Service Industries, Inc .......................... 2,300 52
Nortek, Inc. .............................................. 1,200 38
Pittston Brink's Group .................................... 1,200 27
Reynolds & Reynolds Co. - Cl A ............................ 1,600 35
Roper Industries, Inc. .................................... 700 29
SCP Pool Corp. * .......................................... 1,700 59
SPS Technologies, Inc. .................................... 600 28
Viad Corp. ................................................ 1,000 26
W.W. Grainger, Inc. ....................................... 600 25
------
628
Electric Power - 3.6%
Avista Corp. .............................................. 2,100 42
CMS Energy Corp. .......................................... 2,100 58
El Paso Electric Co. ...................................... 2,500 40
Energy East Corp. ......................................... 5,100 107
NiSource, Inc. ............................................ 1,900 52
PPL Corp. ................................................. 3,500 193
Public Service Co. of New Mexico .......................... 2,800 90
Puget Energy, Inc. ........................................ 3,400 89
RGS Energy Group, Inc. .................................... 2,700 101
UtiliCorp United, Inc. .................................... 7,200 220
------
992
Electrical Equipment - 0.8%
Anixter International, Inc. ............................... 2,100 64
Mettler-Toledo International, Inc. * ...................... 600 26
Pentair, Inc. ............................................. 700 24
The Genlyte Corp. * ....................................... 2,200 68
Universal Electronics, Inc. ............................... 1,300 23
Zygo Corp.* ............................................... 1,200 27
------
232
Electronic Components - 0.1%
Centiillium Communications, Inc ........................... 900 22
Electronic Products & Services - 5.3%
Aeroflex, Inc. * .......................................... 800 8
Alliance Semiconductor Corp. * ............................ 800 10
Alliant Energy Corp. ...................................... 1,800 52
Amphenol Corp. - Cl. A * .................................. 1,900 76
Anaren Micro Circuits, Inc. * ............................. 400 8
Audiovox Corp. - Cl. A * .................................. 1,200 13
Avnet, Inc. ............................................... 3,144 70
Ball Corp. ................................................ 1,800 86
BEI Technologies, Inc. .................................... 900 24
Benchmark Electronics, Inc. * ............................. 600 15
Cabot Microelectronics Corp. .............................. 664 41
Checkpoint Systems, Inc. * ............................... 600 11
Cirrus Logic, Inc. * ..................................... 1,000 23
CyberOptics Corp. * ....................................... 900 11
Cytyc Corp. * ............................................. 3,100 71
Elantec Semiconductor, Inc. * ............................. 400 14
Electro Scientific Industries, Inc. * ..................... 900 34
Emulex Corp. * ........................................... 900 36
Entrust Technologies, Inc. * .............................. 600 4
Exar, Corp. * ............................................. 800 16
FEI Co.* .................................................. 900 37
General Semiconductor, Inc. ............................... 300 3
Generale Cable Corp. ...................................... 3,700 69
II-VI, Inc. * ............................................. 1,000 18
Keithley Instruments, Inc. ................................ 1,400 30
Lam Research Corp. * ..................................... 2,000 59
Lattice Semiconductor Corp. * ............................. 1,200 29
Microsemi Corp. ........................................... 600 43
Molecular Devices, Corp.* ................................. 300 6
Moog, Inc. - Cl. A * ..................................... 1,000 39
MRV Communications, Inc. * ................................ 1,500 14
Newport Corp. ............................................. 900 24
Park Electrochemical Corp. ................................ 800 21
PerkinElmer, Inc. ......................................... 3,600 99
Pioneer Standard Electronics, Inc ......................... 2,200 28
QLogic Corp. * ........................................... 1,300 84
153
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Electronic Products & Services - Continued
Rogers Corp. .............................................. 600 $ 16
Rudolph Technologies, Inc. ................................ 500 24
Sensormatic Electronics Corp. * ........................... 1,200 20
Standard Microsystems Corp. ............................... 2,400 43
Tektronix, Inc. ........................................... 3,200 87
TranSwitch Corp. * ....................................... 800 9
Trimble Navigation, Ltd. * ................................ 300 6
Vicor Corp. * ............................................. 800 13
Woodhead Industries, Inc. ................................. 1,300 22
------
1,466
Energy - Alternative Source - 0.8%
Covanta Energy Corp. ...................................... 2,400 45
Massey Energy Co. ......................................... 4,200 83
Woodward Governor Co. ..................................... 1,200 101
------
229
Engineering & Construction - 0.1%
York International Corp. .................................. 1,000 35
Financial Services - 2.0%
Advanta Corp. - Cl. A ..................................... 1,600 26
Ameritrade Holding Corp. * ............................... 1,300 10
BlackRock, Inc.* .......................................... 2,300 79
Eaton Vance Corp. * ....................................... 1,700 59
First Tennessee National Corp. ............................ 1,800 63
Heller Financial, Inc. .................................... 2,700 108
Pacific Century Financial Corp ............................ 1,300 34
S1 Corp. * ............................................... 1,000 14
SEI Investments Co. ....................................... 2,600 123
UIL Holding Corp. ......................................... 500 24
------
540
Food, Beverage & Tobacco - 3.1%
Brown-Forman Corp. - Cl. B ................................ 1,400 90
Constellation Brands, Inc. - Cl. A * ..................... 1,500 61
Corn Products International, Inc .......................... 1,300 42
Fleming Cos., Inc. ........................................ 1,800 64
IBP, Inc. ................................................. 1,300 33
J.M. Smucker Co. .......................................... 1,400 36
McCormick & Co., Inc. ..................................... 1,400 59
Pepsi Bottling Group, Inc. ................................ 2,200 88
Pilgrims Pride Corp. - Cl. B .............................. 1,300 16
R.J. Reynolds Tobacco Holdings, Inc. * .................... 2,300 126
Smithfield Foods, Inc. * ................................. 4,000 161
Suiza Foods Corp. * ....................................... 1,000 53
SuperValu, Inc. ........................................... 1,700 30
------
859
Foreign Governmental - 0.1%
Interface, Inc. ........................................... 2,200 17
Health Care Products - 7.3%
Abgenix, Inc. * ........................................... 1,000 45
Andrx Corp.* ............................................. 700 54
Applera Corporation - Celera Genomics Group ............... 900 36
Bacou USA, Inc. ........................................... 1,200 34
Barr Laboratories, Inc. * ................................. 500 35
Beckman Coulter, Inc. ..................................... 2,100 86
Bergen Brunswig Corp. - Cl. A ............................. 5,300 102
Bio-Rad Laboratories, Inc. - Cl. A ........................ 1,000 50
C.R. Bard, Inc. ........................................... 1,500 85
Cell Genesys, Inc. * ..................................... 2,500 51
Cephalon, Inc. * ......................................... 500 35
Conmed Corp. .............................................. 1,200 31
COR Therapeutics, Inc. * ................................. 900 27
CuraGen Corp. * ........................................... 500 18
Datascope Corp. * ......................................... 1,000 46
Dentsply International, Inc. .............................. 1,600 71
Diagnostic Products Corp. ................................. 1,200 40
Haemonetics Corp.8 ........................................ 700 21
Hillenbrand Industries, Inc. .............................. 1,200 69
Immunogen, Inc. ........................................... 600 12
Invitrogen Corp. * ....................................... 900 65
King Pharmaceuticals, Inc. * ............................. 1,850 99
Maxim Pharmaceuticals, Inc. * ............................. 700 4
Maxygen, Inc. * ........................................... 500 10
Medicis Pharmaceutical Corp. - Cl. A ...................... 500 27
Millipore Corp. ........................................... 500 31
Myriad Genetics, Inc. * ................................... 500 32
Owens and Minor, Inc. ..................................... 2,700 51
Patterson Dental Co. * ................................... 1,400 42
Perrigo Co. ............................................... 10,100 169
Pharmaceutical Product Development, Inc. * ................ 1,500 46
Pharmacopeia, Inc. * ..................................... 800 19
PolyMedica Corp. * ....................................... 1,000 40
Priority Healthcare Corp. - Cl. B * ...................... 900 25
Protein Design Labs, Inc. * ............................... 400 35
ResMed, Inc. .............................................. 1,500 76
Respironics, Inc. * ....................................... 1,400 42
Sicor, Inc. ............................................... 1,800 42
Steris Corp. .............................................. 2,000 40
Varian Medical Systems, Inc. * ............................ 1,200 86
Varian, Inc. * ........................................... 1,000 32
Vertex Pharmaceuticals, Inc. * ............................ 600 30
Vical, Inc. * ............................................ 1,300 18
------
2,009
Health Care Services - 3.9%
Albany Molecular Research, Inc ............................ 800 30
AmeriSource Health Corp. - Cl A * ........................ 2,300 127
Apria Healthcare Group, Inc. * ............................ 1,400 40
Beverly Enterprises, Inc. * ............................... 1,700 18
Biosite Diagnostics, Inc. ................................. 900 40
Caremark Rx, Inc. * ....................................... 4,500 74
Coventry Health Care, Inc. * ............................. 1,900 38
Fisher Scientific International, Inc. ..................... 1,200 35
154
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Health Care Services - Continued
Health Management Associates, Inc. - Cl. A ................ 1,700 $ 36
Healthnet, Inc. ........................................... 1,800 31
Healthsouth Corp.* ........................................ 4,600 74
Humana, Inc. * ............................................ 3,100 31
Idec Pharmaceuticals Corp. ................................ 2,000 135
Oxford Health Plans, Inc. * ............................... 2,000 57
PacifiCare Health Systems, Inc. * ......................... 2,300 38
St. Jude Medical, Inc. .................................... 2,100 126
Syncor International Corp. * .............................. 1,600 50
Trigon Healthcare, Inc. ................................... 500 33
Universal Health Services, Inc. - Cl. B * ................. 600 27
WebMD Corp. * ............................................. 4,000 28
------
1,068
Household Appliances & Furnishings - 0.9%
CompX International, Inc.* ................................ 1,000 12
Energizer Holdings , Inc. ................................. 1,800 41
Furniture Brands International, Inc.* ..................... 1,200 34
Lennox International, Inc. ................................ 2,100 23
Mohawk Industries, Inc. * ................................. 1,400 49
Rent-Way, Inc. * .......................................... 1,100 12
Springs Industries, Inc. - Cl A ........................... 1,900 84
------
255
Housing - 0.5%
American Standard Cos., Inc. .............................. 500 30
D.R. Horton, Inc. ......................................... 1,561 35
Pulte Corp. ............................................... 1,500 64
------
129
Insurance - 3.0%
American National Insurance Co. ........................... 400 30
Conseco, Inc. ............................................. 2,400 33
Fidelity National Financial, Inc. ......................... 1,410 35
LandAmerica Financial Group, Inc. ......................... 1,400 44
Liberty Financial Companies, Inc. * ....................... 1,700 55
National Western Life Insurance Co. ....................... 500 60
Nationwide Financial Services - Cl. A ..................... 4,900 214
Old Republic International Corp. .......................... 2,900 84
Protective Life Corp. ..................................... 1,300 45
Safeco Corp. .............................................. 2,200 65
Stancorp Financial Group, Inc. ............................ 1,300 61
The Midland Co. ........................................... 900 40
The MONY Group, Inc. ...................................... 1,300 52
------
818
Leisure & Recreation - 3.0%
Arctic Cat, Inc. .......................................... 1,900 27
Argosy Gaming Co. ......................................... 2,200 61
Aztar Corp. ............................................... 1,900 23
Bally Total Fitness Holding Corp. * ....................... 800 24
Blockbuster, Inc. - Cl. A ................................. 2,300 42
Brunswick Corp. ........................................... 1,000 24
Callaway Golf Co. ......................................... 4,500 71
Dover Downs Entertainment ................................. 1,300 20
Hotel Reservations Network, Inc. - Cl. A .................. 100 5
International Game Technology ............................. 4,000 251
Lodgenet Entertainment Corp. .............................. 1,300 23
MeriStar Hospitality Corp. ................................ 3,700 88
Sabre Group Holdings, Inc. * .............................. 1,900 95
Ticketmaster Online-CitySearch, Inc. - Cl. B * ............ 400 6
Trendwest Resorts, Inc. * ................................. 900 21
WMS Industries, Inc. ...................................... 1,000 32
World Wrestling Federation Entertainment, Inc. ............ 1,300 18
------
831
Machinery - 2.7%
AGCO Corp. ................................................ 3,500 32
Applied Industrial Technologies, Inc. ..................... 1,800 34
FMC Corp. * ............................................... 1,200 82
Franklin Electric Co., Inc. ............................... 700 53
Imation Corp. * ........................................... 1,000 25
JLG Industries, Inc. ...................................... 2,400 30
Kennametal, Inc. .......................................... 1,700 63
NACCO Industries, Inc. - Cl. A ............................ 900 70
SPX Corp. ................................................. 1,200 150
Stewart & Stevenson Services, Inc. ........................ 900 30
Tecumseh Products Co. - Cl. A ............................. 1,200 60
Thermo Electron Corp. * ................................... 5,600 123
------
752
Media - Publishing - 0.5%
McClatchy Newspapers, Inc. - Cl. A ........................ 1,700 66
Pulitzer, Inc. ............................................ 1,300 69
------
135
Media - TV & Radio - 1.8%
Belo Corp. ................................................ 2,700 51
BHC Communications, Inc. - Cl A * ......................... 300 42
Charter Communications, Inc. - Cl. A * .................... 2,200 51
Chris-Craft Industries , Inc. ............................. 300 22
Entercom Communications Corp.* ............................ 900 48
Getty Images, Inc. ........................................ 1,600 42
Grey Global Group, Inc. ................................... 60 40
Hearst-Argyle Television, Inc. * .......................... 1,300 26
Insight Communications Co., Inc. * ........................ 1,600 40
Primedia, Inc. ............................................ 1,902 13
Radio One, Inc. * ......................................... 2,400 55
Westwood One, Inc. * ...................................... 2,100 77
------
507
Metal Production & Fabrication - 0.4%
Cleveland Cliffs, Inc. .................................... 1,900 35
Commercial Metals Co. ..................................... 1,400 45
Timken Co. ................................................ 2,100 36
------
116
155
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Metals & Mining - 0.3%
Penn Engineering & Manufacturing Corp. .................... 1,600 28
Precision Castparts Corp. ................................. 500 18
Wolverine Tube, Inc. * .................................... 2,700 45
------
91
Natural Gas Distribution - 1.5%
Nicor, Inc. ............................................... 1,700 66
Peoples Energy Corp. ...................................... 3,500 141
Southwest Gas Corp. ....................................... 3,800 90
UGI Corp. ................................................. 4,300 116
------
413
Oil - 0.3%
ONEOK, Inc. ............................................... 4,600 91
Oil & Natural Gas Exploration & Production - 3.4%
Equitable Resources, Inc. ................................. 2,900 97
Helmerich & Payne, Inc. ................................... 2,500 77
Kinder Morgan, Inc. ....................................... 1,500 75
Murphy Oil Corp. .......................................... 1,400 103
Patina Oil & Gas Corp. .................................... 800 21
Patterson Uti Energy * .................................... 5,800 104
Pride International, Inc. * ............................... 1,500 28
Rowan Cos., Inc. * ........................................ 1,200 27
Sempra Energy ............................................. 5,000 137
Sunoco, Inc. .............................................. 4,000 146
Tom Brown, Inc. ........................................... 1,300 31
Ultramar Diamond Shamrock Corp ............................ 1,000 47
Valero Energy Corp. ....................................... 700 26
Vintage Petroleum, Inc. ................................... 1,700 32
------
951
Oil - Equipment & Service - 0.7%
Cooper Cameron Corp. ...................................... 400 22
Marine Drilling Companies, Inc. * ......................... 1,500 29
Smith International, Inc. ................................. 1,900 114
Tidewater, Inc. ........................................... 800 30
------
195
Paper & Forest Products - 1.5%
Boise Cascade Corp. ....................................... 2,500 88
Louisiana-Pacific Corp. ................................... 3,700 43
Pope & Talbot, Inc. ....................................... 2,100 27
Rayonier, Inc. ............................................ 1,700 79
United Stationers, Inc. * ................................. 1,900 60
Westvaco Corp. ............................................ 4,400 107
------
404
Personal & Commercial Lending - 0.9%
Countrywide Credit Industries, Inc. ....................... 5,300 243
Pollution Control - 0.8%
Allied Waste Industries, Inc. ............................. 6,900 129
Republic Services, Inc. - Cl A ............................ 5,200 103
------
232
Precious Metals/Gems/Stones - 0.3%
Freeport-McMoRan Copper & Gold, Inc. - Cl. B .............. 4,500 50
Homestake Mining Co. ...................................... 3,800 29
------
79
Real Estate Development - 1.1%
KB Home ................................................... 1,300 39
Lennar Corp. .............................................. 3,800 159
Standard Pacific Corp. .................................... 1,400 32
The St. Joe Co. ........................................... 2,800 75
------
305
Real Estate Investment Trust - 5.1%
AMLI Residential Properties Trust ......................... 2,100 52
Arden Realty Group, Inc. .................................. 2,300 61
Avalonbay Communities, Inc. ............................... 2,400 112
Boston Properties, Inc. ................................... 1,700 70
Camden Property Trust ..................................... 600 22
CarrAmerica Realty Corp. .................................. 2,800 85
Centerpoint Properties Corp. .............................. 1,900 95
Chelsea Property Group, Inc. .............................. 800 38
Duke Realty Investments, Inc. ............................. 3,200 80
FelCor Lodging Trust, Inc. ................................ 3,900 91
First Industrial LP * ..................................... 1,400 45
General Growth Properties ................................. 1,700 67
Glenborough Realty Trust, Inc. ............................ 2,800 54
Healthcare Realty Trust, Inc. ............................. 2,400 63
Highwoods Properties, Inc. ................................ 3,800 101
International Rectifier Corp. * ........................... 600 21
Liberty Property Trust .................................... 2,400 71
Mack-Cali Realty Corp. .................................... 2,100 60
Public Storage, Inc. ...................................... 2,100 62
Spieker Properties, Inc. .................................. 1,400 84
Vornado Realty Trust ...................................... 1,800 70
------
1,404
Real Estate Operations - 0.3%
HomeStore.com, Inc. * ..................................... 900 32
M.D.C. Holdings, Inc. ..................................... 870 31
Security Capital Group, Inc. - Cl. B * .................... 1,000 21
------
84
Retail - Department Stores - 2.4%
BJ's Wholesale Club, Inc. ................................. 1,200 64
Cato Corp. - Cl. A ........................................ 1,300 25
Dillard's, Inc. - Cl. A ................................... 3,900 59
Dollar Thrifty Automotive Group, Inc.* .................... 2,500 60
Family Dollar Stores, Inc. ................................ 1,200 31
Freds , Inc. .............................................. 1,250 32
Genesco, Inc.* ............................................ 1,300 44
Handleman Co. ............................................. 2,200 37
MSC Industrial Direct Co., Inc. - Cl. A ................... 1,400 24
Payless ShoeSource, Inc. * ................................ 400 26
Pier 1 Imports, Inc. ...................................... 2,600 30
156
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Retail - Department Stores - Continued
Rare Hospitality International, Inc.* ..................... 1,450 $ 33
Shopko Stores, Inc. ....................................... 1,100 8
Spiegel, Inc. - Cl. A ..................................... 1,600 15
Talbots, Inc. ............................................. 700 31
Toys "R" Us, Inc. * ....................................... 2,400 59
Value City Department Stores, Inc * ....................... 4,500 52
Venator Group, Inc. ....................................... 2,400 37
------
667
Retail - Food - 0.7%
Brinker International, Inc. * ............................. 1,550 40
Darden Restaurants, Inc. .................................. 1,500 42
Krispy Kreme Doughnuts, Inc. .............................. 800 32
Landry's Seafood Restaurants, Inc. * ...................... 1,000 17
Lone Star Steakhouse & Saloon ............................. 3,900 50
The Great Atlantic & Pacific Tea Co., Inc. ................ 1,200 18
------
199
Shoe & Apparel Manufacturing - 1.0%
Columbia Sportswear Co. * ................................. 900 46
Jones Apparel Group, Inc. * ............................... 900 39
Liz Claiborne, Inc. ....................................... 1,600 81
Oakley, Inc. * ............................................ 2,000 37
Reebok International, Ltd. ................................ 1,300 41
Timberland Co. - Cl. A * .................................. 700 28
------
272
Steel - 0.6%
AK Steel Corp. ............................................ 2,800 35
Carpenter Technology Corp. ................................ 800 23
Remec, Inc. * ............................................. 850 11
Ryerson Tull, Inc. ........................................ 6,700 90
------
159
Telecommunication Equipment - 1.1%
Andrew Corp. * ............................................ 1,500 28
Cable Design Technologies Corp ............................ 1,650 27
Covad Communications Group, Inc. * ........................ 1,600 2
DMC Stratex Networks, Inc. - Notes * ...................... 2,000 20
Glenayre Technologies, Inc. * ............................. 1,700 2
Harmonic, Inc. * .......................................... 517 5
L-3 Communications Holdings, Corp. * ...................... 1,800 137
NMS Communications Corp. .................................. 700 5
Polycom, Inc. * ........................................... 1,000 23
Somera Communications, Inc. * ............................. 2,400 17
Spectrasite Holdings, Inc. ................................ 1,900 14
Tekelec, Inc. ............................................. 600 16
TriQuint Semiconductor, Inc. * ............................ 700 16
------
312
Telecommunication Services - 1.1%
Allen Telecom, Inc. ....................................... 1,100 17
Centennial Cellular Corp. - A Shares * .................... 1,500 20
Citizens Communications Co. ............................... 4,400 53
Focal Communications Corp. * ............................. 800 2
Greif Bros. Corp. - Cl. A * ............................... 1,000 30
IDT Corp. * ............................................... 400 5
IDT Corp. Cl. B ........................................... 400 4
Illuminet Holdings, Inc. * ............................... 1,400 44
Inet Technologies, Inc. * ................................. 200 2
Leap Wireless International, Inc. * ....................... 500 15
Metricom, Inc. * ......................................... 400 1
Pac-West Telecomm, Inc.* .................................. 1,300 3
RCN Corp. * ............................................... 400 2
TeleCorp PCS, Inc. * ..................................... 900 17
Travelocity.com * ......................................... 300 9
Triton PCS, Inc. - Cl. A .................................. 800 33
WEST Corp. ................................................ 1,600 35
Winstar Communications, Inc. * ............................ 1,900
------
292
Telephone - 0.3%
CenturyTel, Inc. .......................................... 3,000 91
Talk America Holdings, Inc. ............................... 800 1
------
92
Transportation Services - 1.5%
America West Holdings Corp. - Cl. B * .................... 1,300 13
Arkansas Best Corp. ....................................... 1,400 32
CNF Transportation, Inc. .................................. 1,200 34
Expeditors International of Washington, Inc. .............. 1,200 72
Frontier Airlines, Inc. * ................................. 2,400 30
Landstar Systems, Inc. .................................... 300 20
Roadway Express, Inc. ..................................... 1,800 43
UAL Corp. ................................................. 2,200 77
USFreightways Corp. ....................................... 1,000 30
Wabtec Corp. .............................................. 2,200 33
Yellow Corp. * ........................................... 1,700 32
------
416
------
TOTAL COMMON STOCK- 97.8% 27,091
------
RIGHTS
Bank - 0.0%
Bank United Corp.
expires 02/12/01 .......................................... 900 0
TOTAL RIGHTS- 0.0% 0
------
157
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
(000's)
SHORT-TERM INVESTMENTS - 1.1%
Investment in joint repurchase agreement
with Goldman Sachs & Co., 4.11% due
07/02/01. (Secured by various U.S.
Treasury obligations and U.S.
Government Agency Bonds) $ 300 $ 300
-------- --------
TOTAL INVESTMENTS- 98.9% 27,391
Other Assets & Liabilities, Net- 1.1% 298
-------- --------
NET ASSETS- 100.0% $27,689
======== ========
* Non-income producing security.
See notes to financial statements.
158
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Apparel - 0.6%
Unifi, Inc. ............................................... 43,700 $ 371
Auto & Truck Parts - 1.3%
Modine Manufacturing Co. .................................. 12,500 345
TBC Corp* ................................................. 43,800 419
-------
764
Bank - 5.4%
Community First Bankshares,
Inc ...................................................... 37,500 862
First Republic Bank * ..................................... 30,900 757
Silicon Valley Bancshares* ................................ 26,300 579
Texas Regional Bancshares, Inc ............................ 24,100 971
-------
3,169
Business Services - 3.5%
Electro Rent Corp. * ...................................... 68,800 1,122
G&K Services, Inc. - Cl. A ................................ 18,800 506
McGrath Rentcorp .......................................... 18,000 434
-------
2,062
Chemical - 1.9%
Airgas, Inc. * ............................................ 46,900 558
Arch Chemicals, Inc. ...................................... 25,000 546
-------
1,104
Computer Software & Services - 2.3%
Analysts International Corp. .............................. 18,700 84
Packeteer, Inc. * ......................................... 28,100 352
Progress Software Corp.* .................................. 34,400 557
SPSS, Inc. * .............................................. 21,900 346
-------
1,339
Construction - 3.9%
Florida Rock Industries, Inc. ............................. 8,800 413
Insituform Technologies, Inc. - Cl. A * ................... 50,000 1,825
U.S. Aggregates, Inc. * ................................... 37,500 50
-------
2,288
Consumer Miscellaneous - 0.8%
CSS Industires, Inc. * .................................... 18,700 482
Container - 2.1%
Ivex Packaging Corp. * .................................... 40,600 771
Liqui-Box Corp. ........................................... 11,200 437
-------
1,208
Diversified Operations - 8.3%
Ameron International Corp. ................................ 4,400 294
AptarGroup, Inc. .......................................... 22,500 730
Culp, Inc. ................................................ 21,900 98
Dal Tile International , Inc. ............................. 25,100 465
Dan River Inc. * .......................................... 62,500 169
Deltic Timber Corp. ....................................... 13,300 383
Landauer, Inc ............................................. 12,500 375
Layne Christensen Co. * ................................... 18,800 160
Mathews International Corp.* .............................. 25,000 1,099
Myers Industries, Inc. .................................... 22,700 343
Packaged Ice, Inc. * ..................................... 53,100 114
SCP Pool Corp. * ......................................... 18,700 644
-------
4,874
Electric Power - 0.3%
West Hampshire Energy Services, Inc. ...................... 10,500 199
Electronic Products & Services - 4.6%
Analogic Corp. ............................................ 17,500 797
Brooks Automation, Inc. * ................................. 15,600 719
Littelfuse, Inc. * ....................................... 21,900 587
Methode Electronics, Inc. - Cl. A ......................... 21,900 188
Stratos Lightwave, Inc. ................................... 31,229 406
-------
2,697
Energy - Alternative Source - 1.7%
Woodward Governor Co. ..................................... 11,800 995
Financial Services - 5.2%
Allied Capital Corp. ...................................... 37,500 868
American Capital Strategies, Ltd .......................... 21,900 614
First Financial Fund Inc. * ............................... 47,000 619
Triad Guaranty, Inc. * ................................... 22,900 916
-------
3,017
Food, Beverage & Tobacco - 0.9%
American Italian Pasta Co. * ............................. 8,000 371
International Multifoods Corp. ............................ 6,200 129
-------
500
Health Care Products - 3.7%
Bone Care International, Inc.* ........................... 37,500 994
Owens and Minor, Inc. ..................................... 43,700 830
Sola International, Inc.* ................................. 25,000 353
-------
2,177
Household Appliances / Furnishings - 1.8%
Aaron Rents, Inc. ......................................... 31,300 532
Stanley Furniture Co., Inc. ............................... 20,000 538
-------
1,070
Housing - 0.9%
Skyline Corp. ............................................. 18,700 509
Insurance - 5.1%
Brown & Brown ............................................. 50,000 2,100
Markel Corp. * ........................................... 3,100 609
Presidential Life Corp. ................................... 12,500 280
-------
2,989
Insurance - Property & Casualty - 0.7%
Proassurance Corp. ........................................ 25,000 431
Machinery - 3.1%
Franklin Electric Co., Inc. ............................... 7,500 569
IDEX Corp. ................................................ 15,600 530
159
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Machinery - Continued
Thomas Industries, Inc. ................................... 25,000 $ 738
-------
1,837
Media - TV & Radio - 1.4%
Saga Communications, Inc. - Cl. A* ........................ 29,200 693
Sinclair Broadcast Group, Inc. ............................ 14,400 149
-------
842
Natural Gas Distribution - 0.7%
Vectren Corp. ............................................. 20,000 414
Oil - 1.9%
Newpark Resources, Inc. * ................................. 37,500 416
Tetra Technologies, Inc. * ................................ 28,100 687
-------
1,103
Oil - Equipment & Service - 1.8%
Carbo Ceramics, Inc. ...................................... 15,000 556
Lone Star Technologies, Inc.* ............................. 14,100 510
-------
1,066
Oil & Natural Gas Exploration & Production - 6.6%
Atwood Oceanics, Inc. * ................................... 9,400 330
Chieftan International, Inc. * ............................ 28,100 808
Forest Oil Corp. * ........................................ 20,600 577
HS Resources, Inc. * ...................................... 4,900 318
Penn Virginia Corp. ....................................... 18,800 618
XTO Energy, Inc. .......................................... 84,400 1,211
-------
3,862
Paper & Forest Products - 1.0%
Wausau-Mosinee Paper Corp. ................................ 43,800 565
Real Estate Investment Trust - 6.4%
Apartment Investment & Management Co. ..................... 6,200 299
Glenborough Realty Trust, Inc. ............................ 37,500 724
Innkeepers USA Trust ...................................... 37,500 449
JP Realty, Inc. ........................................... 25,000 612
Kilroy Realty Corp. ....................................... 15,600 454
LaSalle Hotel Properties .................................. 31,200 556
Sun Communities, Inc. ..................................... 18,700 661
-------
3,755
Real Estate Operations - 0.4%
The IT Group, Inc. * ...................................... 36,000 229
Retail - Department Stores - 7.5%
Casey's General Stores, Inc. .............................. 37,500 488
Freds , Inc. .............................................. 35,150 905
Hancock Fabrics, Inc. ..................................... 25,000 224
Haverty Furniture Co., Inc. ............................... 50,000 748
Rare Hospitality
International, Inc. * .................................... 37,500 847
Ruby Tuesday, Inc. ........................................ 68,800 1,176
-------
4,388
Shoe & Apparel Manufacturing - 1.1%
Stein Mart, Inc.* ......................................... 62,500 646
Steel - 1.0%
Gibraltar Steel Corp. ..................................... 28,100 551
Telecommunication Equipment - 0.5%
UTI Worlwide, Inc. ........................................ 17,000 271
Telephone - 2.5%
Black Hills Corp. ......................................... 11,200 450
Cleco Corp. ............................................... 28,700 653
Otter Tail Power Co. ...................................... 12,600 350
-------
1,453
Transportation Services - 2.2%
Hub Group Inc. * .......................................... 13,200 172
Landstar Systems, Inc. .................................... 11,300 769
Midwest Express Holdings, Inc.* ........................... 20,600 357
-------
1,298
-------
TOTAL COMMON STOCK- ............................ 93.1% 54,525
-------
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Investments in joint trading account - 5.0%
Investments in joint trading account
3.97% due 07/02/01 $ 2,911 2,911
U.S. Treasury Bills - 1.8%
U.S. Treasury Bills 3.49% due 12/06/01 # .................. 1,100 1,083
------- -------
TOTAL SHORT-TERM INVESTMENTS- 6.8% 3,994
------- -------
TOTAL INVESTMENTS- 99.9% 58,519
Other Assets & Liabilities, Net- 0.1% 54
------- -------
NET ASSETS- 100.0% $58,573
======= =======
* Non-income producing security.
# All or a portion of the principle amount of this security was pledged to cover
initial margin requirements for open future contracts.
See notes to financial statements.
160
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
REAL ESTATE EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Leisure & Recreation - 4.7%
Hilton Hotels Corp. ...................................... 10,900 $ 126
MeriStar Hospitality Corp. ............................... 93,050 2,210
Starwood Hotels & Resorts Worldwide Inc. ................. 141,600 5,279
--------
7,615
Real Estate - 0.7%
Weingarten Realty Investors .............................. 24,800 1,087
Real Estate Development - 1.7%
Catellus Development Corp.* .............................. 96,700 1,687
The Macerich Co. ......................................... 44,300 1,099
--------
2,786
Real Estate Investment Trust - 88.6%
Alexandria Real Estate ................................... 19,700 784
AMB Property Corp. ....................................... 119,400 3,076
AMLI Residential Properties Trust ........................ 50,700 1,247
Apartment Investment & Management Co. .................... 51,500 2,482
Archstone Communities Trust .............................. 219,800 5,667
Arden Realty Group, Inc. ................................. 137,200 3,663
Avalonbay Communities, Inc. .............................. 184,045 8,604
Boston Properties, Inc. .................................. 151,100 6,180
BRE Properties, Inc. ..................................... 51,200 1,551
Brookfield Properties Corp. .............................. 176,300 3,369
Cabot Industrial Trust .................................. 29,300 615
Camden Property Trust .................................... 62,000 2,275
CarrAmerica Realty Corp. ................................. 158,300 4,828
CBL & Associates Properties, Inc. ........................ 59,200 1,817
Centerpoint Properties Corp. ............................. 19,450 976
Charles E. Smith Residential Realty, Inc. ................ 95,600 4,794
Chateau Communities, Inc. ................................ 75,900 2,383
Cousins Properties, Inc. ................................. 77,250 2,074
Duke Realty Investments, Inc. ............................ 97,739 2,429
Equity Office Properties Trust ........................... 369,693 11,693
Equity Residential Properties Trust ...................... 147,300 8,330
Essex Property Trust, Inc. ............................... 65,500 3,246
Federal Realty Investment Trust .......................... 142,800 2,962
FelCor Lodging Trust, Inc. ............................... 88,500 2,071
First Industrial LP * .................................... 33,800 1,086
Frontline Capital Group .................................. 118,800 178
General Growth Properties ................................ 40,700 1,602
Host Marriott Corp. ...................................... 312,500 3,913
Kimco Realty Corp. ....................................... 50,000 2,368
Koger Equity, Inc. * ..................................... 10,400 172
Liberty Property Trust ................................... 81,200 2,404
Mack-Cali Realty Corp. ................................... 23,600 672
Manufactured Home Communities, Inc. ...................... 65,100 1,829
Pacific Gulf Properties, Inc. ............................ 22,300 109
Post Properties, Inc. .................................... 9,700 367
Prentiss Properties Trust ................................ 65,850 1,732
Prologis Trust ........................................... 156,659 3,559
PS Business Parks, Inc. .................................. 18,500 518
Public Storage, Inc. ..................................... 204,000 6,049
Reckson Associates Realty Corp. .......................... 7,700 177
Regency Centers Corp. .................................... 50,450 1,281
Shurgard Storage Centers, Inc. ........................... 22,000 688
Simon Property Group, Inc. ............................... 235,800 7,067
SL Green Realty Corp. .................................... 40,300 1,222
Spieker Properties, Inc. ................................. 132,400 7,937
Storage USA, Inc. ........................................ 10,000 360
Summit Properties, Inc. .................................. 14,900 400
Sun Communities, Inc. .................................... 500 18
Taubman Centers, Inc. .................................... 35,000 490
Trizec Hahn Corp. ........................................ 149,000 2,710
Vornado Realty Trust ..................................... 130,400 5,091
Washington Real Estate Investment Trust .................. 35,200 832
Wyndham International, Inc. .............................. 137,500 344
--------
142,291
Real Estate Operations - 1.6%
Rouse Co. ................................................ 89,200 2,556
--------
TOTAL COMMON STOCK- 97.3% 156,335
--------
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 2.1%
Investment in joint trading account
3.97% due 07/02/01 ..................................... $ 3,401 3,401
--------- --------
TOTAL INVESTMENTS- 99.4% 159,736
Other Assets & Liabilities, Net- 0.6% 893
--------- --------
NET ASSETS- 100.0% $160,629
========= ========
* Non-income producing security.
See notes to financial statements.
161
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 1.8%
Boeing Co. ........................................... 146,300 $ 8,134
General Dynamics Corp. ............................... 266,000 20,697
United Technologies Corp. ............................ 277,800 20,352
---------
49,183
Auto & Truck Parts - 0.3%
Lear Corp. * ........................................ 244,000 8,516
Automobile - 0.9%
Ford Motor Co. ....................................... 600,000 14,730
General Motors Corp. - Cl. H ......................... 506,658 10,260
---------
24,990
Bank - 5.0%
Bank of America Corp. ................................ 340,000 20,410
Bank of New York Co., Inc. ........................... 121,100 5,813
Comerica, Inc. ....................................... 232,800 13,409
Fifth Third Bancorp .................................. 107,900 6,479
FleetBoston Financial Corp. .......................... 226,600 8,939
JP Morgan Chase & Co. ................................ 400,000 17,840
Mellon Financial Corp. ............................... 341,400 15,705
State Street Corp. ................................... 53,600 2,653
US Bancorp ........................................... 1,236,000 28,169
Washington Mutual, Inc. .............................. 565,200 21,223
---------
140,640
Brokerage & Investment Management - 0.4%
Charles Schwab Corp. ................................. 3,900 60
Goldman Sachs Group, Inc. ............................ 45,900 3,938
Morgan Stanley, Dean Witter,
Discover & Co. ...................................... 128,300 8,241
---------
12,239
Chemical - 1.8%
Air Products & Chemicals,
Inc ................................................. 298,700 13,666
Dow Chemical Co. ..................................... 428,500 14,248
E.I. du Pont de Nemours &
Co .................................................. 125,230 6,041
Praxair, Inc. ........................................ 346,200 16,271
---------
50,226
Commercial Services - 0.9%
Avery Dennison Corp. ................................. 219,400 11,200
Concord EFS, Inc. .................................... 150,600 7,833
Omnicom Group, Inc. .................................. 22,400 1,926
TMP Worldwide, Inc. .................................. 60,800 3,648
---------
24,607
Computer Equipment - 6.0%
Brocade Communications
Systems, Inc. ....................................... 55,800 2,455
Dell Computer Corp. * ................................ 921,600 24,100
EMC Corp. ............................................ 115,100 3,344
Gateway, Inc. ........................................ 144,100 2,370
Intel Corp. .......................................... 2,077,100 60,755
International Business
Machines Corp. ...................................... 418,600 47,302
Lexmark International Group,
Inc. - Cl. A ........................................ 265,400 17,848
McData Corp. ......................................... 154,100 2,704
Veritas Software Corp.* .............................. 105,500 7,019
---------
167,897
Computer Software & Services - 8.2%
Adobe Systems, Inc. .................................. 183,100 8,606
Cadence Design Systems, Inc. ......................... 386,200 7,195
Check Point Software
Technologies, Ltd. * ................................ 105,200 5,320
Electronic Data Systems
Corp. * ............................................. 283,400 17,712
First Data Corp. ..................................... 192,900 12,394
Fiserv, Inc. ......................................... 156,100 9,987
Micromuse, Inc. * .................................... 119,200 3,336
Microsoft Corp. ...................................... 1,808,900 132,050
Oracle Corp.* ........................................ 886,000 16,834
Parametric Technology Corp. .......................... 42,400 593
Peoplesoft, Inc. ..................................... 109,900 5,410
Siebel Systems, Inc. * ............................... 112,000 5,253
SunGard Data Systems, Inc. ........................... 181,700 5,453
---------
230,143
Consumer Miscellaneous - 0.7%
Black & Decker Corp. ................................. 305,700 12,063
Harley-Davidson, Inc. ................................ 147,100 6,925
---------
18,988
Cosmetic & Personal Care - 1.6%
Avon Products, Inc. .................................. 244,100 11,297
Colgate-Palmolive Co. ................................ 164,900 9,727
Procter & Gamble Co. ................................. 176,000 11,229
Unilever NV - NY Shares .............................. 217,700 12,968
---------
45,221
Diversified Operations - 8.1%
Amgen, Inc. .......................................... 150,700 9,144
Danaher Corp. ........................................ 193,500 10,836
General Electric Co. ................................. 3,401,330 165,815
Tyco International, Ltd. ............................. 774,800 42,227
---------
228,022
Electric Power - 2.0%
Allegheny Energy, Inc. ............................... 241,800 11,667
Duke Energy Co. ...................................... 400,000 15,604
Exelon Corp. ......................................... 335,500 21,512
Mirant Corp. ......................................... 194,400 6,687
---------
55,470
Electrical Equipment - 0.2%
Best Buy Co., Inc. ................................... 106,800 6,784
162
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - Continued
Electronic Components - 0.1%
Electronic Arts, Inc. ................................. 28,400 $ 1,644
Electronic Products & Services - 4.9%
Analog Devices, Inc. .................................. 232,400 10,051
Applera Corporation - Applied Biosystems Group ........ 86,700 2,319
Applied Materials, Inc. * ............................. 357,300 17,544
Applied Micro Circuits Corp. * ........................ 133,900 2,303
Celestica, Inc. ....................................... 49,300 2,539
Cisco Systems, Inc. ................................... 1,483,100 26,992
Emulex Corp. .......................................... 78,800 3,184
Integrated Device Technology, Inc. .................... 55,800 1,768
KLA-Tencor Corp.* ..................................... 237,363 13,879
LSI Logic Corp. ....................................... 350,000 6,580
Marvell Technology Group, Ltd. * ...................... 140,600 3,782
Maxim Integrated Products, Inc. * ..................... 262,432 11,602
Sanmina Corp. * ....................................... 114,200 2,673
Tektronix, Inc. ....................................... 288,900 7,844
Texas Instruments, Inc. ............................... 476,500 15,010
Xilinx, Inc. * ........................................ 219,300 9,044
---------
137,114
Energy - Alternative Source - 0.3%
El Paso Corp. ......................................... 155,900 8,191
Financial Services - 0.7%
Providian Financial Corp. * ........................... 120,000 7,104
Stillwell Financial, Inc. ............................. 362,500 12,165
---------
19,269
Food, Beverage & Tobacco - 3.4%
Anheuser-Busch Cos., Inc. ............................. 247,200 10,185
Coca-Cola Co. ......................................... 300,000 13,500
Kraft Foods, Inc. CL A ................................ 163,800 5,078
Pepsi Bottling Group, Inc. ............................ 6,900 277
PepsiCo, Inc. ......................................... 549,800 24,301
Philip Morris Cos., Inc. .............................. 837,900 42,523
---------
95,864
Health Care Products - 12.5%
Abbott Laboratories ................................... 308,000 14,787
Allergan, Inc. ........................................ 132,500 11,329
American Home Products Corp. .......................... 608,200 35,543
Andrx Corp. * ......................................... 32,300 2,487
Bristol-Myers Squibb Co. .............................. 436,000 22,803
Eli Lilly & Co. ....................................... 112,400 8,318
Forest Laboratories, Inc. * ........................... 31,000 2,201
Genetech, Inc. * ...................................... 104,000 5,731
Ivax Corp. ............................................ 61,650 2,404
Johnson & Johnson ..................................... 1,057,704 52,885
King Pharmaceuticals, Inc. * .......................... 64,500 3,467
MedImmune, Inc. * ..................................... 108,900 5,140
Medtronic, Inc. ....................................... 173,600 7,987
Merck & Co., Inc. ..................................... 493,100 31,514
Pfizer, Inc. .......................................... 2,726,300 109,188
Pharmacia Corp. ....................................... 181,700 8,349
Schering-Plough Corp. ................................. 570,100 20,661
UnitedHealth Group, Inc. .............................. 105,700 6,527
---------
351,321
Health Care Services - 0.7%
Lincare Holdings, Inc. ................................ 137,400 4,123
Tenet Healthcare Corp. ................................ 130,000 6,707
Trigon Healthcare, Inc. ............................... 144,700 9,384
---------
20,214
Insurance - 4.1%
American International Group, Inc. .................... 407,500 35,045
Hartford Financial Services
Group, Inc. .......................................... 349,600 23,913
Lincoln National Corp. ................................ 412,200 21,331
St. Paul Cos., Inc. ................................... 381,100 19,318
Torchmark, Inc. ....................................... 210,100 8,448
XL Capital, Ltd. - Cl. A .............................. 78,900 6,478
---------
114,533
Leisure & Recreation - 0.2%
Sabre Group Holdings, Inc. ............................ 100,000 5,000
Media - TV & Radio - 5.2%
AOL Time Warner, Inc. * ............................... 1,636,250 86,722
BEA Systems, Inc. ..................................... 148,100 4,548
Clear Channel Communications, Inc. .................... 229,700 14,402
The Walt Disney Co. ................................... 487,300 14,078
Viacom, Inc. - Cl. B * ................................ 489,299 25,321
---------
145,071
Metals & Mining - 0.8%
Minnesota Mining &
Manufacturing Co. .................................... 197,100 22,489
Natural Gas Distribution - 0.9%
Enron Corp. ........................................... 509,900 24,985
Oil - 1.5%
Baker Hughes, Inc. .................................... 300,000 10,050
Royal Dutch Petroleum Co. - NY Shares ................. 540,100 31,472
---------
41,522
Oil & Natural Gas Exploration & Production - 4.3%
Chevron Corp. ......................................... 174,000 15,747
Exxon Mobil Corp. ..................................... 842,870 73,625
Kerr-McGee Corp. ...................................... 168,200 11,147
Transocean Sedco Forex, Inc. .......................... 50,450 2,081
USX-Marathon Group .................................... 572,500 16,894
---------
119,494
163
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Paper & Forest Products - 0.4%
Kimberly-Clark Corp. ................................ 203,000 $ 11,348
Personal & Commercial Lending - 2.9%
Citigroup, Inc. ..................................... 1,549,000 81,849
Real Estate Operations - 0.1%
HomeStore.com, Inc. ................................. 39,800 1,391
Retail - Department Stores - 7.4%
Abercrombie & Fitch Co. ............................. 197,700 8,798
Bed Bath & Beyond, Inc. * ........................... 300,500 9,376
Home Depot, Inc. .................................... 559,600 26,049
Kohl's Corp. ........................................ 393,500 24,684
Lowe's Cos., Inc. ................................... 402,766 29,221
May Department Stores Co. ........................... 271,100 9,288
Talbots, Inc. ....................................... 128,000 5,600
Target Corp. ........................................ 338,300 11,705
TJX Cos., Inc. ...................................... 499,100 15,906
Wal-Mart Stores, Inc. ............................... 1,348,900 65,826
----------
206,453
Retail - Drug Stores - 0.6%
CVS Corp. ........................................... 263,900 10,187
Rite Aid Corp. ...................................... 15,000 135
Walgreen Co. ........................................ 210,700 7,182
----------
17,504
Retail - Food - 0.2%
Starbucks Corp. * ................................... 210,700 4,846
Telecommunication Equipment - 2.6%
Ciena Corp. * ....................................... 96,900 3,682
Comverse Technology, Inc. ........................... 219,400 12,528
Linear Technology Corp. ............................. 339,700 15,022
Micron Technology, Inc. ............................. 181,100 7,443
Nokia Oyj - ADR ..................................... 200,000 4,408
Qualcomm, Inc. * .................................... 382,000 22,339
RF Micro Devices, Inc. .............................. 105,000 2,832
Scientific-Atlanta, Inc. * .......................... 76,200 3,094
Sonus Networks, Inc. * .............................. 99,200 2,317
----------
73,665
Telecommunication Services - 3.2%
Broadwing, Inc. ..................................... 452,100 11,054
EchoStar Communications
Corp. - Cl. A* ..................................... 195,400 6,335
Sprint PCS (PCS Group) * ............................ 809,500 19,549
Verizon Communications .............................. 971,600 51,981
----------
88,919
Telephone - 2.3%
AT&T Corp. - Liberty Media
Group - Cl. A ...................................... 704,262 12,318
Qwest Communications
International, Inc. ................................ 1,080,300 34,429
SBC Communications, Inc. ............................ 196,800 7,884
Telephone and Data Systems, Inc. .................... 96,500 10,494
----------
65,125
U.S. Government Agencies - 1.4%
Federal National Mortgage Assoc. .................... 471,900 40,182
----------
TOTAL COMMON STOCK- 98.6% 2,760,919
----------
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 1.6%
Investments in joint trading account
3.97% due 07/02/01 ................................. $ 45,184 45,184
Shares
Cash Equivalents - 0.4%
Navigator Securities Lending
Prime Portfolio ** 9,944,668 9,945
---------- ----------
TOTAL SHORT-TERM INVESTMENTS 2.0% 55,129
---------- ----------
TOTAL INVESTMENTS- 100.6% 2,816,048
Other Assets & Liabilities, Net- (0.6)% (16,058)
---------- ----------
NET ASSETS- 100.0% $2,799,990
========== ==========
ADR-american Depository Receipts.
* Non-income producing security.
** Represents investment of security lending collateral.
See notes to financial statements.
164
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 1.0%
General Dynamics Corp. (US) ............................. 120,200 $ 9,353
United Technologies Corp. (US) .......................... 233,660 17,118
--------
26,471
Auto & Truck Parts - 0.3%
Lear Corp. (US) ......................................... 144,500 5,043
Visteon Corp. (US) ...................................... 212,400 3,904
--------
8,947
Automobile - 0.8%
AutoNation, Inc. (US) ................................... 99,300 1,152
Ford Motor Co. (US) ..................................... 309,000 7,586
General Motors Corp. (US) ............................... 82,000 5,277
General Motors Corp. - Cl. H (US) ....................... 438,100 8,871
--------
22,886
Bank - 3.9%
Bank of America Corp. (US) .............................. 347,500 20,860
Bank of New York Co., Inc. (US) ......................... 85,100 4,085
Bank One Corp. (US) ..................................... 120,000 4,296
Comerica, Inc. (US) ..................................... 159,600 9,193
FleetBoston Financial Corp. (US) ........................ 143,900 5,677
JP Morgan Chase & Co. (US) .............................. 269,400 12,015
Mellon Financial Corp. (US) ............................. 139,524 6,418
TCF Financial Corp. (US) ................................ 100,000 4,631
US Bancorp (US) ......................................... 699,600 15,944
Washington Mutual, Inc. (US) ............................ 616,800 23,161
--------
106,280
Business Services - 0.1%
Interpublic Group Cos., Inc. (US) ....................... 59,200 1,738
Robert Half International, Inc. (US) .................... 61,000 1,518
--------
3,256
Chemical - 1.5%
Air Products & Chemicals, Inc. (US) ..................... 224,632 10,277
Dow Chemical Co. (US) ................................... 539,900 17,952
E.I. du Pont de Nemours & Co. (US) ...................... 76,500 3,690
Praxair, Inc. (US) ...................................... 196,200 9,221
--------
41,140
Commercial Services - 1.0%
Avery Dennison Corp. (US) ............................... 108,500 5,539
Concord EFS, Inc. (US) .................................. 83,700 4,353
Omnicom Group, Inc. (US) ................................ 147,100 12,651
Quintiles Transnational Corp. (US) ...................... 111,500 2,815
R.R. Donnelley & Sons Co. (US) .......................... 108,200 3,214
--------
28,572
Computer Equipment - 3.1%
Brocade Communications Systems, Inc. (US) ............... 22,300 981
Compaq Computer Corp. (US) .............................. 63,000 976
Dell Computer Corp. (US) ................................ 383,400 10,026
Hewlett-Packard Co. (US) ................................ 24,800 709
Intel Corp. (US) ........................................ 1,057,400 30,929
International Business Machines Corp. (US) .............. 253,700 28,668
Lexmark International Group, Inc. - Cl. A (US) .......... 190,000 12,778
--------
85,067
Computer Software & Services - 4.6%
Cadence Design Systems, Inc. (US) ....................... 229,400 4,274
CheckFree Corp. (US) .................................... 58,900 2,065
DoubleClick, Inc. (US) .................................. 107,500 1,501
Electronic Data Systems Corp. (US) ...................... 111,500 6,969
First Data Corp. (US) ................................... 186,800 12,002
Intuit, Inc. (US) ....................................... 187,100 7,482
Macromedia, Inc. (US) ................................... 64,900 1,168
Micromuse, Inc. (US) .................................... 58,100 1,626
Microsoft Corp. (US) .................................... 881,300 64,335
NCR Corp. (US) .......................................... 75,000 3,525
Oracle Corp. (US) ....................................... 559,800 10,636
Peoplesoft, Inc. (US) ................................... 30,000 1,477
SunGard Data Systems, Inc. (US) ......................... 169,000 5,072
VeriSign, Inc. (US) ..................................... 33,000 1,980
WebMethods, Inc. (US) ................................... 17,900 379
--------
124,491
Consumer Miscellaneous - 0.5%
Black & Decker Corp. (US) ............................... 185,000 7,300
Clorox Co. (US) ......................................... 122,200 4,136
Dollar General Corp. (US) ............................... 166,100 3,239
--------
14,675
Cosmetic & Personal Care - 0.8%
Avon Products, Inc. (US) ................................ 100,100 4,633
Colgate-Palmolive Co. (US) .............................. 120,000 7,079
Procter & Gamble Co. (US) ............................... 74,508 4,753
Unilever NV - NY Shares (US) ............................ 97,300 5,796
--------
22,261
Diversified Operations - 4.1%
Costco Wholesale Corp. (US) ............................. 115,200 4,733
Danaher Corp. (US) ...................................... 117,200 6,563
General Electric Co. (US) ............................... 1,452,100 70,790
Illinois Tool Works, Inc. (US) .......................... 32,100 2,032
Reynolds & Reynolds Co - Cl. A (US) ..................... 149,400 3,279
Tyco International, Ltd. (US) ........................... 451,300 24,596
--------
111,993
Electric Power - 1.9%
AES Corp. (US) .......................................... 151,900 6,539
Allegheny Energy, Inc. (US) ............................. 135,600 6,543
Calpine Corp. (US) ...................................... 95,100 3,595
Duke Energy Co. (US) .................................... 190,100 7,416
Edison International (US) ............................... 283,000 3,155
Emerson Electric Co. (US) ............................... 63,400 3,836
165
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Electric Power - Continued
Exelon Corp. (US) ..................................... 215,200 $ 13,798
Mirant Corp. (US) ..................................... 85,000 2,924
Northeast Utilities (US) .............................. 150,700 3,127
----------
50,933
Electronic Products & Services - 3.2%
Agere Systems, Inc. - Cl. A (US) ...................... 245,400 1,841
Agilent Technologies, Inc. (US) ....................... 33,000 1,073
Altera Corp. (US) ..................................... 60,000 1,740
Analog Devices, Inc. (US) ............................. 140,900 6,094
Applera Corporation - Applied
Biosystems Group (US) ............................... 216,200 5,783
Applied Materials, Inc. (US) .......................... 198,276 9,735
Applied Micro Circuits Corp. (US) ..................... 110,000 1,892
Bookham Technolgy PLC (US) ............................ 184,900 536
Cisco Systems, Inc. (US) .............................. 767,300 13,965
KLA-Tencor Corp. (US) ................................. 63,000 3,684
LSI Logic Corp. (US) .................................. 200,000 3,760
Maxim Integrated Products, Inc. (US) .................. 88,752 3,924
MIPS Technologies, Inc. - Cl. B (US) .................. 36,100 347
Novellus Systems, Inc. (US) ........................... 60,600 3,441
Philips Electronics NV (US) ........................... 131,000 3,462
PMC-Sierra, Inc. (US) ................................. 59,300 1,842
Tektronix, Inc. (US) .................................. 190,800 5,180
Teradyne, Inc. (US) ................................... 58,600 1,940
Texas Instruments, Inc. (US) .......................... 306,000 9,639
Waters Corp. (US) ..................................... 175,000 4,832
Xilinx, Inc. (US) ..................................... 84,900 3,501
----------
88,211
Energy - Alternative Source - 0.6%
Dynegy, Inc. - Cl.A (US) .............................. 241,300 11,220
El Paso Corp. (US) .................................... 117,700 6,184
----------
17,404
Engineering & Construction - 0.2%
Fluor Corp. (US) ...................................... 109,300 4,935
Financial Services - 0.4%
Household International, Inc. (US) .................... 75,000 5,003
Stillwell Financial, Inc. (US) ........................ 149,200 5,007
----------
10,010
Food, Beverage & Tobacco - 2.8%
Anheuser-Busch Cos., Inc. (US) ........................ 193,000 7,952
Archer Daniels Midland Co. (US) ....................... 325,400 4,230
Campbell Soup Co. (US) ................................ 159,300 4,102
Coca-Cola Co. (US) .................................... 143,800 6,471
General Mills, Inc. (US) .............................. 111,000 4,860
Kellogg Co. (US) ...................................... 296,200 8,590
Kraft Foods, Inc. CL A (US) ........................... 132,700 4,114
PepsiCo, Inc. (US) .................................... 282,884 12,503
Philip Morris Cos., Inc. (US) ......................... 426,300 21,635
Sara Lee Corp. (US) ................................... 164,548 3,116
----------
77,573
Health Care Products - 8.0%
Abbott Laboratories (US) .............................. 110,800 5,320
Allergan, Inc. (US) ................................... 97,100 8,302
American Home Products Corp. (US) ..................... 124,500 7,276
AstraZeneca Group PLC - ADR (US) ...................... 244,300 11,421
Becton, Dickinson & Co. (US) .......................... 42,400 1,517
Bristol-Myers Squibb Co. (US) ......................... 239,500 12,526
Forest Laboratories, Inc. (US) ........................ 121,800 8,648
Genetech, Inc. (US) ................................... 29,200 1,609
Guidant Corp. (US) .................................... 69,400 2,498
Johnson & Johnson (US) ................................ 589,316 29,466
Medtronic, Inc. (US) .................................. 296,300 13,633
Merck & Co., Inc. (US) ................................ 364,800 23,314
Millipore Corp. (US) .................................. 35,200 2,182
Pfizer, Inc. (US) ..................................... 1,724,700 69,074
Pharmacia Corp. (US) .................................. 220,000 10,109
Schering-Plough Corp. (US) ............................ 147,500 5,345
UnitedHealth Group, Inc. (US) ......................... 89,600 5,533
----------
217,773
Health Care Services - 0.6%
Lincare Holdings, Inc. (US) ........................... 178,000 5,342
Trigon Healthcare, Inc. (US) .......................... 111,900 7,257
Universal Health Services, Inc. - Cl B (US) ........... 89,000 4,049
----------
16,648
Insurance - 3.0%
Allstate Corp. (US) ................................... 100,000 4,399
American International Group,
Inc. (US) ............................................ 194,600 16,736
Cincinnati Financial Corp. (US) ....................... 94,000 3,713
Hartford Financial Services Group, Inc.
(US) ................................................. 234,300 16,026
Jefferson-Pilot Corp. (US) ............................ 72,300 3,494
Lincoln National Corp. (US) ........................... 187,600 9,708
St. Paul Cos., Inc. (US) .............................. 197,200 9,996
The PMI Group, Inc. (US) .............................. 35,000 2,543
Torchmark, Inc. (US) .................................. 144,500 5,810
XL Capital, Ltd. - Cl. A (US) ......................... 105,252 8,641
----------
81,066
Leisure & Recreation - 0.3%
Carnival Corp. (US) ................................... 80,900 2,484
Sabre Group Holdings, Inc. (US) ....................... 105,000 5,250
----------
7,734
Media - Publishing - 0.0%
Knight-Ridder, Inc. (US) .............................. 9,600 569
Media - TV & Radio - 3.4%
Adelphia Communications Corp. .........................
- Cl. A (US) ...................................... 3,800 156
AOL Time Warner, Inc. (US) ............................ 765,750 40,585
Cablevision Systems Corp. (US) ........................ 101,350 2,615
166
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Media - TV & Radio - Continued
Cablevision Systems Corp. -
Cl. A (US) .......................................... 135,900 $ 7,950
Charter Communications, Inc. -
Cl. A (US) .......................................... 90,700 2,118
Clear Channel Communications,
Inc. (US) .......................................... 77,000 4,828
Fox Entertainment Group, Inc. -
Cl. A (US) .......................................... 55,000 1,534
The Walt Disney Co. (US) .............................. 345,900 9,993
USA Networks, Inc. (US) ............................... 98,600 2,761
Viacom, Inc. - Cl. B (US) ............................. 385,800 19,965
---------
92,505
Metals & Mining - 0.7%
Alcoa, Inc. (US) ...................................... 208,600 8,219
Minnesota Mining & Manufacturing
Co. (US) ............................................. 89,300 10,189
---------
18,408
Natural Gas Distribution - 0.6%
Enron Corp. (US) ...................................... 217,200 10,643
Williams Cos., Inc. (US) .............................. 200,200 6,596
---------
17,239
Oil - 1.3%
Baker Hughes, Inc. (US) ............................... 274,000 9,179
Conoco, Inc. - Cl. A (US) ............................. 151,032 4,259
Royal Dutch Petroleum Co. -
NY Shares (US) .................................... 327,180 19,065
Weatherford International, Inc. (US) .................. 52,300 2,510
---------
35,013
Oil & Natural Gas Exploration & Production - 2.7%
Chevron Corp. (US) .................................... 77,600 7,023
Exxon Mobil Corp. (US) ................................ 531,200 46,400
Kerr-McGee Corp. (US) ................................. 50,900 3,373
Kinder Morgan Management LLC
SHS (US) ............................................. 33,500 2,295
Shell Transport & Trading Co. (US) .................... 108,100 5,441
Texaco, Inc. (US) ..................................... 32,400 2,158
Unocal Corp. (US) ..................................... 85,000 2,903
USX-Marathon Group (US) ............................... 120,900 3,568
---------
73,161
Oil - Equipment & Service - 0.1%
BJ Services Co. (US) .................................. 90,600 2,571
Paper & Forest Products - 0.3%
Kimberly-Clark Corp. (US) ............................. 156,500 8,748
Personal & Commercial Lending - 2.6%
Citigroup, Inc. (US) .................................. 961,400 50,801
USA Education, Inc. (US) .............................. 289,100 21,104
---------
71,905
Real Estate Investment Trust - 0.1%
Equity Office Properties Trust (US) ................... 60,000 1,898
Retail - Department Stores - 4.1%
Abercrombie & Fitch Co. (US) .......................... 143,100 6,368
Bed Bath & Beyond, Inc. (US) .......................... 198,000 6,178
Circuit City Stores, Inc. (US) ........................ 175,000 3,150
Gap, Inc. (US) ........................................ 51,300 1,488
Home Depot, Inc. (US) ................................. 258,552 12,036
Kohl's Corp. (US) ..................................... 209,100 13,117
Lowe's Cos., Inc. (US) ................................ 330,200 23,956
May Department Stores Co. (US) ........................ 160,700 5,505
Target Corp. (US) ..................................... 272,200 9,418
TJX Cos., Inc. (US) ................................... 239,200 7,623
Wal-Mart Stores, Inc. (US) ............................ 493,800 24,097
---------
112,936
Retail - Drug Stores - 0.4%
CVS Corp. (US) ........................................ 135,800 5,242
Walgreen Co. (US) ..................................... 133,200 4,549
---------
9,791
Retail - Food - 0.1%
McDonald's Corp. (US) ................................. 93,900 2,541
Steel - 0.2%
Nucor Corp. (US) ...................................... 92,700 4,532
Telecommunication Equipment - 0.7%
Comverse Technology, Inc. (US) ........................ 63,700 3,637
Linear Technology Corp. (US) .......................... 136,900 6,054
Nokia Oyj - ADR (US) .................................. 135,700 2,991
Qualcomm, Inc. (US) ................................... 126,800 7,415
---------
20,097
Telecommunication Services - 2.1%
Broadwing, Inc. (US) .................................. 237,100 5,797
Cox Communications, Inc. -
Cl. A (US) ......................................... 44,000 1,949
Sprint PCS (PCS Group) (US) ........................... 530,900 12,821
Verizon Communications (US) ........................... 672,400 35,974
---------
56,541
Telephone - 1.9%
AT&T Corp. (US) ....................................... 230,900 5,080
AT&T Corp. - Liberty Media Group -
Cl. A (US) ........................................... 851,300 14,889
AT&T Wireless Group (US) .............................. 280,000 4,578
Qwest Communications International,
Inc. (US) ............................................ 536,400 17,095
SBC Communications, Inc. (US) ......................... 177,000 7,091
Sprint Corp. (US) ..................................... 98,400 2,102
---------
50,835
Transportation Services - 0.4%
Canadian National Railway Co. (US) .................... 75,300 3,050
CNF Transportation, Inc. (US) ......................... 1,400 40
167
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Transportation Services - Continued
Union Pacific Corp. (US) .............................. 138,032 $ 7,579
----------
10,669
U.S. Government Agencies - 0.9%
Federal National
Mortgage Assoc. (US) ................................. 279,300 23,782
----------
TOTAL COMMON STOCK- ................................. 65.3% 1,782,067
----------
Par
Value
(000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 0.1%
Lockheed Martin Corp. - Bonds (US)
8.5% due 12/01/29 ..................................... $ 2,943 3,264
Automobile - 0.4%
Ford Motor Co. - Bonds (US)
6.625% due 10/01/28 ................................... 13,024 11,234
Hertz Corp. (US)
7.625% due 08/15/07 ................................... 200 207
----------
11,441
Bank - 1.2%
Bank of America Corp. - Sr. Notes
(US)
7.125% due 09/15/06 ................................... 200 209
Bank of America Corp. (US)
7.4% due 01/15/11 ..................................... 4,225 4,390
Bank One Corp. - Notes (US)
6.5% due 02/01/06 ..................................... 700 709
Banponce Financial Corp. - Ser C. (US)
6.58% due 11/25/03 .................................... 8,900 9,097
Capital One Bank - Sr. Notes (US)
6.875% due 02/01/06 ................................... 200 195
Credit Suisse First Boston Mortgage
Securities Corp. (US)
7.545% due 04/15/10 ................................... 4,533 4,791
Credit Suisse First Boston, Inc. (US)
7.29% due 09/15/09 .................................... 8,062 8,406
J.P. Morgan & Co., Inc. - Sr. Notes (US)
5.75% due 02/25/04 .................................... 1,000 1,009
JP Morgan Chase & Co. - Sub Notes (US)
6.75% due 02/01/11 .................................... 200 200
Korea Development Bank - Notes (US)
7.125% due 04/22/04 ................................... 4,773 4,916
----------
33,922
Brokerage & Investment Management - 0.8%
Lehman Brothers Holdings, Inc. -
Notes (US)
6.625% due 04/01/04 ................................... 7,010 7,162
7.75% due 01/15/05 .................................... 8,062 8,482
Morgan Stanley Group, Inc. (US)
6.75% due 04/15/11 .................................... 4,850 4,816
Residential Funding and Mortgage
Securities Trust II (US)
6.43% due 04/25/16 .................................... 250 248
----------
20,708
Computer Equipment - 0.1%
International Business Machines Corp.
- Notes (US)
5.625% due 04/12/04 ................................... 2,870 2,914
Diversified Operations - 0.0%
EOP Operating LP (US)
7.75% due 11/15/07 .................................... 200 208
Electric Power - 0.2%
Exelon Corp. Sr Notes (US)
6.75% due 05/01/11 .................................... 3,575 3,519
Progress Energy, Inc. - Sr. Notes (US)
7.1% due 03/01/11 ..................................... 500 507
----------
4,026
Electrical Equipment - 0.0%
Progress Energy, Inc. - Sr. Notes (US)
7.75% due 03/01/31 .................................... 200 206
Finance - 0.0.%
Citibank Credit Card Issuance Trust -
Ser. 2000 Cl. C1 (US)
7.45% due 09/15/07 .................................... 250 258
Financial Services - 3.4%
Associates Corp. of North America -
Sr Notes (US)
6.25% due 11/01/08 .................................... 8,118 7,990
Capital One Financial Corp. - Notes (US)
7.25% due 12/01/03 .................................... 8,312 8,443
Chase Commercial Mortgage
Securities Corp. - Ser. 1997-1
Cl. A2 (US)
7.37% due 02/19/07 .................................... 10,722 11,214
Citigroup , Inc. (US)
7.25% due 10/01/10 .................................... 200 208
Citigroup, Inc. - Notes (US)
6.5% due 02/07/06 ..................................... 4,600 4,662
Goldman Sachs Group, Inc. (US)
6.875% due 01/15/11 ................................... 3,380 3,361
Green Tree Financial Corp. (US)
6.68% due 01/15/29 .................................... 7,043 7,186
168
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Financial Services - Continued
Green Tree Financial Corp. - Ser.
1996-8 Cl. A6 (US)
7.6% due 10/15/27 ..................................... $ 7,721 $ 8,100
Green Tree Financial Corp. - Ser.
1997-6 Cl. A7 (US)
7.14% due 01/15/29 .................................... 500 512
LB-UBS Commercial Mortgage Trust
- Ser. 2000-C4 Cl. A2 (US)
7.37% due 06/15/10 .................................... 15,318 16,024
Mortgage Capital Funding, Inc. - Ser
1996 - MC2 Cl. A1 (US)
6.758% due 02/20/04 ................................... 7,990 8,191
Nisource Finance Corp. (US)
7.875% due 11/15/10 ................................... 625 662
PNC Funding Corp. - Sub. Notes (US)
7.5% due 11/01/09 ..................................... 4,094 4,283
Residential Asset Securities Corp. (US)
6.11% due 05/25/24 .................................... 8,062 8,168
Salomon, Inc. - Sr Notes (US)
7.2% due 02/01/04 ..................................... 2,300 2,392
---------
91,396
Food, Beverage & Tobacco - 0.2%
Conagra Foods, Inc. - Notes (US)
7.5% due 09/15/05 ..................................... 500 519
7.875% due 09/15/10 ................................... 450 473
Nabisco, Inc. - Deb (US)
7.55% due 06/15/15 .................................... 700 713
Philip Morris Cos., Inc. - Debs. (US)
8.25% due 10/15/03 .................................... 3,055 3,231
---------
4,936
Foreign Governmental - 0.5%
Province of Ontario (CA)
7.75% due 06/04/02 .................................... 2,000 2,062
Province of Quebec - Debs (CA)
5.5% due 04/11/06 ..................................... 4,755 4,683
7.5% due 09/15/29 ..................................... 6,530 6,914
---------
13,659
Health Care Products - 0.2%
Beckman Instruments, Inc. - Sr. Notes (US)
7.1% due 03/04/03 ..................................... 4,837 4,908
Health Care Services - 0.6% Columbia/HCA
Healthcare Corp. (US)
6.91% due 06/15/05 .................................... 4,000 3,934
HCA-The Healthcare Co. - Sr. Notes (US)
7.875% due 02/01/11 ................................... 6,800 6,834
Tenet Healthcare Corp. - Sr. Notes (US)
8.0% due 01/15/05 ..................................... 3,950 4,068
United Healthcare - Notes (US)
7.5% due 11/15/05 ..................................... 200 209
---------
15,045
Insurance - 0.1%
Aetna Inc. - Sr Notes (US)
7.375% due 03/01/06 ................................... 450 445
Allstate Corp. (US)
7.2% due 12/01/09 ..................................... 200 208
Lincoln National Corp. - Notes (US)
7.0% due 03/15/18 ..................................... 200 192
Provident Companies, Inc. - Sr. Notes (US)
7.0% due 07/15/18 ..................................... 500 453
---------
1,298
Leisure & Recreation - 0.0%
MGM Mirage, Inc. (US)
8.5% due 09/15/10 ..................................... 200 208
Six Flags, Inc. - Sr Notes 144A (US)
9.5% due 02/01/09 ..................................... 500 501
---------
709
Media - TV & Radio - 1.2%
Belo Corp. - Sr Notes (US)
7.125% due 06/01/07 ................................... 500 494
Belo Corp. - Debs (US)
7.25% due 09/15/27 .................................... 750 641
CBS Corp. - Sr. Notes (US)
7.15% due 05/20/05 .................................... 3,525 3,671
Chancellor Media Corp. (US)
8.0% due 11/01/08 ..................................... 750 782
Charter Communications Holdings
LLC - Sr Disc. Notes 144A (US)
0.0% due 05/15/11 ..................................... 230 133
Charter Communications Holdings
LLC - Sr. Notes (US)
10.75% due 10/01/09 ................................... 500 524
Charter Communications Holdings
LLC - Sr Notes 144A (US)
10.0% due 05/15/11 .................................... 1,000 1,015
Clear Channel Communications,
Inc. (US)
7.65% due 09/15/10 .................................... 250 258
Comcast Cable Communications (US)
6.75% due 01/30/11 .................................... 500 489
Cox Radio, Inc. - Sr Notes (US)
6.625% due 02/15/06 ................................... 750 747
CSC Holdings, Inc. - Sr. Notes (US)
8.125% due 07/15/09 ................................... 5,000 4,949
Fox Sports Networks LLC - Sr. Disc.
Notes (US)
0.0% due 08/15/07 ..................................... 750 713
169
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Media - TV & Radio - Continued
Fox/Liberty Networks LLC - Sr Notes (US)
8.875% due 08/15/07 ..................................... $ 1,000 $ 1,040
Liberty Media Corp. - Bonds (US)
7.875% due 07/15/09 ..................................... 1,000 959
News America, Inc. - Debs. (US)
7.125% due 04/08/28 ..................................... 3,483 3,484
Radio one, Inc. - Sr Sub Notes 144A (US)
8.875% due 07/01/11 ..................................... 200 200
The Walt Disney Co. (US)
5.5% due 12/29/06 ....................................... 200 196
Time Warner, Inc. (US)
6.625% due 05/15/29 ..................................... 3,579 3,197
Time Warner, Inc. - Debs (US)
7.25% due 10/15/17 ...................................... 200 197
Time Warner, Inc. - Debs (US)
7.57% due 02/01/24 ...................................... 500 498
Time Warner, Inc. - Notes (US)
8.18% due 08/15/07 ...................................... 2,075 2,252
Viacom, Inc. (US)
7.7% due 07/30/10 ....................................... 5,200 5,484
-------
31,923
Natural Gas Distribution - 0.2%
Florida Gas Transmission Co. (US)
7.625% due 12/01/10 ..................................... 750 763
KN Energy, Inc. - Sr. Notes (US)
6.45% due 03/01/03 ...................................... 4,590 4,654
-------
5,417
Oil & Natural Gas Exploration & Production - 0.3%
Coastal Corp. (US)
7.75% due 06/15/10 ...................................... 500 511
Gulf Canada Resources, Ltd. - Sr. Notes (US)
8.35% due 08/01/06 ...................................... 4,460 4,856
Petroleum Geo-Services ASA - Notes (US)
7.5% due 03/31/07 ....................................... 2,463 2,441
-------
7,808
Paper & Forest Products - 0.0%
Fort James Corp. - Sr. Notes (US)
6.875% due 09/15/07 ..................................... 200 192
Paper Products - 0.0%
Greater Connecticut Consumer Loan
Trust - Notes Cl. A 2BRV 144A (US)
6.25% due 02/15/20 ...................................... 726 725
Personal & Commercial Lending - 3.6%
Asset Backed Securities Corp. - Series 2000-LB1 Cl AF2 (US)
7.57% due 03/21/24 ...................................... 6,795 7,003
Citigroup, Inc. (US)
6.5% due 01/18/11 ....................................... 8,685 8,620
Credit Based Asset Servicing - Sr 2000-CB4 Cl. M1 (US)
7.565% due 11/25/31 ..................................... 11,531 11,691
CS First Boston Securities Corp. (US)
6.91% due 01/15/08 ...................................... 5,735 5,901
EQCC Home Equity Loan Trust (US)
6.223% due 06/25/11 ..................................... 7,498 7,549
Ford Motor Credit Co. (US)
7.875% due 06/15/10 ..................................... 500 522
Ford Motor Credit Co. - Notes (US)
6.875% due 02/01/06 ..................................... 10,120 10,253
GE Capital Commercial Mortgage Corp. (US)
6.079% due 10/15/10 ..................................... 4,980 4,927
General Motors Acceptance Corp. (US)
7.5% due 07/15/05 ....................................... 7,618 7,965
Household Financial Corp. (US)
6.5% due 01/24/06 ....................................... 5,750 5,828
Household Finance Corp. - Notes (US)
6.0% due 05/01/04 ....................................... 5,020 5,068
6.75% due 05/15/11 ...................................... 5,500 5,426
LB Commercial Conduit Mortgage Trust (US)
5.87% due 08/15/06 ...................................... 5,154 5,174
MBNA Master Credit Card Trust (US)
6.6% due 11/15/04 ....................................... 1,000 1,022
Regional Diversified Funding, Ltd. (US)
9.25% due 03/15/30 ...................................... 1,000 993
Residential Asset Mortgage Trust (US)
7.21% due 11/25/19 ...................................... 6,158 6,188
Residential Asset Securities Corp. (US)
7.18% due 01/25/25 ...................................... 2,000 2,056
Sears Credit Account Master Trust - Ser 1998-2 Cl. A (US)
5.25% due 10/16/08 ...................................... 1,000 1,006
Structured Assets Securities Corp. (US)
8.538% due 07/15/27 ..................................... 456 477
-------
97,669
Pollution Control - 0.0%
Waste Management, Inc. - Sr Notes (US)
7.375% due 08/01/10 ..................................... 700 701
170
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Pollution Control - Continued
WMX Technologies, Inc. - Notes (US)
7.1% due 08/01/26 .................................... $ 500 $ 509
---------
1,210
Retail - Department Stores - 0.8%
Federated Department Stores, Inc. -
Sr. Notes (US)
8.5% due 06/15/03 .................................... 6,002 6,329
Office Depot, Inc.- Sr. Sub Notes
144A (US)
10.0% due 07/15/08 ................................... 200 195
Target Corp. (US)
6.35% due 01/15/11 ................................... 7,580 7,484
Wal Mart Stores, Inc. (US)
7.55% due 02/15/30 ................................... 7,405 8,062
---------
22,070
Retail - Food - 0.1%
The Kroger Co. (US)
6.8% due 04/01/11 .................................... 3,125 3,086
Telecommunication Equipment - 0.1%
American Tower Corp. - Sr. Notes
144A (US)
9.375% due 02/01/09 ................................... 900 846
BellSouth Capital Funding
- Debs. (US)
7.875% due 02/15/30 ................................... 1,540 1,640
Nortel Networks, Ltd. - Notes (US)
6.125% due 02/15/06 ................................... 325 281
Spectrasite Holdings, Inc. - Sr. Notes
Ser. B (US)
10.75% due 03/15/10 ................................... 500 420
---------
3,187
Telecommunication Services - 0.3%
AT&T Wireless Group - Sr. Notes
144A (US)
7.875% due 03/01/11 ................................... 200 201
Crown Castle International Corp. - Sr.
Notes (US)
10.75% due 08/01/11 ................................... 875 844
Motorola, Inc. - Notes (US)
6.75% due 02/01/06 ................................... 825 780
Tellus Corp. - Notes (US)
7.5% due 06/01/07 .................................... 250 255
8.0% due 06/01/11 .................................... 400 409
Vodafone Group PLC - Notes (US)
7.625% due 02/15/05 ................................... 500 525
Worldcom, Inc. NT (US)
7.5% due 05/15/11 .................................... 6,665 6,490
---------
9,504
Telephone - 0.7%
AT&T Corp. - Notes (US)
5.625% due 03/15/04 ................................... 2,000 1,994
6.5% due 03/15/29 ..................................... 1,800 1,537
CenturyTel, Inc. - Sr. Notes
Ser. H (US)
8.375% due 10/15/10 ................................... 2,250 2,346
MCI WorldCom, Inc. - Notes (US)
7.75% due 04/01/07 .................................... 5,289 5,451
Sprint Capital Corp. (US)
7.625% due 01/30/11 ................................... 5,390 5,348
U.S. West Capital Funding, Inc. (US)
6.875% due 07/15/28 ................................... 1,849 1,628
---------
18,304
Transportation Services - 0.0%
International Shipholding Corp. - Sr. Notes
Ser. B (US)
7.75% due 10/15/07 .................................... 1,000 890
Teekay Shipping Corp. - Sr Notes 144A (US)
8.875% due 07/15/11 ................................... 200 202
---------
1,092
U.S. Government Agencies - 14.8%
Federal Home Loan Bank- Discount Note (US)
5.25% due 02/13/04 .................................... 2,000 2,014
Federal Home Loan Mortgage Corp. -
Sr Notes (US)
5.8% due 09/02/08 ..................................... 1,500 1,485
Federal National Mortgage
Assoc. (US)
4.75% due 03/15/04 .................................... 9,000 8,958
6.0% due 05/15/08 ..................................... 3,400 3,422
6.0% due 07/25/16 ..................................... 970 955
6.0% due 07/25/31 ..................................... 38,287 36,744
6.375% due 06/15/09 ................................... 1,000 1,020
6.5% due 08/01/13 ..................................... 1,653 1,662
6.5% due 09/01/30 ..................................... 3,729 3,670
6.5% due 05/01/31 ..................................... 9,036 8,891
6.5% due 07/25/31 ..................................... 65,843 64,793
6.5% due 07/25/16 ..................................... 23,244 23,302
6.625% due 11/15/10 ................................... 15,000 15,497
6.75% due 08/15/02 .................................... 10,267 10,554
7.0% due 11/01/30 ..................................... 3,973 3,990
7.0% due 06/01/31 ..................................... 1,000 1,004
7.0% due 0725/31 ...................................... 61,208 61,476
7.25% due 05/15/30 .................................... 4,200 4,545
7.5% due 11/01/30 ..................................... 3,983 4,064
7.5% due 12/01/30 ..................................... 2,416 2,465
7.5% due 06/01/31 ..................................... 2,000 2,041
7.5% due 07/25/16 ..................................... 19,461 20,015
7.5% due 07/25/31 ..................................... 49,730 50,740
8.0% due 12/01/29 ..................................... 2,348 2,425
171
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
8.0% due 07/25/31 ..................................... $ 27,054 $ 27,942
Federal National Mortgage Assoc. -
Notes (US)
7.0% due 07/15/05 ..................................... 10,600 11,200
GMAC Home Loan Trust (US)
6.04% due 09/25/26 .................................... 7,500 7,563
Government National Mortgage Assoc. (US)
6.0% due 10/15/28 ..................................... 3,891 3,766
7.5% due 10/15/30 ..................................... 3,021 3,097
7.5% due 11/15/30 ..................................... 859 881
7.5% due 12/15/31 ..................................... 10,892 11,168
8.0% due 11/15/30 ..................................... 4,356 4,513
----------
405,412
U.S. Governmental - 3.4%
U.S. Treasury - Bonds (US)
5.0% due 02/15/11 ..................................... 8,000 7,761
5.25% due 02/15/29 .................................... 21,835 19,965
6.25% due 05/15/30 .................................... 8,000 8,474
6.75% due 08/15/26 .................................... 9,825 10,895
7.5% due 11/15/16 ..................................... 1,500 1,748
8.875% due 08/15/17 ................................... 13,100 17,196
U.S. Treasury - Notes (US)
4.25% due 05/31/03 .................................... 1,400 1,400
4.625% due 05/15/06 ................................... 6,500 6,411
5.625% due 02/15/06 ................................... 1,500 1,540
5.625% due 05/15/08 ................................... 4,350 4,521
5.75% due 08/15/10 .................................... 4,100 4,195
6.25% due 02/15/07 .................................... 3,750 3,957
6.375% due 08/15/02 ................................... 3,250 3,334
6.875% due 05/15/06 ................................... 1,250 1,348
----------
92,745
----------
TOTAL PUBLICLY-TRADED BONDS 33.3% 909,242
----------
SHORT-TERM INVESTMENTS
Investment in joint trading account - 12.6%
Investment in joint trading account
3.97% due 07/02/01 ................................. 342,997 342,997
Cash Equvalents - 1.6%
Navigator Securities Lending
Prime Portfolio ** ................................ 43,710,715 43,710
---------- ----------
TOTAL SHORT-TERM INVESTMENTS 14.2% 386,707
---------- ----------
TOTAL INVESTMENTS- 112.8% 3,078,016
Other Assets & Liabilities, Net- (12.8)% (348,152)
---------- ----------
NET ASSETS- 100.0% $2,729,864
========== ==========
ADR-American Depository Receipts.
144A - Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2001, securities aggregated $4,018 or .15%
of net assets of the Fund.
**Represents investment of security lending collatral.
See note to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY COUNTRY
Market % of
Country Value Long-Term
Abbreviation (000)'s Investments
Cash Equivalents - Continued
United States ......................... US $2,677,650 99.5%
Canada ................................ CA 13,659 0.5
---------- ----------
$2,691,309 100.0%
========== ==========
172
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Market
Name of Issuer Shares Value
(000's)
PUBLICLY-TRADED BONDS
Aerospace/Defense - 1.3%
CWABS , Inc.
7.74% due 08/25/17 ...................................... $ 1,500 $ 1,534
Automobile - 5.2%
Ford Credit Auto Owner Trust
7.13% due 07/15/04 ...................................... 2,500 2,572
Premier Auto Trust
5.82% due 10/08/03 ...................................... 3,335 3,386
--------
5,958
Bank - 5.3%
BankBoston Corp. - Sr. Notes
6.125% due 03/15/02 ..................................... 1,900 1,924
Banponce Corp. - Notes
6.54% due 11/06/01 ...................................... 1,000 1,009
First Union Corp. - Notes
6.95% due 11/01/04 ...................................... 500 518
J.P. Morgan & Co., Inc. - Sr. Notes
5.75% due 02/25/04 ...................................... 1,000 1,009
Star Banc Corp. - Notes
5.875% due 11/01/03 ..................................... 600 606
Westpac Banking Corp. - Sub. Debs.
9.125% due 08/15/01 ..................................... 1,000 1,006
--------
6,072
Brokerage & Investment Management - 4.6%
Donaldson, Lufkin & Jenrette, Inc. -
Sr. Notes
5.875% due 04/01/02 ..................................... 1,900 1,920
Lehman Brothers Holdings, Inc. -
Notes
6.625% due 04/01/04 ..................................... 470 480
Morgan Stanley, Dean Witter,
Discover & Co.
5.625% due 01/20/04 ..................................... 500 502
Residential Funding and Mortgage
Securities Trust II
5.37% due 02/25/15 ...................................... 2,000 1,996
5.64% due 07/25/14 ...................................... 400 403
--------
5,301
Computer Equipment - 0.4%
International Business Machines Corp. - Notes
5.625% due 04/12/04 ..................................... 500 508
Cosmetics & Personal Care - 1.7%
Dial Corp. - Notes
5.9% due 10/25/01 ....................................... 2,000 1,999
Diversified Operations - 1.3%
CMS Panhandle Holding - Sr. Notes
6.125% due 03/15/04 ..................................... 1,000 983
El Paso Energy Corp. - Sr. Notes
6.625% due 07/15/01 ..................................... 500 501
--------
1,484
Electric Power - 0.4%
Niagara Mohawk Power Corp. - Sr. Notes
7.25% due 10/01/02 ...................................... 499 508
Financial Services - 9.2%
Associates Corp. of North America
- Sr. Notes
5.75% due 11/01/03 ...................................... 1,450 1,462
Chase Credit Card Master Trust
- Cl. A 1998-3
6.0% due 08/15/05 ....................................... 1,075 1,099
CIT Group, Inc.
5.625% due 05/17/04 ..................................... 1,000 997
General Electric Capital Corp. ..........................
7.5% due 05/15/05 ....................................... 3,150 3,365
General Motors Acceptance Corp. -
Notes
7.48% due 02/28/03 ...................................... 1,200 1,241
Green Tree Financial Corp. - Ser
1996-8 Cl. A6
7.6% due 10/15/27 ....................................... 680 713
Lehman Brothers Holdings, Inc. -
Notes
6.625% due 02/05/06 ..................................... 600 611
Salomon, Inc. - Sr. Notes
7.2% due 02/01/04 ....................................... 500 520
U.S. West Capital Funding, Inc. .........................
6.875% due 08/15/01 ..................................... 500 501
--------
10,509
Food, Beverage & Tobacco - 0.6%
Philip Morris Cos., Inc. - Debs.
8.25% due 10/15/03 ...................................... 640 677
Foreign Governmental - 6.1%
Province of Ontario - Canada
7.75% due 06/04/02 ...................................... 3,000 3,093
Province of Quebec - Canada
5.5% due 04/11/06 ....................................... 4,000 3,940
--------
7,033
Healthcare Products - 1.3%
Beckman Instruments, Inc. - Sr. Notes
7.1% due 03/04/03 ....................................... 1,475 1,497
173
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Market
Name of Issuer Shares Value
(000's)
PUBLICLY-TRADED BONDS - CONTINUED
Healthcare Services - 0.8%
Columbia/HCA Healthcare Corp.
6.91% due 06/15/05 ...................................... $ 500 $ 492
Tenet Healthcare Corp. - Sr
Notes
8.625% due 12/01/03 ..................................... 360 375
--------
867
Machinary - 1.4%
Ingersoll Rand Co. - Notes
5.75% due 02/14/03 ...................................... 1,300 1,310
6.25% due 05/15/06 ...................................... 350 351
--------
1,661
Media - T.V. & Radio - 1.9%
Continental Cablevision - Sr. Notes
8.5% due 09/15/01 ....................................... 1,010 1,017
Turner Broadcasting Systems , Inc. -
Sr. Notes
7.4% due 02/01/04 ....................................... 1,144 1,191
--------
2,208
Natural Gas Distribution - 1.6%
Enron Corp. - Debs.
9.125% due 04/01/03 ..................................... 500 530
KN Energy, Inc. - Sr. Notes
6.45% due 03/01/03 ...................................... 1,300 1,318
--------
1,848
Oil - 1.8%
Coastal Corp. - Sr. Notes
8.125% due 09/15/02 ..................................... 500 517
Conoco, Inc. - Notes
5.9% due 04/15/04 ....................................... 1,550 1,569
--------
2,086
Oil & Natural Gas Exploration & Production - 1.9%
Gulf Canada Resources, Ltd. - Sr. Notes
8.35% due 08/01/06 ...................................... 170 185
Occidental Petroleum Corp. - Notes
8.5% due 11/09/01 ....................................... 1,000 1,012
Petroleum-Geo Services ASA - Bonds
6.25% due 11/19/03 ...................................... 1,000 987
--------
2,184
Personal & Commercial Lending - 8.7%
American General Finance Corp. - Notes
5.75% due 11/23/01 ...................................... 1,270 1,280
Asset Backed Securities Corp. - Ser.
2000 Cl. AF2
Asset Backed Securities Corp. - Ser.
2000 Cl. AF2
7.57% due 03/21/24 ...................................... 177 182
Countrywide Funding Corp.
5.25% due 06/15/04 ...................................... 500 498
5.25% due 05/22/03 ...................................... 1,000 1,001
Covenant Transport, Inc. - Cl. A
7.6% due 12/15/29 ....................................... 252 261
Ford Motor Credit Co. - Notes
6.875% due 02/01/06 ..................................... 1,110 1,124
Ford Motor Credit Co. - Sr. Notes
6.125% due 03/20/04 ..................................... 1,500 1,514
Green Tree Financial Corp. - Ser.
1996-F
7.3% due 01/15/28 ....................................... 23 23
Household Finance Corp. - Notes
6.0% due 05/01/04 ....................................... 2,000 2,019
MBNA Master Credit Card Trust
6.6% due 11/15/04 ....................................... 935 956
Money Store Home Equity Trust -
Ser. 1996-B A7
7.55% due 02/15/20 ...................................... 71 72
Money Store Home Equity Trust -
Ser. 1997-D AF3
6.345% due 11/15/21 ..................................... 55 55
Residential Asset Mortgage Trust
7.21% due 11/25/19 ...................................... 1,087 1,092
--------
10,077
Retail - Department Stores - 1.0%
Federated Department Stores, inc . - Sr.
Notes
8.5% due 06/15/03 ....................................... 1,090 1,149
Retail - Food - 1.0%
Safeway, Inc. - Notes
7.05% due 09/15/02 ...................................... 1,100 1,120
Telecommunication Services - 3.6%
Cox Communications, Inc. - Notes
7.0% due 08/15/01 ....................................... 1,100 1,502
Worldcom, Inc. Sr. Notes
6.125% due 08/15/01 ..................................... 1,500 1,502
7.55% due 04/01/04 ...................................... 1,100 1,133
--------
4,139
U.S. Government Agencies - 20.3%
Federal Home Loan Bank
8.0% due 06/01/10 ....................................... 969 1,006
Federal Home Loan Mortgage Corp.
7.75% due 01/15/21 ...................................... 32 32
Federal National Mortgage Assoc.
6.375% due 10/15/02 ..................................... 7,500 7,696
174
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
U.S. Government Agencies - Continued
6.5% due 09/01/02 .................................... $ 1,134 $ 1,147
7.0% due 01/01/03 .................................... 3,406 3,452
7.0% due 12/01/10 .................................... 1,490 1,522
Federal National Mortgage Assoc. - Notes
4.75% due 11/14/03 ................................... 8,500 8,496
---------
23,351
U.S. Governmental - 12.8%
U.S. Treasury - Bonds
5.875% due 11/15/04 .................................. 4,650 4,809
U.S. Treasury - Notes
4.75% due 11/15/03 ................................... 4,530 4,511
5.875 due 02/15/04 ................................... 2,810 2,903
6.625% due 07/31/01 .................................. 2,500 2,506
---------
14,729
---------
TOTAL PUBLICLY-TRADED-BONDS .......................... 94.2% 106,444
---------
SHORT-TERM INVESTMENTS
Investment in joint trading account - 4.7%
Investment in joint trading account
3.97% due 07/02/01 ................................... 5,573 5,373
Shares
Cash Equivalents - 10.2%
Navigator Securities Lending Prime
Portfolio ** 11,815,749 11,816
------------ ---------
TOTAL SHORT-TERM INVESTMENTS 14.9% 17,189
------------ ---------
TOTAL INVESTMENTS- 109.1% 125,688
Other Assets & Liabilities, Net- (9.1)% (10,504)
------------ ---------
NET ASSETS- 100.0% $115,184
============ =========
** Represents investment of security lending collateral.
See notes to financial statements.
175
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 0.5%
Armor Holdings, Inc. * ................................. 26,400 $ 396
Apparel - 0.1%
Charlotte Russe Holding, Inc. ........................... 4,000 107
Auto & Truck Parts - 2.2%
CSK Auto Corp. .......................................... 34,500 286
Polaris Industries Inc. ................................. 29,500 1,351
--------
1,637
Automobile - 1.3%
ANC Rental Corp. * ..................................... 58,400 175
Oshkosh Truck Corp. ..................................... 18,200 806
--------
981
Bank - 3.3%
Citizens Banking Corp. .................................. 1,600 47
Community Bankshares, Inc. .............................. 13,800 199
First Midwest Bancorp, Inc. ............................. 12,200 362
Fulton Financial Corp. .................................. 16,590 339
Net.B@nk, Inc. * ....................................... 38,900 440
San Juan Basin Royalty Trust ............................ 49,600 629
Waypoint Financial Corp. * ............................. 38,800 485
--------
2,501
Brokerage & Investment Management - 0.1%
America First Mortgage Investments, Inc. ................ 11,000 82
Building Materials - 0.8%
The Scotts Co. - Cl A ................................... 13,800 572
Business Services - 0.6%
On Assignment, Inc. ..................................... 10,600 191
Resources Connection, Inc. .............................. 9,000 232
--------
423
Chemical - 0.8%
OM Group, Inc. .......................................... 4,900 275
Spartech Corp. .......................................... 13,900 336
--------
611
Commercial Services - 2.9%
HeadHunter.net, Inc.* ................................... 48,300 226
Korn/Ferry International * ............................. 8,000 124
Official Payments Corp. * ............................... 30,700 158
Power One, Inc. ......................................... 30,000 499
Quanta Services, Inc.* .................................. 25,000 551
RPM, Inc. ............................................... 36,400 335
Steiner Leisure, Ltd. * ................................. 15,000 300
--------
2,193
Computer Equipment - 0.5%
Documentum, Inc. * ..................................... 17,500 226
UNOVA, Inc. * ........................................... 26,000 179
--------
405
Computer Software & Services - 8.3%
Click Commerce, Inc.* ................................... 31,800 286
click2learn.com, Inc. * ................................. 31,900 52
CNet Networks, Inc. ..................................... 18,000 234
Cognizant Technology Solutions Corp ..................... 5,000 212
Digex, Inc. * ........................................... 16,800 218
Digital Insight Corp. 8 ................................. 20,400 451
Extensity, Inc. * ....................................... 20,700 209
Harris Interactive, Inc. * ............................. 31,900 80
Informax, Inc. * ....................................... 18,800 134
Ixia * ................................................. 10,900 207
MatrixOne, Inc. * ....................................... 18,200 422
MicroStrategy, Inc. * ................................... 50,400 141
Moldflow Corp. * ....................................... 15,300 236
National Information Consortium, Inc. * ................. 61,800 113
NetIQ Corp. * ........................................... 25,800 807
Numerical Technologies, Inc. ............................ 10,000 210
PC-Tel, Inc. * ......................................... 16,400 151
Pinnacle Systems, Inc. .................................. 42,000 254
Pixar, Inc. ............................................. 4,600 188
Riverdeep Group PLC - ADR * ............................. 9,700 272
RSA Security, Inc.* ..................................... 13,250 410
Saba Software, Inc. ..................................... 10,900 179
Selectica, Inc. * ....................................... 19,900 85
SignalSoft Corp. ........................................ 11,900 137
Via Networks, Inc. * ................................... 46,400 71
Vignette Corp. * ....................................... 100 1
WebMethods, Inc. ........................................ 5,700 121
Websense, Inc. * ....................................... 14,200 284
Witness Systems, Inc. * ................................. 14,100 155
--------
6,320
Consumer Miscellaneous - 1.4%
Libbey, Inc. ............................................ 21,600 858
NetRatings, Inc. * ..................................... 15,900 229
--------
1,087
Diversified Operations - 1.9%
Donaldson Co., Inc. ..................................... 24,400 760
Ionics, Inc. * ......................................... 16,100 507
Wesco International, Inc. * ............................. 23,600 215
--------
1,482
Electrical Equipment - 4.6%
Advanced Energy Industries, Inc.* ....................... 24,400 1,007
Integrated Electrical Services, Inc. * .................. 29,500 288
LTX Corp. ............................................... 40,500 1,035
Pentair, Inc. ........................................... 25,700 869
Zygo Corporation ........................................ 13,600 302
--------
3,501
Electronic Products & Services - 15.6%
American Superconductor Corp.* ......................... 15,400 397
Anadigics, Inc.* ........................................ 34,300 789
Anaren Micro Circuits, Inc. ............................. 23,300 466
176
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Electronic Products & Services - Continued
ASM International N.V. * ................................ 26,500 $ 526
BE Semiconductor Industries ............................. 7,000 47
Bookham Technology PLC .................................. 17,000 49
Cymer, Inc. * ........................................... 27,200 688
DuPont Photomasks, Inc. ................................. 4,600 222
Electro Scientific Industries, Inc.* .................... 24,900 949
Electroglas, Inc. * ..................................... 38,800 687
EMCORE Corp. * .......................................... 30,700 944
Exar, Corp.* ............................................ 31,500 622
FEI Co. ................................................. 5,500 226
GlobeSpan, Inc.* ........................................ 20,000 292
Helix Technology Corp. .................................. 25,900 789
Microtune, Inc. * ....................................... 18,600 409
Nanometrics, Inc. * ..................................... 19,700 542
Newport Corp. ........................................... 13,000 345
ON Semiconductor Corp .* ................................ 51,400 234
Parthus Technologies PLC - ADR * ........................ 7,200 56
Power Integrations, Inc. * .............................. 25,300 395
Sawtek, Inc. * .......................................... 19,600 461
SpeedFAm-IPEC, Inc. * ................................... 20,800 66
Therma-Wave, Inc. * ..................................... 33,200 633
Transmeta Corp. ......................................... 9,000 50
TranSwitch Corp. ........................................ 18,000 198
Veeco Instruments Inc. * ................................ 10,100 401
Virata, Corp. ........................................... 37,400 443
--------
11,926
Energy - Alternative Source - 1.1%
Massey Energy Co. ....................................... 10,100 199
Rayovac Corp.* .......................................... 19,100 407
Valence Technology, Inc. * .............................. 37,000 238
--------
844
Engineering & Construction - 0.5%
York International Corp. ................................ 11,500 403
Financial Services - 2.1%
American Capital Strategies, Ltd. ....................... 30,600 859
BOK Financial Corp. ..................................... 10,000 269
LendingTree, Inc. 8 ..................................... 32,500 207
Medallion Financial Corp. ............................... 24,000 246
--------
1,581
Food, Beverage & Tobacco - 3.5%
Adolph Coors Co. - Cl. B ................................ 8,000 401
Corn Products International, Inc. ....................... 19,700 630
Dreyer's Grand Ice Cream, Inc. .......................... 23,000 642
Flowers Foods, Inc. * ................................... 4,520 142
Suiza Foods Corp. * ..................................... 15,400 818
--------
2,633
Health Care Products - 9.0%
3 Dimensional Pharmaceuticals, Inc.* .................... 14,200 136
Aclara Biosciences, Inc. * .............................. 14,200 110
Antigenics, Inc. ........................................ 22,800 450
Aviron * ................................................ 10,800 616
Charles River Laboratories * ............................ 9,600 334
ChromaVision Medical Systems, Inc. * .................... 35,600 179
Diversa Corp. ........................................... 17,200 350
Durect Corp. 8 .......................................... 17,100 222
Exelixis, Inc. * ........................................ 41,000 778
Genaissance Pharmaceuticals, Inc. * ..................... 14,800 208
Heska Corp. * ........................................... 89,900 96
ILEX Oncology, Inc. * ................................... 19,600 586
Illumina, Inc. .......................................... 23,500 277
Lexicon Genetics, Inc.* ................................. 18,500 231
Scios, Inc. 8 ........................................... 12,800 320
Tanox, Inc.* ............................................ 11,400 360
Trimeris, Inc.* ......................................... 14,800 741
Unilab Corp. ............................................ 1,200 30
Vical, Inc.* ............................................ 23,900 334
ViroPharma, Inc.* ....................................... 14,700 500
--------
6,858
Health Care Services - 2.3%
Gene Logic, Inc. ........................................ 19,700 430
Kendle International, Inc. * ............................ 24,200 485
LifePoint Hospitals, Inc. * ............................. 12,000 531
Orthodontic Centers of America, Inc. * .................. 10,500 319
--------
1,765
Insurance - 4.1%
Everest Re Group, Ltd. .................................. 17,100 1,279
Fidelity National Financial, Inc. ....................... 29,800 732
First American Financial Corp. .......................... 24,100 456
W.R. Berkley Corp. ...................................... 6,000 249
Willis Group Holdings, Ltd. ............................. 2,700 48
Zenith National Insurance Corp. ......................... 14,000 378
--------
3,142
Leisure & Recreation - 3.8%
Cheap Tickets, Inc. * ................................... 40,300 609
Hotel Reservations Network, Inc. - Cl. A * .............. 5,700 265
International Speedway Corp. - Cl A ..................... 11,200 471
MeriStar Hospitality Corp. .............................. 18,200 432
Speedway Motorsports, Inc. * ............................ 27,700 698
World Wrestling Federation
Entertainment, Inc. .................................... 33,100 457
--------
2,932
Machinery - 0.6%
Columbus McKinnon Corp. ................................. 25,200 284
SonoSite, Inc. .......................................... 7,600 147
--------
431
Media - Publishing - 0.6%
Banta Corp. ............................................. 15,200 445
Media - TV & Radio - 6.8%
ACTV, Inc. * ............................................ 8,200 27
177
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Media - TV & Radio - Continued
BHC Communications, Inc. - Cl. A* ....................... 2,000 $ 278
Crown Media Holdings, Inc. .............................. 15,100 280
Entercom Communications Corp.* .......................... 7,200 386
Entravision Communications - Cl A* ...................... 20,000 246
Insight Communications Company, Inc.8 ................... 28,900 722
Martha Stewart Living Omnimedia, Inc. - Cl. A* .......... 16,000 370
Mediacom Communications Corp. * ......................... 22,800 319
Primedia, Inc. .......................................... 73,036 496
Radio One, Inc. - Cl. D* ................................ 34,900 769
Sirius Satellite Radio Inc. * ........................... 14,600 178
Westwood One, Inc. * .................................... 9,000 332
XM Satellite Radio Holdings, Inc. - Cl. A * ............. 28,000 454
Young Broadcasting, Inc. - Cl. A * ...................... 10,000 336
--------
5,193
Metals & Mining - 0.4%
Kaiser Aluminum Corp. ................................... 78,100 311
Natural Gas Distribution - 1.5%
Energen Corp. ........................................... 12,600 348
New Jersey Resources Corp. .............................. 9,800 443
WGL Holdings, Inc. ...................................... 13,000 352
--------
1,143
Oil & Natural Gas Exploration & Production - 0.2%
Penzoil-Quaker State Co. ................................ 15,000 168
Oil - Equipment & Service - 0.9%
Hydril Co. * ............................................ 10,000 228
Seacor Smit, Inc. ....................................... 9,200 430
--------
658
Paper & Forest Products - 0.2%
Caraustar Industries, Inc. .............................. 18,100 167
Real Estate Development - 0.4%
Trammell Crow Co.* ...................................... 25,400 281
Real Estate Investment Trust - 0.8%
Annaly Mortgage Management, Inc. ........................ 24,000 329
Anthracite Capital, Inc. ................................ 21,900 242
--------
571
Real Estate Operations - 1.2%
CB Richard Ellis Services, Inc. * ....................... 27,200 427
Insignia Financial Group, Inc. * ........................ 39,700 488
--------
915
Retail - 0.0%
Galyans Trading Co., Inc. .............................. 1,500 31
Retail - Department Stores - 3.6%
Dollar Thrifty Automotive Group, Inc.* .................. 9,700 233
Dollar Tree Stores, Inc.* ............................... 36,900 1,027
Factory 2-U Stores, Inc. * .............................. 14,900 438
Ruby Tuesday, Inc. ...................................... 33,700 576
School Specialty, Inc.* ................................. 17,600 455
--------
2,729
Retail - Food - 1.3%
California Pizza Kitchen, Inc. .......................... 17,900 416
Williams-Sonoma, Inc. ................................... 14,300 555
--------
971
Shoe & Apparel Manufacturing - 1.5%
Kellwood Co. ............................................ 20,900 483
Novel Denim Holdings, Ltd. * ............................ 16,000 245
Stride Rite Corp. ....................................... 39,300 334
Tommy Hilfiger Corp. * .................................. 6,000 84
--------
1,146
Telecommunication Equipment - 3.6%
Advanced Fibre Communications, Inc. * ................... 8,200 172
Alliance Fiber Optic Products, Inc.* .................... 34,700 165
Avanex Corp. * .......................................... 37,000 359
Cable Design Technologies Corp. ......................... 20,000 323
Carrier Access Corp. .................................... 39,900 239
Luminent, Inc. * ........................................ 32,500 137
Monolithic Systems Technology, Inc ...................... 5,000 55
Optical Communications Products, Inc* ................... 38,100 405
Polycom, Inc. ........................................... 9,000 208
Spectrasite Holdings, Inc. .............................. 14,000 101
Superior Telecom, Inc. .................................. 39,100 110
Tier Technologies, Inc. Cl B ............................ 23,000 220
Vitria Technology, Inc. ................................. 13,100 45
WebEx Communications, Inc. * ............................ 7,500 200
--------
2,739
Telecommunication Services - 0.8%
Aspect Communications Corp. * ........................... 46,400 324
Emmis Communications Corp. .............................. 8,000 246
Focal Communications Corp.* ............................. 30,900 73
--------
643
Transportation Services - 3.2%
America West Holdings Corp. - Cl B * .................... 23,800 237
Landstar Systems, Inc. .................................. 10,700 728
SkyWest, Inc. ........................................... 8,200 229
USFreightways Corp. ..................................... 12,700 375
Werner Enterprises, Inc. ................................ 36,000 873
--------
2,442
--------
TOTAL COMMON STOCK- 98.9% 75,366
--------
178
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
Market
Name of Issuer Shares Value
(000's)
SHORT-TERM INVESTMENTS - 0.7%
Investment in joint trading account
3.97% due 07/02/01 ..................................... $ 567 $ 567
-------- --------
TOTAL INVESTMENTS- 99.6% 75,933
Other Assets & Liabilities, Net- 0.4% 298
-------- --------
NET ASSETS- 100.0% $ 76,231
======== ========
ADR-American Depository Receipt
* Non-income producing security.
See notes to financial statements.
179
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Australia - 0.6%
Brambles Industries,
Ltd. (DIOP) ............................................ 11,553 $ 283
Publishing &
Broadcasting, Ltd.
(MEDI) ................................................. 48,083 223
------
506
Belgium - 0.7%
Dexia NPV (BANK) ........................................ 17,550 279
Fortis (B) (INSU) ....................................... 13,910 336
UCB SA (HEAL) ........................................... 1,180 41
------
656
Brazil - 0.7%
Compania Brasileira de
Distribuicao Grupo Pao
de Acucar - ADR (RETF) ................................. 5,800 135
Petroleo Brasileiro SA*
(OILX) ................................................. 7,000 182
Telecomunicacoes
Brasileiras SA - ADR
(UTIT) ................................................. 3,434 161
Unibanco - Uniao de
Bancos Brasileiros SA - ................................ 3,985 101
GDR (BANK) ------
579
Canada - 0.3%
Alcan Aluminum, Ltd.
(MEDI) ................................................. 3,122 131
Royal Bank of Canada
(BANK) ................................................. 4,280 137
------
268
Denmark - 0.1%
Tele Danmark A/S (TELS) ................................. 1,530 55
Finland - 1.4%
Nokia Oyj (TELS) ........................................ 55,320 1,255
France - 13.4%
Alcatel (TELE) .......................................... 11,330 237
Altran Technologies SA
(ENGI) ................................................. 1,450 68
AXA SA (INSU) ........................................... 38,200 1,089
Banque Nationale de
Paris (BANK) ........................................... 11,892 1,036
Canal Plus (MEDI) ....................................... 643 2
Cap Gemini SA (COMM) .................................... 1,888 138
Compagnie de St. Gobain
(CONS) ................................................. 3,400 462
Equant (COMP) ........................................... 1,905 34
Groupe Danone (FOOD) .................................... 1,590 218
HerMes International
(RETS) ................................................. 1,430 198
L'Oreal SA (HNBA) ....................................... 2,030 131
Lafarge SA (CONS) ....................................... 681 58
Legrand SA (ELEQ) ....................................... 1,864 356
LVMH (Louis Vuitton Moet
Hennessy) (FOOD) ....................................... 1,910 96
Orange SA* (TELS) ....................................... 34,990 285
Rhone-Poulenc SA (BANK) ................................. 19,509 1,559
Sanofi-Synthelabo SA*
(HEAL) ................................................. 14,478 951
Schneider SA (MACH) ..................................... 1,621 90
Societe Generale - Cl. A
(BANK) ................................................. 3,612 214
Societe Television
Francaise 1 (MEDI) ..................................... 15,375 449
Sodexho Alliance SA
(FOOD) ................................................. 12,634 591
STMicroelectronics
(ETRN) ................................................. 9,456 329
Total Fina SA - Cl. B
(OILX) ................................................. 15,890 2,227
Vivendi Universal SA
(DIOP) ................................................. 16,113 940
------
11,758
Germany - 4.1%
Allianz AG - Reg. (INSU) ................................ 3,128 914
Aventis SA (HEAL) ....................................... 2,288 181
Bayer AG (CHEM) ......................................... 3,835 151
Bayerische Vereinsbank
AG (BANK) .............................................. 6,244 309
Deutsche Bank AG (BANK) ................................. 11,493 824
Deutsche Telekom AG
(UTIT) ................................................. 2,945 67
E.On AG (DIOP) .......................................... 8,421 442
Gehe AG (HEAL) .......................................... 5,860 228
Rhoen-Klinikum AG (HEAL) ................................ 1,720 80
SAP AG (SOFT) ........................................... 2,310 321
Siemins AG (DIOP) ....................................... 1,977 121
------
3,638
Hong Kong - 2.5%
Cheung Kong (Holdings),
Ltd. (READ) ............................................ 44,000 479
China Telecom (Hong
Kong), Ltd. (TELS) ..................................... 120,000 632
Henderson Land
Development Co., Ltd. ..................................
(READ) ................................................. 32,000 142
HSBC Holdings PLC (BANK) ................................ 18,800 222
Hutchison Whampoa, Ltd. .................................
(COMM) ................................................. 67,900 686
------
2,161
India - 0.7%
Global Tele-Systems,
Ltd. (TELE) ............................................ 14,000 52
Hindustan Lever Ltd. ....................................
(CNSU) ................................................. 72,000 314
ICICI, Ltd. (FINL) ...................................... 71,484 213
Reliance Industries,
Inc. (OILX) ............................................ 3,000 24
------
603
Israel - 0.1%
Check Point Software
Technologies, Ltd.*
(COMP) ................................................. 1,857 94
Italy - 5.6%
Alleanza Assicurazioni
(INSU) ................................................. 37,170 392
Assicurazioni Generali
(INSU) ................................................. 7,000 211
Banca Intel SpA (BANK) .................................. 335,413 1,185
Banca Nazionale del
Lavoro (BANK) .......................................... 29,750 93
Bipop-Carire SpA (BANK) ................................. 32,500 122
ENI SpA (OILS) .......................................... 60,872 743
Mediaset SpA (MEDI) ..................................... 10,000 84
Mediolanum SpA (INSU) ................................... 18,315 185
Olivetti SpA (COMM) ..................................... 265,152 470
San Paolo-IMI SpA (BANK) ................................ 4,858 62
Telecom Italia Mobile
SpA (TELS) ............................................. 90,210 460
Telecom Italia SpA
(TELS) ................................................. 29,900 269
UniCredito Italiano SpA
(BANK) ................................................. 152,893 657
------
4,933
180
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Japan - 17.3%
Canon, Inc. (COMM) ...................................... 42,000 $1,697
DDI Corp. (UTIT) ........................................ 23 107
Fanuc, Ltd. (ELEQ) ...................................... 5,200 259
Fuji Television Network,
Inc. (MEDI) ............................................ 42 242
Fujitsu, Ltd. (ELEQ) .................................... 18,000 189
Ito-Yokado Co., Ltd.
(RETS) ................................................. 4,000 184
KAO Corp. (HNBA) ........................................ 7,000 174
Kokuyo Co. (COMM) ....................................... 8,000 84
Kyocera Corp. (ETRN) .................................... 4,600 406
Marui Co., Ltd. (RETS) .................................. 25,000 361
Matsushita Communication
Industries (TELS) ...................................... 4,800 219
Matsushita Electric
Industrial Co. (ETRN) .................................. 37,000 579
Mitsui Fudosan Co., Ltd. ................................
(REAL) ................................................. 52,000 560
Mizuho Holdings, Inc.*
(BANK) ................................................. 180 837
Murata Manufacturing
Co., Ltd. (ETRN) ....................................... 9,800 651
NEC Corp. (COMP) ........................................ 61,000 824
Nippon Telegraph &
Telephone Corp. (UTIT) ................................. 89 464
Nomura Securities Co.,
Ltd. (FUND) ............................................ 42,000 805
NTT Mobile
Communications Network,
Inc. (TELS) ............................................ 92 1,601
Sankyo Co., Ltd. (HEAL) ................................. 16,000 289
Seven-Eleven Japan
(RETF) ................................................. 7,000 273
Shin-Etsu Chemical Co. ..................................
(CHEM) ................................................. 11,000 404
Shiseido Co., Ltd. ......................................
(CHEM) ................................................. 18,000 169
Sony Corp. (ETRN) ....................................... 20,800 1,368
Sumitomo Bank (BANK) .................................... 73,000 603
Sumitomo Corp. (DIOP) ................................... 28,000 196
TDK Corp. (COMP) ........................................ 3,300 154
Tokyo Electron, Ltd. ....................................
(ETRN) ................................................. 5,500 333
Toshiba Corp. (ETRN) .................................... 102,000 539
UFJ Holdings, Inc.
(FINL) ................................................. 29 156
Yamanouchi
Pharmaceutical Co.,
Ltd. (HEAL) ............................................ 13,000 365
------
15,092
Luxembourg - 0.1%
Society Europeenne des
Satellites (MEDI) ...................................... 567 74
Mexico - 1.6%
Fomento Economico
Mexicano SA de CV
(FOOD) ................................................. 81,000 344
Grupo Financiero Banamex
Accival, SA de CV
(FINL) ................................................. 45,000 117
Grupo Iusacell SA de CV
- ADR V* (TELS) ........................................ 9,000 62
Grupo Televisa SA* - GDR
(OILX) ................................................. 15,052 602
Telefonica S.A. (TELS) .................................. 4,529 169
Telefonos de Mexico SA -
ADR (UTIT) ............................................. 2,369 83
------
1,377
Netherlands - 7.2%
ABN Amro Holding NV
(BANK) ................................................. 3,526 66
Akzo Nobel NV (CHEM) .................................... 1,390 59
ASM Lithography Holding
NV (COMP) .............................................. 21,180 476
Elsevier NV (MEDP) ...................................... 13,140 164
Fortis (NL) NV (INSU) ................................... 18,010 438
ING Groep NV (BANK) ..................................... 26,700 1,747
Koninklije KPN NV (TELS) ................................ 2,891 16
Koninklijke (Royal)
Philips Electronics
N.V. (ETRN) ............................................ 34,739 922
Royal Dutch Petroleum
Co. (OILX) ............................................. 16,580 955
VNU NV (MEDP) ........................................... 30,790 1,044
Wolters Kluwer NV - CVA
(MEDP) ................................................. 14,805 398
6,285
Norway - 0.4%
Orkla ASA (DIOP) ........................................ 13,750 249
Statoil ASA (OILX) ...................................... 8,950 66
------
315
Portugal - 0.4%
Jeronimo Martins, SGPS,
SA (RETF) .............................................. 7,183 46
Portugal Telecom, SA
(TELS) ................................................. 41,210 288
------
334
Singapore - 0.6%
United Overseas Bank,
Ltd. (BANK) ............................................ 84,072 531
South Korea - 0.6%
Samsung Electronics
(ETRN) ................................................. 2,700 399
Korea Telelecom Corp. - ADR* (TELS) .................... 4,481 99
------
498
Spain - 2.5%
Banco Bilbao Vizcaya SA
(BANK) ................................................. 65,010 842
Banco Santander Central
Hispano SA (BANK) ...................................... 50,980 462
Endesa SA (UTIE) ........................................ 17,270 276
Repsol SA (OILX) ........................................ 10,115 167
Telefonica SA (UTIT) .................................... 32,806 405
------
2,152
Sweden - 3.0%
Electrolux AB - Ser. B
(APPL) ................................................. 11,910 165
Hennes & Mauritz AB - B
Shares (RETS) .......................................... 19,680 338
Nordic Baltic Holding AB
(BANK) ................................................. 121,620 693
Sandvik AB (MACH) ....................................... 3,220 65
Securitas AB - B Shares
(COMM) ................................................. 52,328 917
Telefonaktiebolaget LM
Ericsson AB* (TELE) .................................... 80,300 439
------
2,617
Switzerland - 4.3%
ABB , Ltd. *(ENGI) ...................................... 10,748 163
Adecco SA (COMM) ........................................ 17,300 815
181
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Switzerland - Continued
Credit Suisse Group -
Reg. (BANK) ............................................ 1,030 $ 169
Nestle SA (FOOD) ........................................ 6,720 1,429
Roche Holdings AG (HEAL) ................................ 5,500 396
UBS AG (BANK) ........................................... 5,422 777
------
3,749
Taiwan - 0.5%
Taiwan Semiconductor
(ETRN) ................................................. 239,400 445
United Kingdom - 24.7%
Abbey National First
Capital BV (BANK) ...................................... 9,461 166
AstraZeneca Group PLC
(HEAL) ................................................. 25,013 1,167
Autonomy Corp. PLC
*(SOFT) ............................................... 1,500 9
BG Group PLC (UTIG) ..................................... 13,522 53
BP Amoco PLC (OILX) ..................................... 61,000 502
British
Telelecommunications
PLC (TELS) ............................................. 22,000 139
Cable & Wireless PLC
(TELS) ................................................. 37,270 220
Cadbury Schwepps PLC
(FOOD) ................................................. 49,606 335
Celestica, Inc. (TELS) .................................. 11,670 601
Celltech Group PLC
*(HEAL) ............................................... 14,608 247
Centrica PLC (UTIG) ..................................... 30,900 99
Compass Group PLC*
(FOOD) ................................................. 162,730 1,304
David S. Smith Holdings
PLC (OILX) ............................................. 18,000 35
Diageo PLC (FOOD) ....................................... 84,512 928
Dimension Data Holdings
PLC (SOFT) ............................................. 12,500 48
Electrocomponents PLC
(ETRN) ................................................. 29,070 220
Flextronics
International Ltd. .....................................
(ELEQ) ................................................. 7,100 185
GKN PLC (PART) .......................................... 5,000 48
GlaxoSmithKline PLC*
(HEAL) ................................................. 135,981 3,830
Granada Compass PLC
(DIOP) ................................................. 155,558 327
Hays PLC (DIOP) ......................................... 43,876 113
Hilton Group PLC (LEIS) ................................. 20,000 67
J. Sainsbury PLC (RETF) ................................. 1,640 10
Kingfisher PLC (RETS) ................................... 49,628 269
Lattice Group* (ETRN) ................................... 35,522 79
Reckitt Benckiser PLC
(HNBA) ................................................. 2,000 29
Reed InTELErnational PLC
(HNBA) ................................................. 196,000 1,739
Rio Tinto PLC - Reg .....................................
(DIOP) ................................................. 47,663 847
Royal Bank of Scotland
Group (BANK) ........................................... 84,225 1,859
Shell Transport &
Trading Co. PLC (OILX) ................................. 227,587 1,894
SmartForce Public
Limited Co. - ADR
(COMP) ................................................. 6,166 217
Standard CharTELEred PLC
(BANK) ................................................. 32,000 411
Tesco PLC (RETF) ........................................ 114,360 413
Tomkins PLC (DIOP) ...................................... 97,506 251
Unilever PLC (CNSU) ..................................... 40,388 341
United Business MEDIdia
(MEDP) ................................................. 12,193 99
Vodafone AirTouch PLC
(TELS) ................................................. 677,984 1,504
WPP Group PLC *(COMM) ................................... 94,580 932
------
21,537
United States - 0.1%
Pohang Iron & Steel Co.,
Ltd. - ADR (STEE) ...................................... 6,153 $ 121
------
TOTAL COMMON STOCK- ................................ 93.5% 81,633
------
PREFERRED STOCK
Australia - 0.7%
News Corp., Ltd. (MEDI) ................................. 79,247 637
Brazil - 0.8%
Petroleo Brasiliero SA - ................................ 27,192 637
Petrobas (OILX)
------
TOTAL PREFERRED STOCK- ................................ 1.5% 1,274
------
RIGHTS
Portugal - 0.0%
Portugal Telecom (TELS)
expires 07/09/01 ........................................ 41,210 6
------
TOTAL RIGHTS- ................................ 0.0% 6
------
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 0.9%
Investment in joint trading account
3.97% due 07/02/01 ...................................... $ 827 827
Shares
Cash Equvalents - 15.4%
Navigator Securities
Lending Prime Portfolio** 13,433,155 13,433
TOTAL SHORT-TERM
INVESTMENTS 16.3% 14,260
---------- --------
TOTAL INVESTMENTS- 111.3% 97,173
Other Assets &
Liabilities, Net- (11.3)% (9,840)
---------- --------
NET ASSETS- 100.0% $ 87,333
========== ========
ADR-American Depository Receipts.
GDR-Global Depository Receipts.
* Non-income producing security.
** Represents investment of security lending collateral.
See notes to financial statements.
182
+++
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Bank ........................................ BANK $16,533 19.9%
Telecommunication Services .................. TELS 7,880 9.5
Health Care Products ........................ HEAL 7,775 9.4
Oil & Natural Gas Exploration &
Production ................................. OILX 7,281 8.8
Electronic Products & Services .............. ETRN 6,270 7.6
Commercial Sevices .......................... COMM 5,739 7.0
Food, Beverage & Tobacco .................... FOOD 5,245 6.3
Diversified Operations ...................... DIOP 3,769 4.5
Insurance ................................... INSU 3,565 4.3
Cosmetic & Personal Care .................... HNBA 2,073 2.5
Media - TV & Radio .......................... MEDI 1,842 2.2
Computer Equipment .......................... COMP 1,799 2.2
Media - Publishing .......................... MEDP 1,705 2.0
Retail - Department Stores .................. RETS 1,350 1.6
Telephone ................................... UTIT 1,287 1.5
Electrical Equipment ........................ ELEQ 989 1.2
Retail - Food ............................... RETF 877 1.1
Brokerage & Investment
Management ................................. FUND 805 1.0
Chemicals ................................... CHEM 783 0.9
Oil ......................................... OILS 743 0.9
Telecommunication Equipment ................. TELE 728 0.9
Consumer Miscellaneous ...................... CNSU 655 0.8
Real Estate Operations ...................... READ 621 0.7
Construction ................................ CONS 520 0.6
Financial Services .......................... FINL 486 0.6
Computer Software & Services ................ SOFT 378 0.5
Electric Power .............................. UTIE 276 0.3
Engineering & Construction .................. ENGI 231 0.3
Household Appliances &
Furnishings ................................ APPL 165 0.2
Machinery ................................... MACH 155 0.2
Natural Gas Distribution .................... UTIG 152 0.2
Steel ....................................... STEE 121 0.1
Leisure & Recreation ........................ LEIS 67 0.1
Auto & Truck Parts .......................... AUTO 48 0.1
------- -----
$82,913 100.0%
======= =====
183
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK
Aerospace & Defense - 1.4%
B.F. Goodrich Co. ....................................... 4,500 $ 171
Boeing Co. .............................................. 41,568 2,311
General Dynamics Corp. .................................. 9,300 724
Honeywell International, Inc. ........................... 37,862 1,325
Lockheed Martin Corp. ................................... 20,100 745
Northrop Grumman Corp. .................................. 3,900 312
Raytheon Co. ............................................ 17,400 462
United Technologies Corp. ............................... 22,400 1,641
------
7,691
Auto & Truck Parts - 0.3%
AutoZone, Inc. * ........................................ 5,600 210
Cooper Tire & Rubber Co. ................................ 3,200 45
Cummins Engine Co., Inc. ................................ 1,700 66
Dana Corp. .............................................. 6,515 152
Genuine Parts Co. ....................................... 8,650 273
Goodyear Tire & Rubber Co. .............................. 7,600 213
Johnson Controls, Inc. .................................. 4,100 297
Paccar, Inc. ............................................ 3,300 170
TRW, Inc. ............................................... 6,200 254
Visteon Corp. * ......................................... 6,166 113
------
1,793
Automobile - 0.8%
Delphi Automotive Systems Corp. ......................... 27,069 431
Ford Motor Co. .......................................... 87,036 2,137
General Motors Corp. .................................... 26,100 1,679
Navistar International Corp., Inc. -
Cl. B ................................................ 2,700 76
------
4,323
Bank - 6.6%
AmSouth Bancorp ......................................... 16,900 312
Bank of America Corp. ................................... 75,268 4,518
Bank of New York Co., Inc. .............................. 34,300 1,646
Bank One Corp. .......................................... 54,850 1,964
BB&T Corp. .............................................. 18,800 690
Charter One Financial, Inc. ............................. 9,450 301
Comerica, Inc. .......................................... 8,500 490
Fifth Third Bancorp ..................................... 27,054 1,625
First Union Corp. ....................................... 46,646 1,630
FleetBoston Financial Corp. ............................. 51,420 2,029
Golden West Financial Corp. ............................. 7,300 469
Huntington Bancshares, Inc. ............................. 12,031 197
JP Morgan Chase & Co. ................................... 93,150 4,154
KeyCorp ................................................. 20,400 531
Mellon Financial Corp. .................................. 22,800 1,049
National City Corp. ..................................... 28,500 877
Northern Trust Corp. .................................... 10,300 644
PNC Bank Corp. .......................................... 13,900 914
Regions Financial Corp. ................................. 11,200 358
SouthTrust Corp. ........................................ 15,600 406
State Street Corp. ...................................... 15,200 752
Suntrust Banks, Inc. .................................... 14,100 913
Synovus Financial Corp. ................................. 13,250 416
Union Planters Corp. .................................... 6,600 288
US Bancorp .............................................. 90,919 2,072
Wachovia Corp. .......................................... 10,100 719
Washington Mutual, Inc. ................................. 41,277 1,550
Wells Fargo & Co. ....................................... 80,900 3,756
Zions Bancorp ........................................... 4,300 254
------
35,524
Brokerage & Investment Management - 1.0%
Bear Stearns Cos., Inc. ................................. 5,032 297
Charles Schwab Corp. .................................... 64,675 989
Franklin Resources, Inc. ................................ 13,000 595
Morgan Stanley, Dean Witter, Discover &
Co ..................................................... 52,200 3,353
T. Rowe Price Group, Inc. ............................... 6,100 228
------
5,462
Business Services - 0.5%
Automatic Data Processing, Inc. ......................... 29,900 1,486
H&R Block, Inc. ......................................... 4,200 271
Interpublic Group Cos., Inc. ............................ 18,100 531
Robert Half International, Inc. ......................... 8,800 219
------
2,507
Chemical - 1.0%
Air Products & Chemicals, Inc. .......................... 10,500 480
Ashland, Inc. ........................................... 3,000 120
Dow Chemical Co. ........................................ 42,643 1,418
E.I. du Pont de Nemours & Co. ........................... 48,982 2,363
Eastman Chemical Co. .................................... 3,400 162
Engelhard Corp. ......................................... 6,100 157
Great Lakes Chemical Corp. .............................. 2,300 71
Hercules, Inc. .......................................... 4,600 52
Praxair, Inc. ........................................... 7,300 343
Rohm & Haas Co. ......................................... 10,227 337
Sigma-Aldrich Corp. ..................................... 3,700 143
------
5,646
Commercial Services - 0.9%
American Greetings Corp. - Cl. A ........................ 2,800 31
Avery Dennison Corp. .................................... 5,200 265
Cendant Corp. * ......................................... 40,899 798
Cintas Corp. ............................................ 7,900 365
Concord EFS, Inc. ....................................... 11,600 603
Convergys Corp. * ....................................... 8,000 242
Deluxe Corp. ............................................ 3,100 90
Ecolab, Inc. ............................................ 6,500 266
Equifax, Inc. ........................................... 7,200 264
Omnicom Group, Inc. ..................................... 9,000 774
Power One, Inc. * ....................................... 3,300 55
Quintiles Transnational Corp. * ......................... 6,500 164
R.R. Donnelley & Sons Co. ............................... 4,800 143
The Dun & Bradstreet Corp. * ............................ 7,700 258
184
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Commercial Services - Continued
TMP Worldwide, Inc. ..................................... 5,100 $ 306
-------
4,624
Computer Equipment - 5.9%
Advanced Micro Devices, Inc. ............................ 15,700 453
Apple Computer, Inc. * .................................. 16,000 372
Compaq Computer Corp. ................................... 79,011 1,224
Dell Computer Corp. * ................................... 122,500 3,203
EMC Corp. ............................................... 104,912 3,048
Gateway, Inc. * ......................................... 15,100 248
Hewlett-Packard Co. ..................................... 92,400 2,643
Intel Corp. ............................................. 316,400 9,255
International Business Machines Corp. ................... 81,700 9,232
Lexmark International Group, Inc. -
Cl. A. * ............................................. 6,100 410
Network Appliance, Inc. * ............................... 15,000 206
Palm, Inc. .............................................. 24,561 149
Veritas Software Corp. * ................................ 19,100 1,271
Xerox Corp. ............................................. 32,500 311
-------
32,025
Computer Software & Services - 6.7%
Adobe Systems, Inc. ..................................... 11,200 526
Autodesk, Inc. .......................................... 2,400 90
BMC Software, Inc. ...................................... 11,500 259
BroadVision, Inc. * ..................................... 11,100 56
Cabletron Systems, Inc. * ............................... 9,400 215
Citrix Systems, Inc. * .................................. 8,800 307
Computer Associates International, Inc. ................ 26,925 969
Computer Sciences Corp. * ............................... 8,100 280
Compuware Corp. * ....................................... 17,500 245
Electronic Data Systems Corp. ........................... 22,300 1,394
First Data Corp. ........................................ 18,500 1,189
Fiserv, Inc. ............................................ 5,600 358
IMS Health, Inc. ........................................ 14,200 405
Intuit, Inc. * .......................................... 9,600 384
Mercury Interactive Corp. * ............................. 3,600 216
Microsoft Corp. ......................................... 253,500 18,505
NCR Corp. * ............................................. 4,800 226
Novell, Inc. * .......................................... 14,100 80
Oracle Corp. * .......................................... 263,500 5,006
Parametric Technology Corp. * ........................... 11,800 165
Peoplesoft, Inc. ........................................ 14,100 694
Progressive Corp. ....................................... 3,400 460
Sapient Corp. ........................................... 5,000 49
Siebel Systems, Inc. * .................................. 21,800 1,022
Sun Microsystems, Inc. * ................................ 154,400 2,427
Unisys Corp. * .......................................... 16,000 235
Yahoo!, Inc. * .......................................... 27,400 548
-------
36,310
Construction - 0.1%
Stanley Works ........................................... 3,800 159
Vulcan Materials Co. .................................... 4,800 258
-------
417
Consumer Miscellaneous - 0.5%
Black & Decker Corp. .................................... 3,500 138
Clorox Co. .............................................. 11,100 376
Dollar General Corp. .................................... 15,646 305
Fortune Brands, Inc. .................................... 7,300 280
Harley-Davidson, Inc. ................................... 14,200 669
Newell Rubbermaid, Inc. ................................. 13,116 329
Parker-Hannifin Corp. ................................... 5,650 240
Sherwin-Williams Co. .................................... 7,000 155
Snap-On, Inc. ........................................... 2,500 60
Tupperware Corp. ........................................ 2,500 59
-------
2,611
Container - 0.1%
Bemis Co., Inc. ......................................... 2,400 96
Pactiv Corp. * .......................................... 7,400 99
Sealed Air Corp. * ...................................... 3,589 134
-------
329
Cosmetic & Personal Care - 1.8%
Alberto-Culver Co. - Cl. B .............................. 2,700 114
Avon Products, Inc. ..................................... 11,700 541
Colgate-Palmolive Co. ................................... 26,800 1,581
Gillette Co. ............................................ 50,500 1,464
International Flavors & Fragrances, Inc. ................ 4,400 111
Leggett & Platt, Inc. ................................... 9,900 218
Procter & Gamble Co. .................................... 60,700 3,873
Unilever NV - NY Shares ................................. 26,782 1,595
-------
9,497
Diversified Operations - 6.5%
Amgen, Inc. ............................................. 49,300 2,992
Corning, Inc. ........................................... 43,100 720
Costco Wholesale Corp. * ................................ 21,000 863
Crane Co. ............................................... 2,950 91
Danaher Corp. ........................................... 6,800 381
Eaton Corp. ............................................. 3,100 217
General Electric Co. .................................... 468,000 22,815
Illinois Tool Works, Inc. ............................... 14,100 893
ITT Industries, Inc. .................................... 4,200 186
National Service Industries, Inc. ....................... 1,700 38
Pall Corp. .............................................. 5,300 125
PPG Industries, Inc. .................................... 7,900 415
Textron, Inc. ........................................... 6,700 369
Tyco International, Ltd. ................................ 90,930 4,956
W.W. Grainger, Inc. ..................................... 4,700 193
-------
35,254
Electric Power - 2.8%
AES Corp. * ............................................. 24,900 1,072
Allegheny Energy, Inc. .................................. 5,800 280
Ameren Corp. ............................................ 6,500 278
185
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Electric Power - Continued
American Electric Power Co. ............................. 15,260 $ 705
Calpine Corp. * ......................................... 14,300 541
Cinergy Corp. ........................................... 7,500 262
CMS Energy Corp. ........................................ 5,700 159
Consolidated Edison, Inc. ............................... 10,100 402
Dominion Resources, Inc. ................................ 11,994 721
DTE Energy Co. .......................................... 8,000 372
Duke Energy Co. ......................................... 36,488 1,423
Edison International .................................... 14,300 159
Emerson Electric Co. .................................... 20,100 1,216
Entergy Corp. ........................................... 10,500 403
Exelon Corp. ............................................ 15,150 971
Firstenergy Corp. ....................................... 11,200 360
FPL Group, Inc. ......................................... 8,300 500
GPU, Inc. ............................................... 6,100 214
Mirant Corp. ............................................ 15,868 546
Niagara Mohawk Holdings, Inc. ........................... 7,800 138
NiSource, Inc. .......................................... 9,149 250
PG&E Corp. .............................................. 19,900 223
Pinnacle West Capital Corp. ............................. 4,400 209
PPL Corp. ............................................... 6,900 380
Progress Energy, Inc. ................................... 9,556 429
Public Services Enterprise Group, Inc. .................. 10,100 494
Reliant Energy, Inc. .................................... 14,224 458
Southern Co. ............................................ 32,000 744
TXU Corp. ............................................... 12,312 593
Xcel Energy, Inc. ....................................... 15,550 442
-------
14,944
Electrical Equipment - 0.2%
American Power Conversion ............................... 8,300 131
Best Buy Co., Inc. ...................................... 9,700 616
Cooper Industries, Inc. ................................. 4,000 158
Molex, Inc. ............................................. 9,550 349
-------
1,254
Electronic Products & Services - 3.9%
Agilent Technologies, Inc. * ............................ 21,374 695
Altera Corp. * .......................................... 18,600 539
Analog Devices, Inc. * .................................. 17,200 744
Applera Corporation - Applied Biosystems
Group .................................................. 10,000 268
Applied Materials, Inc. * ............................... 38,400 1,885
Applied Micro Circuits Corp. * .......................... 14,100 243
Ball Corp. .............................................. 1,400 67
Broadcom Corp. - Cl. A. * ............................... 12,900 552
Cisco Systems, Inc. * ................................... 344,000 6,261
Conexant Systems, Inc. * ................................ 10,500 94
Jabil Circuit, Inc. * ................................... 9,000 278
KLA-Tencor Corp. * ...................................... 8,700 509
LSI Logic Corp. * ....................................... 17,200 323
Maxim Integrated Products, Inc. * ....................... 15,100 668
Motorola, Inc. .......................................... 103,895 1,720
National Semiconductor Corp. * .......................... 8,700 253
Novellus Systems, Inc. * ................................ 6,500 369
PerkinElmer, Inc. ....................................... 5,000 138
QLogic Corp. * .......................................... 4,600 296
Rockwell International Corp. * .......................... 8,900 339
Sanmina Corp. ........................................... 14,100 330
Solectron Corp. * ....................................... 30,200 553
Tektronix, Inc. ......................................... 4,000 109
Teradyne, Inc. * ........................................ 8,200 271
Texas Instruments, Inc. ................................. 82,100 2,586
Thomas & Betts Corp. .................................... 2,500 55
Vitesse Semiconductor Corp. * ........................... 9,100 191
Xilinx, Inc. * .......................................... 15,300 631
-------
20,967
Energy - Alternative Source - 0.4%
Dynegy, Inc. - Cl.A ..................................... 15,100 702
El Paso Corp. ........................................... 24,362 1,280
-------
1,982
Engineering & Construction - 0.0%
Fluor Corp. * ........................................... 3,300 149
Financial Services - 1.8%
American Express Co. .................................... 63,000 2,444
Household International, Inc. ........................... 22,166 1,478
Lehman Brothers Holdings, Inc. .......................... 11,700 910
Merrill Lynch & Co., Inc. ............................... 39,300 2,329
Paychex, Inc. ........................................... 17,950 718
Pitney Bowes, Inc. ...................................... 11,800 497
Providian Financial Corp. * ............................. 13,700 811
Stillwell Financial, Inc. ............................... 10,900 366
-------
9,553
Food, Beverage & Tobacco - 4.3%
Adolph Coors Co. - Cl. B ................................ 1,600 80
Anheuser-Busch Cos., Inc. ............................... 42,800 1,763
Archer Daniels Midland Co. .............................. 30,266 394
Brown-Forman Corp. - Cl. B .............................. 3,300 211
Campbell Soup Co. ....................................... 19,700 507
Coca-Cola Co. ........................................... 117,600 5,292
Coca-Cola Enterprises, Inc. ............................. 20,300 332
ConAgra, Inc. ........................................... 25,700 509
General Mills, Inc. ..................................... 13,500 591
H.J. Heinz Co. .......................................... 16,100 658
Hershey Foods Corp. ..................................... 6,600 407
Kellogg Co. ............................................. 19,600 569
Pepsi Bottling Group, Inc. .............................. 6,400 257
PepsiCo, Inc. ........................................... 68,600 3,032
Philip Morris Cos., Inc. ................................ 103,300 5,243
Quaker Oats Co. ......................................... 6,400 584
Ralston-Ralston Purina Group ............................ 14,300 429
Sara Lee Corp. .......................................... 37,700 714
SuperValu, Inc. ......................................... 5,600 98
Sysco Corp. ............................................. 31,800 863
UST, Inc. ............................................... 8,300 240
186
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Food, Beverage & Tobacco - Continued
Wm. Wrigley Jr. Co. ..................................... 10,600 $ 497
-------
23,270
Health Care Products - 11.0%
Abbott Laboratories ..................................... 73,200 3,514
Allergan, Inc. .......................................... 6,200 530
American Home Products Corp. ............................ 62,000 3,623
Bausch & Lomb, Inc. ..................................... 2,200 80
Baxter International, Inc. .............................. 28,200 1,382
Becton, Dickinson & Co. ................................. 11,700 419
Biomet, Inc. ............................................ 8,550 411
Boston Scientific Corp. * ............................... 19,100 325
Bristol-Myers Squibb Co. ................................ 91,300 4,775
C.R. Bard, Inc. ......................................... 2,200 125
Cardinal Health, Inc. ................................... 21,350 1,473
Chiron Corp. * .......................................... 9,200 469
Eli Lilly & Co. ......................................... 52,700 3,900
Forest Laboratories, Inc. * ............................. 8,500 603
Guidant Corp. * ......................................... 14,700 529
Johnson & Johnson ....................................... 143,378 7,169
King Pharmaceuticals, Inc. * ............................ 8,300 446
McKesson HBOC, Inc. ..................................... 13,233 491
MedImmune, Inc. * ....................................... 10,000 472
Medtronic, Inc. ......................................... 57,500 2,646
Merck & Co., Inc. ....................................... 107,800 6,889
Millipore Corp. ......................................... 1,900 118
Pfizer, Inc. ............................................ 297,175 11,902
Pharmacia Corp. ......................................... 61,805 2,840
Schering-Plough Corp. ................................... 69,300 2,511
Stryker Corp. ........................................... 9,000 494
UnitedHealth Group, Inc. ................................ 15,300 945
Watson Pharmaceuticals, Inc. * .......................... 4,800 296
-------
59,377
Health Care Services - 0.6%
Biogen, Inc. * .......................................... 7,100 386
HCA-The Healthcare Corp. ................................ 25,750 1,164
Healthsouth Corp. * ..................................... 19,800 316
Humana, Inc. * .......................................... 7,200 71
Manor Care, Inc. * ...................................... 4,400 140
St. Jude Medical, Inc. .................................. 4,200 252
Tenet Healthcare Corp. * ................................ 15,400 794
Wellpoint Health Networks, Inc. * ....................... 3,200 301
-------
3,424
Household Appliances & Furnishings - 0.1%
Maytag Corp. ............................................ 3,500 102
Whirlpool Corp. ......................................... 3,100 194
-------
296
Housing - 0.1%
Centex Corp. ............................................ 2,800 114
Masco Corp. ............................................. 21,600 539
Pulte Corp. ............................................. 2,200 94
-------
747
Insurance - 4.1%
Aetna US Healthcare, Inc. * ............................. 6,700 173
AFLAC, Inc. ............................................. 24,900 784
Allstate Corp. .......................................... 34,600 1,522
Ambac Financial Group, Inc. ............................. 5,000 291
American General Corp. .................................. 23,842 1,108
American International Group, Inc. ...................... 109,729 9,437
Aon Corp. ............................................... 11,900 417
Chubb Corp. ............................................. 8,300 643
Cigna Corp. ............................................. 7,200 690
Cincinnati Financial Corp. .............................. 7,900 312
Conseco, Inc. ........................................... 15,391 210
Hartford Financial Services Group, Inc. ................. 11,100 759
Jefferson-Pilot Corp. ................................... 7,575 366
John Hancock Financial Services ......................... 14,400 580
Lincoln National Corp. .................................. 9,000 466
Marsh & McLennan Cos., Inc. ............................. 13,100 1,323
MBIA, Inc. .............................................. 7,100 395
Metlife, Inc. ........................................... 35,700 1,106
MGIC Investment Corp. ................................... 4,900 356
Safeco Corp. ............................................ 6,100 180
St. Paul Cos., Inc. ..................................... 10,214 518
Torchmark, Inc. ......................................... 6,300 253
UnumProvident Corp. ..................................... 11,720 376
-------
22,265
Leisure & Recreation - 0.7%
Brunswick Corp. ......................................... 3,800 91
Carnival Corp. .......................................... 27,300 838
Eastman Kodak Co. ....................................... 13,300 621
Harrah's Entertainment, Inc. * .......................... 5,200 183
Hasbro, Inc. ............................................ 7,125 103
Hilton Hotels Corp. ..................................... 17,500 203
Loews Corp. ............................................. 9,200 593
Mattel, Inc. ............................................ 20,900 395
Sabre Group Holdings, Inc. * ............................ 6,274 314
Starwood Hotels & Resorts Worldwide, Inc. ............... 8,900 332
-------
3,673
Machinery - 0.4%
Caterpillar, Inc. ....................................... 16,500 826
Deere & Co. ............................................. 10,700 405
Dover Corp. ............................................. 9,500 358
FMC Corp. * ............................................. 1,400 96
Ingersoll-Rand Co. ...................................... 7,800 321
McDermott International, Inc. ........................... 2,100 25
Thermo Electron Corp. * ................................. 8,600 189
-------
2,220
187
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Media - Publishing - 0.4%
Dow Jones & Co., Inc. ................................... 4,400 $ 263
Gannett Co., Inc. ....................................... 12,300 810
Knight-Ridder, Inc. ..................................... 3,300 196
Meredith Corp. .......................................... 2,200 79
New York Times Co. - Cl. A .............................. 7,300 306
Tribune Co. ............................................. 14,265 571
-------
2,225
Media - TV & Radio - 4.3%
AOL Time Warner, Inc. * ................................. 208,550 11,053
Clear Channel Communications, Inc. ...................... 27,800 1,743
Comcast Corp. - Cl. A ................................... 44,600 1,936
McGraw-Hill Cos., Inc. .................................. 9,200 609
The Walt Disney Co. ..................................... 98,500 2,846
Univision Communications, Inc. -
Cl. A.* ................................................. 9,500 406
Viacom, Inc. - Cl. B. * ................................. 83,562 4,324
-------
22,917
Metal Production & Fabrication - 0.0%
Timken Co. .............................................. 2,900 49
Worthington Industries, Inc. ............................ 3,700 50
-------
99
Metals & Mining - 0.9%
Alcan Aluminum, Ltd. .................................... 15,000 630
Alcoa, Inc. ............................................. 41,088 1,619
Inco, Ltd. .............................................. 9,400 162
Minnesota Mining & Manufacturing Co. .................... 18,800 2,145
Newmont Mining Corp. .................................... 9,401 175
Phelps Dodge Corp. ...................................... 3,396 141
-------
4,872
Natural Gas Distribution - 0.5%
Enron Corp. ............................................. 35,500 1,740
KeySpan Corp. ........................................... 6,400 233
Nicor, Inc. ............................................. 2,000 78
Peoples Energy Corp. .................................... 1,900 76
Williams Cos., Inc. ..................................... 22,600 745
-------
2,872
Oil - 1.3%
Baker Hughes, Inc. ...................................... 15,600 522
ONEOK, Inc. ............................................. 2,400 47
Royal Dutch Petroleum Co. - NY
Shares .................................................. 100,800 5,874
Tosco Corp. ............................................. 7,100 313
-------
6,756
Oil & Natural Gas Exploration & Production - 4.8%
Amerada Hess Corp. ...................................... 4,200 340
Anadarko Petroleum Corp. ................................ 11,662 630
Apache Corp. ............................................ 5,700 289
Burlington Resources, Inc. .............................. 10,510 420
Chevron Corp. ........................................... 30,400 2,751
Conoco, Inc. - Cl. B .................................... 29,145 842
Devon Energy Corp. ...................................... 6,000 315
EOG Resources, Inc. ..................................... 5,600 199
Exxon Mobil Corp. ....................................... 162,455 14,191
Kerr-McGee Corp. ........................................ 4,470 296
Kinder Morgan, Inc. ..................................... 5,400 271
Noble Drilling Corp. * .................................. 6,600 216
Occidental Petroleum Corp. .............................. 18,200 484
Phillips Petroleum Co. .................................. 11,900 678
Rowan Cos., Inc. * ...................................... 4,000 89
Sempra Energy ........................................... 9,704 265
Sunoco, Inc. ............................................ 3,800 139
Texaco, Inc. ............................................ 26,100 1,738
Transocean Sedco Forex, Inc. ............................ 15,236 629
Unocal Corp. ............................................ 11,400 389
USX-Marathon Group ...................................... 14,500 428
-------
25,599
Oil - Equipment & Service - 0.5%
Halliburton Co. ......................................... 20,600 734
Nabors Industries, Inc. * ............................... 7,100 264
Schlumberger, Ltd. ...................................... 27,200 1,432
-------
2,430
Paper & Forest Products - 0.7%
Boise Cascade Corp. ..................................... 2,500 88
Georgia-Pacific Corp. ................................... 10,526 356
International Paper Co. ................................. 22,467 802
Kimberly-Clark Corp. .................................... 25,000 1,398
Louisiana-Pacific Corp. ................................. 4,600 54
Mead Corp. .............................................. 4,400 120
Potlatch Corp. .......................................... 1,200 41
Temple-Inland, Inc. ..................................... 2,200 117
Westvaco Corp. .......................................... 4,300 105
Weyerhaeuser Co. ........................................ 10,500 577
Willamette Industries, Inc. ............................. 5,400 267
-------
3,925
Personal & Commercial Lending - 2.8%
Capital One Financial Corp. ............................. 10,200 612
Citigroup, Inc. ......................................... 236,790 12,512
Countrywide Credit Industries, Inc. ..................... 5,500 252
MBNA Corp. .............................................. 40,575 1,337
USA Education, Inc. ..................................... 7,900 577
-------
15,290
Pollution Control - 0.2%
Allied Waste Industries, Inc. * ......................... 8,600 161
Waste Management, Inc. .................................. 29,057 895
-------
1,056
Precious Metals/Gems/Stones - 0.1%
Barrick Gold Corp. ...................................... 19,300 292
188
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Precious Metals/Gems/Stones - Continued
Freeport-McMoRan Copper & Gold, Inc. -
Cl. B .................................................. 6,300 $ 70
Homestake Mining Co. .................................... 11,100 86
Placer Dome, Inc. ....................................... 14,100 138
-------
586
Real Estate Development - 0.0%
KB Home ................................................. 2,100 63
Real Estate Investment Trust - 0.1%
Marriott International, Inc. - Cl. A .................... 11,800 559
Retail - Department Stores - 4.7%
Bed Bath & Beyond, Inc. * ............................... 13,100 409
Circuit City Stores, Inc. ............................... 8,700 157
Dillard's, Inc. - Cl. A ................................. 3,600 55
Federated Department Stores, Inc. * ..................... 9,200 391
Gap, Inc. ............................................... 41,075 1,191
Harcourt General, Inc. .................................. 3,500 204
Home Depot, Inc. ........................................ 109,650 5,104
J.C. Penney Co., Inc. ................................... 12,400 327
K-mart Corp. * .......................................... 22,900 263
Kohl's Corp. ............................................ 15,500 972
Limited, Inc. ........................................... 20,052 331
Lowe's Cos., Inc. ....................................... 18,200 1,320
May Department Stores Co. ............................... 13,950 478
Nordstrom, Inc. ......................................... 7,000 130
Office Depot, Inc. ...................................... 12,900 134
RadioShack Corp. ........................................ 8,800 268
Sears, Roebuck & Co. .................................... 15,500 656
Staples, Inc. * ......................................... 20,750 332
Target Corp. ............................................ 42,600 1,474
Tiffany & Co. ........................................... 6,900 250
TJX Cos., Inc. .......................................... 13,400 427
Toys "R" Us, Inc. * ..................................... 9,300 230
Wal-Mart Stores, Inc. ................................... 210,400 10,268
-------
25,371
Retail - Drug Stores - 0.4%
CVS Corp. ............................................... 18,300 706
Longs Drug Stores Corp. ................................. 1,900 41
Walgreen Co. ............................................ 48,200 1,646
-------
2,393
Retail - Food - 1.0%
Albertson's, Inc. ....................................... 19,177 575
Darden Restaurants, Inc. ................................ 5,300 148
McDonald's Corp. ........................................ 61,800 1,672
Safeway, Inc. * ......................................... 24,200 1,162
Starbucks Corp. * ....................................... 17,400 400
The Kroger Co. * ........................................ 39,200 980
Tricon Global Restaurants, Inc. * ....................... 7,050 310
Wendy's International, Inc. ............................. 4,900 125
Winn-Dixie Stores, Inc. ................................. 6,700 175
-------
5,547
Retailers - Broadline - 0.0%
Big Lots, Inc. .......................................... 5,300 73
Shoe & Apparel Manufacturing - 0.2%
Liz Claiborne, Inc. ..................................... 2,300 116
Nike, Inc. - Cl. B ...................................... 12,400 520
Reebok International, Ltd. .............................. 2,400 77
V.F. Corp. .............................................. 5,800 211
-------
924
Steel - 0.1%
Allegheny Technologies, Inc. ............................ 3,750 68
Nucor Corp. ............................................. 3,600 176
USX-U.S. Steel Group, Inc. .............................. 3,800 76
-------
320
Telecommunication Equipment - 1.6%
ADC Telecommunications, Inc. * .......................... 36,700 242
Andrew Corp. * .......................................... 3,450 64
Comverse Technology, Inc. ............................... 7,700 440
JDS Uniphase Corp. * .................................... 60,900 761
Linear Technology Corp. ................................. 14,800 654
Lucent Technologies, Inc. ............................... 161,925 1,004
Micron Technology, Inc. ................................. 27,700 1,139
Nortel Networks Corp. ................................... 151,000 1,373
Qualcomm, Inc. * ........................................ 36,100 2,111
Scientific-Atlanta, Inc. ................................ 7,400 300
Symbol Technologies, Inc. ............................... 10,300 229
Tellabs, Inc. * ......................................... 19,200 372
-------
8,689
Telecommunication Services - 2.1%
Avaya , Inc. * .......................................... 14,102 193
Citizens Communications Co. ............................. 14,400 173
Global Crossing, Ltd. * ................................. 41,490 358
Nextel Communications, Inc. - Cl. A. * .................. 36,700 642
Sprint PCS (PCS Group). * ............................... 43,500 1,051
Verizon Communications .................................. 127,174 6,804
WorldCom, Inc. * ........................................ 136,477 1,938
-------
11,159
Telephone - 3.4%
Alltel Corp. ............................................ 14,600 894
AT&T Corp. .............................................. 161,707 3,558
BellSouth Corp. ......................................... 88,600 3,568
CenturyTel, Inc. ........................................ 7,100 215
Constellation Energy Group .............................. 7,500 319
Qwest Communications International, Inc. ................ 78,462 2,501
SBC Communications, Inc. ................................ 158,297 6,341
Sprint Corp. ............................................ 42,400 906
-------
18,302
Transportation Services - 0.7%
AMR Corp. * ............................................. 7,500 271
Burlington Northern Santa Fe Corp. ...................... 18,900 570
189
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
(000's)
COMMON STOCK - CONTINUED
Transportation Services - Continued
CSX Corp. ............................................... 9,900 $ 359
Delta Air Lines, Inc. ................................... 5,800 256
Fedex Corp. * ........................................... 14,300 575
Norfolk Southern Corp. .................................. 18,000 372
Ryder System, Inc. ...................................... 2,600 51
Southwest Airlines Co. .................................. 35,250 652
U.S. Airways Group, Inc. * .............................. 2,900 70
Union Pacific Corp. ..................................... 11,600 637
-------
3,813
U.S. Government Agencies - 1.2%
Federal Home Loan Mortgage Corp. ........................ 33,000 2,310
Federal National Mortgage Assoc ......................... 46,900 3,994
-------
6,304
-------
TOTAL COMMON STOCK- ............... 96.5% 520,278
-------
Par
Value
(000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account
3.97% due 07/02/01 ...................................... $ 17,751 17,751
U.S. Treasury Bills
3.435% due 09/13/01# .................................... 1,245 1,236
-------- --------
TOTAL SHORT-TERM
INVESTMENTS- ............... 3.5% 18,987
-------- --------
TOTAL INVESTMENTS- ............... 100.0% 539,265
Other Assets & Liabilities, Net- ............... (0.0)% (118)
-------- --------
NET ASSETS- ............... 100.0% $539,147
======== ========
* Non-income producing security.
# All or a portion of the principle amount of this security was pledged to cover
initial margin requirements for open future contracts.
See notes to financial statements.
190
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.6%
Argo-Tech Corp.
8.625% due 10/01/07 ..................................... 415 $ 371
K&F Industries, Inc. - Sr. Sub. Notes
9.25% due 10/15/07 ...................................... 225 232
-------
603
Asset Backed - 0.4%
Hayes Lemmerz International , Inc.
Sr. Notes 144A
11.875% due 06/15/06 .................................... 150 148
Auto & Truck Parts - 5.0%
Accuride Corp. - Sr. Sub. Notes
9.25% due 02/01/08 ...................................... 375 248
Delco Remy International, Inc.
10.625% due 08/01/06 .................................... 195 198
Delco Remy International, Inc. - Sr Notes
8.625% due 12/15/07 ..................................... 50 49
Dura Operating Corp.
9.0% due 05/01/09 ....................................... 235 217
Federal Mogul Corp.
7.5% due 01/15/09 ....................................... 750 90
Federal Mogul Corp. - Sr. Notes
8.8% due 04/15/07 ....................................... 100 13
Hayes Lemmerz International, Inc.
9.125% due 07/15/07 ..................................... 575 431
Hayes Lemmerz International, Inc. - Ser. B
9.125% due 07/15/07 ..................................... 5 4
LDM Technologies, Inc.
10.75% due 01/15/07 ..................................... 135 81
Lear Corp. - Ser. B
7.96% due 05/15/05 ...................................... 140 141
8.11% due 05/15/09 ...................................... 300 298
Lear Corp. - Sub. Notes
9.5% due 07/15/06 ....................................... 100 104
Numatics, Inc. - Ser. B
9.625% due 04/01/08 ..................................... 100 63
-------
1,937
Automobile - 0.5%
Navistar International Corp.- Sr Notes 144A
9.375% due 06/01/06 ..................................... 35 35
Navistar International - Sr. Sub Notes Ser. B
8.0% due 02/01/08 ....................................... 150 140
-------
175
Bank - 0.3%
Western Financial Bank - Sub.
8.875% due 08/01/07 ..................................... 125 118
Business Services - 0.2%
Express Scripts, Inc. - Sr. Notes
9.625% due 06/15/09 ..................................... 80 87
Chemical - 3.5%
Acetex Corp. - Sr. Notes
9.75% due 10/01/03 ...................................... 120 120
Georgia Gulf Corp.
10.375% due 11/01/07 .................................... 400 400
Lyondell Chemical Co.
9.875% due 05/01/07 ..................................... 345 345
Lyondell Chemical Co. - Debs
9.8% due 02/01/20 ....................................... 110 107
Lyondell Chemical Co. - Sec. Notes Ser. A
9.625% due 05/01/07 ..................................... 100 100
PCI Chemicals Canada, Inc.
9.25% due 10/15/07 ...................................... 90 43
PMD Group, Inc. 144A
11.0% due 02/28/11 ...................................... 15 15
Sterling Chemicals, Inc. - Ser. B
12.375% due 07/15/06 .................................... 125 103
Texas Petrochemical Corp. - Sr. Sub.
Notes
11.125% due 07/01/06 .................................... 150 133
-------
1,366
Chemicals - 0.2%
Hexcel Corp. Sr. Sub Notes 144A
9.75% due 01/15/09 ...................................... 85 82
Coal - 0.7%
P&L Coal Holdings Corp.
9.625% due 05/15/08 ..................................... 242 254
Commercial Services - 3.1%
Allied Waste North America
10.0% due 08/01/09 ...................................... 450 464
American Color Graphics, Inc.
12.75% due 08/01/05 ..................................... 250 245
Pierce Leahy Command Co.
8.125% due 05/15/08 ..................................... 75 75
Pierce Leahy Corp. - Sr. Sub. Notes
9.125% due 07/15/07 ..................................... 220 222
Waste Management, Inc.
6.875% due 05/15/09 ..................................... 200 194
-------
1,200
Computer Equipment - 0.5%
Seagate Technology, Inc. 144A
12.5% due 11/15/07 ...................................... 210 208
Computer Software & Services - 1.2%
Concentric Network Corp. - Sr. Notes
12.75% due 12/15/07 ..................................... 150 51
Exodus Communications, Inc.
10.75% due 12/15/09 ..................................... 300 102
Exodus Communications, Inc. - Sr Notes
11.25% due 07/01/08 ..................................... 150 52
11.625% due 07/15/10 .................................... 650 231
PSINet, Inc. - Sr. Notes
10.0% due 02/15/05 ...................................... 200 13
191
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Computer Software & Services - Continued
PSINet, Inc. - Sr. Notes
11.0% due 08/01/09 ...................................... 50 $ 3
11.5% due 11/01/08 ...................................... 375 24
-------
476
Construction - 0.4%
Beazer Homes USA , Inc. - Sr. Notes
8.625% due 05/15/11 ..................................... 115 116
Kansas City Southern Railway Co.
9.5% due 10/01/08 ....................................... 25 26
-------
142
Consumer Miscellaneous - 2.0%
Hasbro, Inc. - Notes
7.95% due 03/15/03 ...................................... 83 80
8.5% due 03/15/06 ....................................... 34 33
Lin Holdings Corp. - Sr. Disc. Notes
1.0% due 03/01/08 ....................................... 750 579
Resolution Performance Products - Sr. Sub Notes
13.5% due 11/15/10 ...................................... 65 70
-------
762
Container - 3.8%
BWAY Corp. - Ser. B
10.25% due 04/15/07 ..................................... 175 166
Crown Cork & Seal Co., Inc. - Notes
8.375% due 01/15/05 ..................................... 175 72
Gaylord Container Corp. - Sr. Notes Ser. B
9.375% due 06/15/07 ..................................... 645 407
Owens-Illinois Inc.
7.85% due 05/15/04 ...................................... 165 130
Owens-Ilinois, Inc. - Debs
7.5% due 05/15/10 ....................................... 210 149
Stone Container Corp.
9.75% due 02/01/11 ...................................... 350 356
Stone Container Corp. - Sr. Notes 144A
9.25% due 02/01/08 ...................................... 200 203
-------
1,483
Diversified Operations - 1.0%
Consumers International - Sr. Notes
10.25% due 04/01/05 ..................................... 350 112
Pacifica Papers, Inc. - Sr. Notes
10.0% due 03/15/09 ...................................... 50 53
Roller Bearing Co. America, Inc. - Ser. B
9.625% due 06/15/07 ..................................... 30 28
SCG Holdings Corp.
12.0% due 08/01/09 ...................................... 229 144
Westinghouse Air Brake Co. - Sr Notes
9.375% due 06/15/05 ..................................... 45 45
-------
382
Electric Power - 3.9%
AES Corp. - Sr. Notes
8.875% due 02/15/11 ..................................... 485 473
Calpine Corp. - Sr. Notes
8.5% due 02/15/11 ....................................... 600 577
8.625% due 08/15/10 ..................................... 100 97
CMS Energy Corp. Sr. Notes
7.5% due 01/15/09 ....................................... 200 186
Western Resources, Inc.
7.125% due 08/01/09 ..................................... 15 14
Western Resources, Inc. - Sr. Notes
6.875% due 08/01/04 ..................................... 180 172
-------
1,519
Electrical Equipment - 2.0%
Amkor Technologies, Inc.
9.25% due 05/01/06 ...................................... 50 48
9.25% due 02/15/08 ...................................... 475 446
Amkor Technologies, Inc. - Sr. Sub Notes
10.5% due 05/01/09 ...................................... 175 165
Wesco Distribution, Inc. - Ser. B
9.125% due 06/01/08 ..................................... 100 95
-------
754
Electronic Products & Services - 0.3%
ViaSystems, Inc. Sr. Sub Notes Ser B
9.75% due 06/01/07 ...................................... 230 115
Financial Services - 0.6%
AMSC Acquisition Co., Inc. - Ser. B
12.25% due 03/31/08 ..................................... 50 13
Tembec Finance Corp. - Sr. Notes
9.875% due 09/30/05 ..................................... 195 201
-------
214
Food, Beverage & Tobacco - 2.0%
Aurora Foods, Inc. - Sr. Sub Notes
9.875% due 02/15/07 ..................................... 230 1202
8.75% due 07/01/08 ...................................... 75 62
Azurix Corp.
10.75% due 02/15/10 ..................................... 145 146
Nash-Finch Co. - Ser. B
8.5% due 05/01/08 ....................................... 225 213
New World Pasta Co.
9.25% due 02/15/09 ...................................... 225 148
-------
771
Health Care Products - 4.8%
Alaris Medical Systems, Inc.
9.75% due 12/01/06 ...................................... 850 595
Alaris Medical, Inc. - Sr. Disc Notes
1.0% due 08/01/08 ....................................... 150 38
Bergen Brunswig Corp.
7.375% due 01/15/03 ..................................... 250 249
Conmed Corp.
9.0% due 03/15/08 ....................................... 340 333
192
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Health Care Products - Continued
Mediq, Inc.
11.0% due 06/01/08 ...................................... $ 125 $ 1
Owens & Minor, Inc.
10.875% due 06/01/06 .................................... 131 138
Owens Illinois, Inc.
7.15% due 05/15/05 ...................................... 315 233
Packard Bioscience, Co. - Sr. Sub Notes
9.375% due 03/01/07 ..................................... 125 118
Warner Chilcott, Inc.
12.625% due 02/15/08 .................................... 125 138
-------
1,843
Health Care Services - 3.3%
Beverly Enterprises, Inc.
9.0% due 02/15/06 ....................................... 410 419
9.625% due 04/15/09 ..................................... 130 133
Bio-Rad Laboratories, Inc.
11.625% due 02/15/07 .................................... 107 116
Fisher Scientific International, Inc. - Sr. Sub Notes
9.0% due 02/01/08 ....................................... 125 124
HCA-The Healthcare Corp. - Notes
8.75% due 09/01/10 ...................................... 65 69
Manor Care, Inc. - Sr. Notes 144A
8.0% due 03/01/08 ....................................... 25 25
Omnicare, Inc. - Sr. Sub Notes 144A
8.125% due 03/15/11 ..................................... 50 52
Tenet Healthcare Corp. - Sr. Sub Notes
8.125% due 12/01/08 ..................................... 75 77
8.625% due 01/15/07 ..................................... 50 52
Triad Hospitals
8.75% due 05/01/09 ...................................... 50 51
Universal Hospital Services - Sr Notes
10.25% due 03/01/08 ..................................... 150 136
-------
1,254
Household Appliances / Furnishings - 0.4%
Mattress Discounters Corp.
12.625% due 07/15/07 .................................... 75 23
Sealy Mattress Co. - Ser. B
0.0% due 12/15/07 ....................................... 175 143
-------
166
Housing - 2.3%
American Standard Cos., Inc.
7.625% due 02/15/10 ..................................... 85 84
Grove Worldwide LLC - Sr. Sub. Notes
9.25% due 05/01/08 ...................................... 85 1
KB Home - Sr. Sub Notes
9.5% due 02/15/11 ....................................... 280 281
Standard Pacific Corp. - Sr. Notes
8.5% due 06/15/07 ....................................... 110 108
8.5% due 04/01/09 ....................................... 220 216
Standard Pacific Corp. - Sr. Notes
9.5% due 09/15/10 ....................................... 200 201
-------
891
Industrial Tech - div - 0.7%
Conseco, Inc. - Sr. Notes
10.75% due 06/15/08 ..................................... 265 260
Leisure & Recreation - 4.9%
Ackerley Group, Inc. - Sr. Sub Notes Ser. B
9.0% due 01/15/09 ....................................... 400 350
AMC Entertainment, Inc. - Sr. Sub. Notes
9.5% due 03/15/09 ....................................... 50 46
9.5% due 02/01/11 ....................................... 375 334
John Q. Hammons Hotels
8.875% due 02/15/04 ..................................... 425 420
Physician Sales & Service, Inc.
8.5% due 10/01/07 ....................................... 230 214
Station Casinos, Inc. - Sr. Sub Notes
8.875% due 12/01/08 ..................................... 150 151
9.875% due 07/01/10 ..................................... 100 103
True Temper Sports, Inc. - Sr. Sub. Notes
10.875% due 12/01/08 .................................... 275 280
-------
1,898
Machinery - 0.4%
Anthony Crane Rental - Sr. Notes
10.375% due 08/01/08 .................................... 300 155
Media - Publishing - 0.3%
Sun Media Corp. - Sr. Sub. Notes
9.5% due 05/15/07 ....................................... 135 134
Media - TV & Radio - 11.9%
Adelphia Communications Corp.
9.375% due 11/15/09 ..................................... 50 48
9.875% due 03/01/07 ..................................... 100 99
Allbritton Communications Co. - Sr Sub. Debs. Ser. B
9.75% due 11/30/07 ...................................... 50 51
Cablevision SA - Bonds
13.75% due 05/01/09 ..................................... 60 42
Century Communications Corp. - Cl. A
8.875% due 01/15/07 ..................................... 75 71
Century Communications Corp. - Sr Disc. Notes
0.0% due 01/15/08 ....................................... 650 299
Charter Communications Holdings LLC - Sr. Notes
10.75% due 10/01/09 ..................................... 100 105
Charter Communications Holdings LLC - Sr. Notes 144A
10.0% due 05/15/11 ...................................... 100 101
193
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Media - TV Continued
Charter Communications Holdings, LLC - Sr. Notes
8.625% due 04/01/09 ..................................... $ 525 $ 499
Classic Cable, Inc.
10.5% due 03/01/10 ...................................... 560 162
Classic Cable, Inc. - Ser. B
9.375% due 08/01/09 ..................................... 20 6
CSC Holdings, Inc. - Sr. Notes 144A
7.625% due 04/01/11 ..................................... 100 95
EchoStar DBS Corp. - Sr. Notes
9.375% due 02/01/09 ..................................... 675 673
Frontiervision Holding L.P. - Sr Disc. Notes
1.0% due 09/15/07 ....................................... 200 207
Granite Broadcassting Corp. - Sr Sub. Notes
8.875% due 05/15/08 ..................................... 175 122
Insight Communications Company, Inc. - Sr. Notes 144A
0.0% due 02/15/11 ....................................... 350 199
Mediacom Broadband LLC - Sr. Notes 144A
11.0% due 07/15/13 ...................................... 200 203
Quebecor Media, Inc. - Sr. Disc Notes 144A
0.0% due 07/15/11 ....................................... 680 349
Rogers Communications
8.875% due 07/15/07 ..................................... 200 200
Telewest Communications - Sr. Notes
9.875% due 02/01/10 ..................................... 650 543
Time Warner Telecom, Inc.
10.125% due 02/01/11 .................................... 370 337
United Pan Europe Communications - Sr. Notes Ser. B
11.25% due 02/01/10 ..................................... 175 63
11.5% due 02/01/10 ...................................... 125 45
Young Broadcasting, Inc.
8.75% due 06/15/07 ...................................... 50 46
-------
4,565
Metal Production & Fabrication - 0.3%
Century Aluminum Co. - Ser. 144A
11.75% due 04/15/08 ..................................... 95 99
Metals & Mining - 0.1%
Neenah Corp. - Ser. F
11.125% due 05/01/07 .................................... 40 21
Neenah Corp. - Sr. Sub. Notes
11.125% due 05/01/07 .................................... 10 6
-------
27
Natural Gas Distribution - 1.2%
Energy Corp. of America - Sr. Sub. Notes
9.5% due 05/15/07 ....................................... 550 445
Oil & Natural Gas Exploration & Production - 2.0%
Costilla Energy, Inc. - Sr. Notes
10.25% due 10/01/06 ..................................... 68
Plains Resources, Inc.
10.25% due 03/15/06 ..................................... 200 206
Plains Resources, Inc. - Sr. Sub Notes
10.25% due 03/15/06 ..................................... 175 180
Pride International, Inc. - Sr Notes
9.375% due 05/01/07 ..................................... 100 106
10.0% due 06/01/09 ...................................... 100 111
Texas Petrochemical Corp. - Sr. Sub. Notes
11.125% due 07/01/06 .................................... 175 156
-------
759
Oil - Equipment & Service - 0.3%
ICO, Inc. - Sr. Notes
10.375% due 06/01/07 .................................... 50 50
Pioneer Natural Resources Co.
9.625% due 04/01/10 ..................................... 45 50
-------
100
Paper & Forest Products - 2.3%
Caraustar Industries, Inc. - Sr. Sub Notes - Ser. 144A
9.875% due 04/01/11 ..................................... 300 282
Doman Industries, Ltd.
12.0% due 07/01/04 ...................................... 75 77
Doman Industries, Ltd. - Sr. Notes
8.75% due 03/15/04 ...................................... 275 165
Millar Western Forest Products, Ltd - Sr. Notes
9.875% due 05/15/08 ..................................... 200 188
Paperboard Industries International, Inc. - Sr. Notes
8.375% due 09/15/07 ..................................... 185 167
Tembec Indiana , Inc. - Sr. Notes
8.5% due 02/01/11 ....................................... 15 15
-------
894
Pollution Control - 0.6%
Allied Waste North America
7.625% due 01/01/06 ..................................... 250 247
Real Estate Development - 0.3%
D.R. Horton, Inc.
8.0% due 02/01/09 ....................................... 60 58
Del Webb Corp. - Sr. Sub. Debs ..........................
10.25% due 02/15/10 ..................................... 75 77
-------
135
Real Estate Operations - 0.1%
The IT Group, Inc.
11.25% due 04/01/09 ..................................... 40 37
Retail - Department Stores - 0.3%
J.C. Penney Co., Inc.
7.6% due 04/01/07 ....................................... 50 47
194
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Retail - Department Stores - Continued
J.C. Penney Co., Inc. Notes
7.375% due 08/15/08 ..................................... $ 85 $ 76
-------
123
Retail - Drug Stores - 1.3%
Duane Reade, Inc. - Sr. Sub. Notes
9.25% due 02/15/08 ...................................... 500 490
Retail - Food - 0.1%
Stater Bros. Holdings, Inc. - Sr Notes
10.75% due 08/15/06 ..................................... 55 52
Retailers - Food & Drug - 1.2%
Rite Aid Corp. - Notes
7.125% due 01/15/07 ..................................... 300 250
Rite Aid Corp. - Sr. Notes 144A
11.25% due 07/01/08 ..................................... 200 200
-------
450
Shoe & Apparel Manufacturing - 1.4%
Levi Strauss & Co.
11.625% due 01/15/08 .................................... 225 203
Levi Strauss & Co. - Notes
7.0% due 11/01/06 ....................................... 260 195
WestPoint Stevens, Inc. - Sr. Notes
7.875% due 06/15/08 ..................................... 350 128
-------
526
Steel - 2.3%
AK Steel Corp.
7.875% due 02/15/09 ..................................... 400 392
AK Steel Corp. - Sr. Notes
9.125% due 12/15/06 ..................................... 100 103
Algoma Steel, Inc.
12.375% due 07/15/05 .................................... 300 60
Armco, Inc. - Sr. Notes
9.0% due 09/15/07 ....................................... 75 74
Bayou Steel Corp.
9.5% due 05/15/08 ....................................... 10 6
National Steel Corp.
9.875% due 03/01/09 ..................................... 320 125
Weirton Steel Corp. - Sr. Notes
11.375% due 07/01/04 .................................... 375 113
-------
873
Telecommunication Equipment - 3.1%
Fairchild Semiconductor Corp.
10.375% due 10/01/07 .................................... 35 34
Fairchild Semiconductor Corp. - Sr Sub. Notes
10.125% due 03/15/07 .................................... 400 384
10.5% due 02/01/09 ...................................... 200 193
L-3 Communications Corp. - Sr. Sub. Notes
8.5% due 05/15/08 ....................................... 35 36
Nextel Communications, Inc. - Sr Notes
9.375% due 11/15/09 ..................................... 350 276
NTL, Inc. - Sr. Notes
10.0% due 02/15/07 ...................................... 100 68
Satelites Mexicanos SA - Sr. Notes
10.125% due 11/01/04 .................................... 125 85
Williams Communications Group, Inc. - Sr. Notes
10.875% due 10/01/09 .................................... 250 103
Winstar Communications, Inc. - Sr Notes
12.75% due 04/15/10 ..................................... 150 2
-------
1,181
Telecommunication Services - 12.6%
BTI Telecom Corp. - Sr. Notes
10.5% due 09/15/07 ...................................... 100 20
Crown Castle International Corp. - Sr. Disc. Notes
1.0% due 11/15/07 ....................................... 250 192
Flag Telecom Holdings, Ltd. - Sr Notes
11.625% due 03/30/10 .................................... 200 136
Fonda Group, Inc. - Sr. Sub Notes
9.5% due 03/01/07 ....................................... 125 101
GCI, Inc. - Sr. Notes
9.75% due 08/01/07 ...................................... 575 562
Global Crossing Holdings, Ltd.
9.125% due 11/15/06 ..................................... 450 354
Global Crossing Holdings, Ltd. - Sr Sub Notes 144A
8.7% due 08/01/07 ....................................... 300 229
GST Telecommunications, Inc. - Sr Sub Notes
12.75% due 11/15/07 ..................................... 50
GT Group Telecom - Sr. Disc. Notes
0.0% due 02/01/10 ....................................... 630 208
Hyperion Telecommunications, Inc. - Sr. Disc. Notes
13.0% due 04/15/03 ...................................... 250 188
Hyperion Telecommunications, Inc. - Sr. Notes
12.25% due 09/01/04 ..................................... 190 156
Insight Midwest LP
9.75% due 10/01/09 ...................................... 235 241
Insight Midwest LP - Sr. Notes 144A
10.5% due 11/01/10 ...................................... 40 42
KMC Telecom Holdings, Inc. - Sr Disc. Notes
1.0% due 02/15/08 ....................................... 275 25
Level 3 Communications, Inc.
11.25% due 03/15/10 ..................................... 200 86
Level 3 Communications, Inc. - Sr Notes
9.125% due 05/01/08 ..................................... 230 97
McLeodUSA, Inc.
8.125% due 02/15/09 ..................................... 175 95
McLeodUSA, Inc. - Sr. Notes
8.375% due 03/15/08 ..................................... 380 209
195
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Telecommunication Services - Continued
McLeodUSA, Inc. - Sr. Notes
9.5% due 11/01/08 ....................................... $ 55 $ 32
Nextel Communications, Inc. - Sr. Disc. Notes
1.0% due 10/31/07 ....................................... 650 422
NTL Communications Corp. - Sr. Notes
1.0% due 10/01/08 ....................................... 615 271
RCN Corp.
0.0% due 10/15/07 ....................................... 50 13
10.0% due 10/15/07 ...................................... 200 84
RCN Corp. - Sr. Disc. Notes
1.0% due 07/01/08 ....................................... 425 111
Rogers Cantel, Inc. Sr. Sec. Debs
9.375% due 06/01/08 ..................................... 225 223
Rogers Wireless, Inc.
9.625% due 05/01/11 ..................................... 175 175
Telecommunications Techniques Co.
9.75% due 05/15/08 ...................................... 240 204
Time Warner Telecom Llc - Sr. Notes
9.75% due 07/15/08 ...................................... 395 355
------
4,831
Telephone - 0.4%
ITC DeltaCom, Inc. - Sr. Notes
8.875% due 03/01/08 ..................................... 125 71
9.75% due 11/15/08 ...................................... 75 46
Nextlink Communications, Inc. - Sr Disc. Notes
1.0% due 04/15/08 ....................................... 300 48
------
165
Transportation Services - 1.7%
Air Canada, Inc. - Sr. Notes - Ser 144A
10.25% due 03/15/11 ..................................... 555 508
Dunlop Standard Aero Holdings - Sr Notes
11.875% due 05/15/09 .................................... 150 158
------
666
------
TOTAL PUBLICLY-TRADED-BONDS- .................... 93.8% 36,062
------
Shares
COMMON STOCK
Food, Beverage & Tobacco - 0.0%
Aurora Foods, Inc. ...................................... 2,213 11
------
TOTAL COMMON STOCK- 0.0% 11
------
PREFERRED STOCK
Media - Publishing - 0.3%
Primedia, Inc. .......................................... 1,250 97
Telecommunication Services - 0.0%
XO Communications, Inc. ................................. 136 8
------
TOTAL PREFERRED STOCK- 0.3% 105
Market
Name of Issuer Shares Value
(000's)
WARRANTS
Household Appliances / Furnishings - 0.0%
Mattress Discounters Corp.
expires 07/15/07 ...................................... 75 $ 0
Telecommunication Services - 0.0%
GT Group Telecom, Inc.
expires 02/01/10 ...................................... 180 5
KMC Telecom Holdings, Inc. - WT 144A
expires 04/15/08 ...................................... 250 1
------
TOTAL WARRANTS- 0.0% 6
------
Par
Value
(000's)
SHORT-TERM INVESTMENTS - 4.0%
Investment in joint trading account
3.97% due 07/02/01 ................................... $1,554 1,554
------ -------
TOTAL INVESTMENTS- 98.1% 37,738
Other Assets & Liabilities, Net- 1.9% 725
------ -------
NET ASSETS- 100.0% $38,463
====== =======
144/ Pursuant to Rule 144A under the Securities Act of 1993, these securities
may be resold in transactions exempt from registration, normal/to qualified
institutional buyers. At June 30, 2001, securities aggregated $3,021 or 7.8% of
net assets of the Fund.
See notes to financial statements.
196
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS
Australia - 0.9%
Commonwealth of Australia - Bonds
(GOVF)
7.5% due 07/15/05 ................................. 1,000 $ 542
Canada - 0.9%
Government of Canada - Bonds (GOVF)
7.0% due 12/01/06 ................................. 500 348
Tellus Corp. (TELS)
7.5% due 06/01/06 ................................. 250 165
-------
513
Denmark - 2.2%
Danske Kredit (LEND)
6.0% due 10/01/29 ................................. 5,932 645
Kingdom of Denmark -
Bullet Bond (GOVF)
8.0% due 03/15/06 ................................. 5,080 649
-------
1,294
Finland - 4.6%
Republic of Finland - Bonds (GOVF)
5.75% due 02/23/11 ................................ 3,050 2,662
France - 4.6%
Government of France - Bonds (GOVF)
5.25% due 04/25/08 ................................ 1,580 1,362
Government of France - O.A.T. (GOVF)
5.5% due 04/25/07 ................................. 1,490 1,308
-------
2,670
Germany - 16.9%
Bayer Hypo Vereins (BANK)
5.0% due 04/02/08 ................................. 1,000 835
Bundesrepublic Deutschland - Bonds
(GOVF)
6.75% due 04/22/03 ................................ 2,500 2,200
Federal Republic of Germany - Bonds
(GOVF)
5.25% due 01/04/08 ................................ 3,750 3,241
5.25% due 01/04/11 ................................ 750 643
6.875% due 05/12/05 ............................... 2,350 2,146
Kredit Fur Wiederaufbau (BANK)
5.0% due 07/04/11 ................................. 900 740
-------
9,805
Greece - 1.6%
Hellenic Republic - Bonds (GOVF)
8.6% due 03/26/08 ................................. 646 650
8.8% due 06/19/07 ................................. 293 294
-------
944
Ireland - 1.0%
Republic of Ireland - Debs. (GOVF)
4.0% due 04/18/10 ................................. 750 578
Japan - 6.3%
Government of Japan - Bonds (GOVF)
0.9% due 12/22/08 ................................. 370,000 2,987
1.8% due 03/22/10 ................................. 80,000 686
-------
3,673
Luxembourg - 1.5%
KFW International Finance, Inc.
(GOVF)
1.75% due 03/23/10 ................................ 100,000 862
Netherlands - 4.9%
Government of Netherlands - Bonds
(GOVF)
6.5% due 04/15/03 ................................. 1,500 1,316
Kingdom of Netherlands (GOVF)
5.5% due 07/15/10 ................................. 1,780 1,538
-------
2,854
New Zealand - 0.7%
Government of New Zealand - Bonds
(GOVF)
8.0% due 11/15/06 ................................. 1,000 430
Norway - 0.9%
Norwegian Government - Bonds (GOVF)
6.75% due 01/15/07 ................................ 5,000 534
Spain - 1.5%
Kingdom of Spain (GOVF)
4.0% due 01/31/10 ................................. 1,150 887
Supra National - 16.1%
Asian Development Bank (BANK)
5.625% due 02/18/02 ............................... 150,000 1,244
Bank of Ireland (BANK)
6.45% due 02/10/10 ................................ 1,000 861
BAT International Finance (FOOD)
4.875% due 02/25/09 ............................... 600 466
British Telecommunications
PLC (GOVF)
6.875% due 02/15/11 ............................... 1,120 959
European Investment Bank - Notes (GOVF)
3.0% due 09/20/06 ................................. 230,000 2,091
FIixed Link Finance BV (FINL)
6.3% due 08/28/25 ................................. 250 352
International-American Development Bank -
Bonds (BANK)
1.9% due 07/08/09 ................................. 100,000 873
Kingdom of Spain - Notes (GOVF)
3.1% due 09/20/06 ................................. 120,000 1,098
197
SCHEDULE OF INVESTMENTS--Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
PUBLICLY-TRADED BONDS - CONTINUED
Supra National - Continued
Mannesman Finance BV (MACH)
4.75% due 05/27/09 ................................. 750 $ 581
Royal Bank of Scotland PLC (BANK)
8.375% due 01/29/07 ................................ 300 459
Standard Charter Bank (BANK)
5.375% due 05/06/09 ................................ 450 355
-------
9,339
Sweden - 0.8%
Swedish Government (GOVF)
5.0% due 01/28/09 .................................. 5,200 468
United Kingdom - 3.7%
Treasury (GOVF)
8.0% due 12/07/15 .................................. 540 968
U.K. Treasury (GOVF)
7.25% due 12/07/07 ................................. 555 856
U.K. Treasury - Bonds (GOVF)
8.5% due 12/07/05 .................................. 200 314
-------
2,138
United States - 26.8%
Aetna Inc. SR NT (INSU)
7.375% due 03/01/06 ................................ 100 99
American Tower Corp.
- Sr. Notes 144A (TELS)
9.375% due 02/01/09 ................................ 225 212
Bank One Corp. - Notes (BANK)
6.5% due 02/01/06 .................................. 250 253
Belo Corp. - Debs (MEDI)
7.25% due 09/15/27 ................................. 425 363
Belo Corp. - Sr Notes (MEDI)
7.125% due 06/01/07 ................................ 100 99
CenturyTel, Inc. - Sr. Notes Ser. H
(UTIT)
8.375% due 10/15/10 ................................ 250 261
Chancellor Media Corp. (MEDI)
8.0% due 11/01/08 .................................. 125 130
Charter Communications Holdings
LLC - Sr Notes (MEDI)
10.75% due 10/01/09 ................................ 50 52
Charter Communications Holdings
LLC - Sr Notes144A (MEDI)
10.0% due 05/15/11 ................................. 375 381
Clear Channel Communications, Inc.
(MEDI)
7.65% due 09/15/10 ................................. 250 258
Comcast Cable Communications
(MEDI)
6.75% due 01/30/11 ................................. 100 98
Cox Radio, Inc. - Sr Notes (MEDI)
6.625% due 02/15/06 ................................ 150 149
Crown Castle International Corp.
- Sr. Notes (TELS)
10.75% due 08/01/11 ................................ 75 73
Federal Home Loan Mortgage (GOVA)
4.5% due 03/15/04 .................................. 740 626
Federal Natioanl Mortgage Assoc.
(GOVA)
5.125% due 02/13/04 ................................ 1,000 1,005
6.0% due 05/15/08 .................................. 225 226
6.5% due 08/01/13 .................................. 444 446
6.5% due 09/01/30 .................................. 489 481
7.0% due 11/01/30 .................................. 745 748
7.0% due 12/01/30 .................................. 583 586
7.5% due 12/01/30 .................................. 403 411
8.0% due 12/01/30 .................................. 380 392
Federal National Mortgage Assoc. - Sr.
Notes (GOVA)
2.125% due 10/09/07 ................................ 100,000 880
Fox Sports Networks LLC - Sr. Disc.
Notes (MEDI)
0.0% due 08/15/07 .................................. 125 119
Liberty Media Corp. - Bonds (MEDI)
7.875% due 07/15/09 ................................ 100 96
Nisource Finance Corp. (FINL)
7.875% due 11/15/10 ................................ 125 132
Nortel Networks, Ltd. - Notes (TRAN)
6.125% due 02/15/06 ................................ 125 108
Progress Energy, Inc. - Sr. Notes
(UTIE)
7.1% due 03/01/11 .................................. 100 101
Six Flags, Inc. - Sr Notes 144A (LEIS)
9.5% due 02/01/09 .................................. 100 100
Spectrasite Holdings, Inc. - Sr. Notes
Ser. B (TELS)
10.75% due 03/15/10 ................................ 75 63
Tellus Corp. NT (TELS)
8.0% due 06/01/11 .................................. 75 77
The Kroger Co. (TELS)
6.8% due 04/01/11 .................................. 75 74
Time Warner, Inc. -
Notes (MEDI)
8.18% due 08/15/07 ................................. 150 163
U.S. Treasury - Bonds (GOVE)
5.25% due 02/15/29 ................................. 250 229
7.25% due 05/15/16 ................................. 1,500 1,709
8.875% due 08/15/17 ................................ 425 558
U.S. Treasury - Notes (GOVE)
5.75% due 08/15/03 ................................. 1,000 1,028
6.25% due 02/15/07 ................................. 1,325 1,398
6.875% due 05/15/06 ................................ 1,000 1,078
Viacom, Inc. (MEDI)
7.7% due 07/30/10 .................................. 150 158
Waste Management, Inc. - Sr. Notes
(POLL)
7.375% due 08/01/10 ................................ 125 125
-------
15,545
-------
TOTAL PUBLICLY-TRADED-BOND .......................... 95.9% 55,738
-------
198
SCHEDULE OF INVESTMENTS -- Continued
(UNAUDITED)
JOHN HANCOCK VARIABLE SERIES TRUST I
June 30, 2001
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
Par Market
Name of Issuer Value Value
(000's) (000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account - 2.0%
Investment in joint trading account
3.97% due 07/02/01 ...................... $ 1,146 $ 1,146
Shares
Cash Equivalents - 7.2%
Navigator Securities
Lending Prime Portfolio ** ............. 4,185,781 4,186
---------- ----------
TOTAL SHORT-TERM INVESTMENTS-....... 9.2% 5,332
---------- ----------
TOTAL INVESTMENTS- ................... 105.1% 61,070
Other Assets & Liabilities, Net .. (5.1)% (2,961)
---------- ----------
NET ASSETS- ................... 100.0% $ 58,109
========== ==========
** Represents investment of security lending collateral.
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
Foreign Governmental ..................... GOVF $32,617 58.5%
U.S. Governmental ........................ GOVE 6,000 10.7
U.S. Government Agencies ................. GOVA 5,801 10.4
Bank ..................................... BANK 5,620 10.1
Media - TV & Radio ....................... MEDI 2,066 3.7
Telecommunication Services ............... TELS 664 1.2
Personal & Commercial Lending ............ LEND 645 1.2
Machinery ................................ MACH 581 1.0
Financial Services ....................... FINL 484 0.9
Food, Beverage & Tobacco ................. FOOD 466 0.8
Telephone ................................ UTIT 261 0.5
Pollution Control ........................ POLL 125 0.2
Transportation ........................... TRAN 108 0.2
Electric Power ........................... UTIE 101 0.2
Leisure & Recreation ..................... LEIS 100 0.2
Insurance ................................ INSU 99 0.2
------- -----
$55,738 100.0%
======= =====
199
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
The John Hancock Variable Series Trust I (the "Trust") is a diversified
open-end management investment company registered under the Investment Company
Act of 1940, as amended. The Trust is organized as a Massachusetts business
trust. The Trust consists of thirty-three funds: Large Cap Growth, Fundamental
Growth, Aggressive Balanced, Active Bond, Active Bond II (formerly, CORE Bond),
Emerging Markets Equity, International Equity Index, International Equity, Small
Cap Growth, Health Sciences, Global Balanced, Mid Cap Growth, Mid Cap Blend,
Large Cap Value, Large Cap Value CORE, Large Cap Value CORE II (formerly,
American Leaders Large Cap Value), Large/Mid Cap Value, Money Market, Large/Mid
Cap Value II (formerly, Mid Cap Value), Small/Mid Cap Growth, Bond Index, Large
Cap Aggressive Growth, Small/Mid Cap CORE, Small Cap Value(formerly, Small/Mid
Cap Value), Real Estate Equity, Growth & Income, Managed, Short-Term Bond, Small
Cap Equity, International Opportunities, Equity Index, High Yield Bond and
Global Bond Funds (collectively, "the Funds"). The Trust may add or delete Funds
in the future to accommodate various investment objectives. The Trust has issued
shares of beneficial interest exclusively to John Hancock Variable Life Account
U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock
Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I
("JHVAAI") to fund policies and contracts issued by the John Hancock Variable
Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account
U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock
Variable Life Insurance Account UV ("JHVLAUV"), John Hancock Variable Annuity
Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF")
to fund contracts and policies issued by John Hancock Life Insurance Company
("John Hancock" or "JHLICO") to Investors Partner Life Account L ("IPLL"), to
John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable
Life Account PPM-2 ("PPM-2").
NOTE B--ACCOUNTING POLICIES
VALUATION OF INVESTMENTS: For the Large Cap Growth, Fundamental Growth,
------------------------
Aggressive Balanced, Emerging Markets Equity, Small Cap Growth, Health Sciences,
Mid Cap Growth, Mid Cap Blend, Large Cap Value, Large Cap Value CORE, Large Cap
Value CORE II, Large/Mid Cap Value, Large/Mid Cap Value II, Small/Mid Cap
Growth, Large Cap Aggressive Growth, Small/Mid Cap CORE, Small Cap Value, Real
Estate Equity, Growth & Income, Managed, Small Cap Equity, and Equity Index
Funds: Common stocks and other such securities traded on national exchanges are
normally valued on the basis of closing prices. Securities traded in the
over-the-counter market and securities with no sales on the day of valuation are
normally valued at their last available bid price.
For the Active Bond, Active Bond II, Bond Index, Managed, Short-Term Bond,
High Yield Bond and Global Bond Funds: Debt investment securities having a
primary market over-the-counter are valued on the basis of valuations furnished
by a pricing service which determines valuations for normal institutional size
trading units of debt securities, without exclusive reliance upon quoted prices.
For the Money Market Fund: The Board of Trustees has determined that the
appropriate method for valuing Fund securities is amortized cost, so long as the
average weighted maturity of money market instruments comprising the Fund does
not exceed 90 days. Accordingly, Fund securities are valued at amortized cost,
which approximates market value. The amortized cost method involves valuing a
security at its cost on the date of purchase and thereafter assuming a constant
amortization to maturity of the difference between the principal amount due at
maturity and the cost of the security to the Fund.
For each of the Funds, short-term investments, with a maturity not to
exceed 60 days, are valued at amortized cost, which approximates market value.
For the International Equity Index, International Equity, Global Balanced
and International Opportunities
200
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--CONTINUED
Funds: Investments in securities traded on national securities exchanges in the
United States or on equivalent foreign exchanges are normally valued at the last
quoted sales price on such exchanges as of the close of business on the date of
which assets are valued. Securities traded in the over-the-counter market and
securities traded with no sales on the day of valuation are normally valued at
their last available bid price. All Fund securities initially expressed in terms
of foreign currencies have been translated into U.S. Dollars as described in
"Currency Translation" below.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Funds, are
valued at fair value as determined in good faith by the Board of Trustees.
Investment security transactions are recorded on the date of purchase or sale.
REPURCHASE AGREEMENTS: The Funds may enter into repurchase agreements which
---------------------
are contracts under which a Fund would acquire a security for a relatively short
period (usually not more than 7 days) subject to the obligation of the seller to
repurchase and the Fund to resell such security at a fixed time and price
(representing the Funds' cost plus interest). A Fund will enter into repurchase
agreements only with member banks of the Federal Reserve System and with
"primary dealers" in United States government securities. The underlying
securities, which represent the collateral of the agreement, must be marked to
market daily to ensure that each repurchase agreement is fully collateralized at
all times. A Fund will not invest more than 10% of its net assets in repurchase
agreements maturing in more than 7 days.
JOINT REPURCHASE AGREEMENTS: The Active Bond and Small Cap Growth Funds,
---------------------------
along with other registered investment companies having a management contract
with John Hancock Advisers, Inc. ("Adviser"), an indirect wholly-owned
subsidiary of John Hancock, may participate in a joint repurchase agreement
pursuant to an exemptive order issued by the Securities and Exchange Commission.
Aggregate cash balances are invested in one or more repurchase agreements, whose
underlying securities are obligations of the U.S. Government and/or its
agencies. The Funds' custodian bank receives delivery of the underlying
securities for the joint repurchase agreement on the Funds' behalf. The Adviser
is responsible for ensuring that the agreement is fully collateralized at all
times. The International Equity, Large Cap Value CORE and Small/Mid Cap CORE
Funds, along with other registered investment companies having a management
contract with Goldman Sachs Asset Management, may participate in a joint
repurchase agreement pursuant to an exemptive order issued by the Securities and
Exchange Commission. Aggregate cash balances are invested in one or more
repurchase agreements, whose underlying securities are obligations of the U.S.
Government and/or its agencies. The Funds' custodian bank receives delivery of
the underlying securities for the joint repurchase agreement on the Funds'
behalf. Goldman Sachs Asset Management is responsible for ensuring that the
agreement is fully collateralized at all times.
JOINT TRADING ACCOUNT: Pursuant to an exemptive order issued by the
---------------------
Securities and Exchange Commission, the order permits the Funds to pool daily
uninvested cash balances into a joint account for the purpose of investing the
cash balances in short-term repurchase agreements, commercial paper and other
short-term investments which in no event will have a maturity in excess of 7
days. Joint account holdings as of June 30, 2001:
Name of Issuer Market Value
- -------------- ------------
Abbott Laboratories, 4.10%, due 07/05/01 $29,990
AES Hawaii Inc., 3.82%, due 07/03/01 41,478
American General Financial Corp., 3.87%, due 07/05/01 49,984
Blue Ridge Asset, 3.78%, due 07/02/01 50,000
Deere John Capital Corp., 3.75%, due 07/03/01 49,995
Eagle Funding Capital Corp., 3.98%, due 07/02/01 36,025
201
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- --------------
Ford Motor Credit Corp., 3.86%, due 07/02/01 $36,801
Ford Motor Credit Corp. Puerto Rico, 3.86%, due 07/03/01 13,099
Greenwich Funding Corp., 3.77%, due 07/02/01 18,774
Greenwich Funding Corp., 4.05%, due 07/06/01 7,496
Greenwich Funding Corp., 4.10%, due 07/05/01 3,421
National Australia Funding, 3.86%, due 07/05/01 14,807
Paccar Financial Corp., 4.05%, due 07/06/01 49,978
Petrobas Int'l Financial Corp., 3.85%, due 07/03/01 8,861
Prudential Funding Corp., 3.75%, due 07/02/01 6,584
Twin Towers Inc., 3.85%, due 07/03/01 5,102
Twin Towers Inc., 3.90%, due 07/05/01 43,986
Windmill Funding Corp., 4.05%, due 07/05/01 14,995
Windmill Funding Corp., 4.11%, due 07/06/01 34,984
--------
Joint Trading Account Totals $516,360
========
CURRENCY TRANSLATION: All assets or liabilities initially expressed in
--------------------
terms of foreign currencies are translated into U.S. dollars based on London
currency exchange quotations as of 5:00 p.m., London time, on the date of any
determination of the net asset value of the Funds. Unrealized exchange
adjustments are included in unrealized appreciation (depreciation) of
investments. Transactions affecting statement of operations accounts and net
realized gain (loss) on investments are translated at the rates prevailing at
the dates of transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gains or losses
from investments.
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of forward foreign
currency contracts, disposition of foreign currencies, currency gains and losses
realized between trade and settlement dates of security transactions, and the
difference between the amounts of net investment income accrued and the U.S.
dollar amount actually received. Net unrealized foreign exchange gains and
losses arise from changes in the value of assets and liabilities other than
investments in securities, resulting from changes in the exchange rate.
DISCOUNT AND PREMIUM ON SECURITIES: The Funds accrete discount and amortize
----------------------------------
premium from par value on securities from either the date of issue or the date
of purchase over the life of the security.
EXPENSES: Expenses directly attributable to a Fund are charged to that
--------
Fund. Expenses not directly attributed to a Fund are allocated on the basis of
relative net assets.
BANK BORROWINGS: The Funds (except for Money Market and International
---------------
Equity Index Funds) are permitted to have bank borrowings for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. The Funds have entered
into a syndicated line of credit agreement with State Street Bank and Trust
Company ("SSBT"). This agreement enables the Funds to participate in an
unsecured line of credit, which permits borrowings up to $75 million,
collectively. Interest is charged to each Fund, based on its borrowing. In
addition, a commitment fee is charged to each Fund based on the average daily
unused portion of the line of credit and is allocated among the participating
Funds. Interest expense paid under the line of credit is
202
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--CONTINUED
included under the caption "Other fees" in the Statement of Operations. The
following funds had borrowings under the line of credit during the period ended
June 30, 2001:
Average Daily Loan
Balance During the
Period for which Weighted
Loans were Average Interest
Fund Outstanding Interest Rate Expense
- ---- ----------- ------------- -------
Large Cap Growth .................. $2,065 4.70% $ 4
Mid Cap Blend ..................... 89 5.47 --
Large Cap Aggressive
Growth ........................... 1,086 4.95 --
Small/Mid Cap CORE ................ 210 6.02 --
Short-Term Bond ................... 1,568 5.95 1
International
Opportunities .................... 989 4.57 3
High Yield Bond ................... 113 6.57 --
Global Bond ....................... 273 4.85 1
SECURITIES LENDING: Certain Funds (Large Cap Growth, Active Bond,
------------------
International Equity Index, Small Cap Growth, Mid Cap Growth, Large Cap Value,
Large/Mid Cap Value II, Small/Mid Cap Growth, Growth & Income, Managed,
Short-Term Bond, International Opportunities and Global Bond Funds) have entered
into an agreement with SSBT to lend their securities to certain qualified
brokers who pay these Funds negotiated lender fees. These loans are
collateralized at all times with cash or securities with a market value at least
equal to the market value of the securities on loan. Cash collateral is invested
in a short-term instrument. As with other extensions of credit, these Funds may
bear the risk of delay of the loaned securities in recovery or even loss of
rights in the collateral should the borrower of the securities fail financially.
At June 30, 2001, the market value of the securities loaned and the market value
of the collateral were as follows:
Value of Securities
Fund Value of Securities Loaned Value of Collateral Collateral
- ---- -------------------------- ------------------- -------------------
Large Cap Growth $19,365 $20,023 -
Active Bond 239,427 247,041 -
International Equity 24,514 25,718 $85
Index
Small Cap Growth 15,490 15,318 849
Mid Cap Growth 11,799 12,189 -
Large Cap Value 5,585 5,765 -
Large/Mid Cap Value II 6,269 6,461 -
Small/Mid Cap Growth 27,428 28,339 -
Growth & Income 9,611 9,945 -
Managed 42,656 43,710 -
Short-Term Bond 12,320 11,816 753
International 13,057 13,433 275
Opportunities
Global Bond 4,102 4,186 -
FINANCIAL FUTURES CONTRACTS: The Large Cap Growth, Active Bond, Emerging
---------------------------
Markets Equity, International Equity Index, International Equity, Small Cap
Growth, Health Sciences, Global Balanced, Mid Cap Growth,
203
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Large Cap Value CORE, Large/Mid Cap Value, Large/Mid Cap Value II, Small/Mid Cap
Growth, Small Cap Value, Small/Mid Cap CORE, Real Estate Equity, Growth &
Income, Managed, Short-Term Bond, Equity Index, High Yield Bond and Global Bond
Funds may buy and sell financial futures contracts to hedge against the effects
of fluctuations in interest rates and other market conditions. At the time the
Fund enters into a financial futures contract, it will be required to deposit
with its custodian a specified amount of cash or U.S. government securities,
known as "initial margin". Each day, the futures contract is valued at the
official settlement price of the board of trade or U.S. commodities exchange.
Daily variation margin adjustments, arising from this "mark to market", are
recorded by the Funds as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a loss. Risk
of entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange. At June 30, 2001, open financial futures
contracts were as follows:
Open Unrealized
Fund Contracts Position Expiration Month Gain (Loss)
- ---- --------- -------- ---------------- ----------
INTERNATIONAL EQUITY
INDEX
CAC 40 10 Euro Index 3 Long Sep. 01 $ 4
Futures
DAX Index Futures 1 Long Sep. 01 5
Nikkei 225 Index Futures 3 Long Sep. 01 2
UK Treasury Bond Futures 2 Long Sep. 01 (2)
----
$ 9
====
INTERNATIONAL EQUITY
DJ Euro 50 Index Futures 6 Long Sep. 01 $ 4
TOPIX Index Futures 4 Long Sep. 01 (3)
----
$ 1
====
LARGE CAP VALUE CORE
S&P 500 Index Futures 4 Long Sep. 01 $ 4
S&P Mini 500 Index 11 Long Sep. 01 (1)
Futures ----
$ 3
====
LARGE/MID CAP VALUE
S&P Mini 500 Index 7 Long Sep. 01 $ 3
Futures ====
LARGE/MID CAP VALUE II
S&P 500 Index Futures 3 Long Sep. 01 ($35)
====
SMALL/MID CAP CORE
Russell 2000 Index 2 Long Sep. 01 $14
Futures ====
SMALL CAP VALUE
Russell 2000 Index 6 Long Sep. 01 $32
Futures ====
EQUITY INDEX
S&P 500 Index Futures 56 Long Sep. 01 ($515)
=====
204
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--CONTINUED
At June 30, 2001, the International Equity, Large Cap Value CORE and
Small/Mid Cap CORE Funds had deposited $36, $165 and $200, respectively, in
segregated accounts to cover initial margin requirements on open financial
futures contracts.
FORWARD FOREIGN CURRENCY CONTRACTS: The Funds may use forward foreign
----------------------------------
currency contracts to facilitate transactions in foreign securities and to
manage Funds' currency exposure. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell are used to hedge the
Funds' investments against currency fluctuations. Neither type of foreign
currency transaction will eliminate fluctuations in the prices of the Funds'
securities or prevent loss if the price of such securities should decline. The
U.S. dollar value of a forward foreign currency contract is determined using
forward exchange rates supplied by a quotation service. Realized gain (loss) on
the purchases and sales of forward foreign currency contracts is recognized on
settlement date.
As of June 30, 2001 the Emerging Markets Equity, International Equity
Index, Global Balanced, Managed and Global Bond Funds had open forward foreign
currency contracts which contractually obligate the Fund to deliver or receive
currencies at a specified date, as follows:
Principal Amount Unrealized
Fund Covered by Contract Expiration Month Gain (Loss)
- ---- ------------------- ---------------- -----------
EMERGING MARKETS EQUITY
Currency Sold
- -------------
Mexican Peso 15,170 Jan. 02 ($98)
======
INTERNATIONAL EQUITY INDEX
Currency Purchased
- ------------------
Euro 455 Sep. 01 ($4)
Japanese Yen 102,700 Sep. 01 (29)
Pound Sterling 289 Sep. 01 3
------
($30)
======
Currency Sold
- -------------
Euro 154 Sep. 01 $2
Japanese Yen 78,800 Sep. 01 9
Pound Sterling 175 Sep. 01 1
------
$12
======
GLOBAL BALANCED
Currency Purchased
- ------------------
Canadian Dollar 128 Sep. 01 $3
Euro 93 Jul. 01 (4)
Euro 214 Aug. 01 (13)
Euro 164 Sep. 01 (7)
Euro 399 Mar. 02 (6)
------
($27)
======
205
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Principal Amount Covered by Expiration Unrealized
Fund Contract Month Gain (Loss)
- ---- -------- ----- -----------
GLOBAL BALANCED-CONTINUED
Currency Sold
- -------------
Canadian Dollar 207 Sep. 01 ($1)
Euro 39 Jul. 01 1
Euro 93 Sep. 01 4
Japanese Yen 5,907 Jul. 01 1
Japanese Yen 19,959 Aug. 01 15
Japanese Yen 5,072 Sep. 01 1
Japanese Yen 38,276 Mar. 02 3
--------
$24
========
MANAGED
Currency Purchased
- ------------------
Euro 46,363 Oct. 01 ($652)
Japanese Yen 4,850,237 Oct. 01 (445)
Pound Sterling 5,610 Oct. 01 (29)
Swiss Franc 15,760 Oct. 01 (132)
--------
($1,258)
========
Currency Sold
- -------------
Euro 46,363 Oct. 01 $373
Japanese Yen 4,850,237 Oct. 01 1,335
Pound Sterling 5,610 Oct. 01 61
Swiss Franc 3,029 Jun. 01 11
Swiss Franc 12,731 Oct. 01 72
--------
$1,852
========
GLOBAL BOND
Currency Purchased
- ------------------
Australian Dollar 1,954 Sep. 01 $4
Euro 254,663 Jul. 01 (73)
Japanese Yen 114,590 Sep. 01 (7)
--------
($76)
========
Currency Sold
- -------------
Euro 7,901 Jul. 01 $178
Euro 525 Sep. 01 10
Pound Sterling 700 Sep. 01 7
Swedish Krona 5,000 Sep. 01 20
--------
$215
========
FEDERAL INCOME TAXES: Each of the Funds intends to comply with the
--------------------
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income to shareholders. Therefore, no federal income tax provision is
required.
206
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--CONTINUED
As of December 31, 2000, the Funds had approximate net tax basis capital loss
carryforwards, which may be applied against any net taxable gains, as follows:
Small Cap Growth had $8,256, which expires in 2008; Money Market had $14 and
$78, which expire in 2007 and 2008, respectively; Bond Index had $158 and $557,
which expire in 2007 and 2008, respectively; Short-Term Bond had $131, $1,304
and $679, which expire in 2006, 2007 and 2008, respectively; High Yield Bond had
$276 and $513, which expire in 2007 and 2008, respectively; and Global Bond had
$1,204 and $1,947, which expire in 2007 and 2008, respectively.
DIVIDENDS, INTEREST AND DISTRIBUTIONS: Dividend income is recorded on the
-------------------------------------
ex-dividend date and interest income is recorded on the accrual basis. Dividend
income for the Aggressive Balanced, Emerging Markets Equity, International
Equity Index, International Equity, Health Sciences, Global Balanced, Mid Cap
Growth, Mid Cap Blend, Large Cap Value, Large/Mid Cap Value, Large/Mid Cap Value
II, Small/Mid Cap Growth, Large Cap Aggressive Growth, Real Estate Equity,
Growth & Income, Managed, International Opportunities and Equity Index Funds are
shown net of foreign taxes withheld of $1, $34, $268, $21, $1, $12, $3, $1, $11,
$1, $6, $2, $2, $8, $92, $80, $127 and $17, respectively. Realized gains and
losses from security transactions are determined on the basis of identified
cost.
A dividend of its net investment income will be declared and distributed
daily by the Money Market Fund. Dividends of net investment income will be
declared and distributed monthly by all other Funds. Each Fund will distribute
all of its net realized capital gains annually, at the end of its fiscal year.
ESTIMATES: The preparation of the financial statements in conformity with
---------
accounting principles generally accepted in the United States of America
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 the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
On February 16, 2000, September 28, 2000, October 20, 2000 and April 6,
2001, the Board of Trustees of the Trust renewed its Investment Advisory
Agreement with John Hancock. For its services, John Hancock receives monthly
compensation at the following rates:
For the Large Cap Growth Fund, 0.40% on an annual basis of the first
$500,000 of the net assets of the Fund; 0.35% for net assets between $500,000
and $1,000,000; and 0.30% for net assets in excess of $1,000,000;
For the Fundamental Growth Fund, 0.90% on an annual basis of the first
$250,000 of the Fund's net assets; and 0.85% for net assets in excess of
$250,000;
For the Aggressive Balanced Fund, 0.675% on an annual basis of the first
$250,000 of the Fund's net assets; 0.625% for net assets between $250,000 and
$500,000; and 0.60% for net assets in excess of $500,000;
For the Active Bond Fund, 0.70% on an annual basis of the first $100,000 of
the net assets of the Fund; 0.65% for net assets between $100,000 and
$250,000; 0.61% for net assets between $250,000 and $500,000; 0.575% for net
assets between $500,000 and $1,000,000; and 0.55% for net assets in excess of
$1,000,000;
For the Active Bond II Fund, 0.70% on an annual basis of the first $100,000
of the net assets of the Fund; 0.65% for net assets between $100,000 and
$250,000; 0.61% for net assets between $250,000 and $500,000; 0.575% for net
assets between $500,000 and $1,000,000; and 0.55% for net assets in excess of
$1,000,000;
For the Emerging Markets Equity Fund, 1.30% on an annual basis of the first
$10,000 of the Fund's net assets; 1.20% for net assets between $10,000 and
$150,000; and 1.10% for net assets in excess of $150,000;
207
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--CONTINUED
For the International Equity Index Fund, 0.18% on an annual basis of
the first $100,000 of the Fund's net assets; 0.15% for net assets between
$100,000 and $200,000; and 0.11% for net assets in excess of $200,000;
For the International Equity Fund, 1.00% on an annual basis of the
first $50,000 of the Fund's net assets; 0.95% for net assets between
$50,000 and $200,000; and 0.90% for net assets in excess of $200,000;
For the Small Cap Growth Fund, 0.75% on an annual basis of the Fund's
net assets;
For the Health Sciences Fund, 1.00% on an annual basis of the first
$250,000 of the Fund's net assets; 0.95% of net assets in excess of
$250,000;
For the Global Balanced Fund, 1.05% on an annual basis of the first
$150,000 of the Fund's net assets; 0.95% for net assets between $150,000
and $300,000; 0.80% for net assets between $300,000 and $500,000; and 0.75%
for net assets in excess of $500,000;
For the Mid Cap Growth Fund, 0.85% on an annual basis of the first
$100,000 of the Fund's net assets; and 0.80% on an annual basis for net
assets in excess of $100,000;
For the Mid Cap Blend Fund, 0.75% on an annual basis of the first
$250,000 of the Fund's net assets; 0.70% for net assets between $250,000
and $500,000; and 0.65% for net assets in excess of $500,000;
For the Large Cap Value Fund, 0.75% on an annual basis of the Fund's
net assets;
For the Large Cap Value CORE Fund, 0.75% on an annual basis for the
first $50,000 of the Fund's net assets; 0.65% for net assets between
$50,000 and $200,000; and 0.60% in excess of $200,000;
For the Large Cap Value CORE II Fund, 0.75% on an annual basis for the
first $50,000 of the Fund's net assets; 0.65% for net assets between
$50,000 and $200,000; and 0.60% in excess of $200,000;
For the Large/Mid Cap Value Fund, 0.95% on an annual basis for the
first $25,000 of the Fund's net assets; 0.85% for net assets between
$25,000 and $50,000; 0.75% for net assets between $50,000 and $100,000; and
0.65% for net assets in excess of $100,000;
For the Money Market Funds, 0.25% on an annual basis of the Fund's net
assets;
For the Large/Mid Cap Value II Fund, 0.95% on an annual basis for the
first $25,000 of the Fund's net assets; 0.85% for net assets between
$25,000 and $50,000; 0.75% for net assets between $50,000 and $100,000; and
0.65% for net assets in excess of $100,000;
For the Small/Mid Cap Growth Fund, 0.75% on an annual basis of the
first $250,000 of the Fund's net assets; 0.70% for net assets between
$250,000 and $500,000; and 0.65% for net assets in excess of $500,000;
For the Bond Index Fund, 0.15% on an annual basis of the first
$100,000 of the Fund's net assets; 0.13% for net assets between $100,000
and $250,000; and 0.11% for net assets in excess of $250,000;
For the Large Cap Aggressive Growth Fund, 1.00% on an annual basis for
the first $10,000 of the Fund's net assets; 0.875% for net assets between
$10,000 and $20,000; 0.75% for net assets in excess of $20,000;
For the Small/Mid Cap CORE Fund, 0.80% on an annual basis of the first
$50,000 of the Fund's net assets; and 0.70% for net assets in excess of
$50,000;
For the Small Cap Value Fund, 0.95% on an annual basis for the first
$100,000 of the Fund's net assets; 0.90% for net assets between $100,000
and $250,000; 0.85% for net assets in excess of $250,000.
For the Real Estate Equity Fund, 1.10% on an annual basis of the first
$50,000 of the Fund's net assets, 1.00% for net assets between $50,000 and
$100,000; 0.90% for net assets between $100,000 and $200,000 and 0.80% for
net assets in excess of $200,000;
208
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--CONTINUED
For the Growth & Income Fund, 0.71% on an annual basis of the first
$150,000 of the Fund's net assets; 0.69% for net assets between $150,000
and $300,000; and 0.67% for net assets in excess of $300,000;
For the Managed Fund, 0.74% on an annual basis of the first $500,000
of the Fund's net assets; 0.68% for net assets between $500,000 and
$1,000,000; and 0.65% for net assets in excess of $1,000,000;
For the Short-Term Bond Fund, 0.30% on an annual basis of the Fund's
net assets;
For the Small Cap Equity Fund, 0.90% on an annual basis of the first
$150,000 of the Fund's net assets; 0.75% for net assets between $150,000
and $300,000; 0.65% for net assets between $300,000 and $500,000, and 0.60%
for net assets in excess of $500,000;
For the International Opportunities Fund, 1.00% on an annual basis of
the first $20,000 of the Fund's net assets; 0.85% for net assets between
$20,000 and $50,000; and 0.75% for net assets in excess of $50,000;
For the Equity Index Fund, 0.15% on an annual basis of the first
$75,000 of the Fund's net assets; 0.14% for net assets between $75,000 and
$125,000; and 0.13% for the net assets in excess of $125,000;
For the High Yield Bond Fund, 0.65% on an annual basis of the first
$100,000 of the Fund's net assets; 0.60% for net assets between $100,000
and $200,000; and 0.50% for net assets in excess of $200,000;
For the Global Bond Fund, 0.85% on an annual basis of the first
$150,000 of the Fund's net assets; 0.80% for net assets between $150,000
and $300,000; 0.75% for net assets between $300,000 and 500,000; and 0.70%
for the net assets in excess of $500,000.
In the event that normal operating expenses of each Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of each Fund's daily net asset value,
John Hancock and JHVLICO will reimburse each Fund for such excess. Accordingly,
for the period ended June 30, 2001, the reimbursements paid from John Hancock
and JHVLICO were $249 to Large Cap Growth, $50 to Fundamental Growth, $28 to
Aggressive Balanced, $84 to Active Bond, $23 to Active Bond II, $286 to Emerging
Markets Equity, $15 to International Equity Index, $42 to International Equity,
$24 to Global Balanced, $24 to Mid Cap Blend, $21 to Large Cap Value CORE, $34
to Large Cap Value CORE II, $14 Large/Mid Cap Value, $31 to Small/Mid Cap CORE,
$11 to Small Cap Value, $149 to Growth & Income, $3 to Small Cap Equity, $57 to
International Opportunities, $14 to High Yield Bond and $9 to Global Bond Funds.
During the year ended December 31, 2000, John Hancock voluntarily
contributed approximately $284 to the Money Market Fund. John Hancock received
no shares of beneficial interest or other consideration in exchange for the
contribution, which increased the Funds' net asset values.
John Hancock has entered into Sub-Advisory Agreements with Independence
Investment LLC, formerly Independence Investment Associates, Inc., with respect
to the Large Cap Growth, Aggressive Balanced, Mid Cap Blend, Real Estate Equity,
Growth & Income, Managed and Short-Term Bond Funds; with Adviser, with respect
to the Active Bond, Active Bond II and Small Cap Growth Funds; with Independence
International Associates, Inc., with respect to the International Equity Index
Fund, each of whom is an affiliate of John Hancock, and, under the supervision
of John Hancock, is responsible for the day-to-day investment management of each
of the Funds. John Hancock has also entered into the Sub-Advisory Agreements
with the following Sub-Advisers, each of whom under the supervision of John
Hancock, is responsible for the day-to-day investment management of each of the
Funds:
209
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--CONTINUED
Fund Sub-Advisers
- ---- ------------
Fundamental Growth Putnam Investment Management, LLC.
Emerging Markets Equity Morgan Stanley Investment Management, Inc.
International Equity Goldman Sachs Asset Management
Health Sciences Putnam Investment Management, LLC
Global Balanced Capital Guardian Trust Company
Mid Cap Growth Janus Capital Corporation
Large Cap Value T. Rowe Price Associates, Inc.
Large Cap Value CORE Goldman Sachs Asset Management
Large Cap Value CORE II Goldman Sachs Asset Management
Large/Mid Cap Value Wellington Management Company, LLP
Money Market Wellington Management Company, LLP
Large/Mid Cap Value II Wellington Management Company, LLP
Small/Mid Cap Growth Wellington Management Company, LLP
Bond Index Mellon Bond Associates, LLP
Large Cap Aggressive Growth Alliance Capital Management, LLP
Small/Mid Cap CORE Goldman Sachs Asset Management
Small Cap Value T. Rowe Price Associates, Inc.
Real Estate Equity Morgan Stanley Investment Management, Inc.
Growth & Income Putnam Investment Management, LLC
Managed Capital Guardian Trust Company
Small Cap Equity Capital Guardian Trust Company
International Opportunities T. Rowe Price International, Inc.
Equity Index State Street Global Bank & Trust N.A.
High Yield Bond Wellington Management Company, LLP
Global Bond Capital Guardian Trust Company
Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the
principal underwriter and transfer agent of the Trust. Certain officers and
trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV,
JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and
some are also officers of John Hancock. Fees for independent trustees are paid
by the Trust.
NOTE D--INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities and obligations of the U.S. government, for each Fund for
the period ended June 30, 2001 were as follows:
Fund Purchases Sales and Maturities
- ---- --------- --------------------
Large Cap Growth $348,967 $470,780
Fundamental Growth 26,189 20,227
Aggressive Balanced 18,881 18,201
210
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--CONTINUED
Fund Purchases Sales and Maturities
- ---- --------- --------------------
Active Bond $1,032,689 $1,031,185
Active Bond II 10,764 9,694
Emerging Markets Equity 19,299 20,006
International Equity Index 1,523 13,009
International Equity 11,489 3,490
Small Cap Growth 92,144 106,028
Health Sciences 21,829 1,103
Global Balanced 5,863 5,235
Mid Cap Growth 205,948 179,358
Mid Cap Blend 18,693 16,729
Large Cap Value 31,678 14,597
Large Cap Value CORE 32,971 7,446
Large Cap Value CORE II 6,934 6,108
Large/Mid Cap Value 28,813 8,658
Large/Mid Cap Value II 175,136 174,373
Small/Mid Cap Growth 86,602 90,331
Bond Index 56,128 37,584
Large Cap Aggressive Growth 27,076 14,269
Small/Mid Cap CORE 13,939 7,798
Small Cap Value 49,686 29,419
Real Estate Equity 16,297 19,157
Growth & Income 1,301,449 1,497,180
Managed 2,547,128 2,660,323
Short-Term Bond 76,006 43,513
Small Cap Equity 19,961 14,766
International Opportunities 8,697 22,541
Equity Index 108,060 56,800
High Yield Bond 17,368 4,789
Global Bond 13,024 17,850
The identified cost of investments owned by the Funds (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation at June 30, 2001, were
as follows:
Net Unrealized
Identified Unrealized Unrealized Appreciation
Fund Cost Appreciation Depreciation (Depreciation)
- ---- ---- ------------ ------------ --------------
Large Cap Growth $879,877 $91,678 $(98,282) $(6,604)
Fundamental Growth 43,668 2,716 (6,770) (4,054)
Aggressive Balanced 19,821 1,320 (958) 362
Active Bond 751,001 12,448 (5,054) 7,394
Active Bond II 6,036 102 (28) 74
211
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's) Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Net Unrealized
Identified Unrealized Unrealized Appreciation
Fund Cost Appreciation Depreciation (Depreciation)
- ---- ---- ------------ ------------ ------------
Emerging Markets $31,458 $1,384 $(6,384) $(5,000)
Equity
International Equity 172,212 16,111 (34,872) (18,761)
Index
International Equity 22,763 566 (3,325) (2,759)
Small Cap Growth 193,543 29,252 (27,669) 1,583
Health Sciences 20,732 1,296 (933) 363
Global Balanced 28,446 1,336 (3,201) (1,865)
Mid Cap Growth 335,271 24,877 (66,733) (41,486)
Mid Cap Blend 20,788 2,453 (738) 1,715
Large Cap Value 198,377 27,975 (10,558) 17,417
Large Cap Value CORE 41,072 2,193 (1,597) 596
Large Cap Value CORE II 6,427 431 (294) 137
Large/Mid Cap Value 34,451 1,408 (1,108) 300
Large/Mid Cap Value II 121,079 6,789 (7,704) (915)
Small/Mid Cap Growth 173,354 26,190 (19,901) 6,289
Bond Index 78,055 962 (472) 490
Large Cap Aggressive
Growth 36,458 1,585 (3,283) (1,698)
Small/Mid Cap CORE 26,120 3,914 (2,943) 971
Small Cap Value 48,906 6,936 (1,317) 5,619
Real Estate Equity 131,899 26,215 (1,779) 24,436
Growth & Income 2,539,202 445,108 (223,391) 221,717
Managed 2,488,798 307,678 (105,167) 202,511
Short-Term Bond 107,177 1,431 (109) 1,322
Small Cap Equity 81,967 9,992 (16,593) (6,601)
International
Opportunities 102,682 3,267 (23,036) (19,769)
Equity Index 556,479 42,341 (78,542) (36,201)
High Yield Bond 41,135 1,073 (6,024) (4,951)
Global Bond 57,066 513 (1,841) (1,328)
NOTE E--COMBINATION
On December 22, 2000, the shareholders of John Hancock International
Opportunities II Fund ("International Opportunities II") approved the
combination between International Opportunities II and International
Opportunities, Funds, providing for the transfer of substantially all of the
assets and liabilities of the International Opportunities II Fund to the
International Opportunities Fund in exchange solely for the trust shares of the
International Opportunities Fund. The acquisition was accounted for as a
tax-free exchange of 1,947 trust shares of the International Opportunities Fund
for the net assets of International Opportunities II Fund, which amounted to
$22,528, including $2,878 of unrealized depreciation, after the close of
business on December 29, 2000. The net assets of the International Opportunities
Fund prior to the combination on December 29, 2000, were $94,169, and the
aggregate net assets of the International Opportunities Fund after the
combination amounted to $116,697.
212
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE F--CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 2001, the Funds adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies, as revised, and began
amortizing premiums on debt securities. Prior to this date, the Funds did not
amortize premiums on debt securities. The cumulative effect of this accounting
change had no impact on the total net assets of the Funds, but resulted in a
following reduction in the cost of the investments and a corresponding increase
(decrease) in unrealized appreciation (depreciation) on investments, based on
securities held as of December 31, 2000:
Reduction in the Cost Increase in Net
Fund of Investments Unrealized Appreciation
- ---- -------------- -----------------------
Aggressive Balanced $4 $4
Active Bond 3,461 3,461
Active Bond II 1 1
Global Balanced 35 35
Bond Index 678 678
Managed 5,533 5,533
Short-Term Bond 314 314
High Yield Bond 41 41
Global Bond 156 156
The effect of this change in the period ended June 30, 2001 was as follows:
Increase In
Decrease in Net Net Unrealized Increase in
Fund Investment Income Appreciation/(Depreciation) Net Realized Losses
- ---- ----------------- --------------------------- -------------------
Aggressive Balanced $4 $7 $(3)
Active Bond 853 2,309 (1,456)
Active Bond II 4 7 (3)
Global Balanced 38 63 (25)
Bond Index 125 553 (428)
Managed 1,370 7,558 (6,188)
Short-Term Bond 143 192 (49)
High Yield Bond 9 18 (9)
Global Bond 206 215 (9)
213
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE F--CHANGE IN ACCOUNTING PRINCIPLE--CONTINUED
The effect of this change on the per share operating performance and on the
annualized ratio of net investment income to average net assets in the period
ended June 30, 2001 was as follows:
Increase (Decrease)
Decrease in in Net Realized and Decrease in Net
Net Investment Income Unrealized Gains Investment Income
Fund Per Share (Losses) Per Share to Average Net Assets
- ---- --------- ------------------- ---------------------
Aggressive Balanced - - 0.04%
Active Bond $0.01 $0.01 0.20
Active Bond II 0.01 0.01 0.15
Global Balanced 0.01 0.01 0.27
Bond Index 0.02 0.02 0.35
Managed 0.01 0.01 0.10
Short-Term Bond 0.01 0.01 0.29
High Yield Bond - - 0.06
Global Bond 0.03 0.03 0.64
The Statement of Changes in Net Assets and the Financial Highlights for
prior periods have not been restated to reflect this change in presentation.
OTHER MATTERS
Section 30 and Rule 30d-1(b) under the Investment Company Act of 1940, as
amended, requires registered management investment companies to furnish
information relating to any matter submitted during the reporting period to a
vote of Shareholders of the Trust. John Hancock Variable Series Trust I
solicited a vote at special meeting of Contract owners/ Policyholders held on
April 6, 2001 on the following matters:
FOR THE ACTIVE BOND II FUND (FORMERLY, CORE BOND FUND): For Against Abstain
--- ------- -------
To approve a new Sub-Investment Management Agreement among the Trust, John 92% 0% 8%
Hancock, and John Hancock Advisers, Inc.
To approve an amendment to the current Investment Management Agreement between 52% 40% 8%
the Trust and John Hancock, reflecting an increase in this Fund's investment
advisory fee.
FOR THE LARGE CAP VALUE FUND:
To approve an amendment to the current Sub-Investment Management Agreement 88% 4% 8%
among the Trust, John Hancock, and T. Rowe Price Associates, Inc.,
reflecting a decrease in this Fund's sub-investment advisory fee.
To approve an amendment to the current Investment Management Agreement between 68% 23% 9%
the Trust and John Hancock, reflecting an increase in this Fund's investment
advisory fee.
214
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
(UNAUDITED)
June 30, 2001
- --------------------------------------------------------------------------------
(000's Omitted)
FOR THE LARGE CAP VALUE CORE II FUND (FORMERLY, AMERICAN LEADERS For Against Abstain
LARGE CAP VALUE FUND): --- ------- -------
To approve a new Sub-Investment Management Agreement among the Trust, John 100% 0% 0%
Hancock, and Goldman Sachs Asset Management, a unit of the Investment
Management Division of Goldman, Sachs & Co.
To approve an amendment to the current Investment Management Agreement between 80% 19% 1%
the Trust and John Hancock, reflecting an increase in this Fund's investment
advisory fee.
FOR THE MONEY MARKET FUND:
To approve a new Sub-Investment Management Agreement among the Trust, John 81% 9% 10%
Hancock, and Wellington Management Company, LLP.
FOR THE LARGE/MID CAP VALUE II FUND (FORMERLY, MID CAP VALUE FUND):
To approve a new Sub-Investment Management Agreement among the Trust, John 83% 7% 10%
Hancock, and Wellington Management Company, LLP.
To approve an amendment to the current Investment management Agreement between 69% 21% 10%
the Trust and John Hancock, reflecting an increase in this Fund's investment
advisory fee.
FOR THE SMALL CAP VALUE FUND (FORMERLY, SMALL/MID CAP VALUE FUND):
To approve a new Sub-Investment Management Agreement among the Trust, John 87% 4% 9%
Hancock, and T. Rowe Price Associates, Inc.
To approve an amendment to the current Investment Management Agreement between 75% 17% 8%
the Trust and John Hancock, reflecting an increase in this Fund's investment
advisory fee.
215
OFFICERS AND TRUSTEES
Michele G. Van Leer, Chairman
Kathleen F. Driscoll, President and Vice Chairman
Karen Q. Visconti, Secretary
Arnold Bergman, Assistant Secretary
Raymond F. Skiba, Treasurer
Jude A. Curtis, Compliance Officer
Maryellen Carney, Assistant Compliance Officer
Patrick F. Smith, Controller
Paula M. Pashko, Assistant Controller
Elizabeth G. Cook
Reverend Diane C. Kessler
Hassel H. McClellan
Robert F. Verdonck
INVESTMENT ADVISER
John Hancock Life Insurance Company
John Hancock Place
P.O. Box 111
Boston, MA 02117
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
SUB-INVESTMENT ADVISERS
Independence Investment LLC
53 State Street
Boston, MA 02109
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
The Boston Company Asset Management, LLC
One Boston Place
Boston, MA 02108
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, CA 90071
Goldman Sachs Asset Management
32 Old Slip
New York, NY 10005
Janus
100 Fillmore Street
Denver, CO 80206-4928
Mellon Bond Associates, LLP
One Mellon Bank Center, Suite 5400
Pittsburgh, PA 15258-0001
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Putnam Investments
One Post Office Square
Boston, MA 02109
SSgA Funds Management, Inc.
Two International Place
Boston, MA 02110
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
T. Rowe Price International, Inc.
100 East Pratt Street
Baltimore, MD 21202
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
[LOGO OF JOHN HANCOCK]
The Variable Series Trust consists of funds used as investment options for
various John Hancock variable life and variable annuity contracts. This report
must be accompanied by the required prospectus and the most current quarterly
performance report for the contract offered. Investors are not able to invest
directly in the Variable Series Trust.
Not all of the funds described in this report are available on every product.
Please refer to the prospectus for additional information about the investment
options on your variable product.
Insurance Products are Issued by: John Hancock Life Insurance Company John
Hancock Variable Life Insurance Company* (*not licensed in New York), Boston, MA
02117 Securities Products are Distributed by: John Hancock Funds, Inc., Member
NASD Signator Investors, Inc., Member NASD, SIPC
S8128 7/01 [LOGO OF IMSA]
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
John Hancock V.A. Money Market Fund
Special Meeting of Shareholders to Be Held on
December 5, 2001
Indicate your voting instructions below by filling in the appropriate boxes
using blue or black ink or dark pencil.
This voting instruction card, if properly executed, will be voted in the manner
directed by the contract owner. If this voting instruction is executed and no
direction is made, this voting instruction will be voted for all proposals and
in the discretion of the insurance company upon such other business as may
properly come before the meeting.
Proposal: To approve an Agreement and Plan of Reorganization between V.A. Money
Market Fund and the Money Market Fund series of the John Hancock Variable Series
Trust I ("Money Market Fund"). Under this Agreement, V.A. Money Market Fund
would transfer all of its assets to Money Market Fund in exchange for shares of
Money Market Fund. These shares will be distributed proportionately to you and
the other shareholders of V.A. Money Market Fund. Money Market Fund will also
assume V.A. Money Market Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
JOHN HANCOCK V.A. MONEY MARKET FUND
A Series of John Hancock Declaration Trust
These voting instructions will be used by the insurance companies in connection
with a solicitation of proxies by the trustees of the Fund.
The undersigned, revoking previous instructions, hereby instructs the
above-referenced insurance companies to vote all the shares of beneficial
interest of John Hancock V.A. Money Market Fund ("V.A. Money Market Fund")
attributable to the undersigned's variable annuity contract at the Special
Meeting of Shareholders (the "Meeting") of V.A. Money Market Fund to be held at
101 Huntington Avenue, Boston, Massachusetts, on Wednesday, December 5, 2001 at
9:00 a.m., Eastern time, and at any adjournment (s) of the Meeting. Receipt of
the Proxy Statement dated November 1, 2001 is hereby acknowledged. If not
revoked, this card shall be voted for the proposal.
Kathleen F. Driscoll and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the special meeting of shareholders
and at any adjournment thereof, as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date ------------------ , 2001
NOTE: Signature(s) should agree with the
name(s) printed herein. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full name as
such. If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
---------------------------------------
---------------------------------------
Signature(s)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
John Hancock V.A. Bond Fund
Special Meeting of Shareholders to Be Held on
December 5, 2001
Indicate your voting instructions below by filling in the appropriate boxes
using blue or black ink or dark pencil.
This voting instruction card, if properly executed, will be voted in the manner
directed by the contract owner. If this voting instruction is executed and no
direction is made, this voting instruction will be voted for all proposals and
in the discretion of the insurance company upon such other business as may
properly come before the meeting.
Proposal: To approve an Agreement and Plan of Reorganization between V.A. Bond
Fund and the Active Bond Fund series of the John Hancock Variable Series Trust I
("Active Bond Fund"). Under this Agreement, V.A. Bond Fund. would transfer all
of its assets to Active Bond Fund in exchange for shares of Active Bond Fund.
These shares will be distributed proportionately to you and the other
shareholders of V.A. Bond Fund. Active Bond Fund will also assume V.A. Bond
Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
JOHN HANCOCK V.A. BOND FUND
A Series of John Hancock Declaration Trust
These voting instructions will be used by the insurance companies in connection
with a solicitation of proxies by the trustees of the Fund.
The undersigned, revoking previous instructions, hereby instructs the
above-referenced insurance companies to vote all the shares of beneficial
interest of John Hancock V.A. Bond Fund ("V.A. Bond Fund") attributable to the
undersigned's variable annuity contract at the Special Meeting of Shareholders
(the "Meeting") of V.A. Bond Fund to be held at 101 Huntington Avenue, Boston,
Massachusetts, on Wednesday, December 5, 2001 at 9:00 a.m., Eastern time, and at
any adjournment (s) of the Meeting. Receipt of the Proxy Statement dated
November 1, 2001 is hereby acknowledged. If not revoked, this card shall be
voted for the proposal.
Kathleen F. Driscoll and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the special meeting of shareholders
and at any adjournment thereof, as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date ----------------, 2001
NOTE: Signature(s) should agree with the
name(s) printed herein. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full name as
such. If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
--------------------------------------------
--------------------------------------------
Signature(s)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
John Hancock V.A. 500 Index Fund
Special Meeting of Shareholders to Be Held on
December 5, 2001
Indicate your voting instructions below by filling in the appropriate boxes
using blue or black ink or dark pencil.
This voting instruction card, if properly executed, will be voted in the manner
directed by the contract owner. If this voting instruction is executed and no
direction is made, this voting instruction will be voted for all proposals and
in the discretion of the insurance company upon such other business as may
properly come before the meeting.
Proposal: To approve an Agreement and Plan of Reorganization between V.A. 500
Index Fund and the Equity Index Fund series of the John Hancock Variable Series
Trust I ("Equity Index Fund"). Under this Agreement, V.A. 500 Index Fund. would
transfer all of its assets to Equity Index Fund in exchange for shares of Equity
Index Fund. These shares will be distributed proportionately to you and the
other shareholders of V.A. 500 Index Fund. Equity Index Fund will also assume
V.A. 500 Index Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
JOHN HANCOCK V.A. 500 INDEX FUND
A Series of John Hancock Declaration Trust
These voting instructions will be used by the insurance companies in connection
with a solicitation of proxies by the trustees of the Fund.
The undersigned, revoking previous instructions, hereby instructs the
above-referenced insurance companies to vote all the shares of beneficial
interest of John Hancock V.A. 500 Index Fund ("V.A. 500 Index Fund")
attributable to the undersigned's variable annuity contract at the Special
Meeting of Shareholders (the "Meeting") of V.A. 500 Index Fund to be held at 101
Huntington Avenue, Boston, Massachusetts, on Wednesday, December 5, 2001 at 9:00
a.m., Eastern time, and at any adjournment (s) of the Meeting. Receipt of the
Proxy Statement dated November 1, 2001 is hereby acknowledged. If not revoked,
this card shall be voted for the proposal.
Kathleen F. Driscoll and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the special meeting of shareholders
and at any adjournment thereof, as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date ----------------- , 2001
NOTE: Signature(s) should agree with the
name(s) printed herein. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full name as
such. If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
--------------------------------------------
--------------------------------------------
Signature(s)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
John Hancock V.A. International Fund
Special Meeting of Shareholders to Be Held on
December 5, 2001
Indicate your voting instructions below by filling in the appropriate boxes
using blue or black ink or dark pencil.
This voting instruction card, if properly executed, will be voted in the manner
directed by the contract owner. If this voting instruction is executed and no
direction is made, this voting instruction will be voted for all proposals and
in the discretion of the insurance company upon such other business as may
properly come before the meeting.
Proposal: To approve an Agreement and Plan of Reorganization between V.A.
International Fund and the International Equity Fund series of the John Hancock
Variable Series Trust I ("International Equity Fund"). Under this Agreement,
V.A. International Fund would transfer all of its assets to International
Equity Fund in exchange for shares of International Equity Fund. These shares
will be distributed proportionately to you and the other shareholders of V.A.
International Fund. International Equity Fund will also assume V.A.
International Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
JOHN HANCOCK V.A. INTERNATIONAL FUND
A Series of John Hancock Declaration Trust
These voting instructions will be used by the insurance companies in connection
with a solicitation of proxies by the trustees of the Fund.
The undersigned, revoking previous instructions, hereby instructs the
above-referenced insurance companies to vote all the shares of beneficial
interest of John Hancock V.A. International Fund ("V.A. International Fund")
attributable to the undersigned's variable annuity contract at the Special
Meeting of Shareholders (the "Meeting") of V.A. International Fund to be held at
101 Huntington Avenue, Boston, Massachusetts, on Wednesday, December 5, 2001 at
9:00 a.m., Eastern time, and at any adjournment (s) of the Meeting. Receipt of
the Proxy Statement dated November 1, 2001 is hereby acknowledged. If not
revoked, this card shall be voted for the proposal.
Kathleen F. Driscoll and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the special meeting of shareholders
and at any adjournment thereof, as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date -------------, 2001
NOTE: Signature(s) should agree with the
name(s) printed herein. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full name as
such. If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
--------------------------------------------
--------------------------------------------
Signature(s)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
John Hancock V.A. Large Cap Growth Fund
Special Meeting of Shareholders to Be Held on
December 5, 2001
Indicate your voting instructions below by filling in the appropriate boxes
using blue or black ink or dark pencil.
This voting instruction card, if properly executed, will be voted in the manner
directed by the contract owner. If this voting instruction is executed and no
direction is made, this voting instruction will be voted for all proposals and
in the discretion of the insurance company upon such other business as may
properly come before the meeting.
Proposal: To approve an Agreement and Plan of Reorganization between V.A. Large
Cap Growth Fund and the Growth & Income Fund series of the John Hancock Variable
Series Trust I ("Growth & Income Fund"). Under this Agreement, V.A. Large Cap
Growth Fund would transfer all of its assets to Growth & Income Fund in exchange
for shares of Growth & Income Fund. These shares will be distributed
proportionately to you and the other shareholders of V.A. Large Cap Growth Fund.
Growth & Income Fund will also assume V.A. Large Cap Growth Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
JOHN HANCOCK V.A. LARGE CAP GROWTH FUND
A Series of John Hancock Declaration Trust
These voting instructions will be used by the insurance companies in connection
with a solicitation of proxies by the trustees of the Fund.
The undersigned, revoking previous instructions, hereby instructs the
above-referenced insurance companies to vote all the shares of beneficial
interest of John Hancock V.A. Large Cap Growth Fund ("V.A. Large Cap Growth
Fund") attributable to the undersigned's variable annuity contract at the
Special Meeting of Shareholders (the "Meeting") of V.A. Large Cap Growth Fund to
be held at 101 Huntington Avenue, Boston, Massachusetts, on Wednesday, December
5, 2001 at 9:00 a.m., Eastern time, and at any adjournment (s) of the Meeting.
Receipt of the Proxy Statement dated November 1, 2001 is hereby acknowledged. If
not revoked, this card shall be voted for the proposal.
Kathleen F. Driscoll and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the special meeting of shareholders
and at any adjournment thereof, as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date -------------, 2001
NOTE: Signature(s) should agree with the
name(s) printed herein. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full name as
such. If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
--------------------------------------------
--------------------------------------------
Signature(s)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
John Hancock V.A. Core Equity Fund
Special Meeting of Shareholders to Be Held on
December 5, 2001
Indicate your voting instructions below by filling in the appropriate boxes
using blue or black ink or dark pencil.
This voting instruction card, if properly executed, will be voted in the manner
directed by the contract owner. If this voting instruction is executed and no
direction is made, this voting instruction will be voted for all proposals and
in the discretion of the insurance company upon such other business as may
properly come before the meeting.
Proposal 1. To approve an Agreement and Plan of Reorganization between V.A. Core
Equity Fund and the Growth & Income Fund series of the John Hancock Variable
Series Trust I ("Growth & Income Fund"). Under this Agreement, V.A. Core Equity
Fund would transfer all of its assets to Growth & Income Fund in exchange for
shares of Growth & Income Fund. These shares will be distributed proportionately
to you and the other shareholders of V.A. Core Equity Fund. Growth & Income Fund
will also assume V.A. Core Equity Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
JOHN HANCOCK V.A. CORE EQUITY FUND
A Series of John Hancock Declaration Trust
These voting instructions will be used by the insurance companies in connection
with a solicitation of proxies by the trustees of the Fund.
The undersigned, revoking previous instructions, hereby instructs the
above-referenced insurance companies to vote all the shares of beneficial
interest of John Hancock V.A. Core Equity Fund ("V.A. Core Equity Fund")
attributable to the undersigned's variable annuity contract at the Special
Meeting of Shareholders (the "Meeting") of V.A. Core Equity Fund to be held at
101 Huntington Avenue, Boston, Massachusetts, on Wednesday, December 5, 2001 at
9:00 a.m., Eastern time, and at any adjournment (s) of the Meeting. Receipt of
the Proxy Statement dated November 1, 2001 is hereby acknowledged. If not
revoked, this card shall be voted for the proposal.
Kathleen F. Driscoll and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the special meeting of shareholders
and at any adjournment thereof, as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date -----------------------------, 2001
NOTE: Signature(s) should agree with the
name(s) printed herein. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full name as
such. If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
--------------------------------------------
--------------------------------------------
Signature(s)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
John Hancock V.A. Mid Cap Growth Fund
Special Meeting of Shareholders to Be Held on
December 5, 2001
Indicate your voting instructions below by filling in the appropriate boxes
using blue or black ink or dark pencil.
This voting instruction card, if properly executed, will be voted in the manner
directed by the contract owner. If this voting instruction is executed and no
direction is made, this voting instruction will be voted for all proposals and
in the discretion of the insurance company upon such other business as may
properly come before the meeting.
Proposal: To approve an Agreement and Plan of Reorganization between V.A. Mid
Cap Growth Fund and the Fundamental Growth Fund series of the John Hancock
Variable Series Trust I ("Fundamental Growth Fund"). Under this Agreement, V.A.
Mid Cap Growth Fund would transfer all of its assets to Fundamental Growth Fund
in exchange for shares of Fundamental Growth Fund. These shares will be
distributed proportionately to you and the other shareholders of V.A. Mid Cap
Growth Fund. Fundamental Growth Fund will also assume V.A. Mid Cap Growth Fund's
liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
JOHN HANCOCK V.A. MID CAP GROWTH FUND
A Series of John Hancock Declaration Trust
These voting instructions will be used by the insurance companies in connection
with a solicitation of proxies by the trustees of the Fund.
The undersigned, revoking previous instructions, hereby instructs the
above-referenced insurance companies to vote all the shares of beneficial
interest of John Hancock V.A. Mid Cap Growth Fund ("V.A. Mid Cap Growth Fund")
attributable to the undersigned's variable annuity contract at the Special
Meeting of Shareholders (the "Meeting") of V.A. Mid Cap Growth Fund to be held
at 101 Huntington Avenue, Boston, Massachusetts, on Wednesday, December 5, 2001
at 9:00 a.m., Eastern time, and at any adjournment (s) of the Meeting. Receipt
of the Proxy Statement dated November 1, 2001 is hereby acknowledged. If not
revoked, this card shall be voted for the proposal.
Kathleen F. Driscoll and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the special meeting of shareholders
and at any adjournment thereof, as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date -----------------------------, 2001
NOTE: Signature(s) should agree with the
name(s) printed herein. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full name as
such. If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
--------------------------------------------
--------------------------------------------
Signature(s)
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
John Hancock V. A. Small Cap Growth Fund
Special Meeting of Shareholders to Be Held on
December 5, 2001
Indicate your voting instructions below by filling in the appropriate boxes
using blue or black ink or dark pencil.
This voting instruction card, if properly executed, will be voted in the manner
directed by the contract owner. If this voting instruction is executed and no
direction is made, this voting instruction will be voted for all proposals and
in the discretion of the insurance company upon such other business as may
properly come before the meeting.
Proposal: To approve an Agreement and Plan of Reorganization between V.A. Small
Cap Growth Fund and the Small Cap Growth Fund series of the John Hancock
Variable Series Trust I ("Small Cap Growth Fund"). Under this Agreement, V. A.
Small Cap Growth Fund would transfer all of its assets to Small Cap Growth
Fund in exchange for shares of Small Cap Growth Fund. These shares will be
distributed proportionately to you and the other shareholders of V.A. Small Cap
Growth Fund. Small Cap Growth Fund will also assume V. A. Small Cap Growth
Fund's liabilities.
FOR |_| AGAINST |_| ABSTAIN |_|
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF THIS CARD.
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
JOHN HANCOCK LIFE INSURANCE COMPANY
VOTE THIS CARD TODAY!
A PROMPT RESPONSE WILL SAVE THE FUND
THE EXPENSE OF ADDITIONAL MAILING
JOHN HANCOCK V. A. SMALL CAP GROWTH FUND
A Series of John Hancock Declaration Trust
These voting instructions will be used by the insurance companies in connection
with a solicitation of proxies by the trustees of the Fund.
The undersigned, revoking previous instructions, hereby instructs the
above-referenced insurance companies to vote all the shares of beneficial
interest of John Hancock V. A. Small Cap Growth Fund ("V.A. Small Cap Growth
Fund") attributable to the undersigned's variable annuity contract at the
Special Meeting of Shareholders (the "Meeting") of V. A. Small Cap Growth Fund
to be held at 101 Huntington Avenue, Boston, Massachusetts, on Wednesday,
December 5, 2001 at 9:00 a.m., Eastern time, and at any adjournment (s) of the
Meeting. Receipt of the Proxy Statement dated November 1, 2001 is hereby
acknowledged. If not revoked, this card shall be voted for the proposal.
Kathleen F. Driscoll and Michele G. Van Leer, and each of them, with power of
substitution in each, are hereby instructed to vote the shares held in the fund
portfolio attributable to the undersigned at the special meeting of shareholders
and at any adjournment thereof, as specified on the reverse side.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
Date -----------------------------, 2001
NOTE: Signature(s) should agree with the
name(s) printed herein. When signing as
attorney, executor, administrator, trustee
or guardian, please give your full name as
such. If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
--------------------------------------------
--------------------------------------------
Signature(s)
Part B
Statement of Additional Information
GROWTH & INCOME FUND
EQUITY INDEX FUND
INTERNATIONAL EQUITY FUND
FUNDAMENTAL GROWTH FUND
SMALL CAP GROWTH FUND
ACTIVE BOND FUND
MONEY MARKET FUND
(Each an "Acquiring Fund", and each a series of
John Hancock Variable Series Trust I)
197 Clarendon Street
Boston, MA 02117
1-800-824-0335
JOHN HANCOCK V.A. CORE EQUITY FUND
JOHN HANCOCK V.A. LARGE CAP GROWTH FUND
JOHN HANCOCK V.A. 500 INDEX FUND
JOHN HANCOCK V.A. INTERNATIONAL FUND
JOHN HANCOCK V.A. MID CAP GROWTH FUND
JOHN HANCOCK V.A. SMALL CAP GROWTH FUND
JOHN HANCOCK V.A. BOND FUND
JOHN HANCOCK V.A. MONEY MARKET FUND
(Each an "Acquired Fund", and each a Series of John Hancock Declaration Trust)
101 Huntington Avenue
Boston, MA 02199
1-800-824-0335
November 1, 2001
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the related proxy statement and prospectus for Growth &
Income Fund, Equity Index Fund, International Equity Fund, Fundamental Growth
Fund, Small Cap Growth Fund, Active Bond Fund and Money Market Fund (the
"Acquiring Funds") that is also dated November 1, 2001 for use in connection
with the Special Meeting of Shareholders of John Hancock V.A. Core Equity Fund,
John Hancock V.A. Large Cap Growth Fund, John Hancock V.A. 500 Index Fund, John
Hancock V.A. International Fund, John Hancock Mid Cap Growth Fund, John Hancock
V.A. Small Cap Growth Fund, John Hancock V.A. Bond Fund, and John Hancock V.A.
Money Market Fund (the "Acquired Funds"). Please retain this Statement of
Additional Information for future reference. A copy of the proxy statement and
prospectus can be obtained free of charge by calling John Hancock Annuity
Servicing Office at 1-800-824-0335.
Table Of Contents
Page
Introduction 3
Additional Information about the Acquiring Funds 3
General Information and History 3
Investment Objective and Policies 3
Management of the Acquiring Funds 3
Control Persons and Principal Holders of Shares 3
Investment Advisory and Other Services 3
Brokerage Allocation 3
Capital Stock and Other Securities 3
Purchase, Redemption and Pricing of Acquiring Fund Shares 3
Tax Status 4
Underwriters 4
Calculation of Performance Data 4
Financial Statements 4
Additional Information about the Acquired Funds 4
General Information and History 4
Investment Objective and Policies 4
Management of the Acquired Funds 4
Investment Advisory and Other Services 4
Brokerage Allocation 4
Capital Stock and Other Securities 4
Purchase, Redemption and Pricing of the Acquired Funds 5
Tax Status 5
Underwriters 5
Calculation of Performance Data 5
Financial Statements 5
Exhibits
A - Statement of Additional Information, dated May 1, 2001, of the
Acquiring Funds including unaudited financial statements as of June 30,
2001 and audited financial statements as of December 31, 2000.
B - Statement of Additional Information, dated May 1, 2001, of the
Acquired Funds including unaudited financial statements as of June 30,
2001 and audited financial statements as of December 31, 2000.
C - Pro forma combined financial statements as of June 30, 2001, assuming
the reorganization of the Acquired Funds into the corresponding
Acquiring Funds occurred on that date.
2
INTRODUCTION
This Statement of Additional Information ("SAI") is intended to supplement the
information provided in a proxy statement and prospectus dated November 1, 2001.
The proxy statement and prospectus has been sent to the shareholders of the
Acquired Funds in connection with the solicitation by the Trustees of the
Acquired Funds of proxies to be voted at the Special Meeting of Shareholders of
the Acquired Funds to be held on December 5, 2001. This Statement of Additional
Information incorporates by reference the Statement of Additional Information of
the Acquiring Funds, dated May 1, 2001, and the Statement of Additional
Information of the Acquired Funds, dated May 1, 2001. The SAI for the Acquiring
Funds and the SAI for the Acquired Funds are included with this Statement of
Additional Information.
Additional Information About the Acquiring Funds
------------------------------------------------
General Information and History
- -------------------------------
For additional information about the Acquiring Funds generally and their
history, see "What is the Trust" and "The Trust's Business History" in the
Acquiring Fund SAI attached hereto as Exhibit A.
Investment Objective and Policies
- ---------------------------------
For additional information about the Acquiring Funds' investment objectives,
policies and restrictions, see "The Funds' Investment Activities and Their
Risks" and "The Funds' Fundamental Investment Restrictions" in the Acquiring
Fund SAI attached hereto as Exhibit A.
Management of the Acquiring Funds
- ---------------------------------
For additional information about the Acquiring Funds' Board of Trustees,
officers and management personnel, see "Board of Trustees and Officers of the
Trust" in the Acquiring Fund SAI attached hereto as Exhibit A.
Control Persons and Principal Holders of Shares
- -----------------------------------------------
For additional information about control persons of the Acquiring Funds and
principal holders of shares of the Acquiring Funds, see "Board of Trustees and
Officers of the Trust" in the Acquiring Fund SAI attached hereto as Exhibit A.
Investment Advisory and Other Services
- --------------------------------------
For additional information about the Acquiring Funds' investment adviser,
sub-advisers, custodian, transfer agent and independent accountants, see
"Investment Advisory Arrangements" and "Arrangements with other Service
Providers" in the Acquiring Fund SAI attached hereto as Exhibit A.
Brokerage Allocation and Other Practices
- ----------------------------------------
For additional information about the Acquiring Funds' brokerage allocation
practices, see "Portfolio Transactions and Brokerage Allocation" in the
Acquiring Fund SAI attached hereto as Exhibit A.
Capital Stock and Other Securities
- ----------------------------------
For additional information about the voting rights and other characteristics of
the Acquiring Funds' shares of beneficial interest, see "Features of the Trust's
Shares" and "Shareholder Meetings and Voting Rights" in the Acquiring Fund SAI
attached hereto as Exhibit A.
Purchase, Redemption and Pricing of Acquiring Fund Shares
- ---------------------------------------------------------
For additional information about the purchase, redemption and pricing of the
Acquiring Funds' shares, see "Computing the Funds' Net Asset Value" and "Sales
and Redemptions of Fund Shares" in the Acquiring Fund SAI attached hereto as
Exhibit A.
3
Tax Status
- ----------
For additional information about the tax status of the Acquiring Funds, see
"Taxes" in the Acquiring Fund SAI, attached hereto as Exhibit A..
Underwriters
- ------------
For additional information about the Acquiring Funds' principal underwriter and
the distribution contract between the principal underwriter and the Acquiring
Funds, see "Underwriting and Indemnity Agreement" in the Acquiring Fund SAI
attached hereto as Exhibit A.
Calculation of Performance Data
- -------------------------------
For additional information about the investment performance of the Acquiring
Funds, see "Information About Fund Performance" in the Acquiring Fund SAI
attached hereto as Exhibit A.
Financial Statements
- --------------------
Audited annual financial statements of the Acquiring Funds at December 31, 2000
and unaudited semi-annual financial statements as of June 30, 2001 are attached
to the Acquiring Fund SAI, which is attached hereto as Exhibit A.
Pro forma combined financial statements as of June 30, 2001 are also attached
hereto as Exhibit C.
Additional Information About the Acquired Funds
-----------------------------------------------
General Information and History
- -------------------------------
For additional information about the Acquired Funds generally and their history,
see "Organization of the Trust" in the Acquired Fund SAI attached hereto as
Exhibit B.
Investment Objective and Policies
- ---------------------------------
For additional information about the Acquired Funds' investment objectives,
policies and restrictions, see "Investment Policies and Strategies", "Risk
Factors, Investments and Techniques" and "Investment Restrictions" in the
Acquired Fund SAI attached hereto as Exhibit B.
Management of Acquired Funds
- ----------------------------
For additional information about the Acquired Funds' Board of Trustees, officers
and management personnel, see "Those Responsible for Management" in the Acquired
Fund SAI attached hereto as Exhibit B.
Investment Advisory and Other Services
- --------------------------------------
For additional information about the Acquired Funds' investment adviser,
custodian, transfer agent and independent accountants, see "Investment Advisory
and Other Services", "Distribution Contracts", "Shareholders Servicing Agent",
"Custody of Portfolio" and "Independent Auditors" in the Acquired Fund SAI
attached hereto as Exhibit B.
Brokerage Allocation and Other Practices
- ----------------------------------------
For additional information about the Acquired Funds' brokerage allocation
practices, see "Brokerage Allocation" in the Acquired Fund SAI attached hereto
as Exhibit B..
Capital Stock and Other Securities
- ----------------------------------
For additional information about the voting rights and other characteristics of
the Acquired Funds' shares of beneficial interest, see "Description of the
Trust's Shares" and "Dividends" in the Acquired Fund SAI attached hereto as
Exhibit B.
4
Purchase, Redemption and Pricing of Acquired Fund Shares
- --------------------------------------------------------
For additional information about the purchase, redemption and pricing of the
Acquired Funds' shares, see "Net Asset Value", Special Redemptions" and
"Eligible Investors" in the Acquired Fund SAI attached hereto as Exhibit B.
Tax Status
- ----------
For additional information about the tax status of the Acquired Funds, see "Tax
Status" in the Acquired Fund SAI attached hereto as Exhibit B.
Underwriters
- ------------
For additional information about the Acquired Funds' principal underwriter and
the distribution contract between the principal underwriter and the Acquired
Funds, see "Distribution Contracts" in the Acquired Fund SAI attached hereto as
Exhibit B.
Calculation of Performance Data
- -------------------------------
For additional information about the investment performance of the Acquired
Funds, see "Calculation of Performance" in the Acquired Fund SAI attached hereto
as Exhibit B.
Financial Statements
- --------------------
Audited annual financial statements of the Acquired Funds at December 31, 2000
and unaudited semi-annual financial statements as of June 30, 2001 are attached
to the Acquired Fund SAI, which is attached hereto as Exhibit B.
5
JOHN HANCOCK
VARIABLE SERIES TRUST I
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2001
This Statement of Additional Information is not a prospectus. It is
intended that this Statement of Additional Information be read in conjunction
with the Prospectus of John Hancock Variable Series Trust I, dated May 1, 2001.
A copy of the Prospectus may be obtained from John Hancock Variable Series Trust
I, John Hancock Place, P.O. Box 111, Boston, Massachusetts 02117, telephone
number 1-800-REAL LIFE.
This Statement of Additional Information relates to all thirty-three of the
Trust's current "Funds."
THE TRUST'S FINANCIAL STATEMENTS AND INVESTMENT PERFORMANCE INFORMATION
The Trust's financial statements appearing in its Annual Report to contract
holders and the report of Ernst & Young LLP, independent auditors of the Trust,
which appears therein, are incorporated by reference into this Statement of
Additional Information. The information about the total investment returns
achieved by the Trust's various Funds, is also incorporated herein by reference.
No other portions of the Annual Report are incorporated by reference. A free
copy of the Annual Report to contract holders may be obtained by writing to the
address or calling the number above.
1
TABLE OF CONTENTS
PAGE IN THIS
STATEMENT OF
ADDITIONAL
INFORMATION
-----------
The Trust's Financial Statements and Performance Information........... 1
What Is the Trust?..................................................... 4
The Trust's Business History........................................... 4
The Funds' Investment Activities and Their Risks....................... 5
1. Investing in Money Market Instruments........................ 5
2. Investing in Other Fixed Income Obligations.................. 5
3. Investing in Equity Securities............................... 7
4. Investing in Real Estate Securities.......................... 9
5. Investing in Foreign Securities.............................. 10
6. Using Forward Exchange Contracts to Manage Currency 11
Exposure....................................................
7. Using Options on Currencies to Manage Currency Exposure...... 12
8. Using Currency Futures Contracts and Options
Thereon to Manage Currency Exposure......................... 13
9. Using Certain Other Derivative Instruments to Manage
Currency Exposure........................................... 13
10. Using Foreign Currency Exposure Management Strategies
(General Considerations and Risks).......................... 13
11. Reallocating a Fund's Assets Among Asset Classes............. 14
12. Adopting a Temporary Defensive Strategy...................... 14
13. Investing With an Index-Based Objective...................... 14
14. Investing on a Non-Diversified Basis......................... 16
15. Using Options (Generally).................................... 17
16. Using Options on Securities in Certain Conservative
Investment Strategies........................................ 18
17. Using Financial Futures Contracts, Options on Such Contracts
and Options on Stock Indexes (General Considerations)........ 19
18. Using Financial Futures, Options Thereon, and Stock Index
Options for Certain Hedging - Type Strategies................ 20
19. Using Options and Futures in Potentially More Aggressive
Strategies................................................... 22
20. Limiting the Funds' Exposure to Certain Futures and Option
Transactions................................................. 23
21. Using Other Types of Derivative Instruments.................. 24
22. Investing In Other Investment Companies...................... 25
23. Purchasing "When Issued" Securities and Forward
Commitments.................................................. 26
24. Short-Term Trading........................................... 26
25. Entering Into Repurchase Agreements.......................... 27
26. Participating in Joint Trading Accounts...................... 27
27. Lending of Fund Securities................................... 27
28. Using Reverse Repurchase Agreements and Mortgages
"Dollar Rolls"............................................... 28
29. Investing in Rule 144A and Illiquid Securities............... 28
30. Investing in Convertible Securities and Warrants............. 28
31. Investing in Initial Public Offerings ("IPOs")............... 29
2
TABLE OF CONTENTS--Continued
PAGE IN THIS
STATEMENT OF
ADDITIONAL
INFORMATION
-----------
The Funds' Fundamental Investment Restrictions......................... 29
Board of Trustees and Officers of the Trust............................ 33
Investment Advisory Arrangements....................................... 35
The Trust's Investment Advisory Arrangements With John Hancock 35
The Trust's Arrangements With Subadvisers......................... 37
Dollar Amounts of Advisory Fees, Subadvisory Fees, and
Expense Reimbursements....................................... 42
Arrangements With Other Service Providers.............................. 44
Underwriting and Indemnity Agreement.............................. 44
Custody of the Trust's Assets..................................... 44
Subadministration Agreement With State Street Bank................ 44
Independent Auditors.............................................. 45
Portfolio Transactions and Brokerage Allocation........................ 45
Codes of Ethics........................................................ 49
Features of the Trust's Shares......................................... 49
Shareholder Meetings and Voting Rights................................. 50
Sales and Redemptions of Fund Shares................................... 51
Computing the Funds' Net Asset Value................................... 52
Taxes.................................................................. 53
Information About Fund Performance..................................... 53
Legal Matters.......................................................... 54
Reports to Contractholders............................................. 54
Appendix A - Corporate Bond Ratings.................................... 55
3
WHAT IS THE TRUST?
John Hancock Variable Series Trust I, (the "Trust") is an open-end
management investment company. With the exception of the Managed, Growth &
Income, Large Cap Growth, Large Cap Aggressive Growth, Mid Cap Growth, Real
Estate Equity, Global Balanced and Global Bond Funds, each of the Funds is a
"diversified" Fund within the meaning of the Investment Company Act of 1940
(the "Investment Company Act").
Shares of the Trust are currently sold to John Hancock Variable Life
Accounts U, V, and S to support variable life insurance policies issued by John
Hancock Variable Life Insurance Company ("JHVLICO"); John Hancock Variable
Annuity Accounts U and V to support variable annuity contracts issued by John
Hancock Life Insurance Company ("John Hancock"); John Hancock Variable Annuity
Accounts I and JF to support variable annuity contracts issued by JHVLICO; and
John Hancock Variable Life Insurance Account UV to support variable life
insurance policies issued by John Hancock. It is anticipated that, in the
future, Trust shares may be sold to other separate investment accounts of
JHVLICO and John Hancock and to separate investment accounts of other insurance
companies (which may or may not be affiliated with John Hancock). Each of these
separate investment accounts is hereinafter referred to as a "Separate Account."
Because the Separate Accounts currently own all of the Trust's shares,
those Separate Accounts (or John Hancock and JHVLICO) may be deemed to control
the Trust. John Hancock and JHVLICO, in turn, are both directly or indirectly
controlled by John Hancock Financial Services, Inc., a publicly-traded holding
company. The Trust issues a separate series of shares of beneficial interest
for each Fund. Each share issued with respect to a Fund has a pro rata interest
in the net assets of that Fund. The assets of each Fund are charged with the
liabilities of that Fund and a proportionate share of the general liabilities of
the Trust.
THE TRUST'S BUSINESS HISTORY
The Trust is, in part, a successor to three Separate Accounts of JHVLICO,
as well as the six Separate Accounts of John Hancock described below.
On March 28, 1986, all of the investment assets and related liabilities of the
Variable Life Stock, Bond, and Money Market Accounts were transferred to what
are now the Growth & Income, Active Bond and Money Market Funds of the Trust,
respectively, in exchange for shares of those Funds.
On February 20, 1987, all of the investment assets and related liabilities
of six Variable Annuity Stock, Bond and Money Market Accounts were transferred
to what are now the Growth & Income, Active Bond and Money Market Funds of the
Trust, respectively, in exchange for shares of these Funds. The Trust itself
was incorporated on September 23, 1985, under the laws of the State of Maryland
and was reorganized as a Massachusetts business trust effective April 29, 1988.
Over the years, several Funds have been re-named as follows:
YEAR OF
CURRENT FUND NAME PRIOR NAME(S) CHANGE
- ----------------- ------------- ------
Active Bond Sovereign Bond 2000
Bond 1996
Global Balanced International Balanced 2000
Global Bond Strategic Bond 1999
Growth & Income Stock 1996
International Equity Index International Equities 1998
International 1995
Global 1994
4
YEAR OF
CURRENT FUND NAME - continued PRIOR NAME(S) - continued CHANGE
- ----------------------------- ------------------------- ------
Large Cap Growth Select Stock 1995
Short-Term Bond Short-Term U.S. Government 1998
Small/Mid Cap Growth Diversified Mid Cap Growth 1999
Special Opportunities 1998
Small Cap Equity Small Cap Value 2000
Fundamental Growth Fundamental Mid Cap Growth 2000
Large Cap Value CORE II American Leaders Large Cap Value 2001
Large/Mid Cap Value II Mid Cap Value 2001
Small Cap Value Small/Mid Cap Value 2001
Active Bond II Core Bond 2001
THE FUNDS' INVESTMENT ACTIVITIES
AND THEIR RISKS
The different investment activities of the several Funds will affect both
their investment returns and the nature and degree of risks to which they are
exposed. Sections 1. - 29. below describe many (but not all) of these
investment activities and risks.
1. INVESTING IN MONEY MARKET INSTRUMENTS
The Money Market Fund invests exclusively in "money market" instruments;
all the other Funds may invest in these instruments to some extent. These are
high quality, short-term fixed income obligations. Because of their nature,
money market instruments generally do not carry significant risks of loss. The
principal risk is that a Fund's return on money market instruments will be less
than it would have earned on a riskier investment.
2. INVESTING IN OTHER FIXED INCOME OBLIGATIONS
The following Funds invested primarily in non-money market fixed income
(i.e., "debt") securities: the Short-Term Bond, Bond Index, Active Bond, Active
Bond II, Global Bond, and High Yield Bond Funds. The Managed, Aggressive
Balanced and Global Balanced Funds can vary their holdings of these securities
within a broad range. All the other Funds (except the Money Market Fund) may
from time to time invest in non-money market debt to some extent.
Various types of risk associated with these securities are discussed in the
balance of this Section 2.
INTEREST RATE RISK: In general, debt securities with longer maturities
than money market instruments have exposure to interest rate risk. Changes in
generally prevailing market interest rates alter a debt security's market value
and introduce volatility into the rate of return of a Fund that invests in such
securities. When prevailing interest rates go up, the market value of debt
securities tends to go down and vice versa. This sensitivity of the market
value of a debt security to changes in interest rates is generally related to
the "duration" of the instrument. The market value of a shorter-term fixed
income security is generally less sensitive to interest rate moves than that of
a longer-term security. For example, the interest rate risk of the Short-Term
Bond Fund, although moderate, is below that of traditional intermediate or long-
term bond portfolios.
5
CREDIT RISK: The value of a fixed income security may also change as a
result of market perceptions regarding its credit risk: i.e., the ability of
the borrower to repay its debts. The market value of a fixed income security
can fall when the market perceives the borrower to be less credit worthy.
Conversely, the market value of a fixed income security can increase due to its
borrower being perceived as financially stronger. All Funds that invest in non-
money market debt securities may have some exposure to credit risk.
Even some U.S. Government obligations have a degree of credit risk.
"U.S. Government obligations" are bills, certificates of indebtedness, notes and
bonds issued or guaranteed as to principal or interest by the United States or
by agencies or authorities controlled or supervised by and acting as
instrumentalities of the U.S. Government and established under the authority
granted by Congress. Some obligations of U.S. Government agencies, authorities,
and other instrumentalities are supported by the full faith and credit of the
U.S. Treasury; others by the right of the issuer to borrow from the Treasury;
and others only by the credit of the issuing agency, authority, or other
instrumentality. These latter types of obligations, therefore, do have a degree
of credit risk. U.S. Government obligations are used most in the Bond Index,
Active Bond, Active Bond II and Global Bond Funds. All of the other Funds may
also invest in U.S. Government obligations to some extent.
Securities having one of the four highest rating categories for debt
securities as defined by Moody's Investors Services, Inc. (Aaa, Aa, A, or Baa)
or Standard and Poor's Corporation (AAA, AA, A, or BBB) or, if unrated,
determined to be of comparable quality by the subadviser, are referred to as
"investment grade." The meanings of such ratings are set forth in Appendix A to
this Statement of Additional Information. Lower-rated bonds have more credit
risk than higher rated bonds.
RISK OF LOWER-QUALITY INSTRUMENTS: High-yield bonds (or "junk" bonds) are
debt securities rated below "investment grade" as defined above. The value of
these lower rated securities generally is more subject to credit risk than is
the case for higher rated securities, and their values tend to respond more to
changes in market perceptions regarding their credit risk.
Investments in companies issuing high yield securities are considered to be
more speculative than higher quality instruments. As such, these securities
typically pay a higher interest rate than investment grade securities.
Issuers of high yield securities are typically in weak financial health,
and their ability to pay back principal and interest on the bonds they issue is
uncertain. Some of these issuers may be in default or bankruptcy. Compared
with issuers of investment-grade bonds, they are more likely to encounter
financial difficulties and to be materially affected by these difficulties when
they do encounter them.
High yield bond markets may react strongly to adverse news about an issuer
or the economy, or to the perception or expectations of adverse news. These
debt securities may also have less liquid markets than higher rated securities.
Judgment plays a greater role in valuing high yield securities than in the
case of other securities for which more extensive quotations and last-sale
information are available. Adverse publicity and changing investor perceptions
may affect the ability of outside pricing services used by a Fund to value its
portfolio securities, and the ability of the Fund to dispose of its lower-rated
bonds.
The market prices of high yield securities may decline significantly in
periods of general economic difficulty, which may follow periods of rising
interest rates. During an economic downturn or a prolonged period of rising
interest rates, the ability of issuers of lower-rated debt to service their
payment obligations, meet projected goals, or obtain additional financing may be
impaired. In that case, a Fund may find it necessary, at its own expense or in
conjunction with others, to pursue litigation or otherwise exercise its rights
as a security holder to seek to protect the interests of security holders, if it
determines this to be in the interest of Fund investors. The 1980s saw a
dramatic increase in the use of high yield securities to finance highly
leveraged corporate acquisitions and restructurings. Past experience may not
provide an accurate indication of future performance of high yield securities,
especially during periods of economic recession. In fact, from 1989 to 1991,
the percentage of high yield securities that defaulted rose significantly above
prior levels.
6
All Funds (other than the Money Market Fund) that invest in debt securities
may at times have some exposure to high yield securities. The High Yield Bond
Fund invests primarily in these securities. The other Funds most likely to
invest a significant portion of their assets in high yield securities are the
Active Bond and Active Bond II Funds. The Managed, Aggressive Balanced, Short-
Term Bond, Global Bond and Global Balanced Funds may also invest in high yield
securities to some extent. In contrast, the Bond Index Fund will not invest in
debt securities that are not at least investment grade at the time of purchase.
Although not customarily referred to as "high yield" securities or "junk
bonds," debt securities that fall in the lowest rating within the investment
grade category are considered medium grade securities that have some speculative
characteristics. Accordingly, to a lesser degree, they may present the same
risks discussed above with respect to high yield securities.
The considerations discussed above for lower-rated debt securities also are
applicable to lower quality unrated debt instruments of all types, including
loans and other direct indebtedness of businesses with poor credit standing.
Unrated debt instruments are not necessarily of lower quality than rated
securities, but they may not be attractive to as many buyers.
PREPAYMENT/CALL RISK: Prepayment risk is the risk that the obligor on a
debt security may repay or "call" the debt before it is due. Most mortgage
backed securities, asset backed securities, other public bond debt securities
and 144A securities that a Fund might own are exposed to this risk. U.S.
Government securities have minimal exposure to this risk. Prepayment/call is
most likely to occur when interest rates have declined and a borrower can
refinance the debt at a lower interest rate level. Generally, a Fund reinvests
the proceeds resulting from prepayments in a lower yielding instrument. This
results in a decrease in the Fund's current yield. The values of securities
that are subject to prepayment/call risk also tend to increase less in response
to declining interest rates and decrease more in response to increasing interest
rates than would the value of otherwise similar securities that do not have
prepayment or "call" features.
All Funds that invest in debt securities (other than the Money Market Fund)
may at times have some exposure to prepayment/call risk. The Funds most likely
to invest a significant portion of their assets in debt securities with
prepayment/call features are the Short-Term Bond, Bond Index, Active Bond,
Active Bond II, Global Bond and High Yield Bond Funds. The Managed, Aggressive
Balanced, and Global Balanced Funds may also invest in these securities.
RISKS OF "ZERO COUPON" INSTRUMENTS: All of the Funds may, in varying
degrees, invest in debt instruments that provide for payment of interest at the
maturity date of the instrument (or payment of interest in the form of
additional securities), rather than payment of interest in cash periodically
over the life of the instrument. The values of such instruments tend to respond
more to changes in interest rates than do otherwise comparable debt obligations
that provide for periodic interest payments. The Funds most likely to invest a
significant amount of their assets in instruments that are subject to this
volatility risk are the Managed, Aggressive Balanced, Global Balanced, Short-
Term Bond, Bond Index, Active Bond, Active Bond II, Global Bond, and High Yield
Bond Funds. However, all Funds that invest in debt securities may at times have
some exposure to this risk.
3. INVESTING IN EQUITY SECURITIES
All of the Funds intend to invest to some degree in common stock or other
equity securities, except for the Short-Term Bond, Bond Index, Active Bond,
Active Bond II, Global Bond, and Money Market Funds. All of the Funds that
invest in equity securities expect to make such securities their primary
investment (except for the Managed, Aggressive Balanced, High Yield Bond and
Global Balanced Funds, which may nevertheless do so in the discretion of their
subadvisers). Though investing in equity securities, the Managed, Aggressive
Balanced, High Yield Bond, and Global Balanced Funds also expect, under normal
conditions, to invest a substantial amount of their assets in debt obligations.
General risks of investing in equity securities are discussed in the
balance of this Section 3.
7
EQUITY RISK: Investments in common stock or other equity securities
historically have offered a higher rate of return than money market instruments
or longer term debt securities. However, the risks associated with equity
securities also tends to be higher, because the investment performance of equity
securities depends upon factors which are difficult to predict. The fundamental
risk associated with any equity portfolio is the risk that the value of the
investments it holds might decrease in value. Equity security values may
fluctuate in response to the activities of an individual company or in response
to general market, interest rate, and/or economic conditions.
MARKET CAPITALIZATION RISK: Another indication of the relative risk of a
common stock investment is the size of the company, which is typically defined
by reference to its "market capitalization." Market capitalization is computed
by multiplying current market price of a share of the company's stock by the
total number of its shares outstanding.
Investing in larger capitalization companies generally involves a lesser
degree of risk than investing in smaller capitalization companies. Conversely,
investing in the equity securities of smaller companies involves greater risks
and potential rewards than investing in larger, more established companies.
Small capitalization companies, in particular, often have limited product
lines, markets or financial resources, and they may depend upon a small group of
inexperienced managers. Investments in such companies can be both more volatile
and more speculative. These securities may have limited marketability and are
subject to more abrupt or erratic market movements than securities of larger
companies or the market in general.
Three capitalization levels are currently used by the Trust for U.S.
equities: large, medium ("mid"), and small. Each of these capitalization
levels will be defined by reference to the Russell 3000(R) Index. The Russell
3000/(R)/ Index is a broad market index and is representative of the U.S. stock
markets with a total capitalization of $12.8 trillion at the end of 2000./1/
. Large cap: Companies having a capitalization within the range of the
300 largest companies in the Russell 3000/(R)/ Index will be considered
to be large capitalization ("large cap") companies. At the end of 2000,
each of the largest 300 companies in the Russell 3000/(R)/ Index had a
capitalization greater than $ 7.8 billion.
. Mid cap: Companies having a capitalization within the range of the
250 to 1000 largest companies in the Russell 3000/(R)/ Index will be
considered to be "mid cap." At the end of 2000, such mid cap companies
had capitalizations ranging from $1.4 billion to $10 billion.
. Small cap: Companies having a capitalization within the range of the
remaining companies in the Russell 3000/(R)/ Index will be considered to
be small capitalization ("small cap") companies. At the end of 2000, none
of these smallest companies in the Russell 3000/(R)/ Index had a market
capitalization of more than $1.4 billion.
The above parameters for large cap, mid cap and small cap are typically adjusted
at the end of each calendar quarter to reflect changes in the market
capitalization of the Russell 3000/(R)/ Index. However, adjustments may be made
as frequently as monthly in extraordinary circumstances.
The U.S. equity securities of the Managed, Aggressive Balanced, Growth &
Income, Equity Index, Large Cap Value, Large Cap Value CORE, Large Cap Value
CORE II, Large Cap Growth, Large Cap Aggressive Growth, and Global Balanced
Funds are generally expected to represent primarily companies that qualify as
large cap issuers. These Funds also may invest in the equity securities of
companies that qualify as small and mid cap issuers.
- --------------------
/1/ The Russell 3000/(R)/ Index is a service mark of Frank Russell Company,
which does not sponsor and is not in any way affiliated with the Trust.
Inclusion of a security in the index in no way implies an opinion as to its
attractiveness or appropriateness as an investment.
8
The U.S. equity securities of the Large/Mid Cap Value, Large/Mid Cap
Value II, Fundamental Growth, International Equity, and International
Opportunities Funds are generally expected to represent primarily large and mid
cap issuers. These Funds also may invest in the equity securities of companies
that qualify as small cap issuers.
The U.S. equity securities of the Mid Cap Growth and Mid Cap Blend Funds
are generally expected to represent primarily companies that qualify as mid cap
issuers. These Funds also may invest in the equity securities of companies that
qualify as small or large cap issuers.
The U.S. equity securities of the Small/Mid Cap Growth and Small/Mid Cap
CORE Funds are generally expected to represent companies that qualify as small
cap and mid cap issuers. These Funds also may invest in the equity securities
of companies that qualify as large cap issuers.
The U.S. equity securities of the Small Cap Equity, Small Cap Value and
Small Cap Growth Funds are generally expected to represent primarily companies
that qualify as small cap issuers. Although these Funds also may invest
significant amounts in the equity securities of companies that qualify as mid
cap issuers, it is expected that they would rarely invest in the equity
securities of companies that qualify only as large cap issuers.
The Real Estate Equity and Health Sciences Funds have broad latitude to
invest in companies of any size, depending on the market capitalization of the
respective sectors covered by those Funds.
Three capitalization levels are currently used by the Trust for non-U.S.
equities: large, medium ("mid"), and small.
. Large cap: Companies having a capitalization greater than $5 billion
. Mid cap: Companies having a capitalization between $1 billion and $5 billion
. Small cap: Companies having a capitalization less than $1 billion
The non-U.S. equity securities of the International Equity Index Fund are
generally expected to represent primarily non-U.S. companies that qualify as
large cap issuers. This Fund also may invest in the equity securities of non-
U.S. companies that qualify as small and mid cap issuers.
The non-U.S. equity securities of the Global Balanced, International Equity
and International Opportunities Funds are generally expected to represent
primarily non-U.S. companies that qualify as large and mid cap issuers. These
Funds also may invest in the equity securities of non-U.S. companies that
qualify as small cap issuers.
The Emerging Markets Equity has broad latitude to invest in companies of
any size.
4. INVESTING IN REAL ESTATE SECURITIES
The Real Estate Equity Fund invests primarily in companies with activities
related to the real estate industry, such as real estate investment trusts
("REITs") that own commercial and multifamily residential real estate, real
estate operating companies ("REOCs") that derive the majority of their revenue,
income or asset value from real estate and other companies engaged in non-real
estate businesses but whose real estate holdings are significant in relation to
the market value of their common stock.
The securities purchased will be principally common stock (and securities
convertible into or with rights to purchase common stock) but a portion of the
Fund may be invested in preferred stock. The Fund may also invest in commercial
mortgage securities (debt obligations secured by commercial property),
collateralized mortgage obligations (mortgage pass through securities secured by
commercial mortgage pools) and master limited partnerships from time to time,
but does not do so on the date of this Statement of Additional Information.
In addition to the Real Estate Equity Fund, all of the other Funds (except
for the Money Market Fund) may have some exposure to real estate risks through
investments in companies engaged in real estate related businesses or
investments in debt instruments secured by real estate.
9
RISKS OF REAL ESTATE SECURITIES: Generally speaking, real estate
securities may be affected by risks similar to those resulting from the direct
ownership of real estate, as well as by market risks due to changes in interest
rates and by the overall volatility of the equity markets. The market value of
shares in equity real estate investment trusts and commercial property
companies, in particular, is heavily dependent upon the value of their
underlying properties. Overbuilding, declines in local or regional economic
conditions, financial difficulties on the part of major tenants and increases in
real estate taxes and operating expenses all could decrease the value of the
real estate investments.
5. INVESTING IN FOREIGN SECURITIES
Investments in foreign securities may be made in a foreign-denominated
security, or in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") or other U.S.
dollar denominated securities representing underlying shares of foreign
securities. ADRs, EDRs, GDRs and other securities representing underlying shares
of foreign securities may not necessarily be denominated in the same currency as
the securities into which they may be converted, but rather in the currency of
the market in which they are traded. ADRs are receipts, typically issued by an
American bank or trust company, which evidence ownership of underlying
securities issued by a foreign corporation. EDRs are receipts issued in Europe
by banks or depositories which evidence a similar ownership arrangement. GDRs
are receipts issued in two or more markets by banks or depositaries which
evidence a similar ownership arrangement. Generally, ADRs are designed for use
in U.S. securities markets, EDRs for use in European securities markets, and
GDRs for use in multiple securities markets.
Investments in debt securities issued by foreign issuers may be made
directly in foreign-denominated debt instruments or in the form of U.S. dollar
denominated debt securities issued by foreign issuers and publicly traded in the
United States ("Yankees") or in Europe ("Eurobonds").
The International Equity Index, International Equity, International
Opportunities and Emerging Markets Equity Funds invest primarily in foreign
securities, including foreign-denominated securities. The Global Bond and Global
Balanced Funds invest a significant portion of their assets in foreign
securities, including foreign-denominated securities. To a lesser extent, the
Managed, Aggressive Balanced, High Yield Bond, Large Cap Value, Mid Cap Growth,
Real Estate Equity and Health Sciences Funds may also invest in foreign
securities, including foreign-denominated securities.
The following Funds may invest in ADRs and other U.S. dollar denominated
foreign securities to a limited extent: Growth & Income, Equity Index, Large
Cap Growth, Large Cap Aggressive Growth , , Large Cap Value CORE, Large Cap
Value CORE II, Large/Mid Cap Value, Large/Mid Cap Value II, Mid Cap Blend,
Small/Mid Cap Growth, , Small/Mid Cap CORE, Small Cap Equity Small Cap Value and
Small Cap Growth.
The Short-Term Bond, Bond Index, Active Bond, and Active Bond II Funds may
invest in foreign debt securities denominated in U.S. dollars (i.e., Yankees and
Eurobonds).
The Emerging Markets Equity Fund invests primarily in developing countries
commonly known as "emerging markets." To a lesser extent, the Global Balanced,
International Equity Index, International Equity, International Opportunities,
Growth & Income, Fundamental Growth, Mid Cap Growth, Small Cap Equity, Small Cap
Growth, Managed, Aggressive Balanced, Bond Index, Global Bond, Active Bond,
Active Bond II, and High Yield Bond Funds may also invest in emerging markets.
The securities may be denominated in U.S. dollars or any other currency.
Risks of investing in foreign securities are discussed in the paragraphs
that follow:
CURRENCY RISKS: When a Fund buys foreign-issued securities, it usually
must pay for those securities in the local currency. Therefore, the Fund must
convert funds into the local currency to the extent necessary for this purpose.
Similarly, when a Fund sells a foreign security, it may receive payment in the
local currency. Therefore, if the Fund does not wish to continue to hold that
currency, it must enter into a transaction disposing of it.
10
In these ways, therefore, a Fund may temporarily hold foreign currency in
order to facilitate the purchase and sale of foreign securities. This exposes
the fund to the risk that the foreign currency's value could, while the Fund was
temporarily holding that currency, decline relative to the U.S. dollar. This
could result in a loss to the Fund, because the Fund's assets and shares are
valued in U.S. dollars. On the other hand, the Fund could experience gains if
the foreign currency's value, relative to the U.S. dollar, increases during the
period when the Fund holds that currency.
More fundamentally, however, because the Fund values its assets and shares
in U.S. dollars, the Fund's gains and/or losses on investments that are
denominated or traded in foreign currencies will depend in part on changes in
the value of that currency relative to the U.S. dollar. This exposes the Fund
to the risk of loss if that foreign currency loses value, as well as the
possibility of gains if that currency gains value, relative to the U.S. dollar.
The Funds may (but are not required to) employ certain strategies to limit
their risks or otherwise manage their exposure to foreign currencies. Such
currency management techniques, as well as the risks that those techniques
themselves present, are discussed in Sections 6. - 10. below.
Also, a risk exists that a foreign country may have or implement
restrictions on transactions in its currency that prevent a Fund from
effectively managing or reducing its exposure to that currency, even after the
Fund has disposed of any securities denominated or traded in that currency.
The risks associated with foreign currency conversions are not present in
investments in Yankees and Eurobonds because these debt securities are U. S.
dollar denominated.
POLITICAL AND ECONOMIC RISK: Foreign securities often are subject to
heightened political and economic risks, particularly in emerging markets or
other underdeveloped or developing countries, which may have relatively unstable
governments and economies based on only a few industries. Foreign governments
may take over the assets or operations of a company, may impose additional
taxes, or may place limits on the removal of the Fund's assets from that
country. However, investments in foreign securities also offer the opportunity
to diversify holdings and to invest in economies whose growth may outpace that
of the United States.
REGULATORY RISK: Generally, there is less government supervision of
foreign markets. Foreign issuers generally are not subject to uniform
accounting, auditing, and financial reporting standards and practices applicable
to domestic issuers. There may be less publicly available information about
foreign issuers than domestic issuers. These risks may be greater in emerging
markets or other underdeveloped or developing countries.
MARKET RISK: Foreign securities markets, particularly those of emerging
markets or other underdeveloped or developing countries, may be less liquid and
more volatile than domestic markets. Certain markets may require payment for
securities a Fund purchases before delivery of these securities to the Fund, and
delays may be encountered in settling securities transactions. In some foreign
markets, there may be limited protection against failures by other parties to
complete their transactions with a Fund. There may be limited legal recourse
against an issuer in the event of a default on a debt instrument held by a Fund.
TRANSACTION COSTS: Transaction costs of buying and selling foreign
securities, including brokerage, tax, and custody costs, are generally higher
than those involved in domestic transactions. This is particularly true for
investments in emerging markets, or other underdeveloped or developing
countries.
6. USING FORWARD EXCHANGE CONTRACTS TO MANAGE CURRENCY EXPOSURE
TRANSACTION HEDGING AND PORTFOLIO HEDGING: When a Fund anticipates having
to purchase or sell a foreign currency to facilitate a foreign securities
transaction, it may wish to "lock in" the current exchange rate for that
currency (vis-a-vis the U.S. dollar) and thus avoid (in whole or in part)
exposure to further changes in that rate that could occur prior to when the
purchase or sale proceeds are actually paid. This is called "transaction
hedging."
A Fund can do transaction hedging by purchasing or selling foreign
currencies in the "spot" (i.e., cash) market. Alternatively, the following
Funds may use "forward" currency foreign exchange purchase or sale contracts for
11
transaction hedging: the Managed, Aggressive Balanced, Large Cap Value, Mid Cap
Growth, Real Estate Equity, Health Sciences, Global Balanced, International
Equity Index, International Equity, International Opportunities, Emerging
Markets Equity, Global Bond, and High Yield Bond Funds. In a forward exchange
contract, the Fund purchases or sells a specific amount of foreign currency, at
a price set and time set in the contract, which may be any fixed number of days
in the future.
These same Funds may also use forward foreign exchange contracts to reduce
their exposure to changes (relative to the U.S. dollar) in the value of a
foreign currency during a period of time when the Fund owns securities that are
denominated, exposed to or traded in that currency. This is called "portfolio
hedging." Except as described in the paragraph immediately below for certain
funds, the Funds may not engage in portfolio hedging with respect to the
currency of a particular country to an extent greater than the aggregate market
value (at the time of establishing the hedge) of securities held by that Fund
which are denominated, exposed to or traded in that particular foreign currency.
The Funds may or may not attempt to hedge some or all of their foreign portfolio
positions. Rather, they will enter into such transactions only to the extent,
if any, deemed appropriate by their subadvisers. Furthermore, no Fund will use
forward foreign currency exchange contracts for the purpose of leveraging the
Fund's currency exposure.
For purposes of transaction hedging or portfolio hedging, the Managed,
Aggressive Balanced, Mid Cap Growth, Real Estate Equity, Health Sciences, Global
Balanced, Global Bond, International Equity Index, International Equity,
Emerging Markets Equity, and International Opportunities Funds may use forward
exchange contracts on a "proxy" currency, instead of the currency being hedged.
A proxy currency is one that the subadviser believes will bear a close
relationship to the currency being hedged and believes will approximately equal
the performance of such currency relative to the U.S. dollar. Nevertheless,
changes in the value of the currency being hedged may not correspond to changes
in the value of the proxy currency as expected, which could result in the
currency hedge being more favorable or less favorable to the Fund than the
subadviser had expected.
OTHER TECHNIQUES FOR MANAGING CURRENCY EXPOSURE: The Managed, Aggressive
Balanced, Mid Cap Growth, Real Estate Equity, Health Sciences, Global Balanced,
International Equity Index, International Equity, International Opportunities,
Emerging Markets Equity, and Global Bond Funds may use additional techniques
when their subadvisers believe that the currency of a particular country may
suffer a significant decline against the U.S. dollar or against another
currency. In that case, these Funds may enter into a forward currency contract
to sell, for a fixed amount of U.S. dollars or other appropriate currency, the
amount of foreign currency approximating the value of some or all of the Fund's
securities denominated in, traded in, or exposed to such foreign currency. The
currency contract may call for the Fund to receive a currency other than U.S.
dollars, for example, if such other currency is believed to be undervalued or
necessary to bring the Fund's overall exposure to various currencies into a more
desirable balance. For similar purposes, the Managed, Aggressive Balanced,
Global Balanced, Emerging Markets Equity, International Opportunities,
International Equity, Mid Cap Growth, Real Estate Equity, Health Sciences, and
Global Bond Funds may also enter into contracts to purchase, for a fixed amount
of U.S. dollars, or other appropriate currency, an amount of foreign currency
corresponding to the value of some of the Fund's securities.
ASSET SEGREGATION REQUIREMENTS FOR FORWARD EXCHANGE CONTRACTS: A Fund may
"cover" its obligations under outstanding forward currency sale contracts by
maintaining portfolio securities denominated, exposed to or traded in the
currency of such contracts or of an appropriate proxy currency. To the extent a
Fund does not thus cover all of its forward currency sales positions with its
portfolio securities, or if it has outstanding any forward currency purchase
contracts, the Funds' custodian will segregate cash or liquid assets in a
separate account of the Fund in an amount at all times at least equal to the
value of the Fund's net obligation with respect to forward contracts in a
particular currency. If the value of the portfolio securities used to cover a
position or the value of the assets in the segregated account declines, the Fund
will find additional "cover" or additional cash or liquid assets will be placed
in the account so that the value of the account will at least equal the required
amount described in the preceding sentence.
7. USING OPTIONS ON CURRENCIES TO MANAGE CURRENCY EXPOSURE
The Managed, Aggressive Balanced, Mid Cap Growth, Global Balanced,
International Equity Index, International Equity, International Opportunities,
Emerging Markets Equity, Global Bond, and High Yield Bond Funds may also
12
purchase and write put and call options on foreign currencies for the same
purposes as those Funds could use forward foreign exchange contracts (as
discussed in Section 6. above). This could include options traded on U.S. and
foreign exchanges, as well as those traded in "over-the-counter" markets.
The characteristics and risks of these currency option transactions are
similar to those discussed in Sections 15. - 16. below with respect to put and
call options on securities.
Call options on foreign currencies written by a Fund will be "covered,"
which means that the Fund will own at all times at least an equal amount of, or
an offsetting position in, the underlying foreign currency.
ASSET SEGREGATION REQUIREMENT FOR CURRENCY PUT OPTIONS WRITTEN BY A FUND:
With respect to put options on foreign currencies written by a Fund, the Fund
will establish a segregated account with its custodian bank consisting of cash
or liquid securities in an amount equal at all times to the amount the Fund
would be required to deliver upon exercise of the put.
8. USING CURRENCY FUTURES CONTRACTS AND OPTIONS THEREON TO MANAGE CURRENCY
EXPOSURE.
Any Fund may use currency futures contracts and options thereon for the
same purposes and to the same extent as that Fund could use forward foreign
exchange contracts (as discussed in Section 6. above). The characteristics and
risks of such futures and options transactions are similar to those discussed in
Sections 16. - 19. below for other transactions in futures contracts and options
thereon. All transactions in currency futures and options thereon also would be
subject to the applicable limitations in Section 20. below.
9. USING CERTAIN OTHER DERIVATIVE INSTRUMENTS TO MANAGE CURRENCY EXPOSURE
As discussed in Section 21. below, several of the Funds may use currency
"swaps," "caps," "floors," and "collars" for the same purposes as those Funds
could use forward foreign exchange contracts (as discussed in Section 6. above).
The characteristics and risks of such "derivative" transactions, as discussed in
Section 21., are generally also applicable when such instruments are used for
currency management purposes.
10. USING FOREIGN CURRENCY EXPOSURE MANAGEMENT STRATEGIES (GENERAL
CONSIDERATIONS AND RISKS)
The foreign currency management techniques discussed in Sections 6. - 9.
above do not eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. The Funds are not
obligated to try to hedge against any change in the value of any currency. Even
if a Fund wished to do so, there is no assurance that market conditions would be
such as to make such hedging possible.
Moreover, even where a Fund establishes positions designed to manage its
foreign currency exposure, there is no assurance that this will be beneficial to
the Fund. Such positions may cause a Fund to forego gains that it otherwise
could have achieved or incur costs and losses that it would not otherwise have
incurred. (In general the cost to the Funds of engaging in foreign currency
management transactions varies with such factors as the currency involved, the
type and duration of the instrument being used for this purpose, and the market
conditions then prevailing.) It is entirely possible, therefore, that any
effort to manage a Fund's currency exposure could have a negative effect on the
Fund's investment performance.
In general, the more foreign securities a given Fund invests in, the
greater its currency management activities are likely to be. Also, the Managed,
Aggressive Balanced, Mid Cap Growth, Real Estate Equity, Health Sciences, Global
Balanced, International Equity Index, International Equity, International
Opportunities, Emerging Markets Equity, and Global Bond Funds may use certain of
these same types of instruments in currency management strategies that expose
those Funds to currencies other than the U.S. dollar. Although this would not
be done for the purpose of "leveraging" the Fund's overall exposure to
fluctuations in currency values, such strategies could expose those Funds to
greater risks of loss and greater volatility than they otherwise would
experience.
13
11. REALLOCATING A FUND'S ASSETS AMONG ASSET CLASSES
The continual reallocation of assets among the major asset classes (e.g.,
stocks, bonds, and cash) involves the risk that the subadviser may reduce the
Fund's holdings in an asset class whose value increases unexpectedly, or may
increase the Fund's holdings in an asset class just prior to that asset class
experiencing a loss of value. The Managed, Aggressive Balanced, and Global
Balanced Funds tend to exercise broad discretion in reallocating assets across
asset classes. The Global Bond Fund intends to exercise discretion to
reallocate assets across domestic and international asset classes.
All of the other Funds, with the exception of the Money Market Fund,
generally allow the subadviser some latitude to allocate across asset classes.
Nevertheless, this latitude is expected to be exercised to a lesser degree than
in the case of the Managed, Aggressive Balanced, Global Balanced, and Global
Bond Funds.
12. ADOPTING A TEMPORARY DEFENSIVE STRATEGY
All of the Funds, except the Money Market Fund, may (but are not required
to) adopt a defensive investment posture if the subadviser believes the
investment environment for the Fund is negative. Such a defensive posture would
involve reallocating some or all of a Fund's assets in a manner different from
that contemplated by its primary investment objective and strategies.
Most of the Funds are not limited as to the types of investments they could
use temporarily for defensive purposes. Thus, for example, a small cap equity
Fund might temporarily invest in stocks of larger cap companies or in high
quality, short term debt securities. A bond Fund might shorten maturities or
tighten its investment quality parameters. An international Fund might, for
example, limit the countries it would invest in or temporarily invest only in
high quality, short-term debt securities in the United States.
There can be no assurance that the transaction costs and lost investment
opportunities will not outweigh any benefits to a Fund that attempts to adopt a
defensive strategy.
13. INVESTING WITH AN INDEX-BASED OBJECTIVE
The Equity Index, International Equity Index, and Bond Index Funds expect
to invest substantially all of their assets in equity or debt securities within
their investment objectives and policies at all times. Accordingly, these Funds
may carry more risk in times of declining markets than Funds that are more
likely to adopt a defensive investment posture in such circumstances by
reallocating their assets in a manner different from that contemplated by their
primary investment objective and strategies.
Investments in the Equity Index, International Equity Index, and Bond Index
Funds each involve the risk that the Fund will be unable to match the
performance of its corresponding target index. Each Fund's ability to do so is
affected by (a) the size and timing of cash flows into and out of that Fund, (b)
the level of the Fund's expenses, including commissions and "spreads," on its
portfolio transactions, other portfolio management expenses, and other operating
expenses, and (c) the degree of success of the techniques employed by the Fund's
subadviser. Further, if the size of a Fund limits the number of issues that the
Fund can purchase, or that size is relatively small in relation to cash flows,
there is a greater possibility that the Fund may be unable to match the
performance of the corresponding target index.
THE S&P 500 INDEX: The S&P 500 is an index that is constructed by the
Standard & Poor's Corporation ("Standard & Poor's" or "S&P"), which chooses
stocks on the basis of market values and industry diversification. Most of the
largest 500 companies listed on U.S. stock exchanges are included in the index.
Additional stocks that are not among the 500 largest stocks, by market value,
may be included in the S&P 500 for diversification purposes. The index is
capitalization weighted -- that is, stocks with a larger capitalization (shares
outstanding times current price) have a greater weight in the index. Selection
of a stock for inclusion in the S&P 500 Index in no way implies an opinion by
S&P as to its attractiveness as an investment.
14
The Trust and the insurance products supported by the Trust are not
sponsored, endorsed, sold or promoted by Standard & Poor's. Standard & Poor's
makes no representation or warranty, express or implied, to the owners of the
insurance products supported by the Trust or to any member of the public
regarding the advisability of investing in the Trust or such insurance products.
Standard & Poor's only relationship to the Trust is the licensing of Standard &
Poor's "marks" and the S&P 500 Index, which is determined, composed and
calculated by Standard & Poor's without regard to the Fund or the Trust.
"Standard & Poor's," "S&P ," "S&P 500," "Standard & Poor's 500," and "500" are
trademarks of McGraw-Hill, Inc. and have been licensed for use by the Trust. In
determining, composing, or calculating the S&P 500 Index, S&P has no obligation
to take into consideration the needs of the Trust or those of the owners of the
insurance products supported by the Trust. S&P is not responsible for and has
not participated in the determination of the prices and amount of the insurance
products supported by the Trust or the timing of the issuance or sale of such
products or in the determination or calculation of the equations by which such
products are to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing, or trading of such products.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE TRUST, OWNERS OF THE PRODUCTS
SUPPORTED BY THE TRUST, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P
HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
THE LEHMAN BROTHERS GOVERNMENT/CREDIT AND AGGREGATE BOND INDEXES: The Lehman
Brothers Government/Credit Index (the "Government/Credit Index") is intended to
measure the performance of the domestic, fixed-rate investment grade debt
market. The Government/Credit Index is composed of (1) all public obligations
of the U.S. Government, its agencies and instrumentalities (excluding "flower"
bonds and pass-through issues, such as GNMA certificates) and (2) all publicly
issued, fixed-rate, non-convertible, investment grade, U.S. dollar-denominated,
SEC-registered obligations of domestic corporations, foreign governments and
supranational organizations. Securities in the index generally have at least
$150 million par amount outstanding and at least 1 year remaining to maturity.
The Lehman Brothers Aggregate Bond Index (the "Aggregate Bond Index")
covers the U.S. investment grade fixed-rate bond market, including government
and corporate securities, agency mortgage pass-through securities, and asset-
backed securities. The Aggregate Bond Index covers those securities in the
Government/Credit Index, plus those covered by the Lehman Mortgage-Backed
Securities Index ("MBS Index"), the Lehman Commercial Mortgage-Backed Securities
(ERISA Eligible) Index ("CMBS (ERISA Eligible) Index"), and the Lehman Asset-
Backed Securities Index ("ABS Index"). The MBS Index covers fixed-rate
securities backed by mortgage pools of the Government National Mortgage
Association, the Federal Home Loan Mortgage Association, and the Federal
National Mortgage Association. The CMBS (ERISA Eligible) Index covers ERISA-
Eligible CMBS securities. The ABS Index covers several subsectors -- including
credit and charge cards, auto, utilities and home equity loans -- and includes
pass-through, "bullet," and controlled amortization structures.
All non-government issues in the Government/Credit Index and the Aggregate
Bond Index are rated at least Baa by Moody's Investors Service, Inc. ("Moody's")
or, if unrated by Moody's, BBB by Standard & Poor's Ratings Group ("Standard &
Poor's").
All securities in the Government/Credit Index and the Aggregate Bond Index
issued by non-U.S. entities are denominated in U.S. dollars.
15
Lehman Brothers, Inc. is neither a sponsor of nor in any other way
affiliated with the Trust or the insurance products supported by the Trust.
Inclusion of a security in the Government/Credit or Aggregate Bond Indexes in no
way implies an opinion of Lehman Brothers, Inc. as to its attractiveness or
appropriateness as an investment.
THE MSCI EAFE GDP INDEX AND MSCI EMERGING MARKETS FREE ("EMF") INDEX: The
MSCI EAFE GDP Index weights countries such that a country with a larger GDP will
have a greater weight in the index. Stocks within those countries are
capitalization weighted; that is, stocks with a larger capitalization have a
greater weight in the index. The MSCI EMF Index is a market capitalization
weighted index composed primarily of companies representative of the market
structure of Emerging Market countries in Europe, Latin America, and the Pacific
Basin. The MSCI EMF Index excludes closed markets and those shares in otherwise
free markets that are not purchasable by foreigners.
The Trust and the insurance products supported by the Trust are not
sponsored, endorsed, sold or promoted by Morgan Stanley Capital International
("MSCI"). MSCI makes no representation or warranty, express or implied, to the
owners of the Trust, or any member of the public regarding the advisability of
investing in funds generally or in the Trust or any Fund particularly, or the
ability of the MSCI EAFE GDP or MSCI EMF Indexes to track general stock market
performance. MSCI is the licensor of certain trademarks, service marks and
trade names of MSCI and of the MSCI EAFE GDP Index, which is determined,
composed and calculated by MSCI without regard to the Trust. "Morgan Stanley
Capital International" is a service mark of Morgan Stanley & Co., Incorporated,
that has been licensed for use by the Trust.
MSCI has no obligation to take the needs of the Trust or the owners of
insurance products supported by the Trust into consideration in determining,
composing or calculating the MSCI EAFE GDP or MSCI EMF Indexes. MSCI is not
responsible for and has not participated in the determination of the prices or
amounts of insurance products supported by the Trust or the timing of the
issuance and sale of such products, or in the determination or calculation of
the equations by which such products are convertible into cash. MSCI has no
obligation or liability to owners of the Trust or of the insurance products
supported by the Trust in connection with the administration, marketing or
trading of any Fund of the Trust.
ALTHOUGH MSCI OBTAINS INFORMATION FOR INCLUSION IN OR FOR USE IN THE
CALCULATION OF THE INDEX FROM SOURCES WHICH MSCI CONSIDERS RELIABLE, NEITHER
MSCI NOR ANY OTHER PARTY GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA INCLUDED THEREIN. NEITHER MSCI NOR ANY OTHER PARTY MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY OWNERS OF THE
TRUST, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA
INCLUDED THEREIN. NEITHER MSCI NOR ANY OTHER PARTY MAKES ANY EXPRESS OR IMPLIED
WARRANTIES, AND MSCI HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL MSCI OR ANY OTHER PARTY HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT,
SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS)
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
14. INVESTING ON A NON-DIVERSIFIED BASIS
The Managed, Growth & Income, Large Cap Growth, Large Cap Aggressive
Growth, Mid Cap Growth, Real Estate Equity, Health Sciences, Global Balanced and
Global Bond Funds are "non-diversified Funds." Non-diversified Funds are less
restricted in the extent to which they may invest more than 5% of their assets
in any issuer or purchase more than 10% of the voting securities of any issuer.
Because a relatively high percentage of a non-diversified Fund's assets may be
invested in the obligations of a single issuer or a limited number of issuers,
the value of that Fund's shares may be more volatile and more susceptible to any
single economic, political, or regulatory event, or to credit and market risks
associated with a single issuer, than would the shares of a diversified Fund.
16
15. USING OPTIONS (GENERALLY)
Most of the Funds may, in varying degrees, use options on the following
(which, for simplicity, may be referred to as the "subject" of an option):
currencies, securities, equity indexes, interest rate indexes, and financial
futures contracts. This Section 15. discusses certain characteristics and risks
that are generally common to all of these types of options. The Funds' use of
specific types is discussed in Sections 7. - 8. above and 16. - 20. below,
including characteristics and risks peculiar to those types of options or the
Funds' use of them.
PURCHASING "CALL" OPTIONS: If a Fund (or anyone else) "purchases" a "call"
option, it pays a purchase price (often called a "premium") plus, in most cases,
a commission to the broker through whom the purchase was made. In return the
Fund (or other purchaser) has the right (but not the obligation), at or before a
specified future time (called the "expiration date"), to acquire a specified
amount of the option's subject (or the economic equivalent thereof) at a
specified price (called the "strike price" or "exercise price"). If the
purchaser of an option decides to exercise this right, we say the option has
been "exercised." If an option is never exercised before its expiration date,
it expires unexercised.
A Fund (or other purchasers of a call option) may profit in one of two
ways. First, the Fund may be able to exercise the call option at a date when
the value of the option's subject exceeds the purchase price of the option
(including any brokerage commission) plus the exercise price. Whether the Fund
will be able to do this depends on how favorable those prices were and how the
value of the option's subject has changed since the option was purchased.
Secondly, a Fund may profit from purchasing an option if the Fund is able
to sell the option (unexercised) at a profit sometime before its expiration
date. (As a practical matter, such a sale would generally be accomplished by
having the Fund sell (i.e., "write") an option identical to the option it owns,
thereby "netting out" the Fund's exposure to the position.) Whether such a
profit will be possible, of course depends on whether the then market price for
the option (less any commission payable on the sale) exceeds the option's
purchase price (including any related commission). In this regard, one of the
general risks of purchasing options is that, for a variety of reasons, the
market price of an option usually does not vary in the same way or to the same
extent as the value of the option's subject varies. Therefore, a Fund can lose
money purchasing a call option, even if the value of the option's subject
increases.
The basic risk in purchasing an option is that, if the Fund never exercises
or sells the option at a profit, the Fund will lose the entire purchase price of
the option (plus any related commissions). That is the maximum amount the Fund
could lose, however.
SELLING OR "WRITING" CALL OPTIONS: Selling an option is commonly referred
to as "writing" an option. If the Fund (or anyone else) sells ("writes") a call
option, it receives the premium (less any commission) paid by the option's
purchaser and has the obligation to sell the option's subject to the purchaser
at the exercise price if the purchaser exercises the option before it expires.
The Fund can make a profit writing a call option if the purchaser fails to
exercise the option (which usually would happen only if the value of the
option's subject were below the exercise price). In this case, the option's
purchase price (net of any commissions) would be a profit to the Fund.
Alternatively, a Fund could profit from writing a call option if it is able
to subsequently purchase an identical option that would close out the Fund's
position at a profit. This could be done only if the market price of the option
then exceeded the Fund's initial purchase price by an amount greater than any
commissions payable by the Fund on the purchase or sale transactions. There is
a risk, however, that a Fund may be unable to do this, even if the value of the
call option's subject has declined. This is because, as noted above, the value
of an option does not vary in identical fashion to the value of the option's
subject.
The risk of writing a call option is that, if the value of the option's
subject exceeds the option's exercise price, the option is almost sure to be
exercised. In that case, the Fund will suffer a loss to the extent that the
premium it received for writing the option (net of any commissions), plus the
exercise price it receives are less than the value of
17
the option's subject at the time of exercise. Therefore, the higher the value of
the option's subject rises, the greater the Fund's potential loss on an option
it has written. A Fund could cut off its further exposure in such a case by
purchasing an identical call option that would close out its position. The Fund
would, however, probably realize a loss on the transaction, because the purchase
price it would have to pay for that call option would probably have increased to
reflect the increasing value of the option's subject.
WRITING OPTIONS ON A "COVERED" BASIS. One way for a Fund to limit its risk
exposure on call options it has written is to "cover." A call option may be
considered "covered" if, as long as the option is outstanding, the writer
(seller) of the option owns assets that are identical to, or have the same or
similar investment characteristics to, the option's subject. In such a case, if
the value of the option's subject increases, the losses that the Fund will incur
on the call option it has written will tend to be offset by gains that Fund
earns on the assets it is holding to "cover" the option.
Naturally, the more similar the assets held by the fund are to the option's
subject, the more assurance the Fund will have that its losses on call options
it has written will be "covered." How similar those assets must be varies
depending on the Fund and the type of covered option involved. More details in
this regard can be found in Sections 16. - 19. below.
PURCHASING AND SELLING (WRITING) "PUT" OPTIONS: A "put" option is the same
as a call option, except that a Fund (or any other person) that purchases a put
option, by paying the purchase price ("premium") has the right to sell (rather
than buy) the option's subject for a stated exercise ("strike") price.
Conversely, the seller (writer) of a put option receives the premium (net of any
commissions) but has the obligation to purchase the option's subject at its
exercise price if the option is exercised.
Thus, if a Fund purchases a put option, its maximum potential loss would
equal the purchase price (plus any commissions thereon). On the other hand, if
a Fund sells (writes) a put option, the Fund could continue to experience
continuing losses while the option is outstanding, to the extent that the value
of the subject of the option continues to decline. If the subject lost its
value entirely, the Fund's maximum loss would equal the exercise price less the
premium (net of any commissions) that the Fund received initially for writing
the option. Because of this risk exposure, a Fund that writes a put option may
seek to "cover" that option with other assets that it owns. More details about
this can be found in Section 16. - 19. below.
ACCOUNTING FOR OPTIONS: The value of any option that the Fund has
purchased, and the amount of the Fund's obligation under any outstanding option
it has written, will vary as market prices change. These variations are
reflected daily in the Fund's calculation of its net asset value, so that such
value always reflects the estimated impact of current market conditions on all
of the Fund's option positions.
16. USING OPTIONS ON SECURITIES IN CERTAIN CONSERVATIVE INVESTMENT STRATEGIES
Except as otherwise noted below, the general discussion of options in
Section 15. above applies to this Section 16.
Each of the Funds may write covered call options that are traded on
national securities exchanges, except for the Money Market Fund. By "covered"
we mean that the Fund will actually own the securities that are the subject of
the option.
The same Funds may purchase "protective" put options that are traded on
national securities exchanges. By "protective", we mean that the Fund will
actually own the securities that are the subject of the option. If the market
value of such underlying securities remains above the option's exercise price,
the Fund will, in effect, lose the premium it has paid for the option. The
Fund, however, avoids the risk of loss on the underlying securities, to the
extent that the market value of the underlying securities falls below the
exercise price of the put option.
LIQUIDITY RISK: The Funds intend to write and purchase options only if the
subadviser believes that adequate liquidity exists. If for any reason a Fund
cannot, however, close out its open option position when deemed advisable, the
Fund's investment performance could be adversely affected.
18
17. USING FINANCIAL FUTURES CONTRACTS, OPTIONS ON SUCH CONTRACTS AND OPTIONS ON
STOCK INDEXES (GENERAL CONSIDERATIONS)
Most of the Funds may, in varying degrees use financial futures contracts,
options on such futures and options on stock indexes. This Section 17 discusses
certain characteristics and risks that generally pertain to these instruments,
regardless of the specific use to which they are put. The Funds' specific uses
are discussed in Sections 7. - 8. above and 18. - 20. below, including specific
risks related to those risks.
FINANCIAL FUTURES CONTRACTS: Financial futures contracts consist of
interest rate futures contracts, stock index futures contracts, and currency
futures contracts.
An interest rate futures contract is a contract to buy or sell specified
debt securities at a future time for a fixed price. A public market currently
exists for interest rate futures contracts on United States Treasury Bills,
United States Treasury Notes, bank certificates of deposit, and various other
domestic or foreign instruments and indexes.
Stock index futures contracts bind purchaser and seller to delivery at a
future date specified in the contract of a cash amount equal to a multiple of
the difference between the value of a specified stock index on that date and
settlement price specified by the contract. That is, the seller of the futures
contract must pay and the purchaser would receive a multiple of any excess of
the value of the index over the settlement price, and the purchaser must pay and
the seller would receive a multiple of any excess of the settlement price over
the value of the index. A public market currently exists for stock index
futures contracts based on the Standard & Poor's 500 Stock Index, the Standard &
Poor's Midcap Index, the New York Stock Exchange Composite Index, the Value Line
Stock Index, and various other domestic or foreign indexes.
A currency futures contract is a contract to buy or sell a specified amount
of another currency at a future time for a fixed price.
OPTIONS ON FINANCIAL FUTURES CONTRACTS: The writer of an option on a
financial futures contract agrees to assume a position in such financial futures
contract having a specified price, if the purchaser exercises the option and
thereby assumes the opposite position in the financial futures contract. If the
option purchaser would assume the sale side of the futures contract upon
exercise of the option, the option is commonly called a "put" option. If the
option writer would assume the sale side, it is commonly called a "call" option.
As with other types of options, the party that writes the option receives a
premium for doing so, and the party that purchases an option pays a premium
therefor. However, there is no exercise (or strike) price, as such. Rather, if
the value of the futures contract moves against the writer of the option, so
that the option is (or is likely to be) exercised, the option writer, in effect,
has the obligation to pay those losses.
More specifically, an option written by a Fund on a financial futures
contract requires the Fund to pay any amount by which the fluctuating price of
the underlying debt instrument or index exceeds (in the case of a call option)
or is less than (in the case of a put option) the price specified in the futures
contract to which the option relates. Therefore, if the price of the debt
instrument or stock index on which the futures contract is based increases (in
the case of a call option written by a Fund) or decreases (in the case of a put
option written by a Fund), the Fund may incur losses that exceed the amount of
the premium received by the Fund for writing the option.
STOCK INDEX OPTIONS: After payment of a specified premium at the time a
stock index option is entered into, the purchaser of a stock index call option
obtains the right to receive a sum of money upon exercise of the option equal to
a multiple of the excess of a specified stock index on the exercise date over
the exercise or "strike" price specified by the option. The purchaser of a put
option obtains the right to receive a sum of money upon exercise of the option
equal to a multiple of any excess of the strike price over the stock index. The
writer of a call or put stock index option receives a premium, but has the
obligation, upon exercise of the option, to pay a multiple of the difference
between the index and the strike price. Thus, if the price of the stock index
on which an index option is based increases (in the case of a call option
written by a Fund) or decreases (in the case of a put option written by a Fund),
the Fund may incur losses that exceed the premium it received for writing the
option.
19
Stock indexes for which options are currently traded include the Standard &
Poor's 100 and Standard & Poor's 500 Indexes.
MARGIN REQUIREMENTS FOR FUTURES AND OPTIONS: When futures contracts are
traded, both buyer and seller are required to post an initial margin of cash or
U.S. Treasury Bills equaling as much as 5 to 10 percent or more of the contract
settlement price. The nature of the margin requirements in futures transactions
differs from traditional margin payments made in securities transactions in that
margins for futures contracts do not involve the borrowing of funds by the
customer to finance the transaction. Instead, a customer's margin on a futures
contract represents a good faith deposit securing the customer's contractual
obligations under the futures contract. If the market moves against the Trust,
so that a Fund has a net loss on its outstanding futures contracts for a given
day, the Fund generally will be required to post additional margin to that
extent. The margin deposit is returned, assuming the Trust's obligations have
been met, when the futures contract is terminated.
Similar margin requirements will apply in connection with any transactions
in which a Fund writes any options. This includes options on indexes and
futures contracts, as well as other types of options.
CERTAIN RISKS: Financial futures, options thereon, and stock index
options, if used by a Fund, will in most cases be based on securities or stock
indexes the components of which are not identical to the portfolio securities
owned or intended to be acquired by the Fund and in connection with which such
instruments are used. Furthermore, due to supply and demand imbalances and
other market factors, the price movements of financial futures, options thereon,
and stock index options do not necessarily correspond exactly to the price
movements of the securities, currencies, or stock index on which such
instruments are based. These factors increase the difficulty of implementing a
successful strategy using futures and options contracts.
The Funds generally will not take delivery of debt instruments pursuant to
purchasing an interest rate futures contract, nor make a delivery of debt
instruments pursuant to selling an interest rate futures contract. Nor will the
Funds necessarily take delivery of or deliver currencies in connection with
currency futures contracts. Instead, a Fund will more typically close out such
futures positions by entering into closing futures contract transactions.
Similarly, a Fund may wish to close out an option on a futures contract or an
option on an index by entering into an offsetting position in those instruments.
Generally speaking, entering into closing transactions such as described
immediately above would not affect gains and losses of the Fund resulting from
market action prior to such closing transactions. Moreover, there is a risk
that, at the time a Fund wishes to enter into such a closing transaction,
trading in futures or options could be interrupted, for example, because of
supply and demand imbalances arising from a lack of either buyers or sellers.
The futures and options exchanges also may suspend trading after the price has
risen or fallen more than the maximum amount specified by the exchange.
Exercise of options could also be restricted or delayed because of regulatory
restrictions or other factors. Although the subadvisers will seek to avoid
situations where these factors would be likely to cause a problem for the Trust,
in some cases they could adversely affect particular Fund transactions in these
instruments.
ASSET SEGREGATION REQUIREMENT FOR CERTAIN FUTURES AND OPTIONS POSITIONS: A
Fund will maintain at all times in a segregated account with its custodian cash
or liquid securities at least equal to the sum of the purchase prices of all of
the Fund's open futures purchase positions, plus the current value of the
securities underlying all of the Fund's open futures sales positions that are
maintained for purposes other than bona fide hedging, plus the exercise price of
all outstanding put options on futures contracts written by the Fund, minus the
amount of margin deposits with respect thereto as marked to market each day.
18. USING FINANCIAL FUTURES, OPTIONS THEREON, AND STOCK INDEX OPTIONS FOR
CERTAIN HEDGING-TYPE STRATEGIES
This Section 18. should be read against the background of the generally
applicable information about options, futures and related risks that appears in
Sections 15. and 17. above.
20
This Section 18. covers all Funds, except the Money Market Fund.
Specifically, except for the Money Market Fund, all Funds may use exchange-
traded financial futures contracts and options thereon, and, except for the
Active Bond Fund, they also may purchase exchange-traded put or call options on
stock indexes, for the purposes discussed below.
It should be emphasized that none of the Funds is required to use any of
these strategies, and doing so is not a principal investment strategy of any of
the Portfolios. Therefore, it should not be assumed that any particular Fund
will ever necessarily use any of these strategies to a significant extent.
HEDGING WITH FINANCIAL FUTURES CONTRACTS AGAINST MARKET CHANGES: All Funds
covered by this Section 18. (except the Equity Index Fund) may use certain
financial futures contracts as a hedge to protect against possible changes in
interest rates and security prices.
Thus, for example, to hedge against the possibility that interest rates or
other factors may result in a general decline in prices of equity securities of
a type owned by them, these Funds (other than the Equity Index Fund) may sell
stock index futures contracts. Similarly, to hedge against the possibility that
increases in interest rates may adversely affect the market values of debt
securities held by them, these Funds (other than the Equity Index, Large Cap
Value CORE, and Large Cap Value CORE II Funds) may enter into interest rate
futures sale contracts.
ESTABLISHING MARKET EXPOSURE AND MANAGING CASH FLOW WITH FINANCIAL FUTURES
CONTRACTS: On the other hand, purchasing futures contracts could enable a Fund
to take the approximate economic equivalent of a substantial position in bonds
or equity securities. Thus, all of the Funds - - with the exception of the
Money Market Fund - - may purchase and sell stock index and interest rate
futures to maintain market exposure and manage cash flows.
MANAGING FOREIGN CURRENCY EXPOSURE WITH FOREIGN CURRENCY FUTURES CONTRACTS:
Any Fund may use foreign currency futures contracts to the same extent and in
the same manner as it is authorized to use forward foreign exchange contracts in
Section 6. above.
Using options on futures contracts and options on stock indexes for the
foregoing purposes: Each Fund that this Section 18. authorizes to use financial
futures contracts also may purchase options on appropriate financial futures
contracts and (except for the Active Bond Fund) stock indexes for any purpose
and to the extent that it could use financial futures contracts as discussed
above.
LIMITATIONS ON "LONG" POSITIONS FOR CERTAIN FUNDS: The Large Cap Value CORE
and Large Cap Value CORE II Funds may not purchase financial futures contracts,
except for currency futures. The following limitation applies to the Managed,
Aggressive Balanced, Growth & Income, Equity Index, Large Cap Aggressive Growth,
Large/Mid Cap Value, Large/Mid Cap Value II, Fundamental Growth, Mid Cap Blend,
and Real Estate Equity Funds. These Funds may purchase financial futures
contracts, purchase call options on financial futures options or purchase call
options on equity indexes only if (a) they intend to purchase securities (or, in
the case of the Aggressive Balanced, Growth & Income, Equity Index, Large Cap
Aggressive Growth, Large/Mid Cap Value, Large/Mid Cap Value II, Fundamental
Growth, Mid Cap Blend, and Real Estate Equity Funds, wish to establish or
maintain market exposure to securities that the Fund would be authorized to
purchase) and (b) the value of such securities are expected to change by
approximately the same amount as the value of the futures or options contracts
being used to hedge them.
RISKS OF HEDGING-TYPE STRATEGIES: If, after a Fund establishes a hedge
position, the value of the securities or currencies being hedged moves in the
opposite direction from that anticipated, the Fund as a whole will perform less
well than it would have had it not entered into the futures or option
transaction.
The success of the Funds in using hedging-type techniques depends, among
other things, on the subadviser's ability to predict the direction and
volatility of price movements in the futures or options markets, as well as the
securities markets and, in some cases, currency markets, and on the subadviser's
ability to select the proper type, time and duration of option or futures
contracts. Certain of the subadvisers have limited experience in utilizing
these hedging-type techniques, and there can be no assurance that these
techniques will produce their intended result.
21
The prices of the futures and options contracts used for hedging-type
strategies may not vary as contemplated in relation to changes in the price of
the securities or currencies being hedged. Accordingly, there is a risk that
transactions in these instruments, if used by a Fund, may not in fact offset the
impact of adverse market developments in the manner or to the extent
contemplated or that such transactions may result in losses to the Fund which
would not be offset by gains with respect to corresponding portfolio securities
owned or to be purchased by that Fund. Hedging-type transactions also may be
more, rather than less, favorable to a Fund than originally anticipated.
19. USING OPTIONS AND FUTURES IN POTENTIALLY MORE AGGRESSIVE STRATEGIES
This Section 19. should be read against the background of the generally
applicable information about options, futures, and related risks that appears in
Section 15., 17. and 18. above.
This Section 19. applies only to the Managed, Aggressive Balanced, Growth &
Income, Large Cap Value CORE, Large Cap Value CORE II, Large Cap Growth, Mid Cap
Growth, Real Estate Equity, Small/Mid Cap CORE, Small/Mid Cap Growth, Small Cap
Growth, Global Balanced, International Equity Index, International Equity,
Emerging Markets Equity, Short-Term Bond, Bond Index, Global Bond, and High
Yield Bond Funds. The option and futures strategies discussed in this Section
are in addition to those discussed for those (and other) Funds in Sections 7.,
8., 16., and 18. above.
WRITING CERTAIN TYPES OF OPTIONS: The Managed, Aggressive Balanced, Large
Cap Value CORE, Large Cap Value CORE II, Mid Cap Growth, Small/Mid Cap CORE, ,
Small/Mid Cap Growth, Small Cap Growth, Global Balanced, International Equity
Index, International Equity, Emerging Markets Equity, Short-Term Bond, Bond
Index, Global Bond, and High Yield Bond Funds may write "covered" put options on
securities. In addition, the Managed, Aggressive Balanced, Large Cap Value
CORE, Large Cap Value CORE II, Mid Cap Growth, Small/Mid Cap CORE, Small/Mid Cap
Growth, Small Cap Growth, Global Balanced, International Equity Index,
International Equity, Emerging Markets Equity, Short-Term Bond, Bond Index,
Global Bond, and High Yield Bond Funds may also write covered put and call
options on indexes composed of securities in which the Fund may invest. Such
index options may be written in any manner that the Fund in question is
authorized to write options on specific securities it owns.
A put option written by a Fund will be deemed to be "covered" if the Fund
maintains in a segregated account with its custodian cash or liquid securities
with a value at all times at least equal to the exercise price of the put. Put
and call options written by Funds will also be considered to be "covered" to the
extent that the Fund's liabilities under these options are fully offset by its
rights under put or call options purchased by the Fund.
PURCHASING CERTAIN TYPES OF OPTIONS. The Managed, Aggressive Balanced,
Large Cap Value CORE, Large Cap Value CORE II, Mid Cap Growth, Small/Mid Cap
CORE, Small Cap Growth, Global Balanced, International Equity Index,
International Equity, Emerging Markets Equity, Global Bond, and High Yield Bond
Funds may purchase put and call options on securities in which it may invest,
without specific restriction as to the circumstances of such purchases.
Similarly, each of these Funds, as well as the Small/Mid Cap Growth and Short-
Term Bond Funds, may purchase put and call options on indexes composed of
securities in which the Fund may invest, without specific restriction on the
circumstances of such purchases.
Option purchases of the type covered in the preceding paragraph would have
to be consistent with the Fund's investment objective. Also, each of the above-
listed Funds is subject to the limitation on certain futures and options
transactions described in Section 20.
USING OPTIONS TRADED OVER-THE-COUNTER OR ON FOREIGN EXCHANGES: The
Managed, Aggressive Balanced, Growth & Income, Large Cap Value CORE, Large Cap
Value CORE II, Mid Cap Growth, Real Estate Equity, Small/Mid Cap CORE, Small/Mid
Cap Growth, Small Cap Growth, Global Balanced, International Equity Index,
International Equity, Emerging Markets Equity, Short-Term Bond, Bond Index,
Global Bond, and High Yield Bond Funds may also use options on securities and
options on indexes that are traded "over-the-counter" or on foreign exchanges,
in any manner that they would be permitted to use such options that were traded
on domestic exchanges.
22
These Funds will engage in over-the-counter options only with member banks of
the Federal Reserve System and primary dealers in U.S. Government securities.
These Funds will treat over-the-counter options they have purchased and assets
used to cover over-the-counter options they have written as illiquid securities.
However, with respect to options written with primary dealers in U.S. Government
securities pursuant to an agreement requiring a closing purchase transaction at
a formula price, the amount of illiquid securities may be calculated with
reference to the formula price.
USING FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS FOR CERTAIN
PURPOSES: The Managed, Aggressive Balanced, Growth & Income, Large Cap Value
CORE, Large Cap Value CORE II, Large Cap Growth, Mid Cap Growth, Real Estate
Equity, Small/Mid Cap CORE, Small/Mid Cap Growth, Small Cap Value, Small Cap
Growth, Global Balanced, International Equity Index, International Equity,
Emerging Markets Equity, Short-Term Bond, Bond Index, Active Bond, Active Bond
II, Global Bond, and High Yield Bond Funds may use futures contracts on
securities or on market indexes, and options on such futures contracts, without
specific restriction on the purposes of such transactions. Nevertheless, such
transactions would have to be consistent with the Fund's investment objective.
There is no specific overall limit on the amount of the assets these Funds
may devote to financial futures contracts and options thereon, even if such
contracts are not limited to hedging-type transactions. Nevertheless (except
through the purchase of options, as discussed below) the Funds will not use
these techniques for purpose of "leveraging" the Fund's exposure to the
securities underlying any futures contract or option thereon or its exposure to
foreign currencies. Although this limitation does not apply to options on
futures contracts that are purchased by a Fund, the total amount of assets on
deposit as margin to secure options on futures contracts that are not used for
bona fide hedging purposes plus the amount of premiums paid by a Fund for such
options is (pursuant to the restrictions set forth in Section 20. below) limited
to 5% of the Fund's net assets.
RISKS OF POTENTIALLY MORE AGGRESSIVE OPTIONS AND FUTURES STRATEGIES: As
outlined above, the Funds discussed in this Section 19. may engage in types of
options and futures transactions not permitted to the other Funds, including
over-the-counter options, writing covered put options, and more types of
transactions that are not solely for hedging-type purposes or that otherwise may
be more speculative. Also, even as to options and futures transactions of a
type that are permitted to other Funds, these Funds are, in certain cases, not
as limited regarding the amount of their assets that may be so employed.
Accordingly, to the extent that these Funds exercise their broader authority to
enter into options and futures transactions, they may incur greater risks than
the other Funds.
20. LIMITING THE FUNDS' EXPOSURE TO CERTAIN FUTURES AND OPTION TRANSACTIONS.
The Equity Index, Large Cap Value, Small Cap Equity, and International
Opportunities Funds will not enter into any financial futures contract or
purchase any option thereon, if, immediately thereafter, the total amount of its
assets required by commodities exchanges to be on deposit as margin to secure
its obligations under futures contracts, plus the amount of premiums paid by the
Fund for outstanding options to purchase futures contracts, exceeds 5% of the
market value of the Fund's total assets.
The following limitation applies to all of the Funds that can invest in
financial futures contracts or options thereon, other than the Equity Index,
Large Cap Value, Small Cap Equity, and International Opportunities Funds: No
such other Fund may purchase, sell or write futures contracts or options thereon
other than for "bona fide" hedging purposes (as defined by the U.S. Commodity
Futures Trading Commission) if immediately thereafter the Fund's initial margin
deposits on such outstanding non-hedging futures and options positions, plus the
amount of premiums paid by the Fund for such outstanding non-hedging options on
futures contracts, exceeds 5% of the market value of the Fund's net assets. For
the purpose of this calculation, any amount by which an option is "in the money"
at the time of its purchase is excluded from the premium paid therefor.
Nor will any of the Large Cap Value, Large Cap Value CORE, Large Cap Value
CORE II, Small Cap Equity or International Equity Funds enter into any
transaction in interest rate, stock index or currency futures, or options
thereon, or stock index options, if the value of the securities being hedged by
all of such instruments would immediately thereafter be more than one-third of
the value of the Fund's total assets. Nor will any Fund consider as "hedging"
any transaction that is intended to leverage the Fund's investment exposure to
the type of security being hedged or to leverage the Fund's currency exposure.
23
21. USING OTHER TYPES OF DERIVATIVE INSTRUMENTS
The Global Balanced, International Equity Index, and High Yield Bond Funds
may engage in "swap" transactions (specifically interest rate, currency and
index swaps) and in the purchase or sale of related "caps," "floors," or
"collars." The Emerging Markets Equity Fund may also engage in those
transactions and, in addition, may engage in equity swap transactions. The
Managed and Aggressive Balanced Funds may each invest up to 10% of the
respective Fund's total assets (at the time the swap is entered into) in
currency and equity swaps for hedging purposes or for currency management
strategies as discussed in Section 6 above. The International Equity Fund may
invest up to 10% of its total assets (at the time the swap is entered into) in
currency and equity swaps, although it will use currency swaps only for hedging
purposes. The Global Bond Fund may also use these derivative instruments, but
only for currency management strategies as discussed in Section 6. above.
The nature and risks of these types of transactions are discussed further
in the paragraphs that follow.
INTEREST RATE SWAPS: In a typical interest rate swap agreement, one party
agrees to make payments equal to a floating interest rate on a specified amount
(the "notional amount") in return for payments equal to a fixed interest rate on
the same amount for a specified period. If a swap agreement provides for
payments in different currencies, the parties might agree to exchange the
notional amount as well.
Provided the contract so permits, a Fund will usually enter into swaps on a
"net" basis: that is, the two payment streams are netted out in a cash
settlement on the payment date or dates specified in the instrument, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments.
INTEREST RATE CAPS, FLOORS AND COLLARS: The purchaser of an interest rate
cap or floor, upon payment of a fee, has the right to receive payments (and the
seller of the cap is obligated to make payments) to the extent a specified
interest rate exceeds (in the case of a cap) or is less than (in the case of a
floor) a specified level over a specified period of time or at specified dates.
The purchaser of an interest rate collar, upon payment of a fee, has the right
to receive payments (and the seller of the collar is obligated to make payments)
to the extent that a specified interest rate falls outside an agreed upon range
over a specified period of time or at specified dates.
CURRENCY, INDEX AND EQUITY SWAPS, CAPS, FLOORS AND COLLARS: Currency,
index, and equity swaps, caps, floors, and collars are similar to those for
interest rates described in the two preceding paragraphs above, except that,
rather than being determined by variations in specified interest rates, the
obligations of the parties are determined by variations in a specified currency,
interest rate index, or equity index, as the case may be.
RISKS AND PURPOSES OF THESE OTHER DERIVATIVES: The amount of a Fund's
potential gain or loss on any swap transaction is not subject to any fixed
limit. Nor is there any fixed limit on the Fund's potential loss if it sells a
cap, floor or collar. If a Fund buys a cap, floor or collar, however, the
Fund's potential loss is limited to the amount of the fee that it has paid.
Swaps, caps, floors and collars tend to be more volatile than many other
types of investments. Nevertheless, a Fund will use these techniques only as a
risk management tool and not for purposes of leveraging the Fund's market
exposure or its exposure to changing interest rates, security values or currency
values. Rather, a Fund will use these transactions only to preserve a return or
spread on a particular investment or portion of its investments, to protect
against currency fluctuations, as a duration management technique, to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date, or to gain exposure to certain markets in the most economical
way possible. Nor will a Fund sell interest rate caps, floors or collars if it
does not own securities providing the interest that the Fund may be required to
pay under such derivative instruments. Finally, of course, a Fund may use these
derivative instruments only in ways that are consistent with its investment
objective.
The use of swaps, caps, floors and collars involves investment techniques
and risks different from those associated with other portfolio security
transactions. If the subadviser is incorrect in its forecasts of market values,
24
interest rates, currency rates and other applicable factors, the investment
performance of a Fund will be less favorable than if these techniques had not
been used.
These instruments are typically not traded on exchanges. Accordingly,
there is a heightened risk that the other party to certain of these instruments
will not perform its obligations to the Fund. None of the Funds will enter into
any swap, cap, floor, or collar, unless the other party to the transaction is
deemed creditworthy by the subadviser.
There also is a risk that a Fund may be unable to enter into offsetting
positions to terminate its exposure or liquidate its investment under certain of
these instruments when it wishes to do so. Such occurrences could result in
losses to the Fund. In recent years, the swap market has become relatively
liquid. Caps, floors and collars are more recent innovations for which
standardized documentation has not yet been fully developed and, for that
reason, they are less liquid than swaps.
The liquidity of swaps, caps, floors and collars will be determined by the
subadviser based on various factors, including (1) the frequency of trades and
quotations, (2) the number of dealers and prospective purchasers in the
marketplace, (3) dealer undertakings to make a market, (4) the nature of the
instrument (including any demand or tender features) and (5) the nature of the
marketplace for trades (including the ability to assign or offset a Fund's
rights and obligations relating to the investment). Such determinations will
govern whether the instrument will be deemed within the Fund's 15% restriction
on investments in securities that are not readily marketable.
SEGREGATION REQUIREMENTS FOR THESE DERIVATIVES: Each Fund will maintain
cash or liquid high grade debt securities in a segregated account with its
custodian in an amount sufficient at all times to cover its current obligations
under swaps, caps, floors and collars. If a Fund enters into a swap agreement
on a net basis, it will segregate assets with a daily value at least equal to
the excess, if any, of the Fund's accrued obligations under the swap agreement
over the accrued amount the Fund is entitled to receive under the agreement. If
a Fund enters into a swap agreement on other than a net basis, or sells a cap,
floor or collar, it will segregate assets with a daily value at least equal to
the full amount of the Fund's accrued obligations under the agreement.
22. INVESTING IN OTHER INVESTMENT COMPANIES
Each Fund may invest up to 10% of its total assets in shares of other
investment companies investing exclusively in securities in which that Fund may
otherwise invest. As a shareholder in an investment company, a Fund would bear
its ratable share of that investment company's expenses, including advisory and
administration fees, except as specifically stated otherwise in the paragraphs
that follow.
USING OTHER INVESTMENT COMPANIES TO GAIN EXPOSURE TO CERTAIN FOREIGN
SECURITIES: Because of restrictions on direct investment by U.S. entities in
certain countries, other investment companies may provide the most practical (or
only way) for a Fund to invest in certain markets. Such investments may involve
the payment of substantial premiums above the net asset value of those
investment companies' portfolio securities and are subject to limitations under
the Investment Company Act of 1940. A Fund also may incur tax liability to the
extent it invests in the stock of a foreign issuer that is a "passive foreign
investment company," regardless of whether such "passive foreign investment
company" makes distributions to the Fund.
The International Equity Index Fund is likely to invest in closed-end
investment companies known as "country funds" or passive foreign investment
companies. (A "closed end" company is one whose shares can generally be disposed
of only in market transactions, as opposed to redemptions. An "open end" company
is one whose shares are freely redeemable.)The International Equity Fund may
also purchase shares of investment companies investing primarily in foreign
securities, including country funds.
The Large Cap Value CORE, Large Cap Value CORE II, and International Equity
Funds may invest in iShares/(sm)/ (formerly called World Equity Benchmark Shares
or "WEBS") and other investment company securities that represent a similar
interest in securities included in a foreign securities index. iShares/(sm)/ are
shares of an investment company that invests substantially all of its assets in
securities included in the MSCI indices for specified countries. iShares/(sm)/
are listed on the AMEX and were initially offered to the public in 1996. The
market prices of iShares/(sm)/ are expected to fluctuate in accordance with both
changes in the NAVs of their underlying indices and
25
supply and demand of iShares/(sm)/ on the AMEX. To date, iShares/(sm)/ have
traded at relatively modest discounts and premiums to the NAVs. However, iShares
have a limited operating history and information is lacking regarding the actual
performance and trading liquidity of iShares/(sm)/ for extended periods or over
complete market cycles. In addition, there is no assurance that the requirements
of the AMEX necessary to maintain the listing of iShares/(sm)/ will continue to
be met or will remain unchanged. In the event substantial market or other
disruptions affecting iShares/(sm)/ should occur in the future, the liquidity
and value of a Fund's shares could also be substantially and adversely affected.
If such disruptions were to occur, a Fund could be required to reconsider the
use of iShares/(sm)/ as part of its investment strategy.
INVESTING IN STANDARD & POOR'S DEPOSITARY RECEIPTS (SPDR'S): The Equity
Index, Large Cap Value CORE, Large Cap Value CORE II, and Small/Mid Cap CORE
Funds may, consistent with their investment objectives, purchase Standard &
Poor's Depositary Receipts ("SPDRs"). SPDRs are American Stock Exchange-traded
securities that represent ownership in the SPDR Trust, a trust which has been
established to accumulate and hold a portfolio of common stocks that is intended
to track the price performance and dividend yield of the S&P 500. This trust is
a regulated investment company that is sponsored by a subsidiary of the American
Stock Exchange. SPDRs may be used for several reasons, including but not
limited to: facilitating the handling of cash flows or trading, or reducing
transaction costs.
INVESTING IN MONEY MARKET FUND SHARES: A Fund may also invest in money
market funds managed by its subadviser in reliance upon an exemptive order
received by its subadviser from the SEC. Such exemptive orders may permit funds
managed by the subadviser to invest in money market funds managed by it, to an
extent in excess of amounts otherwise permitted by the Investment Company Act.
The subadviser to the Mid Cap Growth Fund will remit the fees it receives from
money market funds it manages, to the extent such fees are based on the Mid Cap
Growth Fund's assets, to the Mid Cap Growth Fund. Nor are the Large Cap Value,
Small Cap Value and International Opportunities Funds charged any investment
management fees for investments in money market funds managed by their
subadvisers.
23. PURCHASING "WHEN ISSUED" SECURITIES AND FORWARD COMMITMENTS
All Funds (other than the Growth & Income and Money Market Funds) may
purchase securities on a when issued or delayed delivery basis. When such
transactions are negotiated, the price of such securities is fixed at the time
of commitment, but delivery and payment for the securities may take place a
month or more after the date of the commitment to purchase. The securities so
purchased are subject to market fluctuations, and no interest accrues to the
purchaser during this period.
In addition, these Funds may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments"), because new issues of securities are typically offered to
investors on that basis. Forward commitments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date.
This risk is in addition to the risk of decline in value of the Fund's other
assets. Although a Fund will enter into such contracts with the intention of
acquiring the securities, the Fund may dispose of a commitment prior to
settlement if its subadviser deems it appropriate to do so.
ASSET SEGREGATION REQUIREMENT FOR THESE TRANSACTIONS. Each Fund will
maintain in a segregated account with its custodian cash or liquid securities
that at all times equal the amount of its when issued and forward commitments.
24. SHORT-TERM TRADING
All Funds can use short-term trading of securities as a means of managing
their portfolios to achieve their investment objectives. As used herein,
"short-term trading" means the purchase and subsequent sale of a security after
it has been held for a relatively brief period of time, in some instances for
less than three months. A Fund may engage in short-term trading to the extent
that the subadviser believes the transactions, net of costs (including
commissions, if any), will benefit the Fund. Generally speaking, short-term
trading can be expected to generate expenses for a Fund that would not be
incurred by a Fund that did not engage in that practice.
26
25. ENTERING INTO REPURCHASE AGREEMENTS
All of the Funds may enter into repurchase agreements.
A repurchase agreement is a contract under which a Fund would acquire a
security for a relatively short period (e.g., 7 days), subject to the seller's
obligation to repurchase the security at a fixed time and price (representing
the Fund's cost plus interest). Repurchase agreements will be entered into only
with member banks of the Federal Reserve System and with "primary dealers" in
U.S. Government securities.
The Managed, Growth & Income, Large Cap Growth, Real Estate Equity, Active
Bond, and Money Market Funds may not invest in repurchase agreements maturing in
more than 7 days. No other Fund will invest in repurchase agreements maturing
in more than 7 days if that investment, together with any other investments
deemed "illiquid," would exceed 15% of the Fund's net assets.
Each Fund has a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian or sub-custodian, either physically or in book-entry form, and that
the collateral must be marked-to-market daily to ensure that each repurchase
agreement is fully "collateralized" at all times. In the event of a bankruptcy
or other default by a seller of a repurchase agreement, however, the Fund could
experience delays in liquidating the underlying securities and could experience
losses (including the possible decline in the value of the underlying securities
during the period while the Fund seeks to enforce its rights thereto, possible
subnormal levels of income and lack of access to income during this period, and
expenses of enforcing its rights).
26. PARTICIPATING IN JOINT TRADING ACCOUNTS
John Hancock has established a "joint trading account" that all Funds, in
the discretion of their subadvisers, can use to invest relatively small amounts
of cash on a more favorable basis than they could do individually. John Hancock
is responsible for investing the aggregate cash balances in the joint trading
account into one or more repurchase agreements, as described in Section 25.
above, or in other money market instruments. The joint trading account was
established pursuant to an order of the SEC and all of the Funds (except the
Large Cap Value CORE, Large Cap Value CORE II, Mid Cap Growth Fund, Small/Mid
Cap CORE, Small Cap Growth, International Equity, and Money Market Funds)
regularly participate in it.
Each Fund is also free to participate in any similar joint trading account
that their subadviser operates for mutual fund assets managed by it. These
other joint trading accounts would be operated pursuant to their own SEC
exemptive orders, and the following Funds regularly participate in such other
joint trading accounts: the Large Cap Value CORE, Large Cap Value CORE II, Mid
Cap Growth, Small/Mid Cap CORE, Small/Mid Cap Growth, Small Cap Growth, and
International Equity Funds.
In each case, the subadviser that operates one of these joint trading
accounts is responsible for ensuring that all repurchase agreements acquired
through these accounts are at all times fully collateralized.
27. LENDING OF FUND SECURITIES
In order to generate additional income, all Funds may, and most do, lend
securities from their portfolios to brokers, dealers and financial institutions
such as banks and trust companies. Such loans will be secured by collateral
consisting of cash or U.S. Government securities, which will be maintained in an
amount equal to at least 100% of the current market value of the loaned
securities. During the period of the loan, the Fund receives the income (if
any) on the loaned securities, as well as additional compensation for making the
loan. Cash collateral may be invested in short-term securities, which will
increase the current income of the Fund. Such loans will not be for more than 60
days and will be terminable by the Fund at any time. The Fund will have the
right to regain record ownership of loaned securities in order to exercise
rights of a holder thereof including receiving interest or other distributions
or exercising voting rights. The Fund may pay reasonable fees to persons
unaffiliated with the Fund for services in arranging such loans.
27
Lending of portfolio securities involves a risk of failure by the borrower
to return the loaned securities, in which event the Fund may incur a loss.
However, most of the Funds' loans of securities are pursuant to an arrangement
with State Street Bank & Trust Company, the Trust's primary custodian. Under
these arrangements, State Street Bank & Trust Company guarantees the Trust
against any loss or damages that any Fund incurs as a result of the borrower
failing to return the Fund's securities in accordance with the terms of the
loan. No Fund will lend portfolio securities having a total value in excess of
33 1/3% of its total assets.
28. USING REVERSE REPURCHASE AGREEMENTS AND MORTGAGE "DOLLAR ROLLS"
The Short-Term Bond and Money Market Funds may enter into reverse
repurchase agreements to facilitate portfolio liquidity, a practice common in
the mutual fund industry, or for arbitrage transactions (discussed below). In a
reverse repurchase agreement, the Fund sells a security and enters into an
agreement to repurchase the security at a specified future date, but at a lower
price. The Fund generally retains the right to interest and principal payments
on the security, as well as use of the proceeds while the repurchase agreement
is outstanding.
The Managed, Aggressive Balanced, Short-Term Bond, Bond Index, Active Bond,
Active Bond II, Global Balanced, and Global Bond Funds may enter into mortgage
dollar rolls, in which the Fund sells mortgage-backed securities for delivery in
the current month and simultaneously contracts to purchase substantially similar
securities at a specified future date and price. While the Fund foregoes
principal and interest paid on the mortgage-backed securities during the "roll"
period, the Fund is compensated by the difference between the current sale price
and the lower price for the future purchase as well as by any return earned on
the proceeds of the initial sale.
The mortgage dollar rolls and reverse repurchase agreements entered into by
a Fund may be used as arbitrage transactions in which the Fund will maintain an
offsetting position in investment-grade debt obligations or repurchase
agreements that mature on or before the settlement date of the related mortgage
dollar roll or reverse repurchase agreement. Since the Fund will receive
interest on the securities or repurchase agreements in which it invests the
transaction proceeds, such transactions could be considered to involve leverage.
However, since such securities or repurchase agreements will be high quality and
will mature on or before the settlement date of the mortgage dollar roll or
reverse repurchase agreement, the Trust does not believe that such arbitrage
transactions present the risks to the Fund that are associated with other types
of leverage.
ASSET SEGREGATION REQUIREMENTS FOR REVERSE REPURCHASE AGREEMENTS AND
MORTGAGE DOLLAR ROLLS: Each Fund will set aside in a segregated account with
its custodian liquid assets that at all times are at least equal to its
obligations under outstanding reverse repurchase agreements and mortgage dollar
rolls it has entered into.
29. INVESTING IN RULE 144A AND ILLIQUID SECURITIES
All Funds may purchase unregistered securities that are eligible for resale
to "qualified institutional buyers" pursuant to Rule 144A under the Securities
Act of 1933. Case-by-case determinations are made whether each issue of Rule
144A securities owned by the Fund is an illiquid security.
If illiquid, a Rule 144A security may not be purchased by the Money Market
Fund. Nor may the Money Market Fund purchase any other investments that are
deemed to be illiquid, if the total of all its illiquid assets would be more
than 10% of its net assets. Each Fund other than the Money Market Fund,
however, may purchase illiquid Rule 144A securities, or other illiquid assets
if, and only if, the total of all the Fund's illiquid assets would not thereby
be made to exceed 15% of the Fund's net assets.
30. INVESTING IN CONVERTIBLE SECURITIES AND WARRANTS
------------------------------------------------
Investments may be made in debt or preferred equity securities convertible
into, or exchangeable for, equity securities. Traditionally, convertible
securities have paid dividends or interest at rates higher than common stocks
but lower than nonconvertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. In recent years, convertibles have been
developed which combine higher or lower current income with options and other
features. Warrants are options to buy a stated number of shares of common stock
at a specified price anytime during the life of the warrants (generally, two or
more years).
28
31. INVESTING IN INITIAL PUBLIC OFFERINGS ("IPOS")
Some Funds of the Trust have the ability to invest in IPOs. IPO
investments may be more volatile than other types of investments and a Fund's
investments in IPOs may be subject to more erratic price movements than the
overall equity market. IPOs could have a substantial impact on performance,
either positive or negative, particularly on a fund with a small asset base.
The actual effect of IPOs on performance depends on a variety of factors,
including the number of IPOs the Fund invests in, whether and to what extent a
security purchased in an IPO appreciates in value, and the asset base of the
Fund. There is no guarantee that a Fund's investments in IPOs, if any, will
continue to have a similar impact on the Fund's performance in the future.
THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS
The Funds' investment objectives and strategies may, in general, be changed
without the approval of shareholders.
In a few cases, however, the Investment Company Act requires such approval. In
addition, the Trust has adopted as "fundamental" the below-listed restrictions
relating to the investment of each Fund's assets. That these restrictions are
"fundamental" policies means that they may not be changed for any Fund without
the approval of a majority of the outstanding voting shares of each affected
Fund. (The term "majority of the outstanding voting shares" means the lesser of
(1) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (2) more than 50% of the outstanding
shares.)
To the extent the Trust's prospectus or this Statement of Additional
Information anywhere sets forth investment restrictions more restrictive than
the fundamental restrictions described below, the more restrictive limitation
controls; but any such more restrictive limitation may be changed without any
shareholder approval, subject to the below fundamental restrictions.
As a matter of fundamental policy, no Fund will:
(1) Purchase real estate or any interest therein, except through the
purchase of corporate or certain government securities (including securities
secured by a mortgage or a leasehold interest or other interest in real estate).
A security issued by a real estate or mortgage investment trust or an interest
in a pool of real estate mortgage loans is not treated as an interest in real
estate. Investments of the type permitted in the Real Estate Equity Fund are not
deemed interests in real estate for the purposes of this restriction.
(2) Make loans, other than through the acquisition of obligations in which
the Fund may invest consistent with its objective and investment policies,
except that each Fund may lend portfolio securities not having a value in excess
of 33 1/3% of the Fund's total assets.
(3) Invest in commodities or in commodity contracts or in puts, calls or a
combination of both, except that
(A) the Managed, Aggressive Balanced, Equity Index, Large Cap Value,
Large Cap Growth, Large Cap Value CORE, Large Cap Value CORE II, Large Cap
Aggressive Growth, Large/Mid Cap Value, Large/Mid Cap Value II, Mid Cap
Growth, Fundamental Growth, Mid Cap Blend, Small Cap Value, Small/Mid Cap
Growth, Small/Mid Cap CORE, Small Cap Equity, Small Cap Growth, Global
Balanced, International Equity Index, International Equity, International
Opportunities, Emerging Markets Equity, Short-Term Bond, Active Bond II,
Bond Index, Global Bond, and High Yield Bond Funds may
(i) write call options on, and purchase put options covered by, securities
held by them and purchase and sell options to close out positions thus
established, provided that no such covered
29
call or put option position will be established in the Large Cap
Growth Fund if more than one-third of the Fund's total assets would
immediately thereafter be subject to such call and put options,
(ii) purchase options on stock indexes and write such options to close out
positions previously established, and
(iii) enter into financial futures contracts or purchase options on such
contracts, and effect offsetting transactions to close out such
positions previously established; provided that, (a) as to the Large
Cap Value, Large Cap Growth, Large/Mid Cap Value II, and Small Cap
Equity Funds, no position in financial futures, options thereon or
options on securities indexes will be established if, immediately
thereafter, the then-current aggregate value of all securities owned
or to be acquired by the Fund which are hedged by such instruments
exceeds one-third of the value of its total assets and (b) as to the
Large Cap Value, Equity Index, Large/Mid Cap Value II, Small Cap
Equity, and International Opportunities Funds, no futures position or
position in options on futures will be established if, immediately
thereafter, the total of the initial margin deposits required by
commodities exchanges with respect to all open futures positions at
the time such positions were established, plus the sum of the premiums
paid for all unexpired options on futures contracts would exceed 5% of
the Fund's total assets;
(B) with respect to the Managed, Aggressive Balanced, Equity Index,
Large Cap Value, Large Cap Value CORE, Large Cap Value CORE II, Large Cap
Aggressive Growth, Large/Mid Cap Value, Large/Mid Cap Value II, Mid Cap
Growth, Fundamental Growth, Mid Cap Blend, Small/Mid Cap Growth, Small/Mid
Cap CORE, Small Cap Equity, Small Cap Value, Small Cap Growth, Global
Balanced, International Equity Index, International Equity, International
Opportunities, Emerging Markets Equity, Short-Term Bond, Bond Index, Active
Bond, Active Bond II, Global Bond, and High Yield Bond Funds, forward
foreign exchange contracts, forward commitments, and when issued securities
are not deemed to be commodities or commodity contracts or puts or calls
for the purposes of this restriction;
(C) the Managed, Aggressive Balanced, Mid Cap Growth, Large Cap Value
CORE, Large Cap Value CORE II, Large Cap Aggressive Growth, Large/Mid Cap
Value, Small/Mid Cap Growth, Small/Mid Cap CORE, Small Cap Growth, Global
Balanced, International Equity Index, International Equity, Emerging
Markets Equity, Short-Term Bond, Bond Index, Global Bond, and High Yield
Bond Funds may, in addition to the activities permitted in (A) and (B)
above,
(i) write put and call options on securities and market indexes, if such
positions are covered by other securities or outstanding put and call
positions of the Fund, and purchase put and call options to close out
any positions thus established, and
(ii) enter into futures contracts on securities or market indexes, or
purchase or write put or call options on such futures contracts, for
hedging or speculative (non-hedging) purposes, and enter into
offsetting transactions to close out any positions thus established;
provided that none of these Funds may purchase, sell or write such
futures or options other than for bona fide hedging purposes if
immediately thereafter the Fund's margin deposits on such non-hedging
positions, plus the amount of premiums paid for outstanding options on
futures contracts that are not for bona fide hedging purposes (less
any amount by which any such option is "in the money" at the time of
purchase) exceeds 5% of the market value of the Fund's net assets;
(D) the Large Cap Growth, Active Bond and Active Bond II Funds may
enter into futures contracts and purchase or write options thereon to the
same extent as is permitted in (C)(ii), above, with respect to the Funds
listed therein, and the Growth & Income, Real Estate Equity, and Health
Sciences Funds may enter into futures contracts and purchase or write
options thereon to the same extent as if permitted in (A)(iii) and (C)(ii)
above; and
30
(E) the Managed, Aggressive Balanced, Equity Index, Large Cap Value,
Large Cap Value CORE, Large Cap Value CORE II, Large Cap Aggressive Growth,
Large/Mid Cap Value, Large/Mid Cap Value II, Mid Cap Growth, Fundamental
Growth, Mid Cap Blend, Small/Mid Cap CORE, Small Cap Equity, Small Cap
Value, Small Cap Growth, Global Balanced, International Equity Index,
International Equity, International Opportunities, Emerging Markets Equity,
Active Bond II, Global Bond, and High Yield Bond Funds may purchase or
write put or call options on foreign currencies, may purchase put or call
options on securities, and may enter into closing transactions with respect
to any of such options.
(4) Engage in the underwriting of securities of other issuers, except to
the extent the Fund may be deemed an underwriter in selling as part of an
offering registered under the Securities Act of 1933 securities which it has
acquired.
(5) Borrow money, except from banks as a temporary measure where such
borrowings would not exceed 5% of the market value of total assets of the Fund
as of the time each such borrowing is made, or 10% as to the Aggressive
Balanced, Large Cap Value CORE, Large Cap Value CORE II, Large Cap Aggressive
Growth, Large/Mid Cap Value, Fundamental Growth, Mid Cap Blend, Small/Mid Cap
CORE, Small Cap Value, Health Sciences, International Equity Index,
International Equity, Emerging Markets Equity, Bond Index, Active Bond II and
High Yield Bond Funds, subject to a non-fundamental policy that none of these
Funds will make additional investments at any time when such borrowings plus any
amounts payable by the Fund under reverse repurchase agreements exceed 5% of
that Fund's total assets.
(6) Except as set forth in the following sentence, neither the Managed and
Active Bond Funds, nor the Growth & Income, Large Cap Growth, Real Estate
Equity, or Money Market Funds may purchase securities which are subject to legal
or contractual delays in or restrictions on resale. The Managed, Growth &
Income, Large Cap Growth, Real Estate Equity, and Active Bond Funds may,
however, purchase restricted securities, including those eligible for resale to
"qualified institutional buyers" pursuant to Rule 144A under the Securities Act
of 1933, subject to a non fundamental restriction limiting all illiquid
securities held by each Fund to not more than 15% of the Trust's net assets.
(7) Purchase securities on margin, except for short-term credits as may be
necessary for the clearance of purchases or sales of securities, or effect a
short sale of any security. Neither the use of futures contracts as permitted
by restriction (3), above nor the use of option contracts as permitted by
restriction (3) above, shall be deemed to be the purchase of a security on
margin.
(8) Invest for the purpose of exercising control over or management of any
company.
(9) Unless received as a dividend or as a result of an offer of exchange
approved by the Securities and Exchange Commission ("SEC") or of a plan of
reorganization, purchase or otherwise acquire any security issued by an
investment company if the Fund would immediately thereafter own (a) more than 3%
of the outstanding voting stock of the investment company, (b) securities of the
investment company having an aggregate value in excess of 5% of the Fund's total
assets, (c) securities of investment companies having an aggregate value in
excess of 10% of the Fund's total assets, or (d) together with investment
companies having the same investment adviser as the Fund (and companies
controlled by such investment companies), more than 10% of the outstanding
voting stock of any registered closed-end investment company. A real estate or
mortgage investment trust is not considered an investment company. This
restriction (9) does not apply to the Aggressive Balanced, Equity Index, Large
Cap Value, Large Cap Value CORE, Large Cap Value CORE II, Large Cap Aggressive
Growth, Large/Mid Cap Value, Large/Mid Cap Value II, Mid Cap Growth, Fundamental
Growth, Mid Cap Blend, Small/Mid Cap CORE, Small Cap Equity, Small Cap Value,
Small Cap Growth, Health Sciences, International Equity, Global Balanced,
International Opportunities, Emerging Markets Equity, Bond Index, Active Bond
II, Global Bond, or High Yield Bond Funds.
(10) Purchase securities of any issuer, if (a) with respect to 75% of the
market value of its total assets, more than 5% of the Fund's total assets taken
at market value would at the time be invested in the securities of such issuer,
unless such issuer is the United States Government or its agency or
instrumentality, or (b) such purchase would result in more than 10% of the
outstanding voting securities of such issuer being held by the Fund. This
31
restriction (10) does not apply to the Managed, Growth & Income, Large Cap
Growth, Large Cap Aggressive Growth, Mid Cap Growth, Health Sciences, Global
Balanced, or Global Bond Funds.
(11) Issue senior securities. For the purposes of this restriction, the
following shall not be deemed to be the issuance of a senior security: the use
of futures contracts as permitted by restriction (3), above; the use of option
contracts as permitted by restriction (3), above; and the use of foreign
currency contracts.
The Aggressive Balanced, Equity Index, Large Cap Value, Large Cap Value
CORE, Large Cap Value CORE II, Large Cap Aggressive Growth, Large/Mid Cap Value,
Large/Mid Cap Value II, Mid Cap Growth, Fundamental Growth, Mid Cap Blend,
Small/Mid Cap Growth, Small/Mid Cap CORE, Small Cap Equity, Small Cap Value,
Small Cap Growth, Global Balanced, International Equity Index, International
Equity, International Opportunities, Emerging Markets Equity, Short-Term Bond,
Bond Index, Active Bond, Active Bond II, Global Bond, and High Yield Bond Funds
will not purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after such purchase, the value of
the Fund's investments in such industry would exceed 25% of its total assets
taken at market value. For the purpose of this restriction, telephone, water,
gas and electric public utilities are each regarded as separate industries, and
wholly-owned finance companies are considered to be in the industry of their
parents if their activities are primarily related to financing the activities of
their parent. In conformity with its understanding of current interpretations of
the Investment Company Act by the staff of the SEC, the Trust, as a non-
fundamental policy, interprets this limitation not to apply to securities issued
by the Federal government, or state and local governments within the U.S., or
political subdivisions thereof; but this exception does not apply to securities
of foreign government entities. If these interpretations change, however, the
Trust may modify its practices to conform to such changes.
For purposes of any restrictions or limitation to which the Trust is
subject, no Fund, by entering into any futures contract or acquiring or writing
any option thereon or on any security or market index, shall be deemed
(1) to have acquired or invested in any securities of any exchange or
clearing corporation for any such instrument or
(2) to have acquired or invested in any debt obligations or in any stocks
comprising indexes on which such instrument is based, but which the Fund does
not hold directly in its portfolio.
32
BOARD OF TRUSTEES AND OFFICERS OF THE TRUST
The Board of Trustees of the Trust is responsible for overall management of
the Trust. The Board may exercise all powers of the Trust, except those powers
which are conferred solely upon or reserved to the shareholders. The following
table provides information about the members of the Board of Trustees and the
officers of the Trust:
NAME, ADDRESS AND AGE POSITIONS HELD WITH TRUST PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- --------------------- ------------------------- ----------------------------------------------
Michele G. Van Leer* (age 43) Chairman and Trustee Senior Vice President, Product Management, John
John Hancock Place Hancock Life Insurance Company; Vice Chairman,
Boston, Massachusetts 02117 President & Director, John Hancock Variable
Life Insurance Company
Thomas J. Lee* (age 46) Vice Chairman, President Vice President, Life and Annuity Services, John
John Hancock Place and Trustee Hancock Life Insurance Company; Vice President
Boston, Massachusetts 02117 & Director, John Hancock Variable Life
Insurance Company
Elizabeth G. Cook (age 63) Trustee Expressive Arts Therapist (Clients:
85 East India Row Massachusetts General Hospital, Dana-Farber
Boston, Massachusetts 02110 Cancer Institute); President, The Advertising
Club of Greater Boston
Diane C. Kessler (age 54) Trustee Executive Director, Massachusetts Council of
325 Parker Street Churches
Newton Centre, Massachusetts 02159
Robert Verdonck (age 55) Trustee Chairman, President and Chief Executive
One Bennington Street Officer, East Boston Savings Bank
East Boston, Massachusetts
02128
Hassell H. McClellan (age 55) Trustee Associate Professor and Graduate Dean, The
Boston College Wallace E. Carroll School of Management, Boston
Graduate School of Management College
140 Commonwealth Avenue
Chestnut Hill, Massachusetts
02467
Raymond F. Skiba (age 55) Treasurer Director, Fund Financial Management, John
John Hancock Place Hancock Funds, Inc.
Boston, Massachusetts 02117
Karen Q. Visconti (age 47) Secretary Senior Marketing Consultant, Life Product
John Hancock Place Management, John Hancock Life Insurance Company
Boston, Massachusetts 02117
* Ms. Van Leer and Mr. Lee are the only Trustees who are "interested persons"
as defined in the Investment Company Act.
33
Certain members of the Trust's Board of Trustees may own either
variable annuity contracts or variable life insurance policies that are
supported by one of the Separate Accounts and, in that sense, have an interest
in shares of the Trust.
The combined interest of all the Trust's officers and Trustees, however, does
not aggregate as much as 1% of any Fund's net assets.
Compensation paid by the Trust to its current disinterested
Trustees during 2000 was as follows:
Ms. Cook $52,100
Ms. Kessler $47,800
Mr. Verdonk $51,300
Mr. McClellan $43,900
The Trust paid no compensation to any other officer or Trustee. Mr McClellan did
not become a Trustee until February 16, 2000.
34
INVESTMENT ADVISORY ARRANGEMENTS
THE TRUST'S INVESTMENT ADVISORY ARRANGEMENTS WITH JOHN HANCOCK
John Hancock, the Trust's investment adviser, is a Massachusetts
corporation. Until February 1, 2000, John Hancock was a mutual life insurance
company. Now, it is a subsidiary of John Hancock Financial Services, Inc., a
publicly-traded holding company. John Hancock provides advisory services to the
Funds pursuant to several investment advisory agreements. The Trust is party to
each of these investment advisory agreements with John Hancock.
The Trust pays John Hancock investment advisory fees at the following
rates:
JOHN HANCOCK'S INVESTMENT ADVISORY FEE
AS AN ANNUAL PERCENTAGE OF EACH PORTION
FUND OF THE FUND'S AVERAGE DAILY NET ASSETS
- ---- --------------------------------------
Managed .74% of first $500 million; .68% of next $500 million; .65% above $1 billion
Large Cap Growth .40% of first $500 million; .35% of next $500 million; .30% above $1 billion
Growth & Income .71% of first $150 million; .69% of next $150 million; .67% above $300 million
Aggressive Balanced .675% of first $250 million; .625% of next $250 million; .60% above $500 million
Large Cap Value CORE .75% of first $50 million; .65% of next $150 million; .60% above $200 million
Large Cap Value CORE II .75% of first $50 million; .65% of next $150 million; .60% above $200 million
Large Cap Aggressive Growth 1.00% of first $10 million; .875% of next $10 million; .75% above $20 million
Active Bond .70% of first $100 million; .65% of next $150 million; .61% of next $250 million;
.58% of next $500 million; .55% above $1 billion
Active Bond II .70% of first $100 million; .65% of next $150 million; .61% of next $250 million;
.58% of next $500 million; .55% above $1 billion
Money Market .25%
Small Cap Growth .75%
Large Cap Value .75%
Equity Index .15% of first $75 million; .14% of next $50 million; .13% above $125 million
Large/Mid Cap Value .95% of first $25 million; .85% of next $25 million; .75% of next $50 million;
65% above $100 million
35
JOHN HANCOCK'S INVESTMENT ADVISORY FEE
AS AN ANNUAL PERCENTAGE OF EACH PORTION
FUND OF THE FUND'S AVERAGE DAILY NET ASSETS - CONTINUED
- ---- --------------------------------------------------
Large/Mid Cap Value II .95% of first $25 million; .85% of next $25 million; .75% of next $50 million;
65% above $100 million
Small Cap Equity .90% of first $150 million; .75% of next $150 million; .65% of next $200 million;
.60% above $500 million
Mid Cap Growth .85% of first $100 million; .80% above $100 million
Fundamental Growth .90% of first $250 million; .85% above $250 million
Real Estate Equity 1.10% of first $50 million; 1.00% of the next $50 million; .90% of the
next $100 million; .80% above $200 million
Health Sciences 1.00% of first $250 million; .95% above $250 million
Mid Cap Blend .75% of first $250 million; .70% of next $250 million; .65% above $500 million
Small/Mid Cap Growth .75% of first $250 million; .70% of next $250 million; .65% above $500 million
Small Cap Value .95%
Small/Mid Cap CORE .80% of first $50 million; .70% above $50 million
Global Balanced 1.05% of first $150 million; .95% of next $150 million; .80% of next
$200 million; .75% above $500 million
International Equity Index .18% of first $100 million; .15% of next $100 million; .11% above $200 million
International Equity 1.00% of first $50 million; .95% of next $150 million; .90% above $200 million
International Opportunities 1.00% of first $20 million; .85% of next $30 million; .75% above $50 million
Emerging Markets Equity 1.30% of first $10 million; 1.20% of next $140 million; 1.10% above $150 million
Short-Term Bond .30%
Bond Index .15% of first $100 million; .13% of next $150 million; .11% above $250 million
Global Bond .85% of first $150 million; .80% of next $150 million; .75 of next $200 million;
.70% above $500 million
High Yield Bond .65% of first $100 million; .60% of next $100 million; .50% above $200 million
36
Under its investment advisory agreements with the Trust, John Hancock
advises the Trust in connection with policy and strategy decisions; provides
administration of much of the Trust's day-to-day operations; serves as the
Trust's transfer agent and dividend disbursing agent; prepares the Trust's
financial statements; maintains records required by the Investment Company Act
of 1940; and supervises activities of the subadvisers (discussed below) and of
other service providers to the Trust. John Hancock also provides the Trust with
office space, supplies and other facilities required for the business of the
Trust. John Hancock pays the compensation of Trust officers and employees and
the expenses of clerical services relating to the administration of the Trust.
To the extent that any administrative or legal services for the Trust are
provided by John Hancock's Law Department, however, John Hancock charges the
Trust separately, and the Trust pays such charges in accordance with the terms
of the investment advisory agreements.
All other expenses not expressly assumed by John Hancock under the
investment advisory agreements are paid by the Trust. These include, but are
not limited to, the Trust's taxes (if any); custodian fees; auditing fees;
brokerage commissions; advisory fees; the compensation of Trustees who are not
affiliated with John Hancock; the Trust's fidelity bond coverage; the costs of
printing and distributing annual and semi-annual reports and voting materials to
holders of variable annuity contracts and variable life insurance policies that
participate in the Trust; tabulating votes; fees for certain accounting,
valuation, and compliance services; legal fees; SEC registration costs; proxy
costs; costs of organizing any new Funds; and other expenses related to the
Trust's operations.
THE TRUST'S ARRANGEMENTS WITH SUBADVISERS
Set forth below are the names to the Funds' subadvisers and
certain persons who may control them.
SUBADVISER GENERAL NATURE
AND THE FUNDS SUBADVISER'S OF
IT MANAGES CONTROLLING PERSON BASIS OF CONTROL CONTROL PERSON'S BUSINESS
-------------------------------- ------------------ ----------------------- --------------------------------
1. Independence Investment LLC John Hancock Indirectly owns 100% Financial services holding
(Managed, Growth & Income, Financial Services of voting stock company
Large Cap Growth, Real Estate Inc.
Equity, Short-Term Bond,
Aggressive Balanced, Mid-Cap John Hancock Indirectly owns Life insurance and other
Blend and International Equity Life Insurance 100% of voting stock financial services provided
Index Funds) Company directly or through subsidiaries
2. John Hancock Advisers, Inc. Same as 1. above.
(Small Cap Growth, Active Bond
and Active Bond II Funds)
3. SSgA Funds Management, Inc. State Street Owns 100% of the Financial services holding
(Equity Index Fund) Corporation subadviser company
4. T. Rowe Price Associates, Inc. T. Rowe price Owns 100% of the Publicly traded financial
(Large Cap Value and Small Cap Group, Inc. subadviser services holding company
Value Funds)
37
SUBADVISER GENERAL NATURE
AND THE FUNDS SUBADVISER'S OF
IT MANAGES--CONTINUED CONTROLLING PERSON BASIS OF CONTROL CONTROL PERSON'S BUSINESS
-------------------------------- ------------------ ----------------------- --------------------------------
5. Janus Capital Corporation Stilwell Indirectly owns 88.7% Publicly traded financial asset
(Mid Cap Growth Fund) Financial, Inc. of the subadviser management company
Owns 6.2% of the
Thomas H. Bailey subadviser and, by CEO and Chairman of the Board,
contract, may elect Janus Capital Corporation
majority of the
subadviser's directors
(subject to approval
of Stilwell Financial,
Inc.)
6. Goldman Sachs Asset Management Goldman, Sachs & The subadviser is a Publicly traded investment
(Small/Mid Cap CORE, Large Cap Co. unit of the Investment banking and financial services
Value CORE, Large Cap Value Management Division of company
CORE II and International Goldman, Sachs & Co.
Equity Funds)
7. T. Rowe Price International, T. Rowe Indirectly owns 100% Publicly traded financial
Inc. (International PriceGroup, Inc. of the subadviser services holding company
Opportunities Fund)
8. Morgan Stanley Dean Witter Morgan Stanley Directly owns 100% of Publicly traded financial
Investment Management Inc. Dean Witter & Co. voting stock services company
(Emerging Markets Equity and
Real Estate Equity Funds)
9. Mellon Bond Associates, LLP Mellon Financial Directly owns 100% of Bank holding company
(Bond Index Fund) Corporation the subadviser
10. Wellington Management Company, Laurie A. Gabriel; Managing Partners Investment management
LLP (High Yield Bond, Small/Mid Duncan M.
Cap Growth, Large/Mid Cap McFarland;
Value, Large/Mid Cap Value II John R. Ryan
and Money Market Funds)
11. Alliance Capital Management, AXA Financial, AXA and its Life insurance and other
LLP (Large Cap Aggressive Inc. ("AXA") subsidiaries owned financial services
Growth) (as of 10/2/00) 55.38%
partnership interest
in the subadviser
38
12. Capital Guardian Trust Company The Capital Group The subadviser is an Financial services holding
(Managed, Small Cap Equity, Companies, Inc. indirect wholly owned company
Global Balanced and Global Bond ("CGCI") subsidiary of CGCI
Funds)
13. Putnam Investment Management, Marsh & McLennan The subadviser is an Publicly owned holding company
LLC Companies, Inc indirect wholly owned whose principal businesses are
(Growth & Income, Fundamental (Marsh") subsidiary of Marsh international insurance and
Growth and Health Sciences reinsurance brokerage,
Funds) employment benefit counseling
and investment management
Set forth below are the sub-advisory fees that John Hancock pays the subadvisers
for each Fund. THE BELOW FEES ARE PAID BY JOHN HANCOCK AND NOT BY THE FUNDS.
SUBADVISORY FEES PAYABLE BY JOHN HANCOCK,
FUND AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS
- ------------------------- ---------------------------------------------------------------------------------------
Managed Assets managed by Independence Investment Associates, Inc. : .30% of first $500 million;
.2625% of next $500 million; and .2250% above $1 billion
Assets managed by Capital Guardian Trust Company : .50% of first $150 million;
.45% of next $150 million; .30% of next $200 million; and .25% above $500 million
Large Cap Growth, .30% of first $500 million; .2625% of next $500 million; and .225% above $1 billion
Growth & Income Assets managed by Independence Investment Associates, Inc. : .1875%
Assets managed by Putnam Investment Management, Inc. : .50% of first $150 million;
.45% of next $150 million; and .35% above $300 million
Active Bond .25% of first $100 million; .20% of next $150 million; .16% of next $250 million;
.125% of next $500 million; and .10% above $1 billion
Active Bond II .25% of first $100 million; .20% of next $150 million; .16% of next $250 million;
.125% of next $500 million; and .10% above $1 billion
Real Estate Equity Assets managed by Independence Investment Associates, Inc. : .30% of first
$300 million; .25% of next $500 million; and .20% above $800 million
Assets managed by Morgan Stanley Dean Witter Investment Management Inc.: .70% of
first $50 million; .60% of next $50 million; .50% of next $100 million; and .40% above
$200 million
Health Sciences .55% of first $250 million; and .50% above $250 million
Short-Term Bond .19% of first $250 million; .17% of next $250 million; and .15% above $500 million
Aggressive Balanced .325% of first $250 million; .275% of next $250 million; and .25% above $500 million
Mid Cap Blend .40% of first $250 million; .35% of next $250 million; and .30% above $500 million
39
SUBADVISORY FEES PAYABLE BY JOHN HANCOCK,
FUND--CONTINUED AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS--CONTINUED
- ------------------------- ---------------------------------------------------------------------------------------
Small Cap Growth .50%
Equity Index .07% of first $75 million; .06% of next $50 million; .05% of next $275 million; and
.03% above $400 million
Large Cap Value .40%
Mid Cap Growth .60% of first $100 million; .55% of the next $400 million; and .45% above $500
million
Small/Mid Cap .60% of first $50 million; and .50% above $50 million
CORE
Large Cap Value .40% of first $50 million; .30% of next $150 million; and .25% above $200 million
CORE
Large Cap Value .40% of first $50 million; .30% of next $150 million; and .25% above $200 million
CORE II
International Equity .60% of first $50 million; .55% of next $150 million; and .50% above $200 million
Small Cap Equity .65% of first $150 million; .50% of next $150 million;.40% of next $200 million; and
.35% above $500 million
Small Cap Value .60%
Global Balanced .65% of first $150 million; .55% of next $150 million; .40 of next $200 million; and
.35% above $500 million
International Equity .125% of first $100 million; .10% of next $100 million; and .06% above $200 million
Index
International .75% of first $20 million; .60% of next $30 million; .50% of next $150 million; and
Opportunities .50% of all assets if the Fund reaches $200 million of net assets
Emerging Markets 1.10% of first $10 million; .90% of next $140 million; and .80% above $150 million.
Equity
Bond Index .08% of first $100 million; .06% of next $150 million; and .04% above $250 million
Global Bond .40% of first $150 million; .35% of next $150 million; .30% of next $200 million; and
.25% above $500 million
High Yield Bond .50% of first $100 million; .45% of next $100 million; and .35% above $200 million.
Small/Mid Cap .55% of first $100 million; .45% of next $100 million; and .40% above $200 million
Growth
Large/Mid Cap .60% of first $25 million; .50% of next $25 million; .40% of next $50 million; and
Value .30% above $100 million
40
SUBADVISORY FEES PAYABLE BY JOHN HANCOCK,
FUND--CONTINUED AS A PERCENTAGE OF EACH FUND'S AVERAGE DAILY NET ASSETS--CONTINUED
- ------------------------- ---------------------------------------------------------------------------------------
Large/Mid Cap .60% of first $25 million; .50% of next $25 million; .40% of next $50 million; and
Value II .30% above $100 million
Large Cap .75% of first $10 million; .625% of next $10 million; and .50% above $20 million
Aggressive Growth
Fundamental Growth .50% of first $250 million; and .45% above $250 million
Money Market .09% of first $250 million; .05% of next $500 million; and .02% above $750 million
41
Dollar Amounts of Advisory Fees, Subadvisory Fees, and Expense Reimbursements
Set out below are the dollar amounts of advisory fees that the Trust
paid to John Hancock and the subadvisory fees that John Hancock paid to
subadvisers for the past three years:
FUND INVESTMENT ADVISER SUBADVISERS*
- ---- ------------------------------------ --------------------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ---- ---- ----
Aggressive Balanced....... $ 103,557 23,956 -- $ 50,277 11,118 --
Managed................... 12,069,024 10,789,553 9,825,708 7,988,141 8,001,416 7,369,096
Growth & Income........... 12,188,384 9,806,770 7,959,851 7,674,810 7,269,220 5,970,179
Equity Index.............. 682,347 448,044 270,965 252,856 181,624 134,418
Large Cap Value........... 1,222,357 1,087,807 746,229 811,804 710,068 497,498
Large Cap Value CORE...... 81,748 13,622 -- 43,874 6,990 --
Large Cap Value CORE II... 22,112 11,056
Large Cap Growth.......... 4,955,653 4,378,106 3,445,963 3,756,913 3,250,179 2,584,378
Large Cap Aggressive
Growth................. 214,471 38,421 -- 156,294 27,498 --
Large/Mid Cap Value....... 87,948 16,857 -- 55,933 10,259 --
Large/Mid Cap Value II.... 829,660 735,223 708,164 522,783 469,451 486,843
Mid Cap Growth............ 4,303,524 1,646,277 506,917 3,001,588 1,119,977 357,811
Real Estate Equity........ 946,388 835,184 1,071,226 473,629 413,496 535,611
Small/Mid Cap Growth...... 1,382,046 1,360,053 1,490,558 939,041 902,527 993,730
Fundamental Growth........ 249,227 17,491 -- 144,847 9,805 --
Mid Cap Blend............. 83,854 13,034 -- 44,970 6,703 --
Small/Mid Cap CORE........ 131.301 47,616 24,490 99,006 35,177 18,367
Small Cap Equity.......... 602,274 512,633 444,992 409,844 348,363 305,920
Small Cap Value........... 126,890 15,837 -- 87,204 10,454 --
Small Cap Growth.......... 1,965,285 732,594 420,449 1.319,650 478,916 280,306
Global Balanced........... 261,293 253,044 235,511 149,889 147,136 138,538
International Equity Index 354,066 313,649 503,992 240,625 210,822 339,357
International Equity...... 139,438 35,992 -- 84,469 20,788 --
International
Opportunities.......... 819,520 582,128 440,905 589,537 409,561 821,925
Emerging Markets 408,779
Equity................. 523,867 182,265 67,915 145,114 57,466
Short-Term Bond........... 220,826 216,170 192,680 114,279 135,464 122,022
Bond Index................ 72,662 48,433 26,490 39,093 25,498 14,128
Active Bond............... 2,573,480 2,214,912 2,127,466 1,534,969 1,643,765 1,595,666
Active Bond II............ 18,261 7,826
Global Bond............... 467,803 488,070 328,177 290,135 306,570 211,575
High Yield Bond........... 159,282 111,177 49,428 123,619 84,425 38,023
Money Market.............. 1,038,533 965,427 748,405 1,038,533 953,183 --
* Paying these fees to the sub-advisers is solely the responsibility of John
Hancock and not the Trust.
42
Under the investment advisory agreements, for any fiscal year in which
the normal operating costs and expenses of any Fund, exclusive of the investment
advisory fee, interest, brokerage commissions, taxes and extraordinary expenses
outside the control of John Hancock exceed 0.10% (.25% prior to April 23, 1999)
of that Fund's average daily net assets, John Hancock will reimburse that Fund
in an amount equal to such excess. These reimbursements have been as follows
for the past three years (rounded to the nearest $1,000 for 1998):
FUND 2000 1999 1998
- ---- ---- ---- ----
Aggressive Balanced................. $ 17,933 $ 6,609 $ --
Equity Index........................ -- 275,336 543,000
Large Cap Value..................... -- -- --
Large Cap Value CORE................ 26,638 5,824 --
Large Cap Aggressive Growth......... 11,479 3,504 --
Large/Mid Cap Value................. 28,895 6,512 --
Mid Cap Growth...................... -- -- 15,000
Small/Mid Cap Growth................ -- 1,790 --
Small Cap Equity.................... 23,198 6,224 17,000
Small Cap Value..................... 32,214 9,254 --
Small Cap Growth.................... -- 27,000
Global Balanced..................... 85,676 91,146 199,000
International Equity Index.......... 195,833 21,900 124,000
International Equity................ 92,396 21,901 --
International Opportunities......... 154,310 92,017 145,000
Global Bond......................... 63,735 1,445 31,000
Fundamental Growth.................. 10,455 2,888 --
Mid Cap Blend....................... 21,030 6,011 --
Small/Mid Cap CORE.................. 53,769 77,179 107,000
Emerging Markets Equity............. 499,569 294,354 111,000
Bond Index.......................... 11,335 17,185 56,000
High Yield Bond..................... 29,620 42,314 85,000
Active Bond......................... 201,827 -- --
43
ARRANGEMENTS WITH OTHER SERVICE PROVIDERS
TO THE TRUST
UNDERWRITING AND INDEMNITY AGREEMENT
Pursuant to an Underwriting and Indemnity Agreement, Signator Investors,
Inc. ("Signator") serves as the Trust's principal underwriter, and John Hancock
provides certain indemnities to the Trust and its Trustees. Neither Signator nor
John Hancock receives any additional compensation from the Trust for the
services and indemnities they provide pursuant to the Underwriting and Indemnity
Agreement. The offering of the Trust's shares through Signator is a continuous
offering on a "best efforts" basis. Signator is a wholly-owned subsidiary of
John Hancock and is located at 197 Clarendon Street, Boston, MA 02117.
CUSTODY OF THE TRUST'S ASSETS
State Street Bank and Trust Company ("State Street Bank") is the primary
custodian of the assets of all Funds. State Street Bank's principal business
address is 225 Franklin Street, Boston MA 02110. The primary custodian's duties
include safeguarding and controlling the Trust's cash and investments, handling
the receipt and delivery of securities, and collecting interest and dividends on
the Trust's investments. Fund securities purchased in the United States are
maintained in the custody of State Street Bank, although such securities may be
deposited in the book-entry system of the Federal Reserve System, with
Depository Trust Company, or with other qualified domestic book-entry systems or
depositories. Also, pursuant to its agreement with the Trust, State Street Bank
provides certain accounting and recordkeeping services to the Trust and
generally values the Trust's assets by computing each Fund's net asset value
each day. The Trust compensates State Street Bank for these functions through
the payment of an annual custody asset fee of .01% of the total net assets of
the Trust, allocated to each Fund based on the percentage of that Fund's total
net assets to the total net assets of the Trust; miscellaneous transaction
charges ranging from $7.00 to $25.00; global asset and transaction fees that
vary by the country in which a Fund's assets are held or traded; a monthly
accounting fee charge that is allocated to each Fund based on the percentage of
that Fund's total net assets to the total net assets of the Trust; valuation and
monthly quote charge; special service fees for activities of a non-recurring
nature; and reimbursement of specified out-of-pocket expenses.
Foreign securities are generally held through subcustodian banks and
depositories around the world with whom State Street Bank has relationships.
In some cases, Funds whose securities are held in this manner may be exposed to
greater risks of loss. This is because the soundness of such foreign entities,
as well as foreign regulatory practices and procedures, may provide less
protection to security holders than is available in the U.S.
In certain circumstances, brokers may have access to assets that a Fund
posts as "margin" in connection with futures and options transactions. In the
event of a broker's insolvency or bankruptcy, a Fund could experience a delay or
incur costs in recovering such assets or might recover less than the full amount
due. Also the value of such assets could decline by the time the Trust could
effect such recovery.
If on any day a Fund experiences net realized or unrealized gains with
respect to financial futures contracts held through a given broker, it will be
entitled immediately to receive from the broker the net amount of such gains.
The Trust will request payment of such amounts promptly after notification by
the broker that such amounts are due. Thereupon, these assets will be deposited
in the Trust's general or segregated account with its primary custodian, as
appropriate.
SUBADMINISTRATION AGREEMENT WITH STATE STREET BANK
Pursuant to a subadministration agreement, with the Trust, State Street
Bank also provides assistance to John Hancock and the subadvisers in computing
total return information for the Trust and in monitoring each Fund's compliance
with the Fund's investment objectives and restrictions, as well as compliance
with certain other applicable legal requirements, . The Trust compensates State
Street Bank for these services through payment of an annual fee that accrues
daily and is billed monthly in arrears. The annual fee is based on the average
net assets of the Trust and is 0.012% of the first $1 billion of average net
assets, 0.0075% of the next $1 of average net assets,
44
and 0.0025% of average net assets after that. Each Fund is allocated the greater
of a minimum monthly Fund fee or the basis point annual fee, based on the pro-
rata total net asset value of that Fund. The minimum monthly Fund fee is phased-
in for new Funds at the rate of 1/12 in month one, 2/12th in month two,
increasing incrementally per month until the full monthly minimum is in effect
in month 12 ($1,333).
INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts, are the
independent auditors of the Trust. Ernst & Young audits the financial statements
of the Trust, prepares the Trust's tax returns, and renders other advice to the
Trust concerning accounting and tax matters. Ernst & Young also meets
periodically with the Trust's Board and with the Audit Committee of the Board to
discuss matters within the scope of Ernst & Young's activities with respect to
the Trust.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
The Funds pay brokers' commissions, transfer taxes, and other fees relating
to their specific portfolio transactions. (Investments in debt securities are,
however, generally traded on a "net" basis through issuers or dealers acting for
their own account as principals and not as brokers. Therefore, no brokerage
commissions are payable on most such transactions, although the price to the
Trust usually reflects a dealer "spread" or "mark-up.")
AMOUNTS OF BROKERAGE PAID
Brokerage commissions paid by the Funds were as follows for the past three
years:
FUND 2000 1999 1998
- ---- ---- ---- ----
Aggressive Balanced............. $ 12,367 $ 4,424 $ --
Managed......................... 2,752,720 2,385,643 1,843,929
Growth & Income................. 5,189,868 4,741,953 2,673,170
Equity Index.................... 64,982 61,865 33,797
Large Cap Value................. 155,165 110,393 63,944
Large Cap Value CORE............ 13,236 3,240 --
Large Cap Value CORE II......... 5,471 -- --
Large Cap Growth................ 1,695,781 1,389,454 815,587
Large Cap Aggressive Growth..... 33,476 11,885 --
Large/Mid Cap Value............. 19,805 6,876 --
Large/Mid Cap Value II.......... 703,137 383,634 495,154
Mid Cap Growth.................. 486,217 245,913 146,033
Real Estate Equity.............. 341,413 122,021 177,186
Fundamental Growth.............. 40,554 3,082 --
Mid Cap Blend................... 27,104 5,586 --
Small/Mid Cap CORE.............. 29,151 12,371 7,225
Small/Mid Cap Growth............ 214,360 621,068 893,945
Small Cap Equity................ 325,733 284,381 176,549
Small Cap Value................. 142,364 21,848 --
Small Cap Growth................ 236,981 146,206 103,248
Global Balanced................. 76,975 47,678 51,205
International Equity Index...... 87,614 133,746 730,529
International Equity............ 36,616 16,561 --
International Opportunities..... 277,851 74,940 117,083
Emerging Markets Equity......... 235,636 189,025 10,018
Bond Index...................... 1,770 598 --
Global Bond..................... 5,910 -- --
High Yield Bond................. -- 200 --
45
HOW BROKERS AND DEALERS ARE SELECTED
Orders for the purchase and sale of Fund portfolio investments are placed
by the respective subadvisers to the Funds. All of these subadvisers place
orders in such manner as, in their opinion, will offer the best overall price
and execution of each transaction. In seeking the best price and execution for
equity securities traded only in the over-the-counter market, they normally deal
directly with the principal market-makers. It is not the practice of sub-
advisers to seek the lowest available commission if, in their reasonable
judgement, there is a material risk that the total cost or proceeds from the
transaction might be less favorable than what may be obtainable elsewhere.
The subadvisers are governed in the selection of brokers and dealers and
the negotiation of brokerage commission rates (or the payment of net prices in
the case of debt securities) by the reliability and quality of the broker's or
dealer's services. Although some weight is given to the availability and value
of research and statistical assistance (discussed immediately below) furnished
by the broker or dealer to the subadviser, it is not always possible to place a
dollar value on such information and services. Because it is only supplementary
to the subadvisers' own research efforts, the receipt of research information
and statistical assistance is not expected to reduce their expenses measurably.
RESEARCH AND STATISTICAL SERVICES FURNISHED BY BROKERS AND DEALERS
Research and statistical assistance typically furnished by brokers or
dealers includes, but is not limited to, analysts' reports on companies and
industries, market forecasts, and economic analyses. Brokers or dealers may also
provide reports on pertinent federal and state legislative developments and
changes in accounting practices; direct access by telephone or meetings with
leading research analysts throughout the financial community, corporate
management personnel, industry experts, leading economists and government
officials; comparative performance and evaluation and technical performance
measurement services; portfolio optimization software; economic advice;
quotation services; and services from recognized experts on investment matters
of particular interest to the subadviser. In addition, the foregoing services
may comprise the use of or be delivered by computer systems whose software and
hardware components may be provided to the subadviser as part of the services.
In any case in which the foregoing systems can be used for both research and
non-research purposes, the subadviser will make an appropriate allocation of
those uses and will pay for any non-research portion of the systems with its own
funds.
Research and statistical services furnished by brokers and dealers handling
the Funds' transactions may be used by the subadvisers for the benefit of all of
the accounts managed by them, and not all of such research and statistical
services may be used by the subadvisers in connection with the Funds.
RELATIONSHIP BETWEEN BROKERAGE COMMISSIONS AND RESEARCH AND STATISTICAL SERVICES
FURNISHED BY BROKERS AND DEALERS
The subadvisers or the Funds will not at any time make a commitment
pursuant to an agreement with a broker because of research services provided.
Nor, except as set forth below, will John Hancock or the subadvisers direct
brokerage upon any prescribed basis to a broker because of research services
provided. The subadviser for the Mid Cap Growth Fund may have an internal
procedure for allocating transactions, in a manner consistent with its execution
policy, to brokers that it has identified as providing superior executions,
research, or research related products or services which benefit its advisory
clients, including the Fund.
Evaluations of the overall reasonableness of any broker's commissions are
made by the subadvisers' traders for the Funds on the basis of their experience
and judgment. To the extent permitted by Section 28(e) of the Securities
Exchange Act of 1934, such traders are authorized to pay a brokerage commission
on a particular transaction in excess of what another broker might have charged
in recognition of the value of the broker's brokerage and research services
46
BROKERAGE TRANSACTIONS IN FOREIGN MARKETS
Brokerage transactions in securities of companies domiciled in countries
other than the United States are anticipated to be normally conducted on the
stock exchanges or other markets of those countries in which the particular
security is traded. Fixed commissions on foreign stock exchange transactions are
generally higher than negotiated commissions available in the United States.
Moreover, there is generally less government supervision and regulation of
foreign stock exchanges and broker-dealers than in the United States. Settlement
periods in non-U.S. markets may differ from the normal settlement period in the
United States.
SIMULTANEOUS TRANSACTIONS WITH OTHER ACCOUNTS
The subadvisers also perform investment advisory services for a number of
other accounts and clients, none of which is given preference over the Trust in
allocating investment opportunities. When opportunities occur which are
consistent with the investment objective of more than one account, it is the
policy of each subadviser to avoid favoring any one account over another.
Accordingly, investment opportunities in such cases are allocated in a manner
deemed equitable by the subadvisers to the particular accounts involved. The
allocation may be based, for example, on such factors as the accounts'
respective investment objectives and then current investment and cash positions.
Subject to these requirements, Trust orders may be combined with orders of other
accounts or clients advised by any of the subadvisers at prices which are
approximately averaged.
USE OF BROKERS WHO ARE AFFILIATED WITH A SUBADVISER
A Fund may place portfolio transactions through certain brokers who are
affiliated with the Fund's subadviser. The Trust has implemented special
procedures governing the circumstances of these transactions. In addition to
complying with any applicable provisions of the Trust's procedures, these
transactions must comply with all applicable legal requirements, including,
where applicable, Rule 17e-1 under the Investment Company Act. Among other
things, that rule requires the commissions or other compensation paid to the
affiliated broker to be reasonable and fair compared to those in similar
transactions between unrelated parties.
47
Set forth below is information about transactions by each Fund with affiliated
brokers in reliance on Rule 17e-1 for each of the past three years:
AMOUNT OF COMMISSIONS
NAME NATURE OF BROKER'S PAID BY FUND
OF AFFILIATION WITH ----------------------------------------
FUND AFFILIATED BROKER FUND'S SUB-ADVISER 2000 1999 1998
- -------------------------- --------------------- --------------------------- ---- ---- ----
International Ord Minnett Group Wholly-owned subsidiary of $ 0 $ 34 $ 263
Opportunities Ltd. sub-adviser's parent
International Jardine Fleming & Co. Wholly-owned subsidiary of $ 518 $ 710 $ 311
Opportunities sub-adviser's parent
International Robert Fleming Wholly-owned subsidiary of $ 527 $ 1,166 $ 1,018
Opportunities Securities, Ltd. sub-adviser's parent
International Jardine Fleming & Co. Wholly-owned subsidiary of $4,485 $ 0 $ 0
Opportunities II sub-adviser's parent
International Robert Fleming Wholly-owned subsidiary of $ 77 $ 0 $ 0
Opportunities II Securities, Ltd sub-adviser's parent
Large/Mid Cap Value II Neuberger Berman, Dual operating division of $ 890 $80,598 $366,985
LLC * sub-adviser's parent
Large Cap Value CORE Goldman, Sachs & Co. Dual operating division of $ 0 $ 96 $ 0
sub-adviser's parent
Large Cap Value Neuberger Berman Affiliated broker of Trust $ 190 $ 0 $ 0
LLC * affiliated sub-adviser
Small/Mid Cap CORE Goldman, Sachs & Co. Dual operating division of $ 753 $ 120 $ 0
parent of sub-adviser
International Equity Goldman, Sachs & Co. Dual operating division of $ 128 $ 0 $ 0
parent of sub-adviser
Emerging Markets Equity Morgan Stanley Asia Wholly-owned subsidiary of $1,785 $ 2,779 $ 0
Limited sub-adviser's parent
Emerging Markets Equity Morgan Stanley Wholly-owned subsidiary of $ 880 $ 3,276 $ 0
International Limited sub-adviser's parent
* Neuberger Berman, LLC is an affiliate of Neuberger & Berman, LLC, which is no
longer the sub-adviser of the Large/Mid Cap Value II Fund.
For 2000, the total dollar amount of such transactions through affiliated
brokers as a percentage of all brokerage-type transactions was 5.13% for the
International Opportunities Fund, 4.89% for the International Opportunities II
Fund, 3.89% for the Large/Mid Cap Value II Fund, 0.82% for the Large Cap Value
Fund, 1.84% for the International Equity Fund, 2.26% for the Small/Mid Cap CORE
Fund, and 1.82% of the Emerging Markets Equity Fund. For 2000, the total
brokerage commissions on such transactions through affiliated brokers, as a
percentage of commissions paid on all brokerage-type transactions was 0.57% for
the International Opportunities Fund, 4.88 for the International Opportunities
II Fund, 0.13% for the Large/Mid Cap Value II Fund, 0.12% for the Large Cap
Value Fund, 2.64% for the Small/Mid Cap CORE Fund, 0.38% for the International
Equity Fund, and 1.13% for the Emerging Markets Equity Fund.
48
CODES OF ETHICS
Employees of John Hancock Life Insurance Company, the Trust, and the sub-
advisers to the Trust and officers and Trustees of the Trust are subject to
restrictions on engaging in personal securities transactions. These restrictions
are set forth in the John Hancock Insider Information Policy and Procedures, the
Variable Series Trust Code of Ethics, and the Codes of Ethics of the sub-
advisers to the various funds of the Trust ("Sub-Advisers' Codes of Ethics"),
(combined, "Codes"). The Codes, in accordance with rule 17j-1 of the Investment
Company Act of 1940, as amended, contain provisions and requirements designed to
identify and address certain conflicts of interest between personal investment
activities of employees of the adviser and sub-advisers to the funds and the
interests of the funds. These Codes do not prohibit personnel from investing in
securities that may be purchased or held by the funds within the Trust. However,
the Codes, consistent with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing and requirements established by
rule 17j-1, among other things, prohibit personal securities investments without
pre-clearance for certain employees, impose time periods during which personal
transactions may not be made in certain securities by employees with access to
investment information, and require the timely submission of broker
confirmations and quarterly reporting of personal securities transactions.
Additional restrictions apply to portfolio managers, traders, research analysts
and others involved in the investment advisory process. The Variable Series
Trust Code of Ethics incorporates and applies its restrictions to officers and
Trustees of the Trust who are affiliated with John Hancock Life Insurance
Company. The Variable Series Trust Code of Ethics does not prohibit unaffiliated
officers and Trustees from investing in securities that may be held by the
Trust; however, the Variable Series Trust Code of Ethics regulates the personal
securities transactions of unaffiliated Trustees of the Trust, including
limiting the time periods during which they may personally buy and sell certain
securities about which they may receive information. The Trust's Trustees, in
compliance with rule 17j-1, approve the Variable Series Trust's Codes of Ethics
and the Sub-Advisers' Codes of Ethics and are required to approve any material
changes to the Variable Series Trust Code of Ethics as well as to the Sub-
Advisers' Codes of Ethics. The Trustees also provide continuing oversight of
personal investment policies and annually evaluate the implementation and
effectiveness of the Codes. The Codes are on public file with, and are
available from, the Securities and Exchange Commission.
FEATURES OF THE TRUST'S SHARES
The shares of beneficial interest of the Trust currently are divided into
33 series, each corresponding to one of the Trust's 33 Funds. The Trust has the
right to establish additional series and issue additional shares without the
consent of its shareholders.
If the holders of variable annuity contracts and variable life insurance
policies show minimal interest in any Fund, the Trust's Board of Trustees, by
majority vote, may eliminate the Fund or substitute shares of another investment
company. Any such action by the Board would be subject to compliance with any
requirements for governmental approvals or exemptions or for shareholder
approval. The holders of variable annuity contracts and variable life insurance
policies participating in any such Fund will be notified in writing of the
Trust's intention to eliminate the Fund and given 30 days to transfer amounts
from such Fund to other Funds without incurring any transaction fee. Amounts not
transferred or withdrawn would automatically be transferred, at the discretion
of the Fund's management.
The assets received by the Trust for the issuance or sale of shares of each
Fund and all income, earnings, profits, and proceeds thereof are specifically
allocated to that Fund. They constitute the underlying assets of each Fund, are
segregated on the books of the Trust, and are to be charged with the expenses of
such Fund. Any assets which are not clearly allocable to a particular Fund or
Funds are allocated in a manner determined by the Board of Trustees. Accrued
liabilities which are not clearly allocable to one or more Funds would generally
be allocated among the Funds in proportion to their relative net assets before
adjustment for such unallocated liabilities.
Each issued and outstanding share in a Fund is entitled to participate
equally in dividends and distributions declared with respect to such Fund and in
the net assets of such Fund upon liquidation or dissolution remaining after
satisfaction of outstanding liabilities.
49
A dividend from the net investment income of the Money Market Fund will be
declared and distributed daily. Dividends from net investment income of the
other Funds will be declared and distributed monthly. The Trust will distribute
all of its net realized capital gains annually. Dividends and capital gains
distributions will normally be reinvested in additional full or fractional
shares of the Fund to which they relate and will be appropriately credited to
investment performance under the variable life insurance policies and variable
annuity contracts participating in that Fund.
The shares of each Fund, when issued, will be fully paid and non-
assessable, and will have no preference, preemptive, exchange or similar rights.
Shares do not have cumulative voting rights.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
Under the Trust's Declaration of Trust, the Trust is not required to hold
an annual shareholders' meeting. Normally, for example, there will be no
shareholders meetings for the purpose of electing Trustees.
In addition, it is expected that the Trustees generally will elect their
own successors and appoint Trustees to fill any vacancy, so long as, after
filling the vacancy, at least two-thirds of the Trustees then in office have
been elected by the shareholders.
Notwithstanding the above if at any time less than a majority of Trustees
in office have been elected by the shareholders, the Trustees must call a
special shareholders' meeting promptly. Also the Trustees will promptly call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Trustee or all of the Trustees, if requested in writing to do so by
holders of 10% or more of the outstanding shares. In this regard, whenever ten
or more shareholders who have been such for at least six months and who hold in
the aggregate either shares having a net asset value of at least $25,000 or at
least 1% of the outstanding shares, whichever is less, apply to the Trustees in
writing stating that they wish to communicate with other shareholders with a
view to obtaining signatures to a request for a shareholders' meeting, for
consideration of the removal of any or all of the Trustees and accompanied by
the material which they wish to transmit, the Trustees will within five business
days after receipt either afford to such applicants access to the Trust's
shareholder list or inform such applicants as to the approximate number of
shareholders of record, and the approximate cost of mailing the material. If the
Trustees elect the latter, the Trustees, upon written request of such
applicants, accompanied by the material to be mailed and the reasonable expenses
of mailing, shall promptly mail such material to all shareholders of record,
unless within five business days the Trustees shall mail to such applicants and
file with the SEC, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that, in
their opinion, either such material is misleading or in violation of applicable
law and specifying the basis of such opinion.
At any shareholders' meeting, all shares of the Trust of whatever class are
entitled to one vote, and the votes of all classes are cast on an aggregate
basis, except on matters where the interests of the Funds differ. Where the
interests of the Funds differ, the voting is on a Fund-by-Fund basis. Approval
or disapproval by the shareholders in one Fund on such a matter would not
generally be a prerequisite of approval or disapproval by shareholders in
another Fund; and shareholders in a Fund not affected by a matter generally
would not be entitled to vote on that matter. Examples of matters which would
require a Fund-by-Fund vote are changes in the fundamental investment policy of
a particular Fund and approval of investment management or sub-investment
management agreements.
50
SALES AND REDEMPTIONS OF FUND SHARES
"SEED MONEY" SHARES
Typically, when a new Fund is added to the Trust, John Hancock (or one
of its affiliates) initially purchases a substantial amount of that Fund's
shares to provide the new fund with a reasonable asset base with which to
commence operations. For example, the most recent such contributions of "seed
money" have been as follows:
"SEED MONEY" DATE
HARES PURCHASED BY OF
FUND JOHN HANCOCK PURCHASE
- ---- ------------ -------
Aggressive Balanced $10,000,000 8/31/99
Equity Index 15,000,000 5/1/98
Large Cap Value CORE 5,000,000 8/31/99
Large Cap Value CORE II 5,000,000 6/30/00
Large Cap Aggressive Growth 10,000,000 8/31/99
Large/Mid Cap Value 5,000,000 8/31/99
Fundamental Growth 5,000,000 8/31/99
Mid Cap Blend 5,000,000 8/31/99
Small/Mid Cap CORE 5,000,000 5/1/98
Small Cap Value 5,000,000 8/31/99
Health Sciences 20,000,000 5/1/01
International Opportunities 15,000,000 5/1/98
Global Balanced 20,000,000 5/1/96
International Equity 10,000,000 8/31/99
Emerging Markets Equity 10,000,000 5/1/98
Bond Index 25,000,000 5/1/98
High Yield Bond 10,000,000 5/1/98
Active Bond II 5,000,000 6/30/00
John Hancock (or its affiliate) may redeem these shares (and thus withdraw
its seed money investment) at some time. However, before withdrawing any part of
their interests in any Fund, John Hancock (or its affiliate) will consider any
possible adverse impact the withdrawal might have on that Fund.
Purchases and redemptions of seed money shares are made at the applicable
Fund's net asset value per share (with no additions or deductions for charges)
next computed after the purchase or redemption order is placed.
SHARES SOLD AND REDEEMED IN CONNECTION WITH TRANSACTIONS UNDER VARIABLE ANNUITY
CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES
Fund shares are sold at their net asset value as next determined after
receipt of net premiums by the Separate Account, without the addition of any
selling commission or sales load.
Shares are redeemed at their net asset value as next determined after
receipt of net surrender requests by the Separate Account. No fee is charged on
redemption. Redemption payments will usually be paid within seven days after
receipt of the redemption request, except that the right of redemption may be
suspended or payments postponed whenever permitted by applicable law and
regulations. Redemptions are normally made in cash, but the Trust reserves the
right, at its discretion, to make full or partial payment by assignment to the
appropriate Separate Account of portfolio securities at their value used in
determining the redemption price. In such cases, the Separate Account would
incur brokerage costs should it wish to liquidate these portfolio securities.
Trust shares are also sold and redeemed as a result of transfer requests,
loans, loan repayments, and similar Separate Account transactions, in each case
without any sales load or commission or at the net asset value per share
computed for the day as of which such Separate Account transactions are
effected.
51
COMPUTING THE FUNDS' NET ASSET VALUE
The net asset value per share of each Fund is determined once daily, after
the declaration of dividends, if any, as of 4:00 p.m., New York City time, on
each business day the New York Stock Exchange ("Exchange") is open for regular
trading. For this purpose, however, certain derivative instruments may be valued
using prices as late as 4:15 p.m.
The net asset value per share of each Fund is determined by adding the
value of all portfolio securities and other assets, deducting all portfolio
liabilities, and dividing by the number of outstanding shares. All Trust
expenses will be accrued daily for this purpose.
Short-term investments with a remaining maturity of 60 days or less, and
all investments of the Money Market Fund, are valued at "amortized cost," which
approximates market value. This involves valuing a security at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates. While this
method provides certainty in valuation, it may result in periods during which
the value of an instrument, as determined by amortized cost, is higher or lower
than the price the Fund would receive upon the sale of the instrument.
The Board of Trustees has established procedures designed to stabilize the
Money Market Fund's price per share, as computed for the purpose of sales and
redemptions, at $1. There can be no assurance, however, that the Fund will at
all times be able to maintain a constant $1 net asset value per share. Such
procedures include review of the Fund's holdings at such intervals as is deemed
appropriate to determine whether the Fund's net asset value, calculated by using
available market quotations, deviates from $1 per share and, if so, whether such
deviation may result in material dilution, or is otherwise unfair to existing
shareholders. In the event that it is determined that such a deviation exists,
the Board of Trustees will take such corrective action as it regards as
necessary and appropriate. Such action may cause losses or gains to be recorded
for the Fund, including decreases or increases in the Fund's net asset value per
share.
Securities and covered call and put options that are listed on a stock
exchange are normally valued at the closing sales price. If there were no sales
during the day, they are normally valued at the last previous sale or bid price
reported, as are equity securities that are traded in the over-the-counter
market.
Non-exchange traded debt securities (other than certain short-term
investments) are valued on the basis of valuations furnished by a pricing
service which uses electronic data processing techniques, without exclusive
reliance upon quoted prices.
Any other security for which market quotations are not readily available,
and any other property for which valuation is not otherwise available, is valued
at fair value as determined in good faith by, or under the direction of, the
Board of Trustees.
Financial futures contracts, options thereon and options on stock indexes
are valued at the last trade price of the day. In the absence of a trade on a
given day, the value generally is used which is established by the exchange on
which the instrument is traded.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day on which the New York Stock Exchange is open. The values
of such securities used in computing net asset value per share are normally
determined as of such times. Trading of these securities may not take place on
every New York Stock Exchange business day and may take place on days which are
not business days in New York. The Trust calculates net asset value per share as
of the close of regular trading on the New York Stock Exchange on each day on
which that exchange is open. Therefore, such calculation does not take place
contemporaneously with the determination of the prices of many of the Funds'
securities used in such calculation. If events affecting the value of such
securities occur between the time when their price is determined and the time as
of which the Fund's net asset value is calculated, such securities may be valued
at fair value by or under the direction of the Board of Trustees.
52
TAXES
The Trust intends that each Fund qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code ("Code"). This requires that
each Fund comply with certain requirements as to the nature of its income and
amounts of dividends and other distributions it pays. Also, in order to qualify
under Subchapter M, at the end of each quarter of a Fund's taxable year, (i) at
least 50% of the market value of the Fund's assets must be represented by cash
and cash items, U.S. Government securities, securities of other regulated
investment companies, and other securities, with such other securities limited,
in respect of any one issuer, to an amount that does not exceed 10% of the
voting securities of such issuer or 5% of the value of the Fund's total assets;
and (ii) not more than 25% of the value of its assets may be invested in the
securities (other than U.S. Government securities and securities of other RICs)
of any one issuer or two or more issuers which the Fund controls and which are
engaged in the same, similar or related trades or businesses.
The Trust also intends that each Fund comply with certain other
diversification requirements, promulgated under Section 817(h) of the Code.
Under these requirements, no more than 55% of the total value of the assets of
each Fund may be represented by any one investment, no more than 70% by any two
investments, no more than 80% by three investments and no more than 90% by four
investments. Generally, for these purposes, all securities of the same issuer
are treated as one investment. In the context of U.S. Government securities
(including any security that is issued, guaranteed or insured by the United
States or an instrumentality of the United States), each U.S. Government agency
or instrumentality is treated as a separate issuer.
Assuming the Funds qualify as regulated investment companies under
Subchapter M, they will not owe any income taxes. On the other hand, if a Fund
fails to qualify under Subchapter M, it may incur income tax liabilities, which
will negatively affect its investment performance.
Also, qualification under Subchapter M, as well as compliance with the
Section 817(h) diversification requirements, (among other things) are necessary
to secure the tax treatment intended for holders of variable annuity contracts
and variable life insurance policies that are supported by the Trust. Therefore,
any such failure to qualify under Subchapter M or to meet the diversification
standards under Section 817(h) could have serious adverse consequences for such
investors.
For a discussion of these and other tax implications of owning a variable
annuity contract or a variable life insurance policy for which the Fund serves
as the investment medium, please refer to the Prospectus for such contract or
policy attached at the front of this Prospectus.
Those Funds that invest substantial amounts of their assets in foreign
securities may be able to make an election to pass through to the insurance
company issuing the variable annuity contract or a variable life insurance
policy any taxes withheld by foreign taxing jurisdictions on foreign source
income. Such an election will result in additional taxable income and income tax
to the insurance company. The amount of additional income tax, however, may be
more than offset by credits for the foreign taxes withheld, which are also
passed through.
INFORMATION ABOUT FUND PERFORMANCE
HOW MONEY MARKET FUND YIELDS ARE CALCULATED
The Money Market Fund may advertise investment performance figures,
including its current yield and its effective yield.
The Money Market Fund's yield is its current investment income, expressed
in annualized terms. The current yield is based on a specified seven-calendar-
day period. It is computed by (1) determining the net change (exclusive of
capital changes) in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of the period, (2) dividing the net change
in account value by the value of the account at the beginning of the base period
to get the base period return, then (3) multiplying the base period return by
52.15 (365 divided by 7). The resulting yield figure is carried to the nearest
hundredth of one percent.
53
The calculations include the value of additional shares purchased with any
dividends paid on the original share and the value of dividends declared on both
the original share and any such additional shares. The capital changes excluded
from the calculation are realized capital gains and losses from the sale of
securities and unrealized appreciation and depreciation.
Compound (effective) yield for the Fund will be computed by dividing the
seven-day annualized yield (determined as above) by 365, adding 1 to the
quotient, raising the sum to the 365th power, and subtracting 1 from the result.
For the seven-day period ending December 31, 2000, the Money Market Fund's
current yield was 6.38%; its effective yield was 6.58%.
The Fund's yield will fluctuate depending upon market conditions, the type,
quality, and maturity of the instruments in the Fund, and its expenses.
CHARGES UNDER VARIABLE LIFE INSURANCE AND VARIABLE ANNUITY POLICIES
Yield and total return quotations do not reflect any charges imposed on any
Separate Account or otherwise imposed pursuant to the variable life insurance
policies and variable annuity contracts that are supported by the Funds. (Those
charges are discussed in the prospectus for such policies or contracts.)
Therefore, the yield or total return of any Fund is not comparable to that of a
publicly available fund. Nor should yield or total return quotations be
considered representative of the Fund's yield or total return in any future
period.
LEGAL MATTERS
The law firm of Foley & Lardner of Washington, D.C., advises the Trust on
certain legal matters relating to the Federal securities laws.
REPORTS TO CONTRACTHOLDERS
Annual and semi-annual reports containing financial statements of the
Trust, as well as any materials soliciting voting instructions for Trust shares,
will be sent to variable life insurance and annuity contractowners having an
interest in the Trust.
54
APPENDIX A
- ----------
CORPORATE BOND RATINGS
Moody's Investors Service, Inc., describes its ratings for corporate bonds
as follows:
. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities,
or fluctuation of protection elements may be of greater amplitude, or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.
. Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment some time in
the future.
. Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
. Bonds which are rated Ba have speculative elements and their future
cannot be considered as well assured. The protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Bonds in this class are
characterized by uncertainty of position.
. Bonds which are rated B generally lack characteristics of a desirable
investment; assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
. Bonds which are rated Caa are of poor standing. Issues may be in default
or there may be present elements of danger with respect to principal or
interest.
. Bonds which are rated Ca are speculative in a high degree. They are
often in default or have other marked shortcomings.
. Bonds which are rated C are the lowest rated class of bonds. They can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Standard & Poor's Corporation describes its ratings for corporate bonds as
follows:
. AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
55
. AA -- Bonds rated AA also qualify as high-quality obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances,
they differ from AAA issues only in small degree.
. A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
. BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
. BB, B, CCC, CC, C -- Bonds rated in these categories are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While this debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
. C1 -- This rating is reserved for income bonds on which no interest is
being paid.
. D -- Bonds rated D are in default and payment of interest and/or
repayment of principal is in arrears.
56
John Hancock Declaration Funds
Supplement to the Prospectus Dated May 1, 2001
John Hancock V.A. Mid Cap Growth Fund
- -------------------------------------
On page 10, the 6th paragraph in the "Goal and Strategy" section has been
deleted and replaced as follows:
The fund may not invest more than 5% of assets in any one security.
The "Portfolio Managers" section has been changed as follows:
PORTFOLIO MANAGERS
Team responsible for day-to-day
investment management
John Hancock
Declaration Funds
Prospectus
May 1, 2001
- --------------------------------------------------------------------------------
Equity
V.A. Core Equity Fund
V.A. 500 Index Fund
V.A. Large Cap Growth Fund
V.A. Mid Cap Growth Fund
V.A. Relative Value Fund
V.A. Small Cap Growth Fund
V.A. Sovereign Investors Fund
International
V.A. International Fund
Sector
V.A. Financial Industries Fund
V.A. Regional Bank Fund
Income
V.A. Bond Fund
V.A. High Yield Bond Fund
V.A. Money Market Fund
V.A. Strategic Income Fund
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these funds or determined whether the information in
this prospectus is adequate and accurate. Anyone who indicates otherwise is
committing a federal crime.
[LOGO](R)
------------------
JOHN HANCOCK FUNDS
Contents
- --------------------------------------------------------------------------------
General information about Overview 3
the Declaration funds.
A fund-by-fund summary Equity
of goals, strategies, risks,
performance and financial V.A. Core Equity Fund 4
highlights. V.A. 500 Index Fund 6
V.A. Large Cap Growth Fund 8
V.A. Mid Cap Growth Fund 10
V.A. Relative Value Fund 12
V.A. Small Cap Growth Fund 14
V.A. Sovereign Investors Fund 16
International
V.A. International Fund 18
Sector
V.A. Financial Industries Fund 20
V.A. Regional Bank Fund 22
Income
V.A. Bond Fund 24
V.A. High Yield Bond Fund 26
V.A. Money Market Fund 28
V.A. Strategic Income Fund 30
Transaction policies and Account information
other information affecting
your fund investment. Buying and selling fund shares 32
Valuing fund shares 32
Fund expenses 32
Dividends and taxes 32
Further information on the Fund details
Declaration funds.
Business structure 33
For more information back cover
Overview
- --------------------------------------------------------------------------------
JOHN HANCOCK DECLARATION FUNDS
These funds offer investment choices for the variable annuity and variable life
insurance contracts of certain insurance companies. You should read this
prospectus together with the attached prospectus of the insurance product you
are considering.
RISKS OF MUTUAL FUNDS
Mutual funds are not bank deposits and are not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Because
you could lose money by investing in these funds, be sure to read all risk
disclosure carefully before investing.
THE MANAGEMENT FIRM
All John Hancock Declaration funds are managed by John Hancock Advisers, Inc.
Founded in 1968, John Hancock Advisers is a wholly owned subsidiary of John
Hancock Financial Services, Inc. and manages more than $30 billion in assets.
FUND INFORMATION KEY
Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:
[Clip Art] Goal and strategy The fund's particular investment goals and the
strategies it intends to use in pursuing those goals.
[Clip Art] Main risks The major risk factors associated with the fund.
[Clip Art] Past performance The fund's total return, measured year-by-year and
over time.
[Clip Art] Financial highlights A table showing the fund's financial performance
for up to five years.
3
V.A. Core Equity Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks above-average total return (capital appreciation plus
income). To pursue this goal, the fund normally invests at least 65% of assets
in a diversified portfolio of equities which are primarily large-capitalization
stocks. The portfolio's risk profile is similar to that of the Standard & Poor's
500 Index.
The managers select from a menu of stocks of approximately 550 companies that
evolves over time. Approximately 70% to 80% of these companies also are included
in the Standard & Poor's 500 Index. The subadviser's investment research team is
organized by industry and tracks these companies to develop earnings estimates
and five-year projections for growth. A series of proprietary computer models
use this in-house research to rank the stocks according to their combination of:
o value, meaning they appear to be underpriced
o improving fundamentals, meaning they show potential for strong growth
This process, together with a risk/ return analysis against the Standard &
Poor's 500 Index, results in a portfolio of approximately 100 to 130 of the
stocks from the top 60% of the menu. The fund generally sells stocks that fall
into the bottom 20% of the menu.
In normal market conditions, the fund is almost entirely invested in stocks. The
fund may invest in dollar-denominated foreign securities and make limited use of
certain derivatives (investments whose value is based on indexes or securities).
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
SUBADVISER
Independence Investment LLC
- ---------------------------
Team responsible for day-to-day
investment management
A subsidiary of John Hancock
Financial Services, Inc.
Founded in 1982
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
30.68% 28.42% 13.89% -7.11%
2001 total return as of March 31: -10.46%
Best quarter: Q4 '98, 23.16% Worst quarter: Q3 '98, -13.01%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -7.11% -9.10%
Life of fund - began 8/29/96 17.11% 19.18%
Index: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
4
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform funds that focus on smallor
medium-capitalization stocks.
The fund's management strategy has a significant influence on fund performance.
If the investment research team's earnings estimates or projections turn out to
be inaccurate, or if the proprietary computer models do not perform as expected,
the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
inadequate or inaccurate financial information and social or political
instability.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- -------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- -------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $11.11 $14.11 $17.74 $19.70
Net investment income (loss)(2) 0.06 0.16 0.10 0.09 0.08
Net realized and unrealized gain (loss) on investments 1.12 3.23 3.90 2.36 (1.48)
Total from investment operations 1.18 3.39 4.00 2.45 (1.40)
Less distributions:
Dividends from net investment income (0.06) (0.14) (0.10) (0.09) (0.09)
Distributions in excess of net investment income -- -- -- --(3) --
Distributions from net realized gain on investments sold (0.01) (0.25) (0.27) (0.40) (0.31)
Distributions in excess of net realized gain on investments sold -- -- -- -- (0.38)
Total distributions (0.07) (0.39) (0.37) (0.49) (0.78)
Net asset value, end of period $11.11 $14.11 $17.74 $19.70 $17.52
Total investment return (4) (%) 11.78(5,6) 30.68(6) 28.42 13.89 (7.11)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,149 8,719 26,691 44,991 40,673
Ratio of expenses to average net assets (%) 0.95(7) 0.95 0.95 0.83 0.85
Ratio of adjusted expenses to average net assets(8) (%) 4.23(7) 1.59 -- -- --
Ratio of net investment income (loss) to average net assets (%) .. 1.60(7) 1.24 0.65 0.47 0.45
Portfolio turnover rate (%) 24 53 55 77 97
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
5
V.A. 500 Index Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks to provide investment results that correspond to the
total return performance of the Standard & Poor's 500 Stock Price Index. To
pursue this goal, the fund normally invests at least 80% of assets in common
stocks of S&P 500(R) companies, in approximately the same proportions as they
are represented in the index.
This fund is passively managed, meaning that the manager does not use any broad
economic or fundamental financial analysis to select investments. The manager
monitors the portfolio daily and rebalances periodically to maintain the
proportions of the index. The fund also invests in futures contracts, exchange
traded funds and options based on S&P 500 stocks.
Under normal circumstances, the fund is fully invested -- directly or through
futures and options contracts -- in all 500 stocks represented in the index. It
may, however, invest in fewer stocks or in stocks of non-S&P 500 companies. The
fund normally maintains less than 1% of assets in cash or cash equivalents.
================================================================================
PORTFOLIO MANAGER
James D. Schantz, CFA
- --------------------------------------
Vice president of adviser
Joined fund team in 2000
Joined adviser in 1998
Executive vice president and
director of quantitative research
at Hagler, Mastrovita & Hewitt
(1994-1998)
Began business career in 1970
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
29.51% 28.44% 20.81% -9.28%
2001 total return as of March 31: -11.95%
Best quarter: Q4 '98, 21.39% Worst quarter: Q3 '98, -10.01%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -9.28% -9.10%
Life of fund - began 8/29/96 17.75% 19.18%
Index: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
6
MAIN RISKS
[Clip Art] The value of your investment will fluctuate with the index. The fund
does not attempt to temper volatility or avoid losses associated with a decline
in the index.
The large-capitalization stocks that make up the index could fall out of favor
with the market, causing the fund to underperform funds that focus on smallor
medium-capitalization stocks.
Certain investment practices may cause the fund to track the index less closely:
o Transaction expenses can reduce fund performance.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o The performance of S&P futures, exchange traded funds or options could
correlate less strongly with the index than investments in the underlying
securities.
o The relative proportions of stocks in the fund's portfolio could drift
over time, which could increase tracking error.
Other factors may affect performance, such as the liquidity of S&P 500 stocks
and the timing of the fund's cash flows. You could lose money by investing in
the fund.
Note: "Standard & Poor's(R)" and "S&P 500(R)" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by the adviser. Standard & Poor's
does not sell or promote the fund or advise whether you should invest in the
fund. A description of this license is provided in the statement of additional
information.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- -----------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- -----------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $10.44 $12.62 $15.23 $18.09
Net investment income (loss)(2) 0.17 0.30 0.20 0.17 0.14
Net realized and unrealized gain (loss) on investments 0.98 2.72 3.37 2.98 (1.81)
Total from investment operations 1.15 3.02 3.57 3.15 (1.67)
Less distributions:
Dividends from net investment income (0.16) (0.30) (0.20) (0.17) (0.15)
Distributions from net realized gain on investments sold (0.55) (0.54) (0.76) (0.11) (0.06)
Distributions in excess of net realized gain on investments sold -- -- -- (0.01) --
Total distributions (0.71) (0.84) (0.96) (0.29) (0.21)
Net asset value, end of period $10.44 $12.62 $15.23 $18.09 $16.21
Total investment return(3,4) (%) 11.49(5) 29.51 28.44 20.81 (9.28)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 4,049 20,008 26,457 37,953 25,094
Ratio of expenses to average net assets (%) 0.60(6) 0.36 0.35 0.35 0.35
Ratio of adjusted expenses to average net assets(7) (%) 1.31(6) 0.83 0.92 0.75 0.93
Ratio of net investment income (loss) to average net assets (%) 4.57(6) 2.45 1.44 1.06 0.86
Portfolio turnover rate (%) -- 9 47 5 7
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
7
V.A. Large Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 65% of assets in stocks of
large-capitalization companies (companies in the capitalization range of the
Russell Top 200 Growth Index, which was $0.88 billion to $415.8 billion as of
March 31, 2001).
In choosing individual stocks, the managers use fundamental financial analysis
to identify companies with:
o strong cash flows
o secure market franchises
o sales growth that outpaces their industries
The fund generally invests in a diversified portfolio of U.S. companies. The
fund has tended to emphasize, or overweight, certain sectors such as health
care, technology or consumer goods. These weightings may change in the future.
The management team uses various means to assess the depth and stability of
companies' senior management, including interviews and company visits. The fund
favors companies for which the managers project an above-average growth rate.
The fund may invest in preferred stocks and other types of equities, and may
invest up to 15% of assets in foreign securities. The fund may also make limited
use of certain derivatives (investments whose value is based on indexes,
securities or currencies).
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
PORTFOLIO MANAGERS
William L. Braman
- -----------------------------------
Executive vice president and chief
investment officer of adviser
Joined fund team in 2000
Joined adviser in 2000
Chief investment officer
at Baring Asset Management
(London 1998-2000)
Head of U.S. equity team at
Baring Asset Management
(Boston 1989-1998)
Began business career in 1977
Robert J. Uek, CFA
- -----------------------------------
Vice president of adviser
Joined fund team in 2000
Joined adviser in 1997
Corporate finance manager
at Ernst & Young (1994-1997)
Began business career in 1990
Paul J. Berlinguet
- -----------------------------------
Vice president of adviser
Joined fund team in 2001
Joined adviser in 2001
U.S. equity investment manager
at Baring America Asset
Management (1989-2001)
Began business career in 1986
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indexes for reference). This information may help provide an indication of the
fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
14.27% 24.60% 20.71% -31.30%
2001 total return as of March 31: -31.74%
Best quarter: Q3 '97, 22.53% Worst quarter: Q1 '97, -15.55%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index 1 Index 2
1 year -31.30% -9.10% -24.53%
Life of fund - began 8/29/96 2.41% 19.18% 19.57%
Index 1: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
Index 2: Russell Top 200 Growth Index, an unmanaged index containing
growth-oriented stocks from the Russell Top 200 Index.
In the future, the adviser will compare the fund's performance only to the
Russell Top 200 Growth Index since it more closely represents the fund's
investment strategy.
8
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Large-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on smallor medium-
capitalization stocks. Similarly, growth stocks could underperform value stocks.
To the extent the fund invests in a given industry, its performance will be hurt
if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- --------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- --------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $9.39 $10.73 $13.37 $15.77
Net investment income (loss)(2) (0.01) (0.04) (0.00)(3) (0.04) (0.08)
Net realized and unrealized gain (loss) on investments (0.60) 1.38 2.64 2.80 (4.85)
Total from investment operations (0.61) 1.34 2.64 2.76 (4.93)
Less distributions:
Distributions from net realized gain on investments sold -- -- -- (0.36) (0.57)
Net asset value, end of period $9.39 $10.73 $13.37 $15.77 $10.27
Total investment return(4) (%) (6.10)(5,6) 14.27(6) 24.60(6) 20.71(6) (31.30)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 994 3,733 10,372 21,872 12,304
Ratio of expenses to average net assets (%) 1.00(7) 1.00 1.00 1.00 0.96
Ratio of adjusted expenses to average net assets(8) (%) 4.76(7) 2.37 1.33 1.02 --
Ratio of net investment income (loss) to average net assets (%) (0.23)(7) (0.39) (0.00) (0.25) (0.59)
Portfolio turnover rate (%) 68 136 176 172 170
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
9
V.A. Mid Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 80% of assets in stocks of medium-
capitalization companies (companies in the capitalization range of the Russell
Midcap Growth Index, which was $0.02 billion to $19.37 billion as of March 31,
2001).
The manager conducts fundamental financial analysis to identify companies with
above-average earnings growth.
In choosing individual securities, the manager looks for companies with growth
stemming from a combination of gains in market share and increasing operating
efficiency. Before investing, the manager identifies a specific catalyst for
growth, such as a new product, business reorganization or merger.
The management team generally maintains personal contact with the senior
management of the companies the fund invests in.
The manager considers broad economic trends, demographic factors, technological
changes, consolidation trends and legislative initiatives.
The fund generally invests in more than 100 companies. The fund may not invest
more than 5% of assets in any one security.
The fund may invest up to 10% of assets in foreign securities. The fund may also
make limited use of certain derivatives (investments whose value is based on
indexes or currencies).
In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash or cash equivalents. In these and other cases, the fund might not achieve
its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
PORTFOLIO MANAGERS
Barbara C. Friedman, CFA
- ---------------------------------
Senior vice president of adviser
Joined fund team in 1998
Joined adviser in 1998
Head of mid-cap equity group
at Fleet Investment Advisors
(1996-1997)
Began business career in 1973
Timothy N. Manning
- ---------------------------------
Joined fund team in 2000
Joined adviser in 2000
Analyst at State Street Research
(1999-2000)
Equity research associate at
State Street Research (1996-1999)
Began business career in 1993
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indexes for reference). This information may help provide an indication of the
fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1998 1999 2000
10.35% 56.18% -11.73%
2001 total return as of March 31: -30.42%
Best quarter: Q4 '99, 41.78% Worst quarter: Q3 '98, -19.74%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index 1 Index 2
1 year -11.73% -9.10% -11.75%
Life of fund - began 1/7/98 15.12% 12.58% 17.28%
Index 1: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
Index 2: Russell Midcap Growth Index, an unmanaged index containing those stocks
from the Russell Midcap Index with a greater-than-average growth orientation.
10
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Medium-capitalization stocks tend to be more volatile than stocks of larger
companies, and as a group could fall out of favor with the market, causing the
fund to underperform investments that focus either on smallor
large-capitalization stocks. Similarly, growth stocks could underperform value
stocks. To the extent the fund invests in a given industry, its performance will
be hurt if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- -------------------------------------------------------------------------------------------------
Period ended: 12/98(1) 12/99 12/00
- -------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $11.03 $17.21
Net investment income (loss)(2) 0.01 (0.03) (0.08)
Net realized and unrealized gain (loss) on investments 1.03 6.23 (1.94)
Total from investment operations 1.04 6.20 (2.02)
Less distributions:
Dividends from net investment income (0.01) -- --
Distributions from net realized gain on investments sold -- (0.02) (0.10)
Tax return of capital --(3) -- --
Total distributions (0.01) (0.02) (0.10)
Net asset value, end of period $11.03 $17.21 $15.09
Total investment return(4,5) (%) 10.35(6) 56.18 (11.73)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,779 6,363 11,482
Ratio of expenses to average net assets (%) 1.00(7) 1.00 1.00
Ratio of adjusted expenses to average net assets(8) (%) 4.23(7) 2.36 1.10
Ratio of net investment income (loss) to average net assets (%) 0.06(7) (0.23) (0.42)
Portfolio turnover rate (%) 103 136 155
(1) Began operations on January 7, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
11
V.A. Relative Value Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks the highest total return (capital appreciation plus
current income) that is consistent with reasonable safety of capital. To pursue
this goal, the fund invests in a diversified portfolio of stocks, bonds and
money market securities. Although the fund may concentrate in any of these asset
classes, under normal circumstances it invests primarily in stocks.
In managing the portfolio, the managers emphasize a value- oriented approach to
individual stock selection. With the aid of proprietary financial models, the
management team looks for companies that are selling at what appear to be
substantial discounts to their long-term intrinsic and "franchise" values. These
companies often have identifiable catalysts for growth, such as new products,
business reorganizations or mergers.
The fund manages risk by typically holding between 50 and 150 large companies
that are diversified across industry sectors. The management team also uses
fundamental financial analysis to identify individual companies with substantial
cash flows, reliable revenue streams, superior competitive positions and strong
management.
The fund may attempt to take advantage of short-term market volatility by
investing in corporate restructurings or pending acquisitions.
In selecting bonds of any maturity, the manager looks for the most favorable
risk/return ratios. The fund may invest up to 15% of net assets in junk bonds
rated as low as CC/Ca and their unrated equivalents.
The fund may invest up to 25% of assets in foreign securities (35% during
adverse U.S. market conditions). The fund may also make limited use of certain
derivatives (investments whose value is based on indexes, securities or
currencies).
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
================================================================================
PORTFOLIO MANAGERS
Timothy E. Quinlisk, CFA
- ---------------------------------
Senior vice president of adviser
Joined fund team in 1998
Joined adviser in 1998
Analyst at Hagler, Mastrouita
& Hewitt (1997-1998)
Analyst at State Street Global
Advisors (1995-1997)
Began business career in 1985
James S. Yu, CFA
- ---------------------------------
Vice president of adviser
Joined fund team in 2000
Joined adviser in 2000
Analyst at Merrill Lynch Asset
Management (1998-2000)
Analyst at Gabelli & Company
(1995-1998)
Began business career in 1990
R. Scott Mayo, CFA
- ---------------------------------
Second vice president of adviser
Joined fund team in 2000
Joined adviser in 1998
Analyst at Morgan Stanley
(1998)
Analyst at Grantham, Mayo &
Van Otterloo (1993-1996)
Began business career in 1993
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1998 1999 2000
21.39% 56.65% -4.80%
2001 total return as of March 31: -9.92%
Best quarter: Q4 `99, 43.25% Worst quarter: Q3 `98, -16.61%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -4.80% -9.10%
Life of fund - began 1/6/98 22.01% 12.47%
Index: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
12
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock and
bond market movements. The fund's management strategy has a significant
influence on fund performance. Large-capitalization stocks as a group could fall
out of favor with the market, causing the fund to underperform investments that
focus on smallor medium-capitalization stocks. Similarly, value stocks could
underperform growth stocks. In addition, if the managers' securities selection
strategies do not perform as expected, the fund could underperform its peers or
lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o Any bonds held by the fund could be downgraded in credit rating or go into
default. Bond prices generally fall when interest rates rise and longer
maturity will increase volatility. Junk bond prices can fall on bad news
about the economy, an industry or a company.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- ------------------------------------------------------------------------------------------------------
Period ended: 12/98(1) 12/99 12/00
- ------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $12.03 $18.03
Net investment income (loss)(2) 0.11 0.10 0.02
Net realized and unrealized gain (loss) on investments 2.02 6.65 (0.80)
Total from investment operations 2.13 6.75 (0.78)
Less distributions:
Dividends from net investment income (0.10) (0.10) (0.02)
Distributions from net realized gain on investments sold -- (0.65) (6.59)
Total distributions (0.10) (0.75) (6.61)
Net asset value, end of period $12.03 $18.03 $10.64
Total investment return(3) (%) 21.39(4,5) 56.65 (4.80)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 17,368 38,766 39,043
Ratio of expenses to average net assets (%) 0.85(6) 0.77 0.79
Ratio of adjusted expenses to average net assets(7) (%) 1.03(6) -- --
Ratio of net investment income (loss) to average net assets (%) 1.17(6) 0.66 0.13
Portfolio turnover rate (%) 242 166 164
(1) Began operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
13
V.A. Small Cap Growth Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term capital appreciation. To pursue this goal,
the fund normally invests at least 80% of assets in stocks of
small-capitalization companies (companies in the capitalization range of the
Russell 2000 Growth Index, which was $10 million to $4.20 billion as of March
31, 2001).
The managers look for companies in the emerging growth phase of development that
are not yet widely recognized. The fund also may invest in established companies
that, because of new management, products or opportunities, offer the
possibility of accelerating earnings.
To manage risk, the fund typically invests in 150 to 220 companies across many
industries, and does not invest more than 5% of assets in any one security.
In choosing individual securities, the managers use fundamental financial
analysis to identify rapidly growing companies. The managers favor companies
that dominate their market niches or are poised to become market leaders. They
look for strong senior management teams and coherent business strategies. They
generally maintain personal contact with the senior management of the companies
the fund invests in.
The fund may invest in preferred stocks and other types of equities, and may
invest up to 10% of assets in foreign securities. The fund may also make limited
use of certain derivatives (investments whose value is based on indexes or
currencies).
In abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years and more than 10% of assets in
cash and cash equivalents. In these and other cases, the fund might not achieve
its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
PORTFOLIO MANAGERS
Bernice S. Behar, CFA
- ---------------------------------
Senior vice president of adviser
Joined fund team in 1996
Joined adviser in 1991
Began business career in 1986
Anurag Pandit, CFA
- ---------------------------------
Vice president of adviser
Joined fund team in 1996
Joined adviser in 1996
Equity analyst at Loomis Sayles
(1992-1996)
Began business career in 1984
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with broad-based market
indexes for reference). This information may help provide an indication of the
fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
11.06% 15.94% 68.52% -22.33%
2001 total return as of March 31: -21.81%
Best quarter: Q4 `99, 44.55% Worst quarter: Q3 `98, -21.42%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index 1 Index 2
1 year -22.33% -3.02% -22.43%
Life of fund - began 8/29/96 11.02% 10.29% 6.88%
Index 1: Russell 2000 Index, an unmanaged index of 2,000 U.S.
small-capitalization stocks.
Index 2: Russell 2000 Growth Index, an unmanaged index containing those stocks
from the Russell 2000 Index with a greater-than-average growth orientation.
14
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
The fund's management strategy has a significant influence on fund performance.
Small-capitalization stocks as a group could fall out of favor with the market,
causing the fund to underperform investments that focus on mediumor
large-capitalization stocks. Similarly, growth stocks could underperform value
stocks. To the extent the fund invests in a given industry, its performance will
be hurt if that industry performs poorly. In addition, if the managers' security
selection strategies do not perform as expected, the fund could underperform its
peers or lose money.
Stocks of smaller companies are more volatile than stocks of larger companies.
Many smaller companies have short track records, narrow product lines or niche
markets, making them highly vulnerable to isolated business setbacks.
To the extent that the fund makes investments with additional risks, these risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price; this risk could also affect
small-capitalization stocks, especially those with low trading volumes.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- ---------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- ---------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $9.32 $10.35 $12.00 $19.76
Net investment income (loss)(2) 0.02 (0.02) (0.06) (0.10) (0.13)
Net realized and unrealized gain (loss) on investments (0.68) 1.05 1.71 8.29 (4.33)
Total from investment operations (0.66) 1.03 1.65 8.19 (4.46)
Less distributions:
Dividends from net investment income (0.02) --(3) -- -- --
Distributions from net realized gain on investments sold -- -- -- (0.43) (0.90)
Total distributions (0.02) -- -- (0.43) (0.90)
Net asset value, end of period $9.32 $10.35 $12.00 $19.76 $14.40
Total investment return(4,5) (%) (6.62)(6) 11.06 15.94 68.52 (22.33)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 975 3,841 8,232 20,867 19,772
Ratio of expenses to average net assets (%) 1.00(7) 1.00 1.00 1.00 1.00
Ratio of adjusted expenses to average net assets(8) (%) 5.19(7) 2.72 1.63 1.38 1.10
Ratio of net investment income (loss) to average net assets (%) 0.62(7) (0.16) (0.59) (0.76) (0.68)
Portfolio turnover rate (%) 31 79 93 120 104
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
15
V.A. Sovereign Investors Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital and income without
assuming undue market risks. To pursue these goals, the fund normally invests at
least 80% of its stock investments in a diversified portfolio of companies with
market capitalizations within the range of the Standard & Poor's 500 Index. On
March 31, 2001, that range was $0.67 billion to $415.8 billion.
At least 65% of the fund's stock investments are "dividend performers" --
companies whose dividend payments have increased steadily for ten years. The
managers use fundamental financial analysis to identify individual companies
with high-quality income statements, substantial cash reserves and identifiable
catalysts for growth, which may be new products or benefits from industry-wide
growth. The managers generally visit companies to evaluate the strength and
consistency of their management strategy. Finally, the managers look for stocks
that are reasonably priced relative to their earnings and industry.
Historically, companies that meet these criteria have tended to have large or
medium market capitalizations.
The fund may not invest more than 5% of assets in any one security. The fund may
invest in bonds of any maturity, with up to 5% of assets in junk bonds rated as
low as C and their unrated equivalents.
The fund typically invests in U.S. companies but may invest in
dollar-denominated foreign securities. It may also make limited use of certain
derivatives (investments whose value is based on indexes).
Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
================================================================================
PORTFOLIO MANAGERS
John F. Snyder III
- ------------------------------------
Executive vice president of adviser
Joined fund team in 1996
Joined adviser in 1991
Began business career in 1971
Barry H. Evans, CFA
- ------------------------------------
Senior vice president of adviser
Joined fund team in 1996
Joined adviser in 1986
Began business career in 1986
Peter M. Schofield, CFA
- ------------------------------------
Vice president of adviser
Joined fund team in 1996
Joined adviser in 1996
Portfolio manager at Geewax,
Terker & Co. (1984-1996)
Began business career in 1984
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
28.43% 16.87% 3.84% -0.33%
2001 total return as of March 31: -9.03%
Best quarter: Q4 `98, 15.75% Worst quarter: Q3 `99, -7.43%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -0.33% -9.10%
Life of fund - began 8/29/96 12.73% 19.18%
Index: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
16
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock and
bond market movements.
The fund's management strategy will influence performance significantly. Large
or medium-capitalization stocks as a group could fall out of favor with the
market, causing the fund to underperform funds that focus on
small-capitalization stocks. Medium-capitalization stocks tend to be more
volatile than stocks of larger companies. In addition, if the managers'
securities selection strategies do not perform as expected, the fund could
underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Any bonds held by the fund could be downgraded in credit rating or go into
default. Bond prices generally fall when interest rates rise and longer
maturity will increase volatility. Junk bond prices can fall on bad news
about the economy, an industry or a company.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including inadequate or
inaccurate financial information and social or political instability.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- ---------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- ---------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $10.74 $13.59 $15.61 $15.96
Net investment income (loss)(2) 0.07 0.22 0.27 0.24 0.21
Net realized and unrealized gain (loss) on investments 0.76 2.82 2.00 0.35 (0.27)
Total from investment operations 0.83 3.04 2.27 0.59 (0.06)
Less distributions:
Dividends from net investment income (0.07) (0.18) (0.25) (0.24) (0.21)
Distributions in excess of net investment income -- -- -- --(3) --
Distributions from net realized gain on investments sold (0.02) (0.01) -- -- --
Tax return of capital -- -- -- --(3) --
Total distributions (0.09) (0.19) (0.25) (0.24) (0.21)
Net asset value, end of period $10.74 $13.59 $15.61 $15.96 $15.69
Total investment return(4) (%) 8.30(5,6) 28.43(6) 16.88 3.84 (0.33)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,111 12,187 34,170 50,254 55,328
Ratio of expenses to average net assets (%) 0.85(7) 0.85 0.74 0.70 0.72
Ratio of adjusted expenses to average net assets(8) (%) 3.78(7) 1.16 -- -- --
Ratio of net investment income (loss) to average net assets (%) 1.90(7) 1.81 1.88 1.57 1.37
Portfolio turnover rate (%) 17 11 19 26 46
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods
shown.
17
V.A. International Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long-term growth of capital. To pursue this goal, the
fund normally invests at least 80% of assets in stocks of foreign companies. The
fund may invest up to 30% of assets in emerging markets as classified by Morgan
Stanley Capital International (MSCI). The fund does not maintain a fixed
allocation of assets, either with respect to securities type or geography.
In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual foreign companies. In
analyzing specific companies for possible investment, the managers ordinarily
look for several of the following characteristics that will enable the companies
to compete successfully in their respective markets:
o above-average per share earnings growth
o high return on invested capital
o a healthy balance sheet
o sound financial and accounting policies and overall financial strength
o strong competitive advantages
o effective research, product development and marketing.
The managers consider whether to sell a particular security when any of those
factors materially changes. The managers allocate the fund's assets among
securities of countries that are expected to provide the best opportunities for
meeting the fund's investment objective. To manage risk, the fund does not
invest more than 5% of assets in any one security.
The fund may use certain derivatives (investments whose value is based on
indexes, securities or currencies).
In abnormal conditions, the fund may temporarily invest more than 20% of assets
in investment-grade short-term securities. In these and other cases, the fund
might not achieve its goal.
================================================================================
SUBADVISER
Nicholas-Applegate
Capital Management
- ----------------------------------
U.S.-based team responsible for
day-to-day investment manage-
ment since December 2000
Founded in 1984
Supervised by the adviser
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
-0.54% 16.76% 31.55% -25.17%
2001 total return as of March 31: -19.07%
Best quarter: Q4 `99, 25.38% Worst quarter: Q3 `98, -17.11%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -25.17% -16.34%
Life of fund - began 8/29/96 6.02% 5.25%
Index: MSCI All Country World Ex-U.S. Free Index, an unmanaged index of freely
traded stocks of foreign companies.
18
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements.
Foreign investments are more risky than domestic investments. Investments in
foreign securities may be affected by fluctuations in currency exchange rates,
incomplete or inaccurate financial information on companies, social instability
and political actions ranging from tax code changes to governmental collapse.
These risks are more significant in emerging markets.
The fund's management strategy has a significant influence on fund performance.
If the fund invests in countries or regions that experience economic downturns,
performance could suffer. In addition, if certain investments or industries do
not perform as expected, or if the managers' security selection strategies do
not perform as expected, the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o In a down market, emerging market securities, other higher-risk securities
and derivatives could become harder to value or to sell at a fair price.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- ---------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- ---------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $11.23 $10.50 $12.18 $15.45
Net investment income (loss)(2) 0.07 0.05 0.07 0.07 0.03
Net realized and unrealized gain (loss) on investments 1.20 (0.13) 1.69 3.75 (3.93)
Total from investment operations 1.27 (0.08) 1.76 3.82 (3.90)
Less distributions:
Dividends from net investment income (0.04) (0.01) (0.07) (0.08) (0.17)
Dividends in excess of net investment income -- -- (0.01) (0.02) --
Distributions from net realized gain on investments sold -- (0.64) -- (0.45) (0.37)
Total distributions (0.04) (0.65) (0.08) (0.55) (0.54)
Net asset value, end of period $11.23 $10.50 $12.18 $15.45 $11.01
Total investment return(3,4) (%) 12.75(5) (0.54) 16.75 31.55 (25.17)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 2,267 3,792 7,201 9,375 7,330
Ratio of expenses to average net assets (%) 1.15(6) 1.15 1.15 1.15 1.15
Ratio of adjusted expenses to average net assets(7) (%) 3.13(6) 2.04 3.13 2.51 3.24
Ratio of net investment income (loss) to average net assets (%) 2.03(6) 0.43 0.59 0.52 0.19
Portfolio turnover rate (%) 14 273 89 116 177
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
19
V.A. Financial Industries Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks capital appreciation. To pursue this goal, the fund
normally invests at least 65% of assets in stocks of U.S. and foreign financial
services companies of any size. These companies include banks, thrifts, finance
companies, brokerage and advisory firms, real estate-related firms, insurance
companies and financial holding companies.
In managing the portfolio, the managers focus primarily on stock selection
rather than industry allocation.
In choosing individual stocks, the managers use fundamental financial analysis
to identify securities that appear comparatively undervalued. Given the
industry-wide trend toward consolidation, the managers also invest in companies
that appear to be positioned for a merger. The managers generally gather
firsthand information about companies from interviews and company visits.
The fund may invest in U.S. and foreign bonds, including up to 5% of net assets
in junk bonds (those rated below BBB/Baa and their unrated equivalents). It may
also invest up to 15% of net assets in investment-grade short-term securities.
The fund may make limited use of certain derivatives (investments whose value is
based on indexes, securities or currencies).
In abnormal market conditions, the fund may temporarily invest up to 80% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
PORTFOLIO MANAGERS
James K. Schmidt, CFA
- ------------------------------------
Executive vice president of adviser
Joined fund team in 1997
Joined adviser in 1985
Began business career in 1979
Thomas M. Finucane
- ------------------------------------
Vice president of adviser
Joined fund team in 1997
Joined adviser in 1990
Began business career in 1983
Thomas C. Goggins
- ------------------------------------
Senior vice president of adviser
Joined fund team in 1998
Joined adviser in 1995
Began business career in 1981
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1998 1999 2000
8.57% 1.23% 27.16%
2001 total return as of March 31: -13.63%
Best quarter: Q4 `98, 16.08% Worst quarter: Q3 `98, -16.76%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year 27.16% -9.10%
Life of fund - began 4/30/97 18.90% 16.17%
Index: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
20
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements. The fund's management strategy has a significant influence on
fund performance. Because the fund focuses on a single sector of the economy,
its performance depends in large part on the performance of that sector. As a
result, the value of your investment may fluctuate more widely than it would in
a fund that is diversified across sectors. For instance, when interest rates
fall or economic conditions deteriorate, the stocks of banks and financial
services companies could suffer losses. Also, rising interest rates can reduce
profits by narrowing the difference between these companies' borrowing and
lending rates.
Stocks of financial services companies as a group could fall out of favor with
the market, causing the fund to underperform funds that focus on other types of
stocks. In addition, if the managers' stock selection strategy does not perform
as expected, the fund could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o Any bonds held by the fund could be downgraded in credit rating or go into
default. Bond prices generally fall when interest rates rise. This risk is
greater for longer maturity bonds. Junk bond prices can fall on bad news
about the economy, an industry or a company.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- ---------------------------------------------------------------------------------------------------------------
Period ended: 12/97(1) 12/98 12/99 12/00
- ---------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $13.44 $14.45 $14.46
Net investment income (loss)(2) 0.11 0.18 0.11 0.06
Net realized and unrealized gain (loss) on investments 3.39 0.97 0.06 3.87
Total from investment operations 3.50 1.15 0.17 3.93
Less distributions:
Dividends from net investment income (0.05) (0.14) (0.10) (0.05)
Distributions from net realized gain on investments sold (0.01) --(3) (0.05) --
Tax return of capital -- -- (0.01) --
Total distributions (0.06) (0.14) (0.16) (0.05)
Net asset value, end of period $13.44 $14.45 $14.46 $18.34
Total investment return(4) (%) 35.05(5,6) 8.55 1.23 27.16
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 18,465 54,569 49,312 71,367
Ratio of expenses to average net assets (%) 1.05(7) 0.92 0.90 0.90
Ratio of adjusted expenses to average net assets(8) (%) 1.39(7) -- -- --
Ratio of net investment income (loss) to average net assets (%) 1.32(7) 1.25 0.77 0.36
Portfolio turnover rate (%) 11 38 72 41
(1) Began operations on April 30, 1997.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the period
shown.
21
V.A. Regional Bank Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks long- term capital appreciation. To pursue this goal,
the fund normally invests at least 65% of assets in stocks of regional banks and
lending companies, including commercial and industrial banks, savings and loan
associations and bank holding companies. Typically, these companies provide
full-service banking, have primarily domestic assets and are based outside of
money centers such as New York City and Chicago.
In managing the portfolio, the managers focus primarily on stock selection.
In choosing individual stocks, the managers use fundamental financial analysis
to identify securities that appear comparatively undervalued. The managers look
for low price/ earnings (P/E) ratios, high-quality assets and sound loan review
processes. Given the industry-wide trend toward consolidation, the managers also
invest in companies that appear to be positioned for a merger. The fund's
portfolio may be concentrated in geographic regions where consolidation activity
is high. The managers generally gather firsthand information about companies
from interviews and company visits.
The fund may also invest in other U.S. and foreign financial services companies,
such as lending companies and money center banks. The fund may invest up to 5%
of net assets in stocks of companies outside the financial services sector and
up to 5% of net assets in junk bonds (those rated below BBB/Baa and their
unrated equivalents).
The fund may make limited use of certain derivatives (investments whose value is
based on indexes, securities or currencies).
In abnormal market conditions, the fund may temporarily invest up to 80% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
================================================================================
PORTFOLIO MANAGERS
James K. Schmidt, CFA
- ------------------------------------
Executive vice president of adviser
Joined fund team in 1998
Joined adviser in 1985
Began business career in 1979
Thomas M. Finucane
- ------------------------------------
Vice president of adviser
Joined fund team in 1998
Joined adviser in 1990
Began business career in 1983
Thomas C. Goggins
- ------------------------------------
Senior vice president of adviser
Joined fund team in 1998
Joined adviser in 1995
Began business career in 1981
PAST PERFORMANCE
[Clip Art] The graph shows the fund's total return has varied from year to year,
while the table shows performance over time (along with a broad-based market
index for reference). This information may help provide an indication of the
fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Total return -- calendar year
- --------------------------------------------------------------------------------
1999 2000
-4.86% 17.91%
2001 total return as of March 31: -1.59%
Best quarter: Q4 `98, 16.10% Worst quarter: Q3 `98, -15.94%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year 17.91% -9.10%
Life of fund - began 5/1/98 1.83% 7.70%
Index: Standard & Poor's 500 Index, an unmanaged index of 500 stocks.
22
MAIN RISKS
[Clip Art] The value of your investment will fluctuate in response to stock
market movements. The fund's management strategy has a significant influence on
fund performance. Because the fund focuses on a single sector of the economy,
its performance depends in large part on the performance of that sector. For
instance, when interest rates fall or economic conditions deteriorate, regional
bank stocks could suffer losses. Also, rising interest rates can reduce profits
by narrowing the difference between these companies' borrowing and lending
rates.
A decline in a region's economy could hurt the banks in that region. Regional
bank stocks as a group could fall out of favor with the market, causing the fund
to underperform funds that focus on other types of stocks. In addition, if the
managers' security selection strategies do not perform as expected, the fund
could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o Any bonds held by the fund could be downgraded in credit rating or go into
default. Bond prices generally fall when interest rates rise. This risk is
greater for longer maturity bonds. Junk bond prices can fall on bad news
about the economy, an industry or a company.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased during the year.
Figures audited by Ernst & Young LLP.
- -----------------------------------------------------------------------------------------------------
Period ended: 12/98(1) 12/99 12/00
- -----------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $9.28 $8.56
Net investment income (loss)(2) 0.09 0.12 0.16
Net realized and unrealized gain (loss) on investments (0.74) (0.57) 1.34
Total from investment operations (0.65) (0.45) 1.50
Less distributions:
Dividends from net investment income (0.07) (0.12) (0.17)
Distributions from net realized gain on investments sold --(3) (0.15) --
Total distributions (0.07) (0.27) (0.17)
Net asset value, end of period $9.28 $8.56 $9.89
Total investment return(4) (%) (6.43)(5,6) (4.86) 17.91
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 20,256 20,295 13,733
Ratio of expenses to average net assets (%) 1.05(7) 1.00 1.01
Ratio of adjusted expenses to average net assets(8) (%) 1.14(7) -- --
Ratio of net investment income (loss) to average net assets (%) 1.39(7) 1.30 1.92
Portfolio turnover rate (%) 28 49 32
(1) Began operations on May 1, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the period
shown.
23
V.A. Bond Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks to generate a high level of current income consistent
with prudent investment risk. In pursuing this goal, the fund normally invests
at least 65% of assets in a diversified portfolio of debt securities. These
include corporate bonds and debentures as well as U.S. government and agency
securities. Most of these securities are investment grade, although the fund may
invest up to 25% of assets in junk bonds rated as low as CC/Ca and their unrated
equivalents. There is no limit on the fund's average maturity.
In managing the fund's portfolio, the managers concentrate on sector allocation,
industry allocation and securities selection: deciding which types of bonds and
industries to emphasize at a given time, and then which individual bonds to buy.
When making sector and industry allocations, the managers try to anticipate
shifts in the business cycle, using top-down analysis to determine which sectors
and industries may benefit over the next 12 months.
In choosing individual securities, the managers use bottom-up research to find
securities that appear comparatively undervalued. The managers look at bonds of
all different quality levels and maturities from many different issuers,
potentially including foreign governments and corporations.
The fund intends to keep its exposure to interest rate movements generally in
line with those of its peers. The fund may invest in mortgage-related securities
and certain other derivatives (investments whose value is based on indexes,
securities or currencies).
Under normal conditions, the fund may not invest more than 10% of assets in cash
or cash equivalents.
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
================================================================================
PORTFOLIO MANAGERS
James K. Ho, CFA
- ------------------------------------
Executive vice president of adviser
Joined fund team in 1996
Joined adviser in 1985
Began business career in 1977
Benjamin A. Matthews
- ------------------------------------
Vice president of adviser
Joined fund team in 1998
Joined adviser in 1995
Began business career in 1970
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
9.31% 9.41% -0.51% 11.89%
2001 total return as of March 31: 2.85%
Best quarter: Q3 `98, 4.76% Worst quarter: Q1 `97, -0.96%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year 11.89% 9.39%
Life of fund - began 8/29/96 7.88% 7.28%
Index: Lehman Brothers Credit Bond Index, an unmanaged index of corporate bonds
and Yankee bonds.
24
MAIN RISKS
[Clip Art] The major factors in this fund's performance are interest rates and
credit risk. When interest rates rise, bond prices generally fall. Generally, an
increase in the fund's average maturity will make it more sensitive to interest
rate risk.
The fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. In general, lower-rated bonds have higher credit risks. If
certain sectors or investments do not perform as the fund expects, it could
underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Junk bonds and foreign securities may make the fund more sensitive to
market or economic shifts in the U.S. and abroad.
o If interest rate movements cause the fund's mortgage-related and callable
securities to be paid off substantially earlier or later than expected,
the fund's share price or yield could be hurt.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
Any U.S. government guarantees on portfolio securities do not apply to these
securities' market value or current yield, or to fund shares.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- --------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- --------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $10.19 $10.36 $10.51 $9.81
Net investment income (loss)(2) 0.23 0.68 0.63 0.64 0.64
Net realized and unrealized gain (loss) on investments 0.21 0.24 0.32 (0.70) 0.50
Total from investment operations 0.44 0.92 0.95 (0.06) 1.12
Less distributions:
Dividends from net investment income (0.23) (0.68) (0.63) (0.64) (0.64)
Distributions from net realized gain on investments sold (0.02) (0.07) (0.17) -- --
Total distributions (0.25) (0.75) (0.80) (0.64) (0.64)
Net asset value, end of period $10.19 $10.36 $10.51 $9.81 $10.29
Total investment return(3,4) (%) 4.42(5) 9.30 9.41 (0.51) 11.89
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 1,056 3,682 10,669 12,531 25,173
Ratio of expenses to average net assets (%) 0.75(6) 0.75 0.75 0.75 0.75
Ratio of adjusted expenses to average net assets(7) (%) 4.15(6) 2.53 1.34 1.01 0.92
Ratio of net investment income (loss) to average net assets (%) 6.69(6) 6.57 5.93 6.39 6.47
Portfolio turnover rate (%) 45 193 367 307 298
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
25
V.A. High Yield Bond Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks to maximize current income without assuming undue
risk. Capital appreciation is a secondary goal. In pursuing these goals, the
fund normally invests at least 65% of assets in U.S. and foreign bonds rated
BBB/Baa or lower and their unrated equivalents. The fund may invest up to 30% of
assets in junk bonds rated CC/Ca and their unrated equivalents. There is no
limit on the fund's average maturity.
In managing the fund's portfolio, the managers concentrate on industry
allocation and securities selection: deciding which types of industries to
emphasize at a given time, and then which individual bonds to buy. The managers
use top-down analysis to determine which industries may benefit from current and
future changes in the economy.
In choosing individual securities, the managers use bottom-up research to find
securities that appear comparatively undervalued. The managers look at the
financial condition of the issuers as well as the collateralization and other
features of the securities themselves.
The managers also look at companies' financing cycles to determine which types
of securities (for example, bonds, preferred stocks or common stocks) to favor.
The fund typically invests in a broad range of industries, although it may
invest up to 40% of assets in electric utilities and telecommunications
companies.
The fund may use certain higher-risk investments, including derivatives
(investments whose value is based on indexes, securities or currencies) and
restricted or illiquid securities. In addition, the fund may invest up to 20% of
net assets in U.S. and foreign stocks.
In abnormal market conditions, the fund may temporarily invest more than 35% of
assets in investment-grade short-term securities. In these and other cases, the
fund might not achieve its goal.
================================================================================
PORTFOLIO MANAGERS
Arthur N. Calavritinos, CFA
- --------------------------------
Vice president of adviser
Joined fund team in 1998
Joined adviser in 1988
Began business career in 1986
Frederick L. Cavanaugh, Jr.
- --------------------------------
Senior vice president of adviser
Joined fund team in 1998
Joined adviser in 1986
Began business career in 1975
Janet L. Clay, CFA
- --------------------------------
Vice president of adviser
Joined fund team in 1998
Joined adviser in 1995
Began business career in 1990
Daniel S. Janis
- --------------------------------
Second vice president of adviser
Joined fund team in 1999
Joined adviser in 1999
Senior risk manager at
BankBoston (1997-1998)
Manager of forward desk at
Morgan Stanley (1991-1997)
Began business career in 1984
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1998 1999 2000
-9.81% 13.12% -6.08%
2001 total return as of March 31: 1.15%
Best quarter: Q2 `99, 4.51% Worst quarter: Q3 `98, -14.84%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year -6.08% -5.86%
Life of fund - began 1/6/98 -1.41% -1.81%*
Index: Lehman Brothers U.S. Corporate High Yield Bond Index, an unmanaged index
of high-yield bonds.
*As of December 31, 1997.
26
MAIN RISKS
[Clip Art] The major factors in the fund's performance are interest rates and
credit risk. When interest rates rise, bond prices generally fall. Generally, an
increase in the fund's average maturity will make it more sensitive to interest
rate risk.
Credit risk depends largely on the perceived financial health of bond issuers.
In general, lower-rated bonds have higher credit risks. Junk bond prices can
fall on bad news about the economy, an industry or a company. Share price, yield
and total return may fluctuate more than with less aggressive bond funds.
The fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. If certain industries or investments do not perform as the
fund expects, it could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability.
o If interest rate movements cause the fund's callable securities to be paid
off substantially earlier or later than expected, the fund's share price
or yield could be hurt.
o If the fund concentrates its investments in telecommunications or electric
utilities, its performance could be tied more closely to those industries
than to the market as a whole.
o Stock investments may go down in value due to stock market movements or
negative company or industry events.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased during the year.
Figures audited by Ernst & Young LLP.
- -------------------------------------------------------------------------------------------------
Period ended: 12/98(1) 12/99 12/00
- -------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $8.22 $8.31
Net investment income (loss)(2) 0.90 0.88 0.94
Net realized and unrealized gain (loss) on investments (1.82) 0.16 (1.40)
Total from investment operations (0.92) 1.04 (0.46)
Less distributions:
Dividends from net investment income (0.84) (0.88) (0.94)
Distributions from net realized gain on investments sold -- (0.07) (0.23)
Tax return of capital (0.02) -- --
Total distributions (0.86) (0.95) (1.17)
Net asset value, end of period $8.22 $8.31 $6.68
Total investment return(3,4) (%) (9.80)(5) 13.12 (6.08)
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 8,120 9,287 7,219
Ratio of expenses to average net assets (%) 0.85(6) 0.85 0.85
Ratio of adjusted expenses to average net assets(7) (%) 1.15(6) 1.03 1.24
Ratio of net investment income (loss) to average net assets (%) 9.85(6) 10.56 12.12
Portfolio turnover rate (%) 102 122 56
(1) Began operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the period shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
27
V.A. Money Market Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks the maximum current income that is consistent with
maintaining liquidity and preserving capital. The fund intends to maintain a
stable $1 share price.
The fund invests only in dollar-denominated securities rated within the two
highest short-term credit categories and their unrated equivalents. These
securities may be issued by:
o U.S. and foreign companies
o U.S. and foreign banks
o U.S. and foreign governments
o U.S. agencies, states and municipalities
o International organizations such as the World Bank and the International
Monetary Fund
The fund may also invest in repurchase agreements based on these securities.
The fund maintains an average dollar-weighted maturity of 90 days or less, and
does not invest in securities with remaining maturities of more than 13 months.
In managing the portfolio, the management team searches aggressively for the
best values on securities that meet the fund's credit and maturity requirements.
The team tends to favor corporate securities and looks for relative yield
advantages between, for example, a company's secured and unsecured short-term
debt obligations.
================================================================================
PORTFOLIO MANAGERS
Team of money market research analysts and portfolio managers
YIELD INFORMATION
For the fund's 7-day effective yield, call 1-800-824-0335
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time. This information may help
provide an indication of the fund's risks. All figures assume dividend
reinvestment but do not include variable contract charges (see attached variable
product prospectus). Past performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
4.90% 4.90% 4.60% 5.90%
2001 total return as of March 31: 1.30%
Best quarter: Q1 `98, 1.25% Worst quarter: Q1 `99, 1.06%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund
1 year 5.90%
Life of fund - began 8/29/96 5.00%
28
MAIN RISKS
[Clip Art] The value of your investment will be most affected by short-term
interest rates. If interest rates rise sharply, the fund could underperform its
peers or lose money.
An issuer of securities held by the fund could default or have its credit rating
downgraded.
Foreign investments carry additional risks, including inadequate or inaccurate
financial information and social or political instability.
An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the fund seeks to
preserve the value of your investment at $1 per share, it is possible to lose
money by investing in the fund.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- ---------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- ---------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income (loss)(2) 0.02 0.05 0.05 0.05 0.06
Less distributions:
Dividends from net investment income (0.02) (0.05) (0.05) (0.05) (0.06)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
Total investment return(3) (%) 1.61(4,5) 4.88(5) 4.87 4.58 5.90
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 207 8,377 16,519 32,952 73,917
Ratio of expenses to average net assets (%) 0.75(6) 0.75 0.74 0.66 0.60
Ratio of adjusted expenses to average net assets(7) (%) 27.48(6) 1.27 -- -- --
Ratio of net investment income (loss) to average net assets (%) 4.68(6) 4.86 4.70 4.55 5.86
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
29
V.A. Strategic Income Fund
GOAL AND STRATEGY
[Clip Art] The fund seeks a high level of current income. In pursuing this goal,
the fund invests primarily in the following categories of securities:
o foreign government and corporate debt securities from developed and
emerging markets
o U.S. government and agency securities
o U.S. junk bonds
The fund may also invest in preferred stock and other types of debt securities.
Although the fund invests in securities rated as low as CC/Ca and their unrated
equivalents, it generally intends to keep its average credit quality in the
investment-grade range. There is no limit on the fund's average maturity.
In managing the portfolio, the managers allocate assets among the three major
categories based on analysis of economic factors such as projected international
interest rate movements, industry cycles and political trends. However, the
managers may invest up to 100% of assets in any one category.
Within each category, the managers look for securities that are appropriate for
the overall portfolio in terms of yield, credit quality, structure and industry
distribution. In selecting securities, relative yields and risk/reward ratios
are the primary considerations.
The fund may use certain higher-risk investments, including derivatives
(investments whose value is based on indexes, securities or currencies) and
restricted or illiquid securities. In addition, the fund may invest up to 10% of
net assets in U.S. or foreign stocks.
In abnormal market conditions, the fund may temporarily invest extensively in
investment-grade short-term securities. In these and other cases, the fund might
not achieve its goal.
The fund may trade securities actively, which could increase its transaction
costs, thus lowering performance.
================================================================================
PORTFOLIO MANAGERS
Frederick L. Cavanaugh, Jr.
- ---------------------------------
Senior vice president of adviser
Joined fund team in 1996
Joined adviser in 1986
Began business career in 1975
Arthur N. Calavritinos, CFA
- ---------------------------------
Vice president of adviser
Joined fund team in 1996
Joined adviser in 1988
Began business career in 1986
Janet L. Clay, CFA
- ---------------------------------
Vice president of adviser
Joined fund team in 1998
Joined adviser in 1995
Began business career in 1990
Daniel S. Janis
- ---------------------------------
Second vice president of adviser
Joined fund team in 1999
Joined adviser in 1999
Senior risk manager at
BankBoston (1997-1998)
Manager of forward desk at
Morgan Stanley (1991-1997)
Began business career in 1984
PAST PERFORMANCE
[Clip Art] The graph shows how the fund's total return has varied from year to
year, while the table shows performance over time (along with a broad-based
market index for reference). This information may help provide an indication of
the fund's risks. All figures assume dividend reinvestment but do not include
variable contract charges (see attached variable product prospectus). Past
performance does not indicate future results.
- --------------------------------------------------------------------------------
Year-by-year total returns -- calendar years
- --------------------------------------------------------------------------------
1997 1998 1999 2000
11.77% 4.92% 4.82% 1.40%
2001 total return as of March 31: 1.06%
Best quarter: Q2 `97, 6.28% Worst quarter: Q3 `98, -2.79%
- --------------------------------------------------------------------------------
Average annual total returns-- for periods ending 12/31/00
- --------------------------------------------------------------------------------
Fund Index
1 year 1.40% 11.85%
Life of fund - began 8/29/96 6.72% 7.70%
Index: Lehman Brothers Government/Credit Bond Index, an unmanaged index of U.S.
government, U.S. corporate and Yankee bonds.
30
MAIN RISKS
[Clip Art] The fund's risk profile depends on its sector allocation. In general,
investors should expect fluctuations in share price, yield and total return that
are above average for bond funds.
When interest rates rise, bond prices generally fall. Generally, an increase in
the fund's average maturity will make it more sensitive to interest rate risk.
A fall in worldwide demand for U.S. government securities could also lower the
prices of these securities.
The fund could lose money if any bonds it owns are downgraded in credit rating
or go into default. In general, lower-rated bonds have higher credit risks, and
their prices can fall on bad news about the economy, an industry or a company.
If certain allocation strategies or certain industries or investments do not
perform as the fund expects, it could underperform its peers or lose money.
To the extent that the fund makes investments with additional risks, those risks
could increase volatility or reduce performance:
o Foreign investments carry additional risks, including potentially
unfavorable currency exchange rates, inadequate or inaccurate financial
information and social or political instability. These risks are greater
in emerging markets.
o If interest rate movements cause the fund's callable securities to be paid
off substantially earlier or later than expected, the fund's share price
or yield could be hurt.
o Stock investments may go down in value due to stock market movements or
negative company or industry events.
o In a down market, higher-risk securities and derivatives could become
harder to value or to sell at a fair price.
o Certain derivatives could produce disproportionate losses and are
generally considered more risky than direct investments.
================================================================================
FINANCIAL HIGHLIGHTS
[Clip Art] This table details the performance of the fund's shares, including
total return information showing how much an investment in the fund has
increased or decreased each year.
Figures audited by Ernst & Young LLP.
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 12/96(1) 12/97 12/98 12/99 12/00
- ------------------------------------------------------------------------------------------------------------------------------------
Per share operating performance
Net asset value, beginning of period $10.00 $10.30 $10.47 $10.10 $9.77
Net investment income (loss)(2) 0.27 0.91 0.85 0.80 0.83
Net realized and unrealized gain (loss) on investments 0.36 0.26 (0.35) (0.33) (0.71)
Total from investment operations 0.63 1.17 0.50 0.47 0.12
Less distributions:
Dividends from net investment income (0.27) (0.91) (0.85) (0.80) (0.83)
Distributions from net realized gain on investments sold (0.06) (0.09) (0.02) -- (0.09)
Total distributions (0.33) (1.00) (0.87) (0.80) (0.92)
Net asset value, end of period $10.30 $10.47 $10.10 $9.77 $8.97
Total investment return(3) (%) 6.45(4,5) 11.77(5) 4.92(5) 4.82(5) 1.40
Ratios and supplemental data
Net assets, end of period (000s omitted) ($) 2,131 5,540 15,019 22,282 34,472
Ratio of expenses to average net assets (%) 0.85(6) 0.85 0.85 0.85 0.76
Ratio of adjusted expenses to average net assets(7) (%) 2.28(6) 1.37 0.93 0.87 --
Ratio of net investment income (loss) to average net assets (%) 7.89(6) 8.77 8.19 8.06 8.91
Portfolio turnover rate (%) 73 110 92 53(8) 53
(1) Began operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods
shown.
(8) Porfolio turnover rate excludes merger activity.
31
Account information
- --------------------------------------------------------------------------------
BUYING AND SELLING FUND SHARES
When you invest in a Declaration fund through a variable contract, your premium
payments are used to buy units of an insurance company separate account that
then buys shares of the fund. The shares are purchased at net asset value (NAV)
and are generally credited to the separate account immediately after the fund
accepts payment from the insurance company. In unusual circumstances or to
protect shareholders, a fund may refuse a purchase order, especially when the
adviser believes the order might be large enough to disrupt the fund's
management. A fund may also temporarily suspend the offering of its shares.
Shares are sold at the next NAV to be determined after the fund accepts the sell
request. The sales proceeds are normally forwarded by bank wire to the insurance
company on the next business day. In unusual circumstances, the fund may
temporarily suspend the processing of sell requests. It may also postpone the
payment of sales proceeds for up to seven days or longer, as allowed by federal
securities laws.
- --------------------------------------------------------------------------------
VALUING FUND SHARES
The NAV for each fund is determined each business day at the close of business
on the New York Stock Exchange (typically 4:00 P.M. Eastern Time). The Exchange
is typically open Monday through Friday.
Except for V.A. Money Market Fund, which values its securities at amortized
cost, securities in a fund's portfolio are generally valued on the basis of
market quotations and valuations provided by independent pricing services. The
funds may also value securities at fair value, especially if market quotations
are not readily available or if the securities' value has been materially
affected by events following the close of a foreign market. Fair value is
determined according to procedures approved by the funds' board of trustees. If
a fund uses this method, the securities' prices may be higher or lower than the
same securities held by another fund using market quotations.
- --------------------------------------------------------------------------------
FUND EXPENSES
Management fees The management fees paid to the investment adviser by the John
Hancock Declaration funds last year are as follows:
- --------------------------------------------------------------------------------
Equity Funds % of net assets
- --------------------------------------------------------------------------------
V.A. Core Equity Fund 0.70%
V.A. 500 Index Fund 0.10%
V.A. Large Cap Growth Fund 0.75%
V.A. Mid Cap Growth Fund 0.75%
V.A. Relative Value Fund 0.60%
V.A. Small Cap Growth Fund 0.75%
V.A. Sovereign Investors Fund 0.60%
- --------------------------------------------------------------------------------
International Funds
- --------------------------------------------------------------------------------
V.A. International Fund 0.90%
- --------------------------------------------------------------------------------
Sector Funds
- --------------------------------------------------------------------------------
V.A. Financial Industries Fund 0.80%
V.A. Regional Bank Fund 0.80%
- --------------------------------------------------------------------------------
Income Funds
- --------------------------------------------------------------------------------
V.A. Bond Fund 0.50%
V.A. High Yield Bond Fund 0.60%
V.A. Money Market Fund 0.50%
V.A. Strategic Income Fund 0.60%
The adviser pays subadvisory fees out of its own assets, and no fund is
responsible for paying a fee to its subadviser.
Expense limitation The adviser may reduce its fee or make other arrangements to
limit each fund's expenses to a specified percentage of average daily net
assets. The adviser has agreed to limit temporarily each fund's expenses to
0.25% of average net assets, excluding management fees, at least until April 30,
2002. If annual expenses fall below this limitation at the end of any fund's
fiscal year, the adviser can impose the full fee and recover any other payments
up to the amount of the limitation.
- --------------------------------------------------------------------------------
DIVIDENDS AND TAXES
All income and capital gain distributions are automatically reinvested in
additional shares of the fund at net asset value and are includable in the
separate accounts holding these shares. For a discussion of the tax status of
your variable contract, including the tax consequences of withdrawals or other
payments, refer to the prospectus of your insurance company's separate account.
32 ACCOUNT INFORMATION
Fund details
- --------------------------------------------------------------------------------
BUSINESS STRUCTURE
The diagram below shows the basic business structure used by the Declaration
funds. The funds' board of trustees oversees the funds' business activities and
retains the services of the various firms that carry out the funds' operations.
The trustees of the Declaration funds have the power to change the funds'
investment goals without shareholder or contract holder approval.
------------------------
Variable
contract holders
------------------------
------------------------
Insurance company
separate accounts
------------------------
------------------------
Declaration
funds
------------------------
---------------------------------------------------
Subadvisers
Independence Investment LLC
53 State Street
Boston, MA 02109
Nicholas-Applegate
Capital Management
600 West Broadway
San Diego, California 92101
Provide portfolio management
to certain funds.
---------------------------------------------------
---------------------------------------------------
Investment adviser
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, MA 02199-7603
Manages the funds' business and
investment activities.
---------------------------------------------------
---------------------------------------------------
Custodians
Investors Bank & Trust Co.
State Street Bank and Trust Company
Hold the funds' assets, settle all
portfolio trades and collect most of
the valuation data required for
calculating each fund's NAV.
---------------------------------------------------
---------------------------------------------------
Trustees
Oversee the funds' activities.
---------------------------------------------------
FUND DETAILS 33
For more information
- --------------------------------------------------------------------------------
This prospectus should be used with the variable contract/product prospectus.
Two documents are available that offer further information on the John Hancock
Declaration funds:
Annual/Semiannual Report to Shareholders
Includes financial statements, a discussion of the market conditions and
investment strategies that significantly affected performance, as well as the
auditors' report (in annual report only).
Statement of Additional Information (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference into (is legally a part of) this prospectus.
To request a free copy of the current annual/semiannual report or the SAI,
please contact John Hancock:
By mail:
John Hancock Annuity Servicing Office
529 Main St. (X-4)
Charlestown, MA 02129
By phone: 1-800-824-0335
On the Internet: www.jhfunds.com
Or you may view or obtain these documents from the SEC:
In person: at the SEC's Public
Reference Room in Washington, DC.
For access to the Reference Room call
1-202-942-8090
By mail: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-0102
(duplicating fee required)
By electronic request:
publicinfo@sec.gov
(duplicating fee required)
On the Internet: www.sec.gov
SEC file number 811-07437
[LOGO](R)
John Hancock Funds, Inc.
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603
Mutual Funds
Institutional Services
Private Managed Accounts
Retirement Plans
Insurance Services
(C)2001 JOHN HANCOCK FUNDS, INC. VA00P 5/01
JOHN HANCOCK DECLARATION TRUST
Statement of Additional Information
May 1, 2001
John Hancock V.A. Core Equity Fund
John Hancock V.A. 500 Index Fund
John Hancock V.A. Large Cap Growth Fund
John Hancock V.A. Mid Cap Growth Fund
John Hancock V.A. Relative Value Fund
John Hancock V.A. Small Cap Growth Fund
John Hancock V.A. Sovereign Investors Fund
John Hancock V.A. International Fund
John Hancock V.A. Financial Industries Fund
John Hancock V.A. Regional Bank Fund
John Hancock V.A. Technology Fund
John Hancock V.A. Bond Fund
John Hancock V.A. High Yield Bond Fund
John Hancock V.A. Money Market Fund
John Hancock V.A. Strategic Income Fund
(each, a "Fund" and collectively, the "Funds")
This Statement of Additional Information provides information about John Hancock
Declaration Trust (the "Trust") and the Funds, in addition to the information
that is contained in the Funds' current Prospectuses. (the "Prospectuses").
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectuses, a copy of which can be obtained free of
charge by writing or telephoning:
John Hancock Annuity Servicing Office
529 Main Street (X-4)
Charlestown, Massachusetts 02129
1-800-824-0335
Table of Contents
Page
Organization of the Trust................................................ 3
Eligible Investors....................................................... 3
Investment Policies and Strategies....................................... 4
Equity................................................................... 4
International............................................................ 7
Sector................................................................... 8
Income................................................................... 10
Risk Factors Investments and Techniques.................................. 12
Investment Restrictions.................................................. 33
Those Responsible for Management......................................... 37
Investment Advisory and Other Services................................... 42
Distribution Contracts................................................... 47
Net Asset Value.......................................................... 47
Special Redemptions...................................................... 48
Description of the Trust's Shares........................................ 48
Dividends................................................................ 50
Tax Status............................................................... 50
Calculation of Performance............................................... 53
Brokerage Allocation..................................................... 56
Shareholder Servicing Agent.............................................. 58
Custody of Portfolio..................................................... 59
Independent Auditors .................................................... 59
Appendix - Description of Bond Ratings................................... A-1
Financial Statements..................................................... F-1
2
ORGANIZATION OF THE TRUST
John Hancock Declaration Trust (the "Trust") is an open-end investment
management company organized as a Massachusetts business trust under the laws of
the Commonwealth of Massachusetts. The Trust currently has fifteen series of
shares designated as: John Hancock V.A. International Fund ("International
Fund"); John Hancock V.A. Regional Bank Fund ("Regional Bank Fund"); John
Hancock V.A. Financial Industries Fund ("Financial Industries Fund"); John
Hancock V.A. Technology Fund ("Technology Fund"); John Hancock V.A. Small Cap
Growth Fund ("Small Cap Growth Fund") (formerly John Hancock V.A. Emerging
Growth Fund); John Hancock Mid Cap Growth Fund ("Mid Cap Growth Fund") (formerly
John Hancock V.A. Special Opportunities Fund); John Hancock V.A. Large Cap
Growth Fund ("Large Cap Growth Fund") (formerly John Hancock V.A. Growth Fund);
John Hancock V.A. Relative Value Fund ("Relative Value Fund") (formerly John
Hancock V.A. Large Cap Value Fund and before that, John Hancock V.A. Growth and
Income Fund); John Hancock V.A. Core Equity Fund ("Core Equity Fund") (formerly
John Hancock V.A. Independence Equity Fund); John Hancock V.A. Sovereign
Investors Fund ("Sovereign Investors Fund"); John Hancock V.A. 500 Index Fund
("500 Index Fund"); John Hancock V.A. Bond Fund ("Bond Fund") (formerly John
Hancock V.A. Sovereign Bond Fund); John Hancock V.A. Strategic Income Fund
("Strategic Income Fund"); John Hancock V.A. High Yield Bond Fund ("High Yield
Bond Fund"); and John Hancock V.A. Money Market Fund ("Money Market Fund").
The investment adviser of each Fund is John Hancock Advisers, Inc. (the
"Adviser"). The Adviser is an indirect wholly-owned subsidiary of John Hancock
Life Insurance Company (formerly John Hancock Mutual Life Insurance Company);
(the "Life Company"), a Massachusetts life insurance company chartered in 1862,
with national headquarters at John Hancock Place, Boston, Massachusetts. The
Life Company is wholly owned by John Hancock Financial Services, Inc., a
Delaware Corporation, organized in February, 2000. The International Fund's
Sub-adviser is Nicholas-Applegate Capital Management ("Nicholas-Applegate"). The
investment Sub-adviser of Core Equity Fund is Independence Investment LLC
("Independence"). The Technology Fund's Sub-adviser is American Fund Advisors,
Inc. ("AFA"). Together AFA, Independence and Nicholas-Applegate are sometimes
referred to herein collectively as the "Sub-advisers" or, individually, as the
"Sub-adviser." The Sub-advisers are responsible for providing investment advice
to their respective Funds, subject to the review of the trustees and overall
supervision of the Adviser. Independence is a wholly owned indirect subsidiary
of the Life Company.
ELIGIBLE INVESTORS
The following information supplements the discussion of each Fund's investment
objective and policies discussed in the Prospectuses. The Funds are designed to
serve as investment vehicles for variable annuity and variable life insurance
contracts (the "Variable Contracts") offered by the separate accounts of various
insurance companies. Participating insurance companies are the owners of shares
of beneficial interest in each Fund of the Trust. In accordance with any
limitations set forth in their Variable Contracts, contract holders may direct,
through their participating insurance companies, the allocation of amounts
available for investment among the Funds. Instructions for any such allocation,
or for the purchase or redemption of shares of a Fund, must be made by the
investor's participating insurance company's separate account as the owner of
the Fund's shares. The rights of participating insurance companies as owners of
shares of a Fund are different from the rights of contract holders under their
Variable Contracts. The term "shareholder" in this Statement of Additional
Information refers only to participating insurance companies, and not to
contract holders.
3
INVESTMENT POLICIES AND STRATEGIES
Each Fund has its own distinct investment objective and policies. In striving to
meet its objective, each Fund will face the challenges of changing business,
economic and market conditions. There is no assurance that the Funds will
achieve their investment objectives. The following information supplements the
discussion of each Fund's investment objective and policies as discussed in the
prospectuses.
Each Fund has adopted investment restrictions detailed in the "Investment
Restrictions" section of this Statement of Additional Information. Some of these
restrictions may help to reduce investment risk. Those restrictions designated
as fundamental may not be changed without shareholder approval. Each Fund's
investment objective, investment policies and non-fundamental restrictions,
however, may be changed by a vote of the Trustees without shareholder approval.
If there is a change in a Fund's investment objective, investors should consider
whether the Fund remains an appropriate investment in light of their current
financial position and needs.
EQUITY
Core Equity Fund
The CORE EQUITY FUND seeks above-average total return (capital appreciation plus
income). To pursue this goal, the Fund normally invests at least 65% of assets
in a diversified portfolio of primarily large capitalization stocks. The
portfolio's risk profile is similar to that of the Standard & Poor's 500 Stock
Index. Consequently, the Fund invests in a number of industry groups without
concentrating in any particular industry.
The managers select from a menu of stocks of approximately 550 companies that
evolves over time. Approximately 70% to 80% of these companies also are included
in the S&P 500 Index. The Sub-adviser's investment research team is organized by
industry and tracks these companies to develop earnings estimates and five-year
projections for growth. A series of proprietary computer models use this
in-house research to rank the stocks according to their combination of: (1)
value, meaning they appear to be underpriced; and (2) improving fundamentals,
meaning they show potential for strong growth.
The Fund may invest in certain other types of equity and debt securities,
including securities of foreign issuers which are U.S. dollar denominated and
traded on a U.S. exchange in the form of common stocks or American Depositary
Receipts.
The fixed income securities of the Fund will be rated "investment grade" (i.e.,
rated BBB or better by Standard & Poor's Ratings Group ("S&P") or Baa or better
by Moody's Investors Service, Inc. ("Moody's")) or, if unrated, determined to be
of investment grade quality by the Adviser or Sub-adviser.
500 Index Fund
The 500 INDEX FUND seeks to provide investment results that correspond to the
total return performance of the Standard & Poor's 500 Stock Price Index ("S&P
500 Index"). To pursue this goal, the Fund normally invests at least 80% of its
total assets in common stocks of the companies that comprise the S&P 500 Index.
The Fund tries to allocate the stocks held in its portfolio in approximately the
same proportions as they are represented in the S&P 500 Index, in an attempt to
minimize the degree to which the Fund's investment results (before Fund
expenses) differ from those of the Index ("tracking error"). This "indexing"
technique is a passive approach to investing and is designed for long-term
investors seeking a diversified portfolio of common stocks. Unlike other equity
4
funds which seek to "beat" stock market averages, the Fund attempts to "match"
the total return performance of the S&P 500 Index and thus provide a predictable
return relative to the benchmark. The degree to which the Fund's performance
correlates with that of the S&P 500 Index will depend upon the size and cash
flows of the Fund, the liquidity of the securities represented in the Index and
the Fund's expenses, among other factors. There is no fixed number of component
stocks in which the Fund will invest, and there can be no assurance that the
Fund's total return will match that of the S&P 500 Index. For a description of
the investment characteristics of the S&P 500 Index, see "The S&P 500 Index."
If John Hancock Financial Services, Inc. or any other affiliated company of John
Hancock Advisers, Inc. (each an "Affiliated Company") is included in the S&P 500
Index, the Fund may purchase the Affiliated Company's stock and maintain its
position in that stock in the approximate percentage that the Affiliated Company
is represented on the S&P 500 Index. The Fund's purchase of an Affiliated
Company's stock must also be in compliance with Rule 12d3-1(a) and (b).
If extraordinary circumstances warrant, the Fund may exclude a stock held in the
S&P 500 Index and include a similar stock in its place if doing so will help the
Fund achieve its objective. Additionally, the Fund may invest in certain
short-term fixed income securities such as cash equivalents, although cash and
cash equivalents are normally expected to represent less than 1% of the Fund's
assets (excluding cash and cash equivalents segregated in relation to futures
contracts). The Fund may also enter into futures contracts and options in order
to invest uncommitted cash balances, to maintain liquidity to meet shareholder
redemptions, or to minimize trading costs. The Fund will not invest in cash
equivalents, futures contracts or options as part of a temporary defensive
strategy.
Large Cap Growth Fund
The LARGE CAP GROWTH FUND seeks long-term capital appreciation. To pursue this
goal, the Fund normally invests at least 65% of assets in stocks of
large-capitalization companies (companies in the capitalization range of the
Russell Top 200 Growth Index, which was $0.88 billion to $415.79 billion as of
March 31, 2001).
In choosing individual securities, the managers use fundamental financial
analysis to identify companies with: (1) strong cash flows; (2) secure market
franchises; and (3) sales growth that outpaces their industries.
When management believes that current market or economic conditions warrant, the
Fund may retain cash or invest in preferred stocks and other types of equity and
debt securities. Fixed income securities held by the Fund may be rated as low as
C by S&P or Moody's. No more than 5% of the Fund's assets will be invested in
fixed income securities rated lower than BBB by S&P or Baa by Moody's or, if
unrated, determined to be of comparable quality by the Adviser. The Fund may
invest up to 15% of assets in foreign securities.
Mid Cap Growth Fund
The MID CAP GROWTH FUND seeks long-term capital appreciation. To pursue this
goal, the Fund normally invests at least 80% of assets in stocks of medium
capitalization companies (companies in the capitalization range of the Russell
MidCap Growth Index, which was $0.02 billion to $19.37 billion as of March 31,
2001.)
In choosing individual securities, the manager looks for companies with growth
stemming from a combination of gains in market share and increased operating
efficiency. The manager considers broad economic trends, demographic factors,
technological changes, consolidation trends and legislative initiatives.
5
The Fund may invest up to 10% of total assets in the securities of foreign
issuers, including, but not limited to, common stocks, sponsored or unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
and Global Depositary Receipts ("GDRs"), convertible preferred stocks, preferred
stocks and warrants. Under normal conditions, the Fund may not invest more than
10% of assets in cash and/or cash equivalents (except cash segregated in
relation to futures, forward and option contracts). In addition, under normal
conditions, the Fund will not invest in any fixed income securities. However, in
abnormal conditions, the fund may temporarily invest in U.S. government
securities with maturities of up to three years, and may also invest more than
10% of total assets in cash and/or cash equivalents (including U.S. government
securities maturing in 90 days or less). The Fund may not invest more than 5% of
assets at the time of purchase in any one security (other than U.S. government
securities).
Relative Value Fund
The RELATIVE VALUE FUND seeks the highest total return (capital appreciation
plus current income) that is consistent with reasonable safety of capital. To
pursue this goal, the Fund invests in a diversified portfolio of stocks, bonds
and money market securities. Although the Fund may concentrate in any of these
asset classes, under normal circumstances it invests primarily in stocks.
In selecting equity securities for the Fund, the portfolio manager emphasizes
issuers whose equity securities trade at valuation ratios lower than comparable
issuers. Some of the valuation tools used include price to earnings, price to
cash flow and price to sales ratios and earnings discount models. The Fund's
portfolio will also include securities that the manager considers to have the
potential for capital appreciation, due to potential recognition of earnings
power or asset value which is not fully reflected in the securities' current
market value. The manager attempts to identify investments which possess
characteristics such as high relative value, intrinsic value, going concern
value, net asset value and replacement book value. The manager also considers an
issuer's financial strength, competitive position, projected future earnings and
dividends and other investment criteria.
The Fund may invest in U.S. Government securities and corporate bonds, notes and
other debt securities of any maturity. The Fund may invest up to 15% of its net
assets in junk bonds, including convertible securities, that may be rated as low
as CC by S&P, Ca by Moody's or their unrated equivalents. The Fund may also
invest up to 25% of its total assets in foreign securities (35% during adverse
U.S. market conditions).
The Fund is managed by Timothy E. Quinlisk, CFA. Mr. Quinlisk is a Senior Vice
President of the Adviser and has managed the Fund since 1998 except between
January and March 2000.
Small Cap Growth Fund
The SMALL CAP GROWTH FUND seeks long-term capital appreciation. To pursue this
goal, the Fund normally invests at least 80% of total assets in stocks of small
capitalization companies (companies in the capitalization range of the Russell
2000 Growth Index, which was $10 million to $4.20 billion on March 31, 2001.)
The managers look for companies in the emerging growth phase of development that
are not yet widely recognized. The Fund also may invest in established companies
that, because of new management, products or opportunities, offer the
possibility of accelerated earnings. For a description of some of the investment
characteristics of smaller capitalization companies, see "Smaller Capitalization
Companies."
The Fund may invest up to 10% of total assets in the securities of foreign
issuers, including, but not limited to, common stocks, sponsored or unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs"), convertible preferred stocks, preferred
stocks and warrants. Under normal conditions, the Fund may not invest more than
6
10% of assets in cash or cash equivalents (except cash segregated in relation to
futures, forward and option contracts). In addition, under normal conditions,
the Fund will not invest in any fixed income securities. However, in abnormal
conditions, the fund may temporarily invest in U.S. government securities and
U.S. government agency securities with maturities of up to three years, and may
also invest more than 10% of total assets in cash and/or cash equivalents
(including U.S. government securities maturing in 90 days or less). The Fund may
not invest more than 5% of total assets at time of purchase in any one security
(other than U.S. government securities).
Sovereign Investors Fund
The SOVEREIGN INVESTORS FUND seeks long-term growth of capital and income
without assuming undue market risks. To pursue these goals, the Fund typically
invests most of its assets in a diversified portfolio of stocks. Under normal
conditions, at least 80% of the Fund's stock investments are in companies within
the capitalization range of the Standard & Poor's 500 Index. On March 31, 2001,
that range was $0.67 million to $415.79 billion.
While there is considerable flexibility in the investment grade and type of
security in which the Fund may invest, the Fund currently uses a strategy of
investing at least 65% of stock investments in companies which have a record of
having increased their dividend payout in each of the preceding ten or more
years. This "dividend performers" strategy can be changed at any time. The Fund
may also invest a smaller portion of its assets in corporate and U.S. Government
fixed income securities. For defensive purposes, however, the Fund may
temporarily hold a larger percentage of high grade liquid preferred stock or
fixed income securities. The amount of the Fund's assets that may be invested in
either equity or fixed income securities is not restricted and is based upon the
judgement of the management team of what might best achieve the Fund's
investment objective.
The Fund's portfolio securities are selected mainly for their investment
character based upon generally accepted elements of intrinsic value, including
industry position, management, financial strength, earning power, marketability
and prospects for future growth. The distribution or mix of various types of
investments is based on general market conditions, the level of interest rates,
business and economic conditions, and the availability of investments in the
equity and fixed income markets.
The fund may not invest more than 5% of total assets at time of purchase in any
one security (other than U.S. government securities). Under normal conditions,
the fund may not invest more than 10% of assets in cash or cash equivalents
(except cash segregated in relation to futures, forward and option contracts).
Fixed income securities held by the Fund may be rated as low as C by S&P or
Moody's. No more than 5% of the Fund's assets will be invested in fixed income
securities rated lower than BBB by S&P or Baa by Moody's or, if unrated,
determined to be of comparable quality by the Adviser. If any security in
Sovereign Investors Fund's portfolio falls below the Fund's minimum credit
quality standards, as a result of a rating downgrade or the Adviser's
determination, the Fund will dispose of the security as promptly as possible
while attempting to minimize any loss.
INTERNATIONAL
International Fund
The INTERNATIONAL FUND seeks long-term growth of capital. To pursue this goal,
the Fund normally invests at least 80% of total assets in stocks of foreign
companies. The Fund may invest up to 30% of total assets in emerging markets as
classified by Morgan Stanley Capital International (MSCI). For a description of
some of the investment characteristics of foreign securities, see "Foreign
Securities and Emerging Countries." Generally, the Fund's portfolio contains
securities of issuers from at least three countries other than the United
States.
7
In managing the portfolio, the managers focus on a "bottom-up" analysis on the
financial conditions and competitiveness of individual foreign companies. In
analyzing specific companies for possible investment, the managers ordinarily
look for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research, product development and marketing;
and general operating characteristics that will enable the companies to compete
successfully in their respective markets. The managers consider whether to sell
a particular security when any of those factors materially changes. The managers
allocate the Fund's assets among securities of countries that are expected to
provide the best opportunities for meeting the Fund's investment objective.
The Fund's foreign equities may include, but are not limited to, common stocks,
convertible preferred stocks, preferred stocks, warrants, American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary
Receipts ("GDRs"). The Fund may not invest more than 5% of total assets at time
of purchase in any one security (other than U.S. government securities).
SECTOR
Financial Industries Fund
The FINANCIAL INDUSTRIES FUND seeks capital appreciation. To pursue this goal,
the Fund normally invests at least 65% of its total assets in equity securities
of U.S. and foreign financial services companies.
A financial services company is a firm that in its most recent fiscal year
either (i) derived at least 50% of its revenues or earnings from financial
services activities, or (ii) devoted at least 50% of its assets to such
activities. Financial services companies provide financial services to consumers
and businesses and include the following types of U.S. and foreign firms:
commercial banks, thrift institutions and their holding companies; consumer and
industrial finance companies; diversified financial services companies;
investment banks; securities brokerage and investment advisory firms; financial
holding companies; financial technology companies; real estate-related firms;
leasing firms; insurance brokerages; and various firms in all segments of the
insurance industry such as multi-line, property and casualty, and life insurance
companies and insurance holding companies.
In managing the portfolio, the managers focus primarily on stock selection
rather than industry allocation. The managers use a strategy of investing in
financial services companies that are currently undervalued, appear to be
positioned for a merger, or are in a position to benefit from regulatory
changes. This strategy can be changed at any time. For a description of the
investment characteristics of the Financial Industries, see "Financial
Industries."
To avoid the need to sell equity securities to meet redemption requests, and to
provide flexibility to take advantage of investment opportunities, the Fund may
invest up to 15% of its net assets in investment grade short-term securities.
The Fund may invest in debt securities of financial services companies and in
debt and equity securities of companies outside of the financial services
sector. The Fund may invest up to 5% of its net assets in below-investment grade
debt securities, rated as low as CCC by S&P or Caa by Moody's or, if unrated,
determined to be of comparable quality by the Adviser.
8
Regional Bank Fund
The REGIONAL BANK FUND seeks long-term capital appreciation. To pursue this
goal, the Fund normally invests at least 65% of total assets in stocks of
regional banks and lending companies, including commercial and industrial banks,
savings and loan associations and bank holding companies that receive a
substantial portion of their income from banks.
A regional bank is one that provides full service banking (i.e., savings
accounts, checking accounts, commercial lending and real estate lending), whose
assets are primarily of domestic origin, and which typically has a principal
office outside of New York City and Chicago. The Fund may invest in banks that
are not Federal Deposit Insurance Corporation insured (including any state or
federally chartered savings and loan association). Although the managers will
primarily seek opportunities for capital appreciation, many of the regional
banks in which the Fund may invest pay regular dividends. Accordingly, the Fund
also expects to receive moderate income.
The Fund may also invest in other financial services companies, including
companies with significant lending operations and "money center" banks. A "money
center" bank is one with a strong international banking business and a
significant percentage of international assets, which is typically located in
New York or Chicago. In seeking growth opportunities, the Fund's management team
may target banks with some or all of the following characteristics: (1) strong
market position in a region with a healthy economy; (2) undiscovered fundamental
strength evidenced by a low stock price relative earnings; (3) the potential to
benefit from a merger or acquisition. For a description of the investment
characteristics of the Banking Industry, see the "Banking Industry."
To avoid the need to sell equity securities to meet redemption requests, and to
provide flexibility to take advantage of investment opportunities, the Fund may
invest up to 15% of its net assets in investment grade short-term securities.
The Fund may invest up to 5% of its net assets in below-investment grade debt
securities of Banks rated as low as CCC by S&P or Caa by Moody's or, if unrated,
determined to be of comparable quality by the Adviser.
Technology Fund
The TECHNOLOGY FUND seeks long-term growth of capital. To pursue this goal, the
Fund invests principally in equity securities of companies that rely extensively
on technology in their product development or operations.
Under normal market conditions, at least 65% of the Fund's total assets are
invested in securities of the technology companies noted above. The Fund's
portfolio is primarily comprised of U.S. and foreign common stocks and
securities convertible into common stocks, including convertible bonds,
convertible preferred stocks and warrants.
Investments in U.S. and foreign companies that rely extensively on technology in
product development or operations may be expected to benefit from scientific
developments and the application of technical advances resulting from improving
technology in many different fields, such as computer software and hardware
(including internet-related technology), semiconductors, telecommunications,
defense and commercial electronics, data storage and retrieval, biotechnology
and others. Generally, investments will be made in securities of a company that
relies extensively on technology in product development or operations only if a
significant part of its assets are invested in, or a significant part of its
total revenue or net income is derived from, technology. For a description of
the investment characteristics of the technology industry, see
"Technology-Intensive Companies."
9
The Fund may invest up to 10% of its net assets in fixed income securities that,
at the time of investment, are rated CC or higher by Standard & Poor's Ratings
Group ("Standard & Poor's") or Ca or higher be Moody's Investors Service, Inc.
("Moody's") or their equivalent, and unrated fixed income securities of
comparable quality as determined by the Adviser.
When market conditions suggest a need for a defensive investment strategy, the
Fund may temporarily invest in short-term obligations of or securities
guaranteed by the U.S. Government or its agencies or instrumentalities, high
quality bank certificates of deposit and commercial paper. This temporary
investment strategy is not designed to achieve the Fund's primary investment
objective.
INCOME
Bond Fund
The BOND FUND seeks to generate a high level of current income consistent with
prudent investment risk. To pursue this goal, the Fund normally invests at least
65% of total assets in a diversified portfolio of debt securities. These include
corporate bonds and debentures, as well as U.S. government and agency
securities. In addition, the Fund contemplates at least 75% of the value of its
total assets will be in (1) debt securities that have, at the time of purchase,
a rating within the four highest grades as determined by Moody's Investors
Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or Standard & Poor's ("S&P") (AAA,
AA, A, or BBB); (2) debt securities of banks, the U.S. Government and its
agencies or instrumentalities and other issuers which, although not rated as a
matter of policy by either Moody's or S&P, are considered by the Fund to have
investment quality comparable to securities receiving ratings within the four
highest grades; and (3) cash and cash equivalents. Under normal conditions, the
Fund may not invest more than 10% of total assets in cash and/or cash
equivalents (except cash segregated in relation to futures, forward and options
contracts).
The Fund may also invest up to 25% of its total assets in fixed income
securities rated below BBB by S&P or below Baa by Moody's or their respective
equivalent ratings or in securities which are unrated. The Fund may invest in
securities rated as low as CC or Ca and unrated securities of comparable credit
quality as determined by the Adviser. These ratings indicate obligations that
are highly speculative and often in default. Securities rated lower than Baa or
BBB are high risk securities generally referred to as "junk bonds." See "High
Yield/High Risk Debt Obligations." for a description of the risks and
characteristics of the various ratings categories.
The Fund may acquire individual securities of any maturity and is not subject to
any limits as to the average maturity of its overall portfolio.
The Fund may invest in securities of United States and foreign issuers. It is
anticipated that under normal conditions, the Fund will not invest more than 25%
of its total assets in foreign securities (excluding U.S. dollar-denominated
Canadian securities).
High Yield Bond Fund
The HIGH YIELD BOND FUND seeks to maximize current income without assuming undue
risk. Capital appreciation is a secondary goal. In pursuing these goals, the
Fund normally invests at least 65% of its total assets in U.S. and foreign bonds
rated Baa or lower by Moody's or BBB or lower by S&P or in unrated securities of
comparable quality as determined by the Adviser. Up to 30% of the Fund's total
assets may be invested in junk bonds rated Ca by Moody's or CC by S&P or in
unrated securities of comparable quality as determined by the adviser. See
"Lower Rated High Yield / High Risk Debt Obligations." for a description of the
risks and characteristics of the various ratings categories. Up to 40% of the
Fund's total assets may be invested in the securities of issuers in the electric
utility and telecommunications industries. For all other industries, the
limitation is 25% of assets. The Fund may also invest up to 20% of its net
assets in U.S. or foreign equities.
10
The types of debt securities in which the Fund may invest include, but are not
limited to, domestic and foreign corporate bonds, debentures, notes, convertible
securities, preferred stocks, municipal obligations and government obligations.
For liquidity and flexibility, the Fund may place up to 35% of its total assets
in investment-grade short-term securities. In abnormal market conditions, it may
invest more assets in these securities as a defensive tactic. The Fund also may
invest in certain higher-risk investments, including options, futures and
restricted securities. See "RISK FACTORS, INVESTMENTS AND TECHNIQUES."
Money Market Fund
The MONEY MARKET FUND seeks the maximum current income that is consistent with
maintaining liquidity and preserving capital. The Fund invests in high-quality
money market instruments including, but not limited to, U.S. Government,
municipal and foreign government securities; obligations of supranational
organizations (e.g., the World Bank and the International Monetary Fund);
obligations of U.S. and foreign banks and other lending institutions; corporate
obligations; repurchase agreements and reverse repurchase agreements. All of the
Fund's investments are denominated in U.S. dollars.
At the time the Money Market Fund acquires its investments, they will be rated
(or issued by an issuer that is rated with respect to a comparable class of
short-term debt obligations) in one of the two highest rating categories for
short-term debt obligations assigned by at least two nationally recognized
rating organizations (or one rating organization if the obligation was rated by
only one such organization). These high quality securities are divided into
"first tier" and "second tier" securities. First tier securities have received
the highest rating from at least two rating organizations while second tier
securities have received ratings within the two highest categories from at least
two rating agencies, but do not qualify as first tier securities. The Fund may
also purchase obligations that are not rated, but are determined by the Adviser,
based on procedures adopted by the Trust's Board of Trustees, to be of
comparable quality to rated first or second tier securities. The Fund may not
purchase any second tier security if, as a result of its purchase (a) more than
5% of its total assets would be invested in second tier securities or (b) more
than 1% of its total assets or $1 million (whichever is greater) would be
invested in the second tier securities of a single issuer.
The Fund seeks to maintain a constant $1.00 share price although there can be no
assurance it will do so. All of the Fund's investments will mature in 397 days
or less. The Fund will maintain an average dollar-weighted portfolio maturity of
90 days or less.
Strategic Income Fund
The STRATEGIC INCOME FUND seeks a high level of current income. In pursuing this
goal, the Fund invests primarily in the following categories of securities:
foreign government and foreign corporate securities from developed and emerging
countries, U.S. Government and agency securities and lower-rated high yield,
high risk, fixed income securities of U.S. issuers. Under normal circumstances,
the Fund's assets are invested in each of the foregoing three categories.
However, from time to time the Fund may invest up to 100% of its total assets in
any one category. The Fund may invest up to 10% of its net assets in common
stocks and similar equity securities of U.S. and foreign companies. No more than
25% of the Fund's total assets, at the time of purchase, will be invested in
government securities of any one foreign country. The fixed income securities in
11
which the Fund may invest include bonds, debentures, notes (including variable
and floating rate instruments), preferred and preference stock, zero coupon
bonds, payment-in-kind securities, increasing rate note securities,
participation interests, multiple class passthrough securities, collateralized
mortgage obligations, stripped debt securities, other mortgage-backed
securities, asset-backed securities and other derivative debt securities.
Variable and floating rate instruments, mortgage-backed securities and
asset-backed securities are derivative instruments that derive their value from
an underlying security. Derivative securities are subject to additional risks.
See "Risks Associated With Specific Types of Derivative Debt Securities."
The Fund generally intends to keep its average credit quality in the investment
grade range. However, the Fund may invest up to 100% of total assets in fixed
income securities rated below Baa by Moody's or below BBB by S&P, or in
securities which are unrated. The Fund may invest in securities rated as low as
Ca or CC, which may indicate that the obligations are highly speculative and in
default. Fixed income securities rated below Baa or BBB are commonly called
"junk bonds." See "Lower Rated High Yield / High Risk Debt Obligations." for a
description of the risks and characteristics of the various ratings categories.
RISK FACTORS, INVESTMENTS AND TECHNIQUES
Banking Industry. Since the Regional Bank Fund's investments will be
concentrated in the banking industry, it will be subject to risks in addition to
those that apply to the general equity market. Events may occur which
significantly affect the entire banking industry. Thus, the Fund's share value
may at times increase or decrease at a faster rate than the share value of a
mutual fund with investments in many industries. In addition, despite some
measure of deregulation, banks and other lending institutions are still subject
to extensive governmental regulation which limits their activities. The
availability and cost of funds to these entities is crucial to their
profitability. Consequently, volatile interest rates and general economic
conditions can adversely affect their financial performance and condition. The
Fund is not a complete investment program. Because the Fund's investments are
concentrated in the banking industry, an investment in the Fund may be subject
to greater market fluctuations than a fund that does not concentrate in a
particular industry. Thus, it is recommended that an investment in the Fund be
considered only one portion of your overall investment portfolio.
Banks, finance companies and other financial services organizations are subject
to extensive governmental regulations which may limit both the amounts and types
of loans and other financial commitments which may be made and the interest
rates and fees which may be charged. The profitability of these concerns is
largely dependent upon the availability and cost of capital funds, and has shown
significant recent fluctuation as a result of volatile interest rate levels.
Volatile interest rates will also affect the market value of debt securities
held by the Fund. In addition, general economic conditions are important to the
operations of these concerns, with exposure to credit losses resulting from
possible financial difficulties of borrowers potentially having an adverse
effect.
Financial Industries. Since the Financial Industries Fund's investments will be
concentrated in the financial services sector, it will be subject to risks in
addition to those that apply to the general equity and debt markets. Events may
occur which significantly affect the sector as a whole or a particular segment
in which the Fund invests. Accordingly, the Fund may be subject to greater
market volatility than a fund that does not concentrate in a particular economic
sector or industry. Thus, it is recommended that an investment in the Fund be
only a portion of your overall investment portfolio.
In addition, most financial services companies are subject to extensive
governmental regulation which limits their activities and may (as with insurance
rate regulation) affect the ability to earn a profit from a given line of
business. Certain financial services businesses are subject to intense
competitive pressures, including market share and price competition. The removal
of regulatory barriers to participation in certain segments of the financial
services sector may also increase competitive pressures on different types of
firms. For example, recent legislation removing traditional barriers between
banking and investment banking activities will allow large commercial banks to
compete for business that previously was the exclusive domain of securities
firms. Similarly, the removal of regional barriers in the banking industry has
intensified competition within the industry.
12
The availability and cost of funds to financial services firms is crucial to
their profitability. Consequently, volatile interest rates and general economic
conditions can adversely affect their financial performance.
Financial services companies in foreign countries are subject to similar
regulatory and interest rate concerns. In particular, government regulation in
certain foreign countries may include controls on interest rates, credit
availability, prices and currency movements. In some cases, foreign governments
have taken steps to nationalize the operations of banks and other financial
services companies. See "Foreign Securities & Emerging Countries."
Technology-Intensive Companies. Since the Technology Fund's investments will be
concentrated in technology-intensive companies, it will be subject to risks in
addition to those that apply to the general equity and debt markets. Securities
prices of technology-intensive companies have tended to be subject to greater
volatility than securities prices in many other industries, due to particular
factors affecting these industries. Competitive pressures may also have a
significant effect on the financial condition of technology-intensive companies.
For example, if the development of new technology continues to advance at an
accelerated rate, and the number of companies and product offerings continues to
expand, the companies could become increasingly sensitive to short product
cycles and aggressive pricing. Accordingly, the Fund's performance will be
particularly susceptible to factors affecting these companies as well as the
economy as a whole.
Smaller Capitalization Companies. Smaller capitalization companies may have
limited product lines, market and financial resources, or they may be dependent
on smaller or less experienced management groups. In addition, trading volume
for these securities may be limited. Historically, the market price for these
securities has been more volatile than for securities of companies with greater
capitalization. However, securities of companies with smaller capitalization may
offer greater potential for capital appreciation since they may be overlooked
and thus undervalued by investors.
Common Stocks. Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without preference over any other shareholder or class of shareholders,
including holders of such entity's preferred stock and other senior equity.
Ownership of common stock usually carries with it the right to vote and,
frequently, an exclusive right to do so. Each Fund (other than Financial
Industries Fund, Regional Bank Fund and Technology Fund) will diversify its
investments in common stocks of companies in a number of industry groups. Common
stocks have the potential to outperform fixed income securities over the long
term. Common stocks provide the most potential for growth, yet are the more
volatile of the two asset classes.
Fixed Income Securities. Fixed income investments of each Fund may include
bonds, notes, preferred stock and convertible fixed income securities issued by
U.S. corporations or the U.S. Government and its political subdivisions. Under
normal conditions, Mid Cap Growth Fund and Small Cap Growth Fund will not invest
in any fixed income securities (other than preferred stock and cash
equivalents).
13
Fixed income securities of corporate and governmental issuers are subject to the
risk of an issuer's inability to meet principal and interest payments on the
obligations (credit risk) and may also be subject to price volatility due to
factors such as interest rate sensitivity, market perception of the issuer's
creditworthiness and general market liquidity (market risk). Debt securities
will be selected based upon credit risk analysis of issuers, the characteristics
of the security and interest rate sensitivity of the various debt issues
available from a particular issuer as well as analysis of the anticipated
volatility and liquidity of the fixed income instruments. The longer a Fund's
average portfolio maturity, the more the value of the portfolio and the net
asset value of the Fund's shares will fluctuate in response to changes in
interest rates. An increase in rates will generally decrease the value of the
Fund's securities, while a decline in interest rates will generally increase
their value.
Preferred Stocks. Each Fund (other than 500 Index Fund and Money Market Fund)
may invest in preferred stock. Preferred stock generally has a preference as to
dividends and upon liquidation over an issuer's common stock but ranks junior to
debt securities in an issuer's capital structure. Preferred stock generally pays
dividends in cash (or additional shares of preferred stock) at a defined rate
but, unlike interest payments on debt securities, preferred stock dividends are
payable only if declared by the issuer's board of directors. Dividends on
preferred stock may be cumulative, meaning that, in the event the issuer fails
to make one or more dividend payments on the preferred stock, no dividends may
be paid on the issuer's common stock until all unpaid preferred stock dividends
have been paid. Preferred stock also may be subject to optional or mandatory
redemption provisions.
Convertible Securities. Each Fund (other than 500 Index Fund and Money Market
Fund) may invest in convertible securities, which may include corporate notes or
preferred stock but are ordinarily long-term debt obligations of the issuer
convertible at a stated exchange rate into common stock of the same or another
issuer. The Mid Cap Growth Fund and Small Cap Growth Fund may only invest in
convertible preferred stock.
As with all debt securities, the market value of convertible securities tends to
decline as interest rates increase and, conversely, to increase as interest
rates decline. The market value of convertible securities can also be heavily
dependent upon the changing value of the equity securities into which these
securities are convertible depending on whether the market price of the
underlying security exceeds the conversion price. Convertible securities
generally rank senior to common stocks in an issuer's capital structure and
consequently entail less risk than the issuer's common stock. However, the
extent of such risk reduction depends upon the degree to which the convertible
security sells above its value as a fixed income security. In evaluating a
convertible security, the Adviser or relevant Sub-adviser will give primary
emphasis to the attractiveness of the underlying common stock.
The S&P 500 Index. The S&P 500 Index is a capitalization weighted index
comprised of 500 industrial, utility, transportation and financial companies in
the United States markets. The S&P 500 Index represents approximately 75% of the
total market capitalization of stocks traded in the U.S. equity market. The
inclusion of a stock in the S&P 500 Index in no way implies that Standard &
Poor's believes the stock to be an attractive investment.
Because of the market-value weighting, the 50 largest companies in the S&P 500
Index currently account for approximately 54.80% of the Index. Typically,
companies included in the S&P 500 Index are the largest and most dominant firms
in their respective industries. As of March 31, 2001, the five largest companies
in the Index were: General Electric (3.99%), Microsoft (2.81%), Exxon Mobil
(2.71%), Pfizer (2.49%) and Citigroup (2.17%). The largest industry categories
were: major pharmaceuticals (5.88%), integrated oil (5.12%), major
telecommunications (5.11%), and major banks (4.43%)
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by John Hancock Advisers, Inc. ("the Adviser"). The 500 Index Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's. Standard &
Poor's makes no representation or warranty, express or implied, to the
purchasers of the Fund or any member of the public regarding the advisability of
investing in securities generally or in the 500 Index Fund particularly or the
ability of the S&P 500 Index to track general stock market performance. Standard
& Poor's only relationship to the Adviser is the licensing of certain trademarks
14
and trade names of Standard & Poor's and of the S&P 500 Index, which is
determined, composed and calculated by Standard & Poor's without regard to the
Adviser or the 500 Index Fund. Standard & Poor's has no obligation to take the
needs of the Adviser or the purchasers of the 500 Index Fund into consideration
in determining, composing or calculating the S&P 500 Index. Standard & Poor's is
not responsible for and has not participated in the determination of the prices
and amount of the 500 Index Fund, the timing of the issuance or sale of the 500
Index Fund or in the determination or calculation of the equation by which the
500 Index Fund is to be converted into cash. Standard & Poor's has no obligation
or liability in connection with the administration, marketing or trading of the
500 Index Fund.
STANDARD & POOR'S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN AND STANDARD & POOR'S SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. STANDARD & POOR'S
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY JOHN
HANCOCK ADVISERS, INC., THE TRUST, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. STANDARD & POOR'S MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL STANDARD & POOR'S HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
"SPDRS" AND OTHER INVESTMENT COMPANIES. Subject to the Fund's non-fundamental
restriction (d), the Fund may invest in Standard & Poor's Depository Receipts
("SPDRs"), other exchange traded funds and other investment companies that are
designed to track the S&P 500 Index. These investments have many of the same
risks as direct investments in common stocks. The market value of these
investment companies are expected to rise and fall as the S&P 500 Index rises
and falls. If the Fund invests in an investment company, it would, in addition
to its own expenses, indirectly bear its ratable share of the investment
company's expenses. SPDRs represent an ownership interest in the SPDR Trust,
which holds a portfolio of common stocks that closely tracks the price
performance and dividend yield of the S&P 500 Index. SPDRs trade on the American
Stock Exchange like shares of common stock.
Foreign Securities and Emerging Countries. Each Fund (other than Core Equity
Fund, 500 Index Fund, Sovereign Investors Fund and Money Market Fund) may invest
in U.S. Dollar and foreign denominated securities of foreign issuers. The Core
Equity Fund, 500 Index Fund, Sovereign Investors Fund and Money Market Fund may
only invest in U.S. dollar denominated securities including those of foreign
issuers which are traded on a U.S. Exchange. The International Fund, Small Cap
Growth Fund, Technology Fund, High Yield Bond Fund and Strategic Income Fund may
also invest securities of foreign issuers located in countries with emerging
economies or securities markets.
Investing in obligations of non-U.S. issuers and foreign banks, particularly
securities of issuers located in emerging countries, may entail greater risks
than investing in similar securities of U.S. issuers. These risks include (i)
social, political and economic instability; (ii) the small current size of the
markets for many such securities and the currently low or nonexistent volume of
trading, which may result in a lack of liquidity and in greater price
volatility; (iii) certain national policies which may restrict a Fund's
investment opportunities, including restrictions on investment in issuers or
industries deemed sensitive to national interests; (iv) foreign taxation; and
(v) the absence of developed structures governing private or foreign investment
or allowing for judicial redress for injury to private property. Investing in
securities of non-U.S. companies may entail additional risks due to the
potential political and economic instability of certain countries and the risks
of expropriation, nationalization, confiscation or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation by any
country, a Fund could lose its entire investment in any such country.
15
In addition, even though opportunities for investment may exist in foreign
countries, and in particular emerging markets, any change in the leadership or
policies of the governments of those countries or in the leadership or policies
of any other government which exercises a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and thereby eliminate any investment
opportunities which may currently exist. Investors should note that upon the
accession to power of authoritarian regimes, the governments of a number of
Latin American countries previously expropriated large quantities of real and
personal property similar to the property which may be represented by the
securities purchased by the Funds. The claims of property owners against those
governments were never finally settled. There can be no assurance that any
property represented by foreign securities purchased by a Fund will not also be
expropriated, nationalized, or otherwise confiscated. If such confiscation were
to occur, a Fund could lose a substantial portion of its investments in such
countries. A Fund's investments would similarly be adversely affected by
exchange control regulations in any of those countries. Certain countries in
which the Funds may invest may have vocal minorities that advocate radical
religious or revolutionary philosophies or support ethnic independence. Any
disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of a Fund's investment
in those countries.
Certain countries prohibit or impose substantial restrictions on investments in
their capital markets, particularly their equity markets, by foreign entities
such as the Funds. As illustrations, certain countries require governmental
approval prior to investments by foreign persons, or limit the amount of
investment by foreign persons in a particular company, or limit the investment
by foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. A Fund could be adversely affected by delays in, or
a refusal to grant, any required governmental approval for repatriation, as well
as by the application to it of other restrictions on investments.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most foreign securities held by the Funds will not be
registered with the SEC and such issuers thereof will not be subject to the
SEC's reporting requirements. Thus, there will be less available information
concerning foreign issuers of securities held by the Funds than is available
concerning U.S. issuers. In instances where the financial statements of an
issuer are not deemed to reflect accurately the financial situation of the
issuer, the Adviser or relevant Sub-adviser will take appropriate steps to
evaluate the proposed investment, which may include on-site inspection of the
issuer, interviews with its management and consultations with accountants,
bankers and other specialists. There is substantially less publicly available
information about foreign companies than there are reports and ratings published
about U.S. companies and the U.S. Government. In addition, where public
information is available, it may be less reliable than such information
regarding U.S. issuers.
Because the Funds (other than Core Equity Fund, 500 Index Fund, Sovereign
Investors Fund and Money Market Fund) may invest, and International Fund will
(under normal circumstances) invest, a portion of their total assets in
securities which are denominated or quoted in foreign currencies, the strength
or weakness of the U.S. dollar against such currencies may account for part of
the Funds' investment performance. A decline in the value of any particular
16
currency against the U.S. dollar will cause a decline in the U.S. dollar value
of a Fund's holdings of securities denominated in such currency and, therefore,
will cause an overall decline in the Fund's net asset value and any net
investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world economy.
Although the Funds value their respective assets daily in terms of U.S. dollars,
the Funds do not intend to convert their holdings of foreign currencies into
U.S. dollars on a daily basis. However, the Funds may do so from time to time,
and investors should be aware of the costs of currency conversion. Although
currency dealers do not charge a fee for conversion, they do realize a profit
based on the difference ("spread") between the prices at which they are buying
and selling various currencies. Thus, a dealer may offer to sell a foreign
currency to a Fund at one rate, while offering a lesser rate of exchange should
the Fund desire to sell that currency to the dealer.
Securities of foreign issuers, and in particular many emerging country issuers,
may be less liquid and their prices more volatile than securities of comparable
U.S. issuers. In addition, foreign securities exchanges and brokers are
generally subject to less governmental supervision and regulation than in the
U.S., and foreign securities exchange transactions are usually subject to fixed
commissions, which are generally higher than negotiated commissions on U.S.
transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a Fund due
to subsequent declines in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser.
The Funds' investment income or, in some cases, capital gains from stock or
securities of foreign issuers may be subject to foreign withholding or other
foreign taxes, thereby reducing the Funds' net investment income and/or net
realized capital gains. See "Tax Status."
Foreign Currency Transactions. Each Fund (other than Core Equity Fund, 500 Index
Fund, Sovereign Investors Fund and Money Market Fund) may engage in foreign
currency transactions. Foreign currency transactions may be conducted on a spot
(i.e., cash) basis at the spot rate for purchasing or selling currency
prevailing in the foreign exchange market.
Each Fund (other than Core Equity Fund, 500 Index Fund, Sovereign Investors
Fund, and Money Market Fund) may also enter into forward foreign currency
exchange contracts to hedge against fluctuations in currency exchange rates
affecting a particular transaction or portfolio position. Forward contracts are
agreements to purchase or sell a specified currency at a specified future date
and price set at the time of the contract. Transaction hedging is the purchase
or sale of forward foreign currency contracts with respect to specific
receivables or payables of a Fund accruing in connection with the purchase and
sale of its portfolio securities quoted or denominated in the same or related
foreign currencies. Portfolio hedging is the use of forward foreign currency
contracts to offset portfolio security positions denominated or quoted in the
same or related foreign currencies. A Fund may elect to hedge less than all of
its foreign portfolio positions as deemed appropriate by the Adviser. The Funds
will not engage in speculative forward foreign currency exchange transactions.
17
If a Fund purchases a forward contract, the Fund will segregate cash or liquid
securities in a separate account in an amount equal to the value of the Fund's
total assets committed to the consummation of such forward contract. The assets
in the segregated account will be valued at market daily and if the value of the
securities in the separate account declines, additional cash or securities will
be placed in the account so that the value of the account will be equal the
amount of the Fund's commitment in forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency rises. Moreover, it may
not be possible for the Funds to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates.
Repurchase Agreements. Each Fund may enter into repurchase agreements. In a
repurchase agreement the Fund buys a security for a relatively short period
(usually not more than seven days) subject to the obligation to sell it back to
the issuer at a fixed time and price plus accrued interest. Each Fund will enter
into repurchase agreements only with member banks of the Federal Reserve System
and with "primary dealers" in U.S. government securities. The Adviser or
relevant Sub-adviser will continuously monitor the creditworthiness of the
parties with whom a Fund enters into repurchase agreements.
Each Fund has established a procedure providing that the securities serving as
collateral for each repurchase agreement must be delivered to the Fund's
custodian either physically or in book-entry form and that the collateral must
be marked to market daily to ensure that each repurchase agreement is fully
collateralized at all times. In the event of bankruptcy or other default by a
seller of a repurchase agreement, a Fund could experience delays in liquidating
the underlying securities and could experience losses, including the possible
decline in the value of the underlying securities during the period in which the
Fund seeks to enforce its rights thereto, possible subnormal levels of income or
lack of access to income during this period, as well as the expense of enforcing
its rights. A Fund will not invest in a repurchase agreement maturing in more
than seven days, if such investment, together with other illiquid securities
held by the Fund would exceed 15% (10% for Money Market Fund) of the Fund's net
assets.
Reverse Repurchase Agreements. Each Fund may also enter into reverse repurchase
agreements which involve the sale of U.S. Government securities held in its
portfolio to a bank with an agreement that the Fund will buy back the securities
at a fixed future date at a fixed price plus an agreed amount of "interest"
which may be reflected in the repurchase price. Reverse repurchase agreements
are considered to be borrowings by a Fund. Reverse repurchase agreements involve
the risk that the market value of securities purchased by a Fund with proceeds
of the transaction may decline below the repurchase price of the securities sold
by a Fund which it is obligated to repurchase. A Fund will also continue to be
subject to the risk of a decline in the market value of the securities sold
under the agreements because it will reacquire those securities upon effecting
their repurchase. To minimize various risks associated with reverse repurchase
agreements, a Fund will establish and maintain a separate account consisting of
highly liquid securities, of any type or maturity, in an amount at least equal
to the repurchase prices of the securities (plus any accrued interest thereon)
under such agreements. In addition, a Fund will not enter into reverse
repurchase agreements and other borrowings exceeding in the aggregate 33 1/3% of
the market value of its total assets. A Fund will enter into reverse repurchase
agreements only with selected registered broker/dealers or with federally
insured banks or savings and loan associations which are approved in advance as
being creditworthy by the Trustees. Under procedures established by the
Trustees, the Adviser will monitor the creditworthiness of the firms involved.
18
Restricted Securities. Each Fund may purchase securities that are not registered
("restricted securities") under the Securities Act of 1933 ("1933 Act"),
including commercial paper issued in reliance on section 4(2) of the 1933 Act
and securities offered and sold to "qualified institutional buyers" under Rule
144A under the 1933 Act. The Fund will not invest more than 15% (10% for Money
Market Fund) of its net assets in illiquid investments. If the Trustees
determine, based upon a continuing review of the trading markets for specific
Section 4(2) paper or Rule 144A securities, that they are liquid, they will not
be subject to the 15% limit on illiquid investments. The Trustees have adopted
guidelines and delegated to the Adviser the daily function of determining and
monitoring the liquidity of restricted securities. The Trustees, however, will
retain sufficient oversight and be ultimately responsible for the
determinations. The Trustees will carefully monitor the Fund's investments in
these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in the Fund if
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.
Options on Securities, Securities Indices and Currency. Mid Cap Growth Fund,
Small Cap Growth Fund and Sovereign Investors Fund may each purchase and write
(sell) call and put options on any index based on securities in which it may
invest. Each other Fund (except Money Market Fund) may purchase and write (sell)
call and put options on any securities in which it may invest, on any securities
index based on securities in which it may invest or on any currency in which
Fund investments may be denominated. These options may be listed on national
domestic securities exchanges or foreign securities exchanges or traded in the
over-the-counter market. Each Fund may write covered put and call options and
purchase put and call options as a substitute for the purchase or sale of
securities or currency, or to protect against declines in the value of portfolio
securities and against increases in the cost of securities to be acquired. Each
Fund, other than the International Fund, Mid Cap Growth Fund, Small Cap Growth
Fund and Sovereign Investors Fund, may also write and purchase options to
enhance total return.
Writing Covered Options. A call option on securities or currency written by a
Fund obligates the Fund to sell specified securities or currency to the holder
of the option at a specified price if the option is exercised at any time before
the expiration date. A put option on securities or currency written by a Fund
obligates the Fund to purchase specified securities or currency from the option
holder at a specified price if the option is exercised at any time before the
expiration date. Options on securities indices are similar to options on
securities, except that the exercise of securities index options requires cash
settlement payments and does not involve the actual purchase or sale of
securities. In addition, securities index options are designed to reflect price
fluctuations in a group of securities or segment of the securities market rather
than price fluctuations in a single security. Writing covered call options may
deprive a Fund of the opportunity to profit from an increase in the market price
of the securities or foreign currency assets in its portfolio. Writing covered
put options may deprive a Fund of the opportunity to profit from a decrease in
the market price of the securities or foreign currency assets to be acquired for
its portfolio.
All call and put options written by the Funds are covered. A written call option
or put option may be covered by (i) maintaining cash or liquid securities,
either of which may be quoted or denominated in any currency, in a segregated
account maintained by the affected Fund's custodian with a value at least equal
to the Fund's obligation under the option, (ii) entering into an offsetting
forward commitment and/or (iii) purchasing an offsetting option or any other
option which, by virtue of its exercise price or otherwise, reduces the Fund's
net exposure on its written option position. A written call option on securities
is typically covered by maintaining the securities that are subject to the
option in a segregated account. Each Fund may cover call options on a securities
index by owning securities whose price changes are expected to be similar to
those of the underlying index.
Each Fund may terminate its obligations under an exchange traded call or put
option by purchasing an option identical to the one it has written. Obligations
under over-the-counter options may be terminated only by entering into an
offsetting transaction with the counterparty to such option. Such purchases are
referred to as "closing purchase transactions."
19
Purchasing Options. A Fund would normally purchase call options in anticipation
of an increase, or put options in anticipation of a decrease ("protective
puts"), in the market value of securities or currencies of the type in which it
may invest. Each Fund may also sell call and put options to close out its
purchased options.
The purchase of a call option would entitle Fund, in return for the premium
paid, to purchase specified securities or currency at a specified price during
the option period. A Fund would ordinarily realize a gain on the purchase of a
call option if, during the option period, the value of such securities or
currency exceeded the sum of the exercise price, the premium paid and
transaction costs; otherwise the Fund would realize either no gain or a loss on
the purchase of the call option.
The purchase of a put option would entitle a Fund, in exchange for the premium
paid, to sell specified securities or currency at a specified price during the
option period. The purchase of protective puts is designed to offset or hedge
against a decline in the market value of the Fund's portfolio securities or the
currencies in which they are denominated. Put options may also be purchased by a
Fund for the purpose of affirmatively benefiting from a decline in the price of
securities or currencies which it does not own. A Fund would ordinarily realize
a gain if, during the option period, the value of the underlying securities or
currency decreased below the exercise price sufficiently to cover the premium
and transaction costs; otherwise the Fund would realize either no gain or a loss
on the purchase of the put option. Gains and losses on the purchase of put
options may be offset by countervailing changes in the value of a Fund's
portfolio securities.
Each Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which a Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Adviser. An exchange, board of trade or other trading facility may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
Risks Associated with Options Transactions. There is no assurance that a liquid
secondary market on a domestic or foreign options exchange will exist for any
particular exchange-traded option or at any particular time. If a Fund is unable
to effect a closing purchase transaction with respect to covered options it has
written, the Fund will not be able to sell the underlying securities or
currencies or dispose of assets held in a segregated account until the options
expire or are exercised. Similarly, if a Fund is unable to effect a closing sale
transaction with respect to options it has purchased, it would have to exercise
the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of underlying securities or currencies.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options). If trading were discontinued, the
secondary market on that exchange (or in that class or series of options) would
cease to exist. However, outstanding options on that exchange that had been
issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
20
A Fund's ability to terminate over-the-counter options is more limited than with
exchange-traded options and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. The
Adviser will determine the liquidity of each over-the-counter option in
accordance with guidelines adopted by the Trustees.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options
depends in part on the Adviser's ability to predict future price fluctuations
and, for hedging transactions, the degree of correlation between the options and
securities or currency markets.
Futures Contracts and Options on Futures Contracts. Mid Cap Growth Fund, Small
Cap Growth Fund and Sovereign Investors Fund may each purchase and sell futures
contracts on any index based on securities in which it may invest for hedging or
other non-speculative purposes. The International Fund may purchase and sell
various types of futures contracts and options on these futures contracts to
hedge against changes in interest rates, securities prices, or currency exchange
rates or for other non-speculative purposes. To seek to increase total return or
hedge against changes in interest rates, securities prices or currency exchange
rates, each other Fund except Money Market Fund may purchase and sell various
kinds of futures contracts, and purchase and write call and put options on these
futures contracts. Each Fund may also enter into closing purchase and sale
transactions with respect to any of these contracts and options. The futures
contracts may be based on various securities (such as U.S. Government
securities), securities indices, foreign currencies and any other financial
instruments and indices. All futures contracts entered into by a Fund are traded
on U.S. or foreign exchanges or boards of trade that are licensed, regulated or
approved by the Commodity Futures Trading Commission ("CFTC").
Futures Contracts. A futures contract may generally be described as an agreement
between two parties to buy and sell particular financial instruments or
currencies for an agreed price during a designated month (or to deliver the
final cash settlement price, in the case of a contract relating to an index or
otherwise not calling for physical delivery at the end of trading in the
contract).
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions which may result in a profit
or a loss. While futures contracts on securities or currency will usually be
liquidated in this manner, a Fund may instead make, or take, delivery of the
underlying securities or currency whenever it appears economically advantageous
to do so. A clearing corporation associated with the exchange on which futures
contracts are traded guarantees that, if still open, the sale or purchase will
be performed on the settlement date.
Hedging and Other Strategies. Hedging is an attempt to establish with more
certainty than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that a Fund proposes to acquire or the
exchange rate of currencies in which portfolio securities are quoted or
denominated. When securities prices are falling, a Fund can seek to offset a
decline in the value of its current portfolio securities through the sale of
futures contracts. When securities prices are rising, a Fund, through the
purchase of futures contracts, can attempt to secure better rates or prices than
might later be available in the market when it effects anticipated purchases. A
Fund may seek to offset anticipated changes in the value of a currency in which
its portfolio securities, or securities that it intends to purchase, are quoted
or denominated by purchasing and selling futures contracts on such currencies.
A Fund may, for example, take a "short" position in the futures market by
selling futures contracts in an attempt to hedge against an anticipated decline
in market prices or foreign currency rates that would adversely affect the
dollar value of the Fund's portfolio securities. Such futures contracts may
include contracts for the future delivery of securities held by a Fund or
21
securities with characteristics similar to those of a Fund's portfolio
securities. Similarly, a Fund may sell futures contracts on any currencies in
which its portfolio securities are quoted or denominated or in one currency to
hedge against fluctuations in the value of securities denominated in a different
currency if there is an established historical pattern of correlation between
the two currencies.
If, in the opinion of the Adviser, there is a sufficient degree of correlation
between price trends for a Fund's portfolio securities and futures contracts
based on other financial instruments, securities indices or other indices, the
Fund may also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in a Fund's portfolio may
be more or less volatile than prices of such futures contracts, the Adviser will
attempt to estimate the extent of this volatility difference based on historical
patterns and compensate for any differential by having the Fund enter into a
greater or lesser number of futures contracts or by attempting to achieve only a
partial hedge against price changes affecting the Fund's portfolio securities.
When a short hedging position is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position. On the other hand, any unanticipated appreciation in
the value of a Fund's portfolio securities would be substantially offset by a
decline in the value of the futures position.
On other occasions, a Fund may take a "long" position by purchasing futures
contracts. This would be done, for example, when a Fund anticipates the
subsequent purchase of particular securities when it has the necessary cash, but
expects the prices or currency exchange rates then available in the applicable
market to be less favorable than prices that are currently available. Subject to
the limitations imposed on International Fund, Mid Cap Growth Fund, Small Cap
Growth Fund, and Sovereign Investors Fund, as described above, a Fund may also
purchase futures contracts as a substitute for transactions in securities or
foreign currency, to alter the investment characteristics of or currency
exposure associated with portfolio securities or to gain or increase its
exposure to a particular securities market or currency.
Options on Futures Contracts. Each Fund (other than the Money Market Fund) may
purchase and write options on the futures contracts described above for the same
purposes as its transactions in futures contracts. The purchase of put and call
options on futures contracts will give a Fund the right (but not the obligation)
for a specified price to sell or to purchase, respectively, the underlying
futures contract at any time during the option period. As the purchaser of an
option on a futures contract, a Fund obtains the benefit of the futures position
if prices move in a favorable direction but limits its risk of loss in the event
of an unfavorable price movement to the loss of the premium and transaction
costs.
The writing of a call option on a futures contract generates a premium which may
partially offset a decline in the value of a Fund's assets. By writing a call
option, a Fund becomes obligated, in exchange for the premium (upon exercise of
the option) to sell a futures contract if the option is exercised, which may
have a value higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may partially offset an
increase in the price of securities that a Fund intends to purchase. However, a
Fund becomes obligated (upon exercise of the option) to purchase a futures
contract if the option is exercised, which may have a value lower than the
exercise price. The loss incurred by each Fund in writing options on futures is
potentially unlimited and may exceed the amount of the premium received.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. A Fund's ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid market.
22
Other Considerations. The International Fund, Mid Cap Growth Fund, Small Cap
Growth Fund, and Sovereign Investors Fund may each engage in futures and related
options transactions for hedging or other non-speculative purposes. Each other
Fund (except Money Market Fund) will engage in futures and related options
transactions either for bona fide hedging purposes or to seek to increase total
return as permitted by the CFTC. To the extent that a Fund is using futures and
related options for hedging purposes, futures contracts will be sold to protect
against a decline in the price of securities (or the currency in which they are
quoted or denominated) that the Fund owns or futures contracts will be purchased
to protect the Fund against an increase in the price of securities (or the
currency in which they are quoted or denominated) it intends to purchase. Each
Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities held by the Fund or securities or instruments which
it expects to purchase. As evidence of its hedging intent, each Fund expects
that on 75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities (or assets denominated in the related currency) in the cash
market at the time when the futures or option position is closed out. However,
in particular cases, when it is economically advantageous for the Fund to do so,
a long futures position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
To the extent that a Fund engages in nonhedging transactions in futures
contracts and options on futures, the aggregate initial margin and premiums
required to establish these nonhedging positions will not exceed 5% of the net
asset value of the Fund's portfolio, after taking into account unrealized
profits and losses on any such positions and excluding the amount by which such
options were in-the-money at the time of purchase.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating a Fund to purchase securities or currencies, require the Fund to
establish with the custodian a segregated account consisting of cash or liquid
securities in an amount equal to the underlying value of such contracts and
options.
While transactions in futures contracts and options on futures may reduce
certain risks, these transactions themselves entail certain other risks. For
example, unanticipated changes in interest rates, securities prices or currency
exchange rates may result in a poorer overall performance for a Fund than if it
had not entered into any futures contracts or options transactions.
Perfect correlation between a Fund's futures positions and portfolio positions
will be impossible to achieve. In the event of an imperfect correlation between
a futures position and a portfolio position which is intended to be protected,
the desired protection may not be obtained and a Fund may be exposed to risk of
loss. In addition, it is not possible to hedge fully or protect against currency
fluctuations affecting the value of securities denominated in foreign currencies
because the value of such securities is likely to fluctuate as a result of
independent factors not related to currency fluctuations.
Some futures contracts or options on futures may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in a futures contract or related option,
which may make the instrument temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the price
of a futures contract or related option can vary from the previous day's
settlement price. Once the daily limit is reached, no trades may be made that
day at a price beyond the limit. This may prevent a Fund from closing out
positions and limiting its losses.
Rights and Warrants. Each Fund may purchase warrants and rights which are
securities permitting, but not obligating, their holder to purchase the
underlying securities at a predetermined price, subject to the Fund's Investment
Restrictions. Generally, warrants and stock purchase rights do not carry with
them the right to receive dividends or exercise voting rights with respect to
the underlying securities, and they do not represent any rights in the assets of
the issuer. As a result, an investment in warrants and rights may be considered
23
to entail greater investment risk than certain other types of investments. In
addition, the value of warrants and rights does not necessarily change with the
value of the underlying securities, and they cease to have value if they are not
exercised on or prior to their expiration date. Investment in warrants and
rights increases the potential profit or loss to be realized from the investment
of a given amount of Fund's assets as compared with investing the same amount in
the underlying stock.
Government Securities. Each Fund may invest in government securities. However,
under normal conditions, Mid Cap Growth Fund and Small Cap Growth Fund will not
invest in any fixed income securities, with the exception of cash equivalents
(which include U.S. Government securities maturing in 90 days or less). In
abnormal conditions, these funds may temporarily invest in U.S. Government
securities and U.S. Government agency securities with maturities of up to three
years, and may also invest more than 10% of total assets in cash and/or cash
equivalents. Certain U.S. Government securities, including U.S. Treasury bills,
notes and bonds, and Government National Mortgage Association certificates
("GNMA"), are supported by the full faith and credit of the United States.
Certain other U.S. Government securities, issued or guaranteed by Federal
agencies or government sponsored enterprises, are not supported by the full
faith and credit of the United States, but may be supported by the right of the
issuer to borrow from the U.S. Treasury. These securities include obligations of
the Federal Home Loan Mortgage Corporation ("FHLMC"), and obligations supported
by the credit of the instrumentality, such as Federal National Mortgage
Association Bonds ("FNMA"). No assurance can be given that the U.S. Government
will provide financial support to such Federal agencies, authorities,
instrumentalities and government sponsored enterprises in the future.
Municipal Obligations. The High Yield Bond Fund may invest in a variety of
municipal obligations which consist of municipal bonds, municipal notes and
municipal commercial paper.
Municipal Bonds. Municipal bonds are issued to obtain funds for various public
purposes including the construction of a wide range of public facilities such as
airports, highways, bridges, schools, hospitals, housing, mass transportation,
streets and water and sewer works. Other public purposes for which municipal
bonds may be issued include refunding outstanding obligations, obtaining funds
for general operating expenses and obtaining funds to lend to other public
institutions and facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds for many types of local, privately operated facilities. Such debt
instruments are considered municipal obligations if the interest paid on them is
exempt from federal income tax. The payment of principal and interest by issuers
of certain obligations purchased by the Fund may be guaranteed by a letter of
credit, note repurchase agreement, insurance or other credit facility agreement
offered by a bank or other financial institution. Such guarantees and the
creditworthiness of guarantors will be considered by the Adviser in determining
whether a municipal obligation meets the Fund's investment quality requirements.
No assurance can be given that a municipality or guarantor will be able to
satisfy the payment of principal or interest on a municipal obligation.
Municipal Notes. Municipal notes are short-term obligations of municipalities,
generally with a maturity ranging from six months to three years. The principal
types of such notes include tax, bond and revenue anticipation notes and project
notes.
Municipal Commercial Paper. Municipal commercial paper is a short-term
obligation of a municipality, generally issued at a discount with a maturity of
less than one year. Such paper is likely to be issued and meet seasonal working
capital needs of a municipality or interim construction financing. Municipal
commercial paper is backed in many cases by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks and other institutions.
24
Issuers of municipal obligations are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Act, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that as a result of litigation or
other conditions the power of ability of any one or more issuers to pay when due
the principal of and interest on their municipal obligations may be affected.
The yields of municipal bonds depend upon, among other things, general money
market conditions, general conditions of the municipal bond market, size of a
particular offering, the maturity of the obligation and rating of the issue. The
ratings of S&P, Moody's and Fitch Investors Service ("Fitch") represent their
respective opinions on the quality of the municipal bonds they undertake to
rate. It should be emphasized, however, that ratings are general and not
absolute standards of quality. Consequently, municipal bonds with the same
maturity, coupon and rating may have different yields and municipal bonds of the
same maturity and coupon with different ratings may have the same yield. Many
issuers of securities chose not to have their obligations rated. Although
unrated securities eligible for purchase by the Fund must be determined to be
comparable in quality to securities having certain specified ratings, the market
for unrated securities may not be as broad for rated securities since many
investors rely on rating organizations for credit appraisal.
Swaps, Caps, Floors and Collars. As one way of managing exposure to different
types of investments, Bond Fund, Strategic Income Fund and High Yield Bond Fund
may enter into interest rate swaps and other types of swap agreements such as
caps, collars and floors. Each of these Funds may also enter into currency
swaps. In a typical interest rate swap, one party agrees to make regular
payments equal to a floating interest rate times a "notional principal amount,"
in return for payments equal to a fixed rate times the same amount, for a
specified period of time. If a swap agreement provides for payments in different
currencies, the parties might agree to exchange the notional principal amount as
well. Swaps may also depend on other prices or rates, such as the value of an
index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specified interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift a Fund's investment exposure from one type of
investment to another. For example, if a Fund agrees to exchange payments in
dollars for payments in a foreign currency, the swap agreement would tend to
decrease the Fund's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a Fund's investments and its
share price and yield.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and may have a considerable impact on a
Fund's performance. Swap agreements are subject to the risk of a counterparty's
failure to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. A Fund may also suffer losses if it is unable to
terminate outstanding swap agreements or reduce its exposure through offsetting
transactions. A Fund will maintain in a segregated account or liquid debt
securities equal to the net amount, if any, of the excess of the Fund's
obligations over its entitlements with respect to swap, cap, collar or floor
transactions.
25
Participation Interests. The Technology Fund, Bond Fund, High Yield Bond Fund,
and Strategic Income Fund may invest in participation interests. Participation
interests, which may take the form of interests in or assignments of certain
loans, are acquired from banks who have made these loans or are members of a
lending syndicate. A Fund's investments in participation interests may be
subject to its 15% limitation on investments in illiquid securities. The
Technology Fund may purchase only those participation interests that mature in
60 days or less, or, if maturing in more than 60 days, that have a floating rate
that is automatically adjusted at least once every 60 days.
Pay-In-Kind, Delayed and Zero Coupon Bonds. The Bond Fund, Strategic Income
Fund, High Yield Bond Fund and Technology Fund may invest in pay-in-kind,
delayed and zero coupon bonds. These are securities issued at a discount from
their face value because interest payments are typically postponed until
maturity. The amount of the discount rate varies depending on factors including
the time remaining until maturity, prevailing interest rates, the security's
liquidity and the issuer's credit quality. These securities also may take the
form of debt securities that have been stripped of their interest payments. The
market prices of pay-in-kind, delayed and zero coupon bonds generally are more
volatile than the market prices of interest-bearing securities and are likely to
respond to a greater degree to changes in interest rates than interest-bearing
securities having similar maturities and credit quality. The Funds' investments
in pay-in-kind, delayed and zero coupon bonds may require a Fund to sell certain
of its portfolio securities to generate sufficient cash to satisfy certain
income distribution requirements.
Structured or Hybrid Notes. The Bond Fund, Strategic Income Fund, High Yield
Bond Fund, and Technology Fund may invest in "structured" or "hybrid" notes. The
distinguishing feature of a structured or hybrid note is that the amount of
interest and/or principal payable on the note is based on the performance of a
benchmark asset or market other than fixed income securities or interest rates.
Examples of these benchmarks include stock prices, currency exchange rates and
physical commodity prices. Investing in a structured note allows a Fund to gain
exposure to the benchmark market while fixing the maximum loss that the Fund may
experience in the event that market does not perform as expected. Depending on
the terms of the note, a Fund may forego all or part of the interest and
principal that would be payable on a comparable conventional note; a Fund's loss
cannot exceed this foregone interest and/or principal. An investment in
structured or hybrid notes involves risks similar to those associated with a
direct investment in the benchmark asset.
Indexed Securities. High Yield Bond Fund may invest in indexed securities,
including floating rate securities that are subject to a maximum interest rate
("capped floaters") and leveraged inverse floating rate securities ("inverse
floaters") (up to 10% of the Fund's total assets). The interest rate or, in some
cases, the principal payable at the maturity of an indexed security may change
positively or inversely in relation to one or more interest rates, financial
indices or other financial indicators ("reference prices"). An indexed security
may be leveraged to the extent that the magnitude of any change in the interest
rate or principal payable on an indexed security is a multiple of the change in
the reference price. Thus, indexed securities may decline in value due to
adverse market changes in interest rates or other reference prices.
Custodial Receipts. Each Fund, other than Mid Cap Growth Fund and Small Cap
Growth Fund, may acquire custodial receipts with respect to U.S. Government
securities. Such custodial receipts evidence ownership of future interest
payments, principal payments or both on certain notes or bonds. These custodial
receipts are known by various names, including Treasury Receipts, Treasury
Investors Growth Receipts ("TIGRs"), and Certificates of Accrual on Treasury
Securities ("CATS"). For certain securities law purposes, custodial receipts are
not considered U.S. Government securities.
Bank and Corporate Obligations. Each of the Funds may invest in commercial
paper. Commercial paper represents short-term unsecured promissory notes issued
in bearer form by banks or bank holding companies, corporations and finance
companies. The commercial paper purchased by the Funds consists of direct U.S.
Dollar denominated obligations of domestic or foreign issuers. Bank obligations
26
in which a Fund may invest include certificates of deposit, bankers' acceptances
and fixed time deposits. Certificates of deposit are negotiable certificates
issued against funds deposited in a commercial bank for a definite period of
time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Fixed time deposits are bank
obligations payable at a stated maturity date and bearing interest at a fixed
rate. Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Bank notes and bankers' acceptances rank junior to domestic deposit
liabilities of the bank and pari passu with other senior, unsecured obligations
of the bank. Bank notes are not insured by the Federal Deposit Insurance
Corporation or any other insurer. Deposit notes are insured by the Federal
Deposit Insurance Corporation only to the extent of $100,000 per depositor per
bank.
Mortgage-Backed Securities. Each Fund (other than Mid Cap Growth Fund and Small
Cap Growth Fund) may invest in mortgage pass-through certificates and
multiple-class pass-through securities, such as real estate mortgage investment
conduits ("REMIC") pass-through certificates, collateralized mortgage
obligations ("CMOs") and stripped mortgage-backed securities ("SMBS"), and other
types of "Mortgage-Backed Securities" that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Guaranteed mortgage pass-through
securities represent participation interests in pools of residential mortgage
loans and are issued by U.S. Governmental or private lenders and guaranteed by
the U.S. Government or one of its agencies or instrumentalities, including but
not limited to the Government National Mortgage Association ("Ginnie Mae"), the
Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by
the full faith and credit of the U.S. Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately owned corporation, for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
U.S. Government, for timely payment of interest and the ultimate collection of
all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities as well as private
issuers. CMOs and REMIC certificates are issued in multiple classes and the
principal of and interest on the mortgage assets may be allocated among the
several classes of CMOs or REMIC certificates in various ways. Each class of
CMOs or REMIC certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Generally, interest is paid or accrues on all
classes of CMOs or REMIC certificates on a monthly basis.
Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac
certificates but also may be collateralized by other mortgage assets such as
whole loans or private mortgage pass- through securities. Debt service on CMOs
is provided from payments of principal and interest on collateral of mortgaged
assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Internal
Revenue Code of 1986, as amended (the "Code"), invests in certain mortgages
primarily secured by interests in real property and other permitted investments
and issues "regular" and "residual" interests. The Funds do not intend to
acquire REMIC residual interests.
27
Stripped Mortgage-Backed Securities. SMBS are derivative multiple-class
mortgage-backed securities. SMBS are usually structured with two classes that
receive different proportions of interest and principal distributions on a pool
of mortgage assets. A typical SMBS will have one class receiving some of the
interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In the most extreme case, one class
will receive all of the interest (the "interest only" class) while the other
class will receive all of the principal (the "principal only" class). The yields
and market risk of interest only and principal only SMBS, respectively, may be
more volatile than those of other fixed income securities. The staff of the
Securities and Exchange Commission ("SEC") considers privately issued SMBS to be
illiquid.
Risk Factors Associated with Mortgage-Backed Securities. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental, agency or other guarantee. When a Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may receive a
rate of interest that is lower than the rate on existing adjustable rate
mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of "locking
in" interest rates.
Conversely, in a rising interest rate environment, a declining prepayment rate
will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.
Asset-Backed Securities. The Bond Fund, Strategic Income Fund and High Yield
Bond Fund may invest in securities that represent individual interests in pools
of consumer loans and trade receivables similar in structure to Mortgage-Backed
Securities. The assets are securitized either in a pass-through structure
(similar to a mortgage pass-through structure) or in a pay-through structure
(similar to a CMO structure). Although the collateral supporting asset-backed
securities generally is of a shorter maturity than mortgage loans and
historically has been less likely to experience substantial prepayments, no
assurance can be given as to the actual maturity of an asset-backed security
because prepayments of principal may be made at any time. Payments of principal
and interest typically are supported by some form of credit enhancement, such as
a letter of credit, surety bond, limited guarantee by another entity or having a
priority to certain of the borrower's other securities. The degree of credit
enhancement varies, and generally applies to only a fraction of the asset-backed
security's par value until exhausted. If the credit enhancement of an
asset-backed security held by a Fund has been exhausted, and if any required
payments of principal and interest are not made with respect to the underlying
loans, a Fund may experience losses or delays in receiving payment.
28
Asset-backed securities are often subject to more rapid repayment than their
stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. During periods of declining
interest rates, prepayment of loans underlying asset-backed securities can be
expected to accelerate. Accordingly, a Fund's ability to maintain positions in
these securities will be affected by reductions in the principal amount of such
securities resulting from prepayments, and its ability to reinvest the returns
of principal at comparable yields is subject to generally prevailing interest
rates at that time.
Credit card receivables are generally unsecured and the debtors on such
receivables are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set-off
certain amounts owed on the credit cards, thereby reducing the balance due.
Automobile receivables generally are secured, but by automobiles rather than
residential real property. Most issuers of automobile receivables permit the
loan servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have a proper
security interest in the underlying automobiles. Therefore, there is the
possibility that, in some cases, recoveries on repossessed collateral may not be
available to support payments on these securities.
Risks Associated With Specific Types of Derivative Debt Securities. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage-Backed Securities.
The risk of early prepayments is the primary risk associated with interest only
debt securities ("IOs"), leveraged floating rate securities whose yield changes
in the same direction, rather than inversely to, a referenced interest rate
("super floaters"), other leveraged floating rate instruments and
Mortgage-Backed Securities purchased at a premium to their par value. In some
instances, early prepayments may result in a complete loss of investment in
certain of these securities.
The primary risks associated with certain other derivative debt securities are
the potential extension of average life and/or depreciation due to rising
interest rates. These securities include floating rate securities based on the
Cost of Funds Index ("COFI floaters"), other "lagging rate" floating rate
securities, floating rate securities that are subject to a maximum interest rate
("capped floaters"), Mortgage-Backed Securities purchased at a discount,
leveraged inverse floating rate securities ("inverse floaters"), principal only
debt securities ("POs"), certain residual or support tranches of CMOs and index
amortizing notes. Index amortizing notes are not Mortgage-Backed Securities, but
are subject to extension risk resulting from the issuer's failure to exercise
its option to call or redeem the notes before their stated maturity date.
Leveraged inverse IOs combine several elements of the Mortgage-Backed Securities
described above and thus present an especially intense combination of
prepayment, extension and interest rate risks.
Planned amortization class ("PAC") and target amortization class ("TAC") CMO
bonds involve less exposure to prepayment, extension and interest rate risks
than other Mortgage-Backed Securities, provided that prepayment rates remain
within expected prepayment ranges or "collars." To the extent that prepayment
rates remain within these prepayment ranges, the residual or support tranches of
PAC and TAC CMOs assume the extra prepayment, extension and interest rate risks
associated with the underlying mortgage assets.
29
Other types of floating rate derivative debt securities present more complex
types of interest rate risks. For example, range floaters are subject to the
risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates. X-reset
floaters have a coupon that remains fixed for more than one accrual period.
Thus, the type of risk involved in these securities depends on the terms of each
individual X-reset floater.
Brady Bonds. The Bond Fund, High Yield Bond Fund and Strategic Income Fund may
invest in Brady Bonds and other sovereign debt securities of countries that have
restructured or are in the process of restructuring sovereign debt pursuant to
the Brady Plan. Brady Bonds are debt securities described as part of a
restructuring plan created by U.S. Treasury Secretary Nicholas F. Brady in 1989
as a mechanism for debtor nations to restructure their outstanding external
indebtedness (generally, commercial bank debt). In restructuring its external
debt under the Brady Plan framework, a debtor nation negotiates with its
existing bank lenders as well as multilateral institutions such as the World
Bank and the International Monetary Fund (the "IMF"). The Brady Plan facilitates
the exchange of commercial bank debt for newly issued bonds (known as Brady
Bonds). The World Bank and the IMF provide funds pursuant to loan agreements or
other arrangements which enable the debtor nation to collateralize the new Brady
Bonds or to repurchase outstanding bank debt at a discount. Under these
arrangements the IMF debtor nations are required to implement domestic monetary
and fiscal reforms. These reforms have included the liberalization of trade and
foreign investment, the privatization of state-owned enterprises and the setting
of targets for public spending and borrowing. These policies and programs seek
to promote the debtor country's ability to service its external obligations and
promote its economic growth and development. The Brady Plan only sets forth
general guiding principles for economic reform and debt reduction, emphasizing
that solutions must be negotiated on a case-by-case basis between debtor nations
and their creditors. The Adviser believes that economic reforms undertaken by
countries in connection with the issuance of Brady Bonds make the debt of
countries which have issued or have announced plans to issue Brady Bonds an
attractive opportunity for investment.
Brady Bonds may involve a high degree of risk, may be in default or present the
risk of default. Agreements implemented under the Brady Plan to date are
designed to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the financial
packages offered by each country differ. The types of options have included the
exchange of outstanding commercial bank debt for bonds issued at 100% of face
value of such debt, bonds issued at a discount of face value of such debt, bonds
bearing an interest rate which increases over time and bonds issued in exchange
for the advancement of new money by existing lenders. Certain Brady Bonds have
been collateralized as to principal due at maturity by U.S. Treasury zero coupon
bonds with a maturity equal to the final maturity of such Brady Bonds, although
the collateral is not available to investors until the final maturity of the
Brady Bonds. Collateral purchases are financed by the IMF, the World Bank and
the debtor nations' reserves. In addition, the first two or three interest
payments on certain types of Brady Bonds may be collateralized by cash or
securities agreed upon by creditors. Although Brady Bonds may be collateralized
by U.S. Government securities, repayment of principal and interest is not
guaranteed by the U.S. Government.
Ratings as Investment Criteria. In general, the ratings of Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P") and Fitch
Investors Service ("Fitch") represent the opinions of these agencies as to the
quality of the securities which they rate. It should be emphasized, however,
that such ratings are relative and subjective and are not absolute standards of
quality. These ratings will be used by the Funds as initial criteria for the
selection of debt securities. Among the factors which will be considered are the
long-term ability of the issuer to pay principal and interest and general
economic trends. Appendix A contains further information concerning the ratings
of Moody's, S&P and Fitch and their significance.
30
Subsequent to its purchase by a Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither of these events will require the sale of the securities by the
Fund (other than Sovereign Investors Fund), but the Adviser will consider the
event in its determination of whether the Fund should continue to hold the
securities. If any security in Sovereign Investors Fund's portfolio falls below
the Fund's minimum credit quality standards, as a result of a rating downgrade
or the Adviser's or Sub-adviser's determination, the Fund will dispose of the
security as promptly as possible while attempting to minimize any loss.
Lower Rated High Yield/High Risk Debt Obligations. Strategic Income Fund,
Regional Bank Fund, Financial Industries Fund, Relative Value Fund, Sovereign
Investors Fund, Large Cap Growth Fund, Technology Fund, Bond Fund and High Yield
Bond Fund may invest in high yield/high risk, fixed income securities rated
below investment grade (e.g., rated below Baa by Moody's or below BBB by S&P).
Ratings are based largely on the historical financial condition of the issuer.
Consequently, the rating assigned to any particular security is not necessarily
a reflection of the issuer's current financial condition, which may be better or
worse than the rating would indicate.
See the Appendix to this Statement of Additional Information which describes the
characteristics of corporate bonds in the various rating categories. These Funds
may invest in comparable quality unrated securities which, in the opinion of the
Adviser or relevant Sub-adviser, offer comparable yields and risks to those
securities which are rated.
Debt obligations rated in the lower ratings categories, or which are unrated,
involve greater volatility of price and risk of loss of principal and income. In
addition, lower ratings reflect a greater possibility of an adverse change in
financial condition affecting the ability of the issuer to make payments of
interest and principal. The market price and liquidity of lower rated fixed
income securities generally respond to short term corporate and market
developments to a greater extent than do the price and liquidity of higher rated
securities because such developments are perceived to have a more direct
relationship to the ability of an issuer of such lower rated securities to meet
its ongoing debt obligations.
Reduced volume and liquidity in the high yield/high risk bond market or the
reduced availability of market quotations will make it more difficult to dispose
of the bonds and to value accurately a Fund's assets. The reduced availability
of reliable, objective data may increase a Fund's reliance on management's
judgment in valuing high yield/high risk bonds. In addition, a Fund's
investments in high yield/high risk securities may be susceptible to adverse
publicity and investor perceptions, whether or not justified by fundamental
factors. In the past, economic downturns and increases in interest rates have
caused a higher incidence of default by the issuers of lower-rated securities
and may do so in the future, particularly with respect to highly leveraged
issuers
Each Fund (other than Money Market Fund) may acquire individual securities of
any maturity and is not subject to any limits as to the average maturity of its
overall portfolio. The longer the Fund's average portfolio maturity, the more
the value of the portfolio and the net asset value of the Fund's shares will
fluctuate in response to changes in interest rates. An increase in interest
rates will generally reduce the value of the Fund's portfolio securities and the
Fund's shares, while a decline in interest rates will generally increase their
value.
Lending of Securities. Each Fund may lend portfolio securities to brokers,
dealers, and financial institutions if the loan is collateralized by cash or
U.S. Government securities according to applicable regulatory requirements. A
Fund may reinvest any cash collateral in short-term securities and money market
funds. When a Fund lends portfolio securities, there is a risk that the borrower
may fail to return the securities involved in the transaction. As a result, the
Fund may incur a loss or, in the event of the borrower's bankruptcy, the Fund
may be delayed in or prevented from liquidating the collateral. It is a
fundamental policy of the Funds not to lend portfolio securities having a total
value exceeding 33 1/3% of its total assets.
31
Short Sales. Large Cap Growth Fund and Financial Industries Fund may engage in
short sales in order to profit from an anticipated decline in the value of a
security. Each Fund (except for 500 Index Fund, International Fund, Mid Cap
Growth Fund, Small Cap Growth Fund, Sovereign Investors Fund, Technology Fund
and Money Market Fund) may also engage in short sales to attempt to limit its
exposure to a possible market decline in the value of its portfolio securities
through short sales of securities which the Adviser believes possess volatility
characteristics similar to those being hedged. To effect such a transaction, a
Fund must borrow the security sold short to make delivery to the buyer. A Fund
then is obligated to replace the security borrowed by purchasing it at the
market price at the time of replacement. Until the security is replaced, a Fund
is required to pay to the lender any accrued interest or dividends and may be
required to pay a premium.
A Fund will realize a gain if the security declines in price between the date of
the short sale and the date on which the Fund replaces the borrowed security. On
the other hand, a Fund will incur a loss as a result of the short sale if the
price of the security increases between those dates. The amount of any gain will
be decreased, and the amount of any loss increased, by the amount of any
premium, interest or dividends a Fund may be required to pay in connection with
a short sale. The successful use of short selling as a hedging device may be
adversely affected by imperfect correlation between movements in the price of
the security sold short and the securities being hedged.
Under applicable guidelines of the staff of the SEC, if a Fund engages in short
sales, it must put in a segregated account (not with the broker) an amount of
cash or liquid securities equal to the difference between (a) the market value
of the securities sold short and (b) any cash or U.S. Government securities
required to be deposited as collateral with the broker in connection with the
short sale (not including the proceeds from the short sale). In addition, until
a Fund replaces the borrowed security, it must daily maintain the segregated
account at such a level that the amount deposited in it plus the amount
deposited with the broker as collateral will equal the current market value of
the securities sold short. Except for short sales against the box, the amount of
the Fund's net assets that may be committed to short sales is limited and the
securities in which short sales are made must be listed on a national securities
exchange.
Short selling may produce higher than normal portfolio turnover which may result
in increased transaction costs to a Fund.
Forward Commitment and When-Issued Securities. Each Fund may purchase securities
on a when-issued or forward commitment basis. "When-issued" refers to securities
whose terms are available and for which a market exists, but which have not been
issued. A Fund will engage in when- issued transactions with respect to
securities purchased for its portfolio in order to obtain what is considered to
be an advantageous price and yield at the time of the transaction. For
when-issued transactions, no payment is made until delivery is due, often a
month or more after the purchase. In a forward commitment transaction, a Fund
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time.
When a Fund engages in forward commitment and when-issued transactions, it
relies on the seller to consummate the transaction. The failure of the issuer or
seller to consummate the transaction may result in the Fund's losing the
opportunity to obtain a price and yield considered to be advantageous. The
purchase of securities on a when-issued or forward commitment basis also
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date.
On the date a Fund enters into an agreement to purchase securities on a
when-issued or forward commitment basis, the Fund will segregate in a separate
account cash or liquid securities, of any type or maturity, equal in value to
the Fund's commitment. These assets will be valued daily at market, and
32
additional cash or securities will be segregated in a separate account to the
extent that the total value of the assets in the account declines below the
amount of the when-issued commitments. Alternatively, a Fund may enter into
offsetting contracts for the forward sale of other securities that it owns.
Short-Term Trading and Portfolio Turnover. Short-term trading means the purchase
and subsequent sale of a security after it has been held for a relatively brief
period of time. The International Fund, Large Cap Growth Fund, Relative Value
Fund, Mid Cap Growth Fund, Small Cap Growth Fund, Technology Fund, Bond Fund,
Strategic Income Fund and High Yield Bond Fund engage in short-term trading in
response to stock market conditions, changes in interest rates or other economic
trends and developments, or to take advantage of yield disparities between
various fixed income securities in order to realize capital gains or improve
income. Short term trading may have the effect of increasing portfolio turnover
rate.
The remaining Funds do not intend to invest for the purpose of seeking
short-term profits. These Funds' particular portfolio securities may be changed,
however, without regard to the holding period of these securities when the
Adviser or relevant Sub-adviser deems that this action will help achieve the
Fund's objective given a change in an issuer's operations or in general market
conditions.
The portfolio turnover rate for each Fund is shown in the section captioned
"Financial Highlights" in the prospectuses. A high rate of portfolio turnover
(100% or greater) involves corresponding higher transaction expenses and may
make it more difficult for a Fund to qualify as a regulated investment company
for Federal income tax purposes.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions. Each Fund has adopted the following
fundamental investment restrictions which will not be changed without the
approval of a majority of the applicable Fund's outstanding voting securities.
Under the Investment Company Act of 1940, as amended (the "1940 Act"), and as
used in the Prospectuses and this Statement of Additional Information, a
"majority of the outstanding voting securities" means approval by the lesser of
(1) the holders of 67% or more of the Fund represented at a meeting if the more
than 50% of the Fund's outstanding shares of the Fund are present in person or
by proxy or (2) more than 50% of the outstanding shares.
Each Fund (other than Money Market Fund) may not:
1. Issue senior securities, except as permitted by paragraphs 2,
5 and 6 below. For purposes of this restriction, the issuance
of shares of beneficial interest in multiple classes or
series, the deferral of the Trustees' fees and the purchase or
sale of options, futures contracts, forward commitments, swaps
and repurchase agreements entered into in accordance with the
Fund's investment policies within the meaning of paragraph 6
below, are not deemed to be senior securities.
2. Borrow money, except for the following extraordinary or
emergency purposes: (i) from banks for temporary or short-term
purposes or for the clearance of transactions; (ii) in
connection with the redemption of Fund shares or to finance
failed settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; and (iii) in
order to fulfill commitments or plans to purchase additional
securities pending the anticipated sale of other portfolio
securities or assets, but only if after each such borrowing
there is asset coverage of at least 300% as defined in the
1940 Act. For purposes of this investment restriction, the
deferral of trustees' fees and short sales, transactions in
futures contracts and options on futures contracts, securities
or indices and forward commitment transactions shall not
constitute borrowing. This restriction does not apply to
transactions in reverse repurchase agreements in amounts not
to exceed 33 1/3% of the value of the Fund's total assets
(including the amount borrowed) taken at market value.
33
3. Act as an underwriter, except to the extent that, in
connection with the disposition of portfolio securities, the
Fund may be deemed to be an underwriter for purposes of the
Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate except that the Fund may (i)
acquire or lease office space for its own use, (ii) invest in
securities of issuers that invest in real estate or interests
therein, (iii) invest in securities that are secured by real
estate or interests therein, (iv) purchase and sell
mortgage-related securities and (v) hold and sell real estate
acquired by the Fund as a result of the ownership of
securities.
5. Invest in commodities, except the Fund may purchase and sell
options on securities, securities indices and currency,
futures contracts on securities, securities indices and
currency and options on such futures, forward foreign currency
exchange contracts, forward commitments, securities index put
or call warrants, interest rate and currency swaps, interest
rate caps, floors and collars and repurchase agreements
entered into in accordance with the Fund's investment
policies.
6. Make loans, except that the Fund (1) may lend portfolio
securities in accordance with the Fund's investment policies
up to 33 1/3% of the Fund's total assets taken at market
value, (2) enter into repurchase agreements, and (3) purchase
all or a portion of an issue of debt securities, bank loan
participation interests, bank certificates of deposit,
bankers' acceptances, debentures or other securities, whether
or not the purchase is made upon the original issuance of the
securities.
7. Purchase the securities of issuers conducting their
principal activity in the same industry if, immediately after
such purchase, the value of its investments in such industry
would equal or exceed 25% of its total assets taken at market
value at the time of such investment, except that the Regional
Bank Fund will invest more than 25% of its total assets in the
banking industry. The Financial Industries Fund will
ordinarily invest more than 25% of its assets in the financial
services sector. The Technology Fund will ordinarily invest
more than 25% of its total assets in the technology industry.
The High Yield Bond Fund may invest up to 40% of the value of
its total assets in the securities of issuers in the electric
utility and telephone industries. This limitation does not
apply to investments in obligations of the U.S. Government or
any of its agencies, instrumentalities or authorities.
8. For each Fund, with respect to 75% of total assets [see
non-fundamental investment restriction (f)], purchase
securities of an issuer (other than the U.S. Government, its
agencies, instrumentalities or authorities), if:
(a) such purchase would cause more than 5% of the Fund's
total assets taken at market value to be invested in
the securities of such issuer; or
(b) such purchase would at the time result in more than
10% of the outstanding voting securities of such
issuer being held by the Fund.
34
Money Market Fund may not:
1. Issue senior securities. For purposes of this restriction, the
issuance of shares of beneficial interest in multiple classes
or series, the deferral of the Trustees' fees and transactions
in repurchase agreements or reverse repurchase agreements are
not deemed to be senior securities.
2. Borrow money, except from banks to meet redemptions in amounts
not exceeding 33 1/3% (taken at the lower of cost or current
value) of its total assets (including the amount borrowed).
The Fund does not intend to borrow money during the coming
year, and will do so only as a temporary measure for
extraordinary purposes or to facilitate redemptions. The Fund
will not purchase securities while any borrowings are
outstanding. This restriction does not apply to the purchase
of reverse repurchase agreements in amounts not to exceed 33
1/3% of the value of the Fund's total assets (including the
amount borrowed) taken at market value.
3. Act as an underwriter, except to the extent that, in
connection with the disposition of portfolio securities, the
Fund may be deemed to be an underwriter for purposes of the
1933 Act.
4. Write, purchase or otherwise invest in any put, call, straddle
or spread option or buy or sell real estate, commodities or
commodity futures contracts.
5. Make loans, except that the Fund (1) may lend portfolio
securities in accordance with the Fund's investment policies
up to 33 1/3% of the Fund's total assets taken at market
value, (2) enter into repurchase agreements, and (3) purchase
all or a portion of an issue of debt securities, bank loan
participation interests, bank certificates of deposit,
bankers' acceptances, debentures or other securities, whether
or not the purchase is made upon the original issuance of the
securities.
6. Purchase the securities of issuers conducting their principal
activity in the same industry if, immediately after such
purchase, the value of its investments in such industry would
equal or exceed 25% of its total assets taken at market value
at the time of such investment. This limitation does not apply
to investments in obligations of the U.S. Government or any of
its agencies, instrumentalities or authorities.
7. With respect to 75% of total assets, purchase securities of
an issuer (other than the U.S. Government, its agencies,
instrumentalities or authorities), if:
(a) such purchase would cause more than 5% of the Fund's
total assets taken at market value to be invested in
the securities of such issuer; or
(b) such purchase would at the time result in more than
10% of the outstanding voting securities of such
issuer being held by the Fund.
Non-Fundamental Investment Restrictions. The following restrictions are
designated as non-fundamental and may be changed by the Trustees without
shareholder approval.
Each Fund (other than Money Market Fund) may not:
(a) Purchase securities on margin or make short sales, unless,
by virtue of its ownership of other securities, the Fund has
the right to obtain securities equivalent in kind and amount
to the securities sold and, if the right is conditional, the
sale is made upon the same conditions, except (i) in
connection with arbitrage transactions, (ii) for hedging the
Fund's exposure to an actual or anticipated market decline in
35
the value of its securities, (iii) to profit from an
anticipated decline in the value of a security, and (iv) for
obtaining such short-term credits as may be necessary for the
clearance of purchases and sales of securities. The 500 Index
Fund, International Fund, Mid Cap Growth Fund, Small Cap
Growth Fund Sovereign Investors Fund, and Technology Fund may
not make short sales.
(b) Purchase a security if, as a result, (i) more than 10% of
the Fund's total assets would be invested in the securities of
other investment companies, (ii) the Fund would hold more than
3% of the total outstanding voting securities of any one
investment company, or (iii) more than 5% of the Fund's total
assets would be invested in the securities of any one
investment company. These limitations do not apply to (a) the
investment of cash collateral, received by the Fund in
connection with lending the Fund's portfolio securities, in
the securities of open-end investment companies or (b) the
purchase of shares of any investment company in connection
with a merger, consolidation, reorganization or purchase of
substantially all of the assets of another investment company.
Subject to the above percentage limitations the Fund may, in
connection with the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees/Directors, purchase
securities of other investment companies within the John
Hancock Group of Funds.
(c) Invest in securities which are illiquid if, as a result, more
than 15% of its net assets would consist of such securities,
including repurchase agreements maturing in more than seven
days, securities that are not readily marketable, restricted
securities not eligible for resale pursuant to Rule 144A under
the 1933 Act and privately issued stripped mortgage-backed
securities. The adviser will determine on a case by case basis
whether a particular OTC option is illiquid.
(d) Invest for the purpose of exercising control over or
management of any company.
In addition:
(e) Under normal conditions, Bond Fund, Mid Cap Growth Fund, Small
Cap Growth Fund and Sovereign Investors Fund may not invest
more than 10% of total assets in cash and/or cash equivalents
(except cash segregated in relation to futures, forward and
option contracts).
(f) International Fund, Mid Cap Growth Fund, Small Cap Growth Fund
and Sovereign Investors Fund may not invest more than 5% of
total assets at time of purchase in any one security (other
than U.S. government securities).
(g) Under normal conditions Mid Cap Growth Fund and Small Cap
Growth Fund will not invest in any fixed income securities.
However, in abnormal conditions, these Funds may temporarily
invest in U.S. government securities and U.S. government
agency securities with maturities of up to three years, and
may also invest more than 10% of total assets in cash and/or
cash equivalents (including U.S. government securities
maturing in 90 days or less).
(h) International Fund normally invests at least 80% of total
assets in a diversified portfolio of foreign stocks from both
developed and emerging countries. The Fund may invest up to
30% of total assets in emerging markets as classified by
Morgan Stanley Capital International (MSCI). Foreign equities
include but are not limited to common stocks, convertible
preferred stocks, preferred stocks, warrants, ADRs, GDRs and
EDRs.
36
(i) Mid Cap Growth Fund and Small Cap Growth Fund may not invest
more than 10% of total assets in foreign securities.
Money Market Fund may not:
(a) Purchase securities on margin or make short sales of
securities except for obtaining such short-term credits as may
be necessary for the clearance of purchases and sales of
securities.
(b) Purchase a security if, as a result, (i) more than 10% of
the Fund's total assets would be invested in the securities of
other investment companies, (ii) the Fund would hold more than
3% of the total outstanding voting securities of any one
investment company, or (iii) more than 5% of the Fund's total
assets would be invested in the securities of any one
investment company. These limitations do not apply to (a) the
investment of cash collateral, received by the Fund in
connection with lending the Fund's portfolio securities, in
the securities of open-end investment companies or (b) the
purchase of shares of any investment company in connection
with a merger, consolidation, reorganization or purchase of
substantially all of the assets of another investment company.
Subject to the above percentage limitations the Fund may, in
connection with the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees/Directors, purchase
securities of other investment companies within the John
Hancock Group of Funds.
(c) Invest in securities which are illiquid if, as a result, more
than 10% of its net assets would consist of such securities,
including repurchase agreements maturing in more than seven
days, securities that are not readily marketable, restricted
securities not eligible for resale pursuant to Rule 144A under
the 1933 Act, purchased OTC options, certain assets used to
cover written OTC options, and privately issued stripped
mortgage-backed securities.
(d) Invest for the purpose of exercising control over or
management of any company. If a percentage restriction on
investment or utilization of assets as set forth above is
adhered to at the time an investment is made, a later change
in percentage resulting from changes in the values of a Fund's
assets will not be considered a violation of the restriction.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amounts of net assets will not be considered a violation
of any of the foregoing restrictions.
The Funds will invest only in countries on the Adviser's Approved Country
Listing. The Approved Country Listing is a list maintained by the Adviser's
investment department that outlines all countries, including the United States,
that have been approved for investment by Funds managed by the Adviser.
THOSE RESPONSIBLE FOR MANAGEMENT
The business of each Fund is managed by the Trustees of the Trust who elect
officers who are responsible for the day-to-day operations of the Funds and who
execute policies formulated by the Trustees. Several of the officers and
Trustees of the Trust are also officers and directors of the Adviser, one or
more of the Sub-advisers and/or the Fund's principal distributor, John Hancock
Funds, Inc. ("John Hancock Funds").
37
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Stephen L. Brown* Trustee and Chairman Chairman and Director, John Hancock
John Hancock Place Life Insurance Company (CEO until
P.O. Box 111 June 2000), John Hancock Financial
Boston, MA 02117 Services, Inc. (CEO until June
July 1937 2000); John Hancock Advisers, Inc.
(the Adviser), John Hancock Funds,
Inc. (John Hancock Funds), The
Berkeley Financial Group, Inc. (The
Berkeley Group); Director, John
Hancock Subsidiaries LLC; John
Hancock Signature Services, Inc.
(Signature Services) (until January
1997); John Hancock Insurance
Agency, Inc.; (Insurance Agency)
(until May 1999); Independence
Investment LLC, Independence Fixed
Income LLC; Insurance Marketplace
Standards Association, Committee
for Economic Development, Ionics,
Inc. (since June 2000), Aspen
Technology, Inc. (since June 2000),
Jobs for Massachusetts, Federal
Reserve Bank of Boston (until March
1999); Financial Institutions
Center (until May 1996), Freedom
Trail Foundation (until December
1996) Beth Israel Hospital and
Corporation (until November 1996);
Director and Member (Beth
Israel/Deaconess Care Group),
Member, Commercial Club of Boston,
President (until April 1996);
Trustee, Wang Center for the
Performing Arts, Alfred P. Sloan
Foundation, John Hancock Asset
Management (until March 1997);
Member, Boston Compact Committee,
Mass. Capital Resource Company;
Chairman, Boston Coordinating
Committee ("The Vault") (until
April 1997).
Maureen R. Ford * Trustee, Vice Chairman, President, Broker/Dealer
101 Huntington Avenue President and Chief Distributor, John Hancock Life
Boston, MA 02199 Executive Officer (1,2) Insurance Company; Vice Chairman,
March 1950 Director, President and Chief
Executive Officer, the Adviser, The
Berkeley Group, John Hancock Funds;
Chairman, Director and President,
Insurance Agency, Inc.; Chairman,
Director and Chief Executive
Officer, Sovereign Asset Management
Corporation (SAMCorp.); Senior Vice
President, MassMutual Insurance Co.
(until 1999); Senior Vice
President, Connecticut Mutual
Insurance Co. (until 1996).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
38
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Dennis S. Aronowitz Trustee Professor of Law, Emeritus, Boston
101 Huntington Avenue University School of Law (as of
Boston, MA 02199 1996); Director, Brookline
June 1931 Bankcorp.
Richard P. Chapman, Jr. Trustee (1) Chairman, President, and Chief
101 Huntington Avenue Executive Officer, Brookline
Boston, MA 02199 Bankcorp. (lending); Director,
February 1935 Lumber Insurance Companies (fire
and casualty insurance); Trustee,
Northeastern University
(education); Director, Depositors
Insurance Fund, Inc. (insurance).
William J. Cosgrove Trustee Vice President, Senior Banker and
101 Huntington Avenue Senior Credit Officer, Citibank,
Boston, MA 02199 N.A. (retired September 1991);
January 1933 Executive Vice President, Citadel
Group Representatives, Inc.;
Trustee, the Hudson City Savings
Bank (since 1995).
Richard A. Farrell Trustee President of Farrell, Healer & Co.,
101 Huntington Avenue (venture capital management firm)
Boston, MA 02199 (since 1980); Prior to 1980, headed
November 1932 the venture capital group at Bank
of Boston Corporation.
Gail D. Fosler Trustee Senior Vice President and Chief
101 Huntington Avenue Economist, The Conference Board
Boston, MA 02199 (non-profit economic and business
December 1947 research); Director, Unisys Corp.;
Director, H.B. Fuller Company; and
DBS Holdings (Singapore) (Banking
and Financial Services); Director,
National Bureau of Economic
Research (academic).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
39
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
William F. Glavin Trustee President Emeritus, Babson College
101 Huntington Avenue (as of 1997); Vice Chairman, Xerox
Boston, MA 02199101 Corporation (until June 1989);
March 1932 Director, Caldor Inc., Reebok, Inc.
(since 1994) and Inco Ltd.
Dr. John A. Moore Trustee President and Chief Executive
101 Huntington Avenue Officer, Institute for Evaluating
Boston, MA 02199 Health Risks, (nonprofit
February 1939 institution) (since September
1989).
Patti McGill Peterson Trustee Executive Director, Council for
101 Huntington Avenue International Exchange of Scholars
Boston, MA 02199 (since January 1998), Vice
May 1943 President, Institute of
International Education (since
January 1998); Senior Fellow,
Cornell Institute of Public
Affairs, Cornell University (until
December 1997); President Emerita
of Wells College and St. Lawrence
University; Director, Niagara
Mohawk Power Corporation (electric
utility).
John W. Pratt Trustee Professor of Business
101 Huntington Avenue Administration Emeritus, Harvard
Boston, MA 02199 University Graduate School of
September 1931 Business Administration (as of June
1998).
William L. Braman Executive Vice President Executive Vice President and Chief
101 Huntington Avenue and Chief Investment Investment Officer, each of the
Boston, MA 02199 Officer(2) John Hancock Funds; Executive Vice
December 1953 President and Chief Investment
Officer, Barring Asset Management,
London UK (until May 2000).
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
40
Positions Held Principal Occupation(s)
Name and Address With the Company During the Past Five Years
- ---------------- ---------------- --------------------------
Richard A. Brown Senior Vice President and Senior Vice President , Chief
101 Huntington Avenue Chief Financial Officer (2) Financial Officer and Treasurer of
Boston, MA 02199 the Adviser, John Hancock Funds,
April 1949 and The Berkeley Group; Second Vice
President and Senior Associate
Controller, Corporate Tax
Department, John Hancock Financial
Services, Inc. (until January
2001).
Susan S. Newton Senior Vice President, Senior Vice President and Chief
101 Huntington Avenue Secretary and Chief Legal Legal Officer the Adviser; John
Boston, MA 02199 Officer Hancock Funds; Vice President
Signature Services (until May
2000), The Berkeley Group, NM March
1950 Capital and SAMCorp.
James J. Stokowski Vice President, Treasurer and Vice President, the Adviser.
101 Huntington Avenue Chief Accounting Officer
Boston, MA 02199
November 1946
Thomas H. Connors Vice President and Compliance Vice President and Compliance
101 Huntington Avenue Officer Officer, the Adviser; Vice
Boston, MA 02199 President, John Hancock Funds.
September 1959
- -------------------
* Trustee may be deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
(1) Member of the Executive Committee. The Executive Committee may generally
exercise most of the powers of the Board of Trustees.
(2) A member of the Investment Committee of the Adviser.
41
The following table provides information regarding the compensation paid by the
Funds and the other investment companies in the John Hancock Fund Complex to the
Independent Trustees for their services. Messrs. Brown and Ms. Ford, each a
non-Independent Trustee, and each of the officers of the Funds are interested
persons of the Adviser, are compensated by the Adviser and/or its affiliates and
receive no compensation from the Funds for their services.
Aggregate Total Compensation
Compensation from From the Fund and John
Independent Trustees the Fund (1) Hancock Fund Complex to Trustees (2)
- -------------------- ------------ ------------------------------------
Dennis J. Aronowitz $ 2,165 $ 75,000
Richard P. Chapman* 2,264 78,000
William J. Cosgrove* 2,066 72,000
Leland O. Erdahl + 2,070 72,100
Richard A. Farrell 2,165 75,000
Gail D. Fosler 1,944 68,000
William F. Glavin* 1,815 64,000
Dr. John A. Moore* 2,070 72,100
Patti McGill Peterson 2,014 70,350
John Pratt 2,066 72,000
--------- ----------
Total $20,639 $718,550
(1) Compensation is for the current fiscal year ending December 31, 2000.
(2) Total compensation paid by the John Hancock Funds Complex to the Independent
Trustees is as of December 31, 2000. As of this date, there were sixty-nine
funds in the John Hancock Fund Complex with each of these Independent Trustees
serving on thirty-one funds.
+ As of February 28, 2001, Mr. Erdahl resigned as Trustees of the Complex.
*As of December 31, 2000, the value of the aggregate accrued deferred
compensation amount from all funds in the John Hancock Funds Complex for Mr.
Chapman was $85,948, Mr. Cosgrove was $218,258, Mr. Glavin was $317,363 and for
Dr. Moore was $263,160 under the John Hancock Group of Funds Deferred
Compensation Plan for Independent Trustees (the "Plan").
All of the officers listed are officers or employees of the Adviser, a
Sub-adviser or affiliated companies. Some of the Trustees and officers may also
be officers, Directors and/or Trustees of one or more of the other funds for
which the Adviser serves as investment adviser.
As of December 31, 2000, all shares were held by the Life Co. and the Variable
Life Co. except the Adviser owns the following: International Fund 30.00%,
Regional Bank 3.60%, Small Cap Growth Fund 7.28%, Mid Cap Growth 6.57%, Large
Cap Growth Fund 8.35%, Relative Value 1.36%, Bond Fund 4.09%, Strategic Income
Fund 10.85%, High Yield Bond Fund 18.51%, Technology Fund 2.61% and Money Market
Fund 0.01%.
At such date, no other person(s) owned of record or was known by the Trust to
beneficially own as much as 5% of the outstanding shares of the Trust or of any
of the Funds.
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser, located at 101 Huntington Avenue, Boston, Massachusetts 02199-7603,
was organized in 1968 and has more than $30 billion in assets under management
in its capacity as investment adviser to the Funds and the other funds and
publicly traded investment companies in the John Hancock group of funds as well
as institutional accounts. The Adviser is an affiliate of the Life Company, one
of the most recognized and respected financial institutions in the nation. With
42
total assets under management of more than $100 billion, the Life Company is one
of the ten largest life insurance companies in the United States, and carries a
high rating from Standard & Poor's and A.M. Best. Founded in 1862, the Life
Company has been serving clients for over 130 years.
Each Fund has entered into an investment management contract (the "Advisory
Agreement") with the Adviser, which was approved by the Funds' shareholders.
Pursuant to the Advisory Agreements, the Adviser will: (a) furnish continuously
an investment program for the Funds and determine, subject to the overall
supervision and review of the Trustees, which investments should be purchased,
held, sold or exchanged, and (b) provide supervision over all aspects of the
Funds' operations except those which are delegated to a custodian, transfer
agent or other agent.
The Funds bear all costs of their organization and operation, including but not
limited to expenses of preparing, printing and mailing all shareholders'
reports, notices, prospectuses, proxy statements and reports to regulatory
agencies; expenses relating to the issuance, registration and qualification of
shares; government fees; interest charges; expenses of furnishing to
shareholders their account statements; taxes; expenses of redeeming shares;
brokerage and other expenses connected with the execution of portfolio
securities transactions; expenses pursuant to the Funds' plan of distribution;
fees and expenses of custodians including those for keeping books and accounts
maintaining a committed line of credit and calculating the net asset value of
shares; fees and expenses of transfer agents and dividend disbursing agents;
legal, accounting, financial, management, tax and auditing fees and expenses of
the Funds (including an allocable portion of the cost of the Adviser's employees
rendering such services to the Funds); the compensation and expenses of Trustees
who are not otherwise affiliated with the Trust, the Adviser or any of their
affiliates; expenses of Trustees' and shareholders' meetings; trade association
membership; insurance premiums; and any extraordinary expenses.
As of December 14, 2000, with respect to International Fund, the Adviser has
entered into a sub-investment management contract (the "Sub-advisory agreement")
with Nicholas-Applegate under which, subject to the review of the Trustees and
the overall supervision of the Adviser, Nicholas-Applegate is responsible for
providing the Fund with investment advice. Nicholas-Applegate will also provide
the Fund on a continuous basis with economic, financial and political
information, research and assistance concerning international markets.
Nicholas-Applegate is a California limited partnership, with offices at 600 West
Broadway, 30th Floor, San Diego, California 92101. Nicholas-Applegate was
organized in August 1984 to manage discretionary accounts investing primarily in
publicly traded equity securities and securities convertible into or exercisable
for publicly traded equity securities, with the goal of capital appreciation. On
January 31, 2001, Nicholas-Applegate was acquired by Allianz of America, Inc.
("AZOA"). Allianz AG, the parent of AZOA, is a German Aktiengesellschaft, a
German publicly traded company, which, together with its subsidiaries, comprises
the world's largest insurance group (the "Allianz Group"). Allianz Group
currently has assets under management of approximately $690 billion, and in its
last fiscal year wrote approximately $50 billion in gross insurance premiums.
Allianz AG's address is: Koeniginstrasse 28, D-80802, Munich, Germany.
Until December 14, 2000, the Sub-adviser to International Fund was Indocam
International Investment Services ("IIIS"). IIIS is organized under the laws of
France and is a wholly owned subsidiary of Indocam, the asset management
affiliate of Credit Agricole, a French banking group. IIIS is located at 90
Boulevard Pasteur, Paris, France 75105. Indocam is an asset management firm
maintaining established relationships with institutional, corporate, and
individual investors, Credit Agricole is one of the largest banks in the world.
The Adviser's Sub-advisory contract with IIIS was terminated effective December
14, 2000. Until March 1, 2000, the International Fund had another Sub-adviser,
John Hancock Advisers, International Limited ("JHAI"), located at 6th Floor,
Duke's Court, 32-36 Duke Street, St. James's, London, England SW1Y6DF. JHAI was
a wholly-owned subsidiary of the Adviser formed in 1987 to provide international
investment research and advisory services to U.S. institutional clients. The
Adviser's Sub-advisory contract with JHAI was terminated effective March 1,
2000.
43
With respect to Core Equity Fund, the Adviser has entered into a Sub-advisory
agreement with Independence Investment LLC ("Independence"). Independence,
located at 53 State Street, Boston, Massachusetts 02109, and organized in 1982,
is a wholly owned indirect subsidiary of John Hancock Subsidiaries, Inc. With
respect to Sovereign Investors Fund, the Adviser's Sub-advisory Agreement with
SAMCorp was terminated effective January 1, 1999.
With respect to Technology Fund, the Adviser has entered into a Sub-advisory
agreement with American Fund Advisors, Inc. ("AFA"). AFA is located at 1415
Kellum Place, Suite 205 Garden City, New York 11530 and was incorporated under
the laws of New York in 1978. AFA, subject to the supervision of the Adviser,
manages the Technology Fund's investments. AFA also provides investment advisory
and management services to individual and institutional clients.
Under each respective Sub-advisory agreement, the corresponding Sub-adviser,
subject to the review of the Trustees and the overall supervision of the
Adviser, is responsible for managing the investment operations of the
corresponding Fund and the composition of the Fund's portfolio and furnishing
the Fund with advice and recommendations with respect to investments, investment
policies and the purchase and sale of securities.
As provided by the Advisory Agreements, each Fund pays the Adviser a fee, which
is accrued daily and paid monthly in arrears and is equal on an annual basis to
a stated percentage of the respective Fund's average daily net asset value.
- ------------------------------------------------ ---------------------------
Technology Fund 0.80%
- ------------------------------------------------ ---------------------------
International Fund 0.90%
- ------------------------------------------------ ---------------------------
Regional Bank Fund 0.80%
- ------------------------------------------------ ---------------------------
Financial Industries Fund 0.80%
- ------------------------------------------------ ---------------------------
Small Cap Growth Fund 0.75%
- ------------------------------------------------ ---------------------------
Mid Cap Growth Fund 0.75%
- ------------------------------------------------ ---------------------------
Large Cap Growth Fund 0.75%
- ------------------------------------------------ ---------------------------
Relative Value Fund 0.60%
- ------------------------------------------------ ---------------------------
Core Equity Fund 0.70%
- ------------------------------------------------ ---------------------------
Sovereign Investors Fund 0.60%
- ------------------------------------------------ ---------------------------
500 Index Fund 0.10%*
- ------------------------------------------------ ---------------------------
Bond Fund 0.50%
- ------------------------------------------------ ---------------------------
Strategic Income Fund 0.60%
- ------------------------------------------------ ---------------------------
High Yield Bond Fund 0.60%
- ------------------------------------------------ ---------------------------
Money Market Fund 0.50%
- ------------------------------------------------ ---------------------------
*Reflects the Adviser's Agreement to limit the management fee. Without this
limitation the management fee would be 0.35%. The Adviser has agreed to continue
this limitation until April 30, 2002.
Under each Sub-advisory agreement, the Adviser (not the Fund) pays a portion of
its fee to the corresponding Sub-adviser. Until May 10, 2001, with respect to
the International Fund, the Adviser pays a Sub-advisory fee to
Nicholas-Applegate equal to 55% of the gross management fee received by the
Adviser with respect to the International Fund's average daily net assets.
Effective May 11, 2001, with respect to the International Fund, the Adviser will
44
pay quarterly a sub-advisory fee to Nicholas-Applegate equal on an annual basis
to (i) 0.50% of the first $500,000,000 of the average daily net asset value of
the Fund; and (ii) 0.45% of the average daily net asset value of the Fund in
excess of $500,000,000. Until December 14, 2000, with respect to the
International Fund, the Adviser paid a sub-advisory fee to IIIS equal to 55% of
the gross management fee received by the Adviser with respect to the
International Fund's average daily net assets. The Sub-advisory agreement with
IIIS was terminated effective December 14, 2000. Prior to March 1, 2000, the
Adviser paid JHAI a Sub-advisory fee equal to 70% of the advisory fee payable on
the International Fund's average daily net assets. JHAI agreed to waive all but
0.05% of this fee beginning January 1, 2000. The Adviser's Sub-advisory
agreement with JHAI was terminated effective March 1, 2000.
With respect to the Core Equity Fund, the Adviser pays a sub-advisory fee to
Independence equal to 55% of the advisory fee payable on the Fund's average
daily net assets. With respect to Technology Fund, the Adviser pays a
sub-advisory fee to AFA equal to 0.10% of the Technology Fund's average daily
net assets.
From time to time, the Adviser may reduce its fee or make other arrangements to
limit the Fund's expenses to a specified percentage of average daily net assets.
The adviser has voluntarily agreed to limit each Fund's expenses, excluding the
management fee, to 0.25% of each Fund's average daily net assets. The Adviser
retains the right to reimpose a fee and recover any other payments to the extent
that, at the end of any fiscal year, the Fund's annual expenses fall below this
limit.
Securities held by a Fund may also be held by other funds or investment advisory
clients for which the Adviser or any of its affiliates provides investment
advice. Because of different investment objectives or other factors, a
particular security may be bought for one or more funds or clients when one or
more are selling the same security. If opportunities for purchase or sale of
securities by the Adviser or Sub-adviser for a Fund or for other funds or
clients for which the Adviser or Sub-adviser renders investment advice arise for
consideration at or about the same time, transactions in such securities will be
made, insofar as feasible, for the respective funds or clients in a manner
deemed equitable to all of them. To the extent that transactions on behalf of
more than one client of the Adviser or its affiliates may increase the demand
for securities being purchased or the supply of securities being sold, there may
be an adverse effect on price.
Pursuant to each Advisory Agreement, and, where applicable, Sub-advisory
agreement, neither the Adviser nor any Sub-adviser is liable for any error of
judgment or mistake of law or for any loss suffered by the Funds in connection
with the matters to which its respective contract relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser or any Sub-adviser in the performance of its duties or from its
reckless disregard of the obligations and duties under the applicable agreement.
Under the Advisory Agreements, each Fund may use the name "John Hancock" or any
name derived from or similar to it only for as long as the applicable advisory
agreement or any extension, renewal or amendment thereof remains in effect. If a
Fund's advisory agreement is no longer in effect, the Fund (to the extent that
it lawfully can) will cease to use such name or any other name indicating that
it is advised by or otherwise connected with the Adviser. In addition, the
Adviser or the Life Company may grant the non-exclusive right to use the name
John Hancock or any similar name to any other corporation or entity, including
but not limited to any investment company of which the Life Company or any
subsidiary or affiliate thereof or any successor to the business of any
subsidiary or affiliate thereof shall be the investment adviser.
45
For the fiscal years ended December 31, 1998, 1999 and 2000, the Adviser's
management fee for each Fund is listed below.
Funds 1998 Management fee received by the Adviser
----- -------------------------------------------
International $49,454
Regional Bank 72,908
Financial Industries 324,581
Small Cap Growth 43,238
Mid Cap Growth 7,546
Large Cap Growth 48,603
Relative Value 45,181
Core Equity 112,746
Sovereign Investors 139,125
500 Index 20,232*
Bond 35,548
Strategic Income 62,923
High Yield Bond 32,414
Money Market 61,349
1999 Management fee 2000 Management fee
Funds received by the Adviser received by the Adviser
----- ----------------------- -----------------------
Technology $ ---- $33,261
International 66,480 81,503
Regional Bank 173,090 113,415
Financial Industries 398,471 434,813
Small Cap Growth 80,965 213,759
Mid Cap Growth 20,806 99,566
Large Cap Growth 121,727 148,433
Relative Value 147,515 257,116
Core Equity 254,281 306,248
Sovereign Investors 248,937 295,467
500 Index 32,613* 33,179
Bond 57,967 80,502
Strategic Income 117,404 165,020
High Yield Bond 54,095 51,368
Money Market 117,918 194,539
*Net of limitation by Adviser. For the fiscal years ended December 31, 1998,
1999 and 2000, the Adviser limited its management fee. Without this limitation,
the management fee received by the Adviser would have been $70,811, $114,145 and
$116,127, respectively.
Each Advisory Agreement, Sub-advisory agreement and Distribution Agreement will
continue in effect from year to year if approved by either the vote of the
Fund's shareholders or the Trustees, including a vote of a majority of the
Trustees who are not parties to the agreement or "interested persons" of any
such party, cast at a meeting called for such purposes. These agreements may be
terminated on 60 days written notice by any party or by a vote of a majority of
the outstanding voting securities of the affected Fund and will terminate
automatically if assigned. On December 12, 2000, the Trustees approved the
termination of IIIS as Sub-adviser to the International Fund and appointed
Nicholas-Applegate as Sub-adviser effective December 14, 2000. On April 25,
2001, the shareholders of the International Fund approved the appointment of
Nicholas-Applegate as Sub-adviser to the Fund.
46
Accounting and Legal Services Agreement. The Trust, on behalf of the Fund, is a
party to an Accounting and Legal Services Agreement with the Adviser. Pursuant
to this agreement, the Adviser provides the Fund with certain tax, accounting
and legal services.
- --------------------------------------------------------------------------------
Funds 1998 1999 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Technology $ --- $ ---- $ 810++++
- --------------------------------------------------------------------------------
International 870 1,312 1,697
- --------------------------------------------------------------------------------
Regional Bank 1,353+ 3,822 2,660
- --------------------------------------------------------------------------------
Financial Industries 6,370 8,707 10,269
- --------------------------------------------------------------------------------
Small Cap Growth 915 1,972 5,347
- --------------------------------------------------------------------------------
Mid Cap Growth 158+++ 511 2,504
- --------------------------------------------------------------------------------
Large Cap Growth 1,012 2,952 3,705
- --------------------------------------------------------------------------------
Relative Value 1,136++ 4,476 8,056
- --------------------------------------------------------------------------------
Core Equity 2,523 6,545 8,230
- --------------------------------------------------------------------------------
Sovereign Investors 3,643 7,445 9,273
- --------------------------------------------------------------------------------
500 Index 3,237 5,834 6,221
- --------------------------------------------------------------------------------
Bond 1,109 2,094 2,048
- --------------------------------------------------------------------------------
Strategic Income 1,645 3,504 5,193
- --------------------------------------------------------------------------------
High Yield Bond 839++ 1,598 1,605
- --------------------------------------------------------------------------------
Money Market 1,914 4,300 7,395
- --------------------------------------------------------------------------------
*From commencement of operations on April 30, 1997. +From commencement of
operations on May 1, 1998. ++From commencement of operations on January 6, 1998.
+++From commencement of operations on January 7, 1998. ++++From commencement of
operations on May 1, 2000.
Personnel of the Adviser, Sub-Advisers, and their affiliates may trade
securities for their personal accounts. The Funds also may hold, or may be
buying or selling, the same securities. To prevent the Funds from being
disadvantaged, the Adviser, the Sub-Adviser and their affiliates and the Funds
have adopted a code of ethics which restricts the trading activity of those
personnel.
DISTRIBUTION CONTRACTS
Distribution Agreement. John Hancock Funds, a wholly owned subsidiary of the
Adviser, serves as the principal underwriter for the Trust in connection with
the continuous offering of the shares of the Funds. John Hancock Funds has the
exclusive right, pursuant to the Distribution Agreement, to purchase shares from
the Funds at net asset value for resale to the separate accounts of insurance
companies at the public offering price.
NET ASSET VALUE
For purposes of calculating the net asset value ("NAV") of the Funds' shares,
the following procedures are utilized wherever applicable.
Debt securities are valued on the basis of valuations furnished by a principal
market maker or a pricing service, both of which generally utilize electronic
data processing techniques to determine valuations for normal institutional size
trading units of debt securities without exclusive reliance upon quoted prices.
Equity securities traded on a principal exchange or NASDAQ National Market
issues are generally valued at last sale price on the day of valuation.
Securities in the aforementioned category for which no sales are reported and
other securities traded over-the-counter are generally valued at the last
available bid price.
47
Short-term debt instruments which have a remaining maturity of 60 days or less
are generally valued at amortized cost which approximates market value. If
market quotations are not readily available or if in the opinion of the Adviser
any quotation or price is not representative of true market value, the fair
value of any security may be determined in good faith in accordance with
procedures approved by the Trustees.
Money Market Fund utilizes the amortized cost valuation method of valuing
portfolio instruments in the absence of extraordinary or unusual circumstances.
Under the amortized cost method, assets are valued by constantly amortizing over
the remaining life of an instrument the difference between the principal amount
due at maturity and the cost of the instrument to the Fund. The Trustees will
from time to time review the extent of any deviation of the net asset value, as
determined on the basis of the amortized cost method, from net asset value as it
would be determined on the basis of available market quotations. If any
deviation occurs which may result in unfairness either to new investors or
existing shareholders, the Trustees will take such actions as they deem
appropriate to eliminate or reduce such unfairness to the extent reasonably
practicable. These actions may include selling portfolio instruments prior to
maturity to realize gains or losses or to shorten the Fund's average portfolio
maturity, withholding dividends, splitting, combining or otherwise
recapitalizing outstanding shares or utilizing available market quotations to
determine net asset value per share.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded. Any assets or liabilities expressed in terms of
foreign currencies are translated into U.S. dollars by the Funds' custodian
based on London currency exchange quotations as of 5:00 p.m., London time (12:00
noon, New York time) on the date of any determination of a Fund's NAV. If
quotations are not readily available, or the value has been materially affected
by events occurring after the closing of a foreign market, assets are valued by
a method that the Trustees believe accurately reflects fair value.
The NAV for each Fund is determined each business day at the close of regular
trading on the New York Stock Exchange (typically 4:00 p.m. Eastern Time) by
dividing the Fund's net assets by the number of its shares outstanding. On any
day an international market is closed and the New York Stock Exchange is open,
any foreign securities will be valued at the prior day's close with the current
day's exchange rate. Trading of foreign securities may take place on Saturdays
and U.S. business holidays on which a Fund's NAV is not calculated.
Consequently, a Fund's portfolio securities may trade and the NAV of that Fund's
shares may be significantly affected on days when a shareholder has no access to
that Fund.
SPECIAL REDEMPTIONS
Although the Funds would not normally do so, each Fund has the right to pay the
redemption price of shares of the Fund in whole or in part in portfolio
securities as prescribed by the Trustees. When the shareholder sells portfolio
securities received in this fashion, a brokerage charge would be incurred. Any
such securities would be valued for the purpose of making such payment at the
same value as used in determining net asset value. Each Fund has elected to be
governed by Rule 18f-1 under the 1940 Act. Under that rule, each Fund must
redeem its shares solely for cash, except to the extent that redemption payments
during any 90-day period for any one account, would exceed the lesser of
$250,000 or 1% of the net asset value.
DESCRIPTION OF THE TRUST'S SHARES
The Trustees of the Trust are responsible for the management and supervision of
the Funds. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest of the Funds,
without par value. Under the Declaration of Trust, the Trustees have the
authority to create and classify shares of beneficial interest in separate
48
series and classes, without further action by shareholders. As of the date of
this Statement of Additional Information, the Trustees have only authorized
shares of the Funds. Additional series may be added in the future. The Trustees
have not authorized the issuance of additional classes of shares of the Funds.
Each share of a Fund represents an equal proportionate interest in the assets
belonging to that Fund. When issued, shares are fully paid and nonassessable
except as provided in the Prospectuses under the caption "Organization and
Management of the Funds." In the event of liquidation of a Fund, shareholders
are entitled to share pro rata in the net assets of the Fund available for
distribution to such shareholders. Shares of a Fund are freely transferable and
have no preemptive, subscription or conversion rights.
In accordance with the provisions of the Declaration of Trust, the Trustees have
initially determined that shares entitle their holders to one vote per share on
any matter on which such shares are entitled to vote. The Trustees may determine
in the future, without the vote or consent of shareholders, that each dollar of
net asset value (number of shares owned times net asset value per share) will be
entitled to one vote on any matter on which such shares are entitled to vote.
The rights, if any, of Variable Contract holders to vote the shares of a Fund
are governed by the relevant Variable Contract. For information on these voting
rights, see the Prospectuses describing the Variable Contract.
Unless otherwise required by the 1940 Act or the Declaration of Trust, each Fund
has no intention of holding annual meetings of shareholders. Fund shareholders
may remove a Trustee by the affirmative vote of at least two-thirds of the
Trust's outstanding shares and the Trustees shall promptly call a meeting for
such purpose when requested to do so in writing by the record holders of not
less than 10% of the outstanding shares of the Trust. Shareholders may, under
certain circumstances, communicate with other shareholders in connection with
requesting a special meeting of shareholders. However, at any time that less
than a majority of the Trustees holding office were elected by the shareholders,
the Trustees will call a special meeting of shareholders for the purpose of
electing Trustees.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for acts or obligations
of the Trust. However, each Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Funds. The Declaration of Trust also provides for indemnification out of the
Funds' assets for all losses and expenses of any shareholder held personally
liable by reason of being or having been a shareholder. The Declaration of Trust
also provides that no series of the Funds shall be liable for the liabilities of
any other series. Furthermore, no fund included in the Funds' Prospectuses shall
be liable for the liabilities of any other series. Liability is therefore
limited to circumstances in which the Funds would be unable to meet their
obligations, and the possibility of this occurrence is remote.
The Fund reserves the right to reject any application which conflicts with the
Fund's internal policies or the policies of any regulatory authority. John
Hancock Funds does not accept starter, credit card or third party checks. All
checks returned by the post office as undeliverable will be reinvested at net
asset value in the fund or funds from which a redemption was made or dividend
paid. Information provided on the account application may be used by the Funds
to verify the accuracy of the information or for background or financial history
purposes. A joint account will be administered as a joint tenancy with right of
survivorship, unless the joint owners notify John Hancock Servicing Center of a
different intent. A shareholder's account is governed by the laws of The
Commonwealth of Massachusetts. For telephone transactions, the transfer agent
will take measures to verify the identity of the caller, such as asking for
name, account number, Social Security or other taxpayer ID number and other
relevant information. If appropriate measures are taken, the transfer agent is
not responsible for any losses that may occur to any account due to an
unauthorized telephone call. Also for your protection telephone transactions are
not permitted on accounts whose names or addresses have changed within the past
30 days. Proceeds from telephone transactions can only be mailed to the address
of record.
49
Selling activities for the Fund may not take place outside the U.S., except with
U.S. military bases, APO addresses and U.S. diplomats. Brokers of record on
Non-U.S. investors' accounts with foreign mailing addresses are required to
certify that all sales activities have occurred, and in the future will occur,
only in the U.S. A foreign corporation may purchase shares of the Fund only if
it has a U.S. mailing address.
DIVIDENDS
Dividends from net investment income are declared and paid as follows:
FUND DECLARED PAID
- ---- -------- ----
Technology Fund Annually Annually
International Fund Annually Annually
Regional Bank Fund Quarterly Quarterly
Financial Industries Fund Annually Annually
Small Cap Growth Fund Annually Annually
Mid Cap Growth Fund Annually Annually
Large Growth Fund Annually Annually
Relative Value Fund Quarterly Quarterly
Core Equity Fund Quarterly Quarterly
Sovereign Investors Fund Quarterly Quarterly
500 Index Fund Quarterly Quarterly
Bond Fund Daily Monthly
Strategic Income Fund Daily Monthly
High Yield Bond Fund Daily Monthly
Money Market Fund Daily Monthly
Capital gains distributions are generally declared annually. Dividends are
automatically reinvested in additional shares of the Funds.
TAX STATUS
Each Fund is treated as a separate entity for accounting and tax purposes, has
elected or intends to elect to be treated, as a separate "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and intends to continue to qualify for each taxable year. As such
and by complying with the applicable provisions of the Code regarding the
sources of its income, the timing of its distributions, and the diversification
of its assets, each Fund will not be subject to Federal income tax on taxable
income (including net realized capital gains) which is distributed to
shareholders in accordance with the timing requirements of the Code.
Qualification of a Fund for treatment as a regulated investment company under
the Code requires, among other things, that (a) at least 90% of a Fund's annual
gross income, without being offset for losses from the sale or other disposition
of stock or securities or other transactions, be derived from interest,
dividends, payments with respect to securities loans and gains from the sale or
other disposition of stock or securities or foreign currencies, or other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies; (b) each Fund distributes to its shareholders for each taxable year
(in compliance with certain timing requirements) as dividends at least 90% of
50
the sum of its taxable and tax-exempt net investment income, the excess of net
short-term capital gain over net long-term capital loss earned in each year and
any other net income (except for the excess, if any, of net long-term capital
gain over net short-term capital loss, which need not be distributed in order
for the Fund to qualify as a regulated investment company but is taxed to the
Fund if it is not distributed); and (c) each Fund diversifies its assets so
that, at the close of each quarter of its taxable year, (i) at least 50% of the
fair market value of its total (gross) assets is comprised of cash, cash items,
U.S. Government securities, securities of other regulated investment companies
and other securities limited in respect of any one issuer to no more than 5% of
the fair market value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer and (ii) no more than 25% of the fair market
value of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies) or of two or more issuers controlled by the Fund and engaged in the
same, similar, or related trades or businesses.
Each Fund also must, and intends to, comply with the diversification
requirements imposed by Section 817(h) of the Code and the regulations
thereunder on certain insurance company separate accounts. These requirements,
which are in addition to the diversification requirements imposed on a Fund by
the 1940 Act and Subchapter M of the Code, place certain limitations on assets
of each insurance company separate account used to fund variable contracts and,
because Section 817(h) and those regulations treat the assets of the Fund as
assets of the related separate account, the assets of a Fund that may be
invested in securities of any one, two, three and four issuers. Specifically,
the regulations provide that, except as permitted by the "safe harbor" described
below, as of the end of each calendar quarter or within 30 days thereafter no
more than 55% of the total assets of a Fund may be represented by any one
investment, no more than 70% by any two investments, no more than 80% by any
three investments and no more than 90% by any four investments. For this
purpose, all securities of the same issuer are considered a single investment,
and each U.S. Government agency and instrumentality is considered a separate
issuer. Section 817(h) provides, as a safe harbor, that a separate account will
be treated as being adequately diversified if the diversification requirements
under Subchapter M are satisfied and no more than 55% of the value of the
account's total assets is attributable to cash and cash items (including
receivables), U.S. Government securities and securities of other regulated
investment companies. Failure by a Fund to both qualify as a regulated
investment company and satisfy the Section 817(h) requirements would generally
result in treatment of the variable contract holders other than as described in
the applicable variable contract prospectuses, including possible current
inclusion in ordinary income of income accrued under the contracts for the
current and all prior taxable years. Under certain circumstances described in
the applicable Treasury regulations, inadvertent failure to satisfy the
applicable diversification requirements may be corrected, but such a correction
would require a payment to the Internal Revenue Service (the "I.R.S.") based on
the tax contract holders would have incurred if they were treated as receiving
the income on the contract for the period during which the diversification
requirements were not satisfied. Any such failure may also result in adverse tax
consequences for the insurance company issuing the contracts. Failure by a Fund
to qualify as a regulated investment company would also subject the Fund to
federal and state income taxation of all of its taxable income and gain, whether
or not distributed to shareholders.
If a Fund acquires stock in certain non-U.S. corporations that receive at least
75% of their annual gross income from passive sources (such as interest,
dividends, certain rents and royalties or capital gain) or hold at least 50% of
their assets in investments producing such passive income ("passive foreign
investment companies"), that Fund could be subject to Federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. Certain elections may ameliorate these adverse tax
consequences, but any such election could require the applicable Fund to
recognize taxable income or gain without the concurrent receipt of cash. Any
Fund that is permitted to acquire stock in foreign corporations may limit and/or
manage its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
51
Foreign exchange gains and losses realized by a Fund in connection with certain
transactions involving foreign currency-denominated debt securities, certain
foreign currency futures and options, foreign currency forward contracts,
foreign currencies, or payables or receivables denominated in a foreign currency
are subject to Section 988 of the Code, which generally causes such gains and
losses to be treated as ordinary income and losses and may affect the amount,
timing and character of distributions to shareholders. Any such transactions
that are not directly related to a Fund's investment in stock or securities,
possibly including speculative currency positions or currency derivatives not
used for hedging purposes, and could under future Treasury regulations produce
income not among the types of "qualifying income" from which the Fund must
derive at least 90% of its annual gross income. Income from investments in
commodities, such as gold and certain related derivative instruments, is also
not treated as qualifying income under this test. If the net foreign exchange
loss for a year treated as ordinary loss under Section 988 were to exceed a
Fund's investment company taxable income computed without regard to such loss
but after considering the post-October loss regulations (i.e., all of the Fund's
net income other than any excess of net long-term capital gain over net
short-term capital loss) the resulting overall ordinary loss for such year would
not be deductible by the Fund or its shareholders in future years.
A Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes in
some cases.
For Federal income tax purposes, each Fund is generally permitted to carry
forward a net realized capital loss in any year to offset its own net realized
capital gains, if any, during the eight years following the year of the loss. To
the extent subsequent net realized capital gains are offset by such losses, they
would not result in Federal income tax liability to the applicable Fund and
would not be distributed as such to shareholders. As of December 31, 2000, the
following Funds had capital loss carryforwards:
- --------------------------------------------------------------------------------
2006 2007 2008
- --------------------------------------------------------------------------------
Technology -- -- $ 14,000
- --------------------------------------------------------------------------------
International -- -- 265,560
- --------------------------------------------------------------------------------
Regional Bank -- -- 2,212,041
- --------------------------------------------------------------------------------
Financial Industries -- $2,140,648 1,313,228
- --------------------------------------------------------------------------------
Small Cap Growth -- -- 2,089,105
- --------------------------------------------------------------------------------
Mid Cap Growth -- -- 633,415
- --------------------------------------------------------------------------------
Large Cap Growth -- -- 1,306,804
- --------------------------------------------------------------------------------
Sovereign Investors $157,877 101,159 1,206,695
- --------------------------------------------------------------------------------
Bond -- 67,593 215,568
- --------------------------------------------------------------------------------
Strategic Income 4,130 136,493 455,777
- --------------------------------------------------------------------------------
Each Fund that invests in certain pay in-kind securities ("PIKs") (debt
securities whose interest payments may be made either in cash or in-kind), zero
coupon securities or certain increasing rate securities (and, in general, any
other securities with original issue discount or with market discount if the
Fund elects to include market discount in income currently) must accrue income
on such investments prior to the receipt of the corresponding cash payments.
However, each Fund must distribute, at least annually, all or substantially all
of its net income, including such accrued income, to shareholders to qualify as
a regulated investment company under the Code and avoid Federal income tax.
Therefore, a Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.
52
Investments in debt obligations that are at risk of or are in default present
special tax issues for any Fund that may hold such obligations, such as Relative
Value Fund, Sovereign Investors Fund, Strategic Income Fund, Technology Fund,
Large Cap Growth Fund, Financial Industries and High Yield Bond Fund. Tax rules
are not entirely clear about issues such as when the Funds may cease to accrue
interest, original issue discount, or market discount, when and to what extent
deductions may be taken for bad debts or worthless securities, how payments
received on obligations in default should be allocated between principal and
income, and whether exchanges of debt obligations in a workout context are
taxable. These and other issues will be addressed by any Fund that may hold such
obligations in order to reduce the risk of distributing insufficient income to
preserve its status as a regulated investment company and seek to avoid becoming
subject to Federal income tax.
Limitations imposed by the Code on regulated investment companies like the Funds
may restrict a Fund's ability to enter into futures, options and currency
forward transactions.
Certain options, futures and forward foreign currency transactions undertaken by
a Fund may cause such Fund to recognize gains or losses from marking to market
even though its securities or other positions have not been sold or terminated
and affect the character as long-term or short-term (or, in the case of certain
currency forwards, options and futures, as ordinary income or loss) and timing
of some capital gains and losses realized by the Fund. Also, certain of a Fund's
losses on its transactions involving options, futures and forward foreign
currency contracts and/or offsetting or successor portfolio positions may be
deferred rather than being taken into account currently in calculating the
Fund's taxable income or gains. These transactions may therefore affect the
amount, timing and character of a Fund's distributions to shareholders. Certain
of the applicable tax rules may be modified if the Fund is eligible and chooses
to make one or more of certain tax elections that may be available. The Funds
will take into account the special tax rules (including consideration of
available elections) applicable to options, futures or forward contracts in
order to minimize any potential adverse tax consequences.
The tax rules applicable to dollar rolls, currency swaps and interest rate
swaps, caps, floors and collars may be unclear in some respects, and the Funds
may be required to limit participation in such transactions in order to qualify
as regulated investment companies. Additionally, the Fund may be required to
recognize gain, but not loss, if a swap or other transaction is treated as a
constructive sale of an appreciated financial position in the Fund's portfolio.
The Fund may have to sell portfolio securities under disadvantageous
circumstances to generate cash, or borrow cash, to satisfy these distribution
requirements.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to the Funds and certain aspects of their distributions. The
discussion does not address special tax rules applicable to insurance companies.
Shareholders should consult their own tax advisers as to the Federal, state or
local tax consequences of ownership or redemption of shares of, and receipt of
distributions from, a Fund in their particular circumstances.
The Funds are not subject to Massachusetts corporate excise or franchise taxes.
Provided that each Fund qualifies as a regulated investment company under the
Code, it will also not be required to pay any Massachusetts income tax.
CALCULATION OF PERFORMANCE
For the 30-day period ended December 31, 2000, the annualized yield was:
Bond Fund 5.84%
Strategic Income Fund 7.94%
High Yield Bond Fund 14.03%
53
Yield (except for Money Market Fund). The yield of each Fund (except for Money
Market Fund) is computed by dividing net investment income per share determined
for a 30-day period by the net asset value per share on the last day of the
period and annualizing the result.
While this is the standard accounting method for calculating yield, it does not
reflect the Fund's actual bookkeeping; as a result, the income reported or paid
by the Fund may be different. The Fund's yield is computed according to the
following standard formula:
6
Yield = 2 ( [ ( a - b ) + 1 ] - 1 )
-------
cd
Where:
a = dividends and interest earned during the period.
b = net expenses accrued during the period.
c = the average daily number of fund shares outstanding
during the period that would be entitled to receive
dividends.
d = the net asset value per share on the last day of the period.
Money Market Fund Yield. For the purposes of calculating yield for the Money
Market Fund, daily income per share consists of interest and discount earned on
the Fund's investments less provision for amortization of premiums and
applicable expenses, divided by the number of shares outstanding, but does not
include realized or unrealized appreciation or depreciation.
If the Fund reports its annualized yield, it will also furnish information as to
the average portfolio maturities of the Fund. It will also report any material
effect of realized gains or losses or unrealized appreciation on dividends which
have been excluded from the computation of yield.
Yield calculations are based on the value of a hypothetical preexisting account
with exactly one share at the beginning of the seven day period. Yield is
computed by determining the net change in the value of the account during the
base period and dividing the net change by the value of the account at the
beginning of the base period to obtain the base period return. Base period is
multiplied by 365/7 and the resulting figure is carried to the nearest 100th of
a percent. Net change in account value during the base period includes dividends
declared on the original share, dividends declared on any shares purchased with
dividends of that share and any account or sales charges that would affect an
account of average size, but excludes any capital changes.
Effective yield is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1
Total Return. Each Fund's total return is computed by finding the average annual
compounded rate of return over the indicated period that would equate the
initial amount invested to the ending redeemable value according to the
following formula
The average annual total return for each Fund for the 1 year period ended
December 31, 2000 and since, the commencement of operations through December 31,
2000 is as follows:
54
Commencement of
1 year period ended Operations to
Funds December 31, 2000 December 31, 2000*
- ----- ----------------- ------------------
Technology Fund --% -36.98%
International -25.17% 6.02%
Financial Industries 27.16% 18.90%
Regional Bank 17.91% 4.96%
Small Cap Growth -22.33% 11.02%
Mid Cap Growth -11.73% 15.12%
Large Cap Growth -31.30% 2.41%
Relative Value -4.80% 22.01%
Core Equity -7.11% 17.11%
Sovereign Investors -0.33% 12.73%
500 Index -9.28% 17.75%
Bond 11.85% 7.88%
High Yield Bond -6.08% -1.41%
Strategic Income 1.36% 32.63%
* Financial Industries Fund commenced operations on April 30, 1997. Relative
Value Fund and High Yield Bond Fund commenced operations on January 6, 1998. Mid
Cap Growth Fund commenced operations on January 7, 1998. Regional Bank Fund
commenced operations on May 1, 1998. Technology Fund commenced operations on May
2, 2000. Each of the other funds commenced operations on August 29, 1996.
n _____
T = \ /ERV/P - 1
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 investment
made at the beginning of the indicated period.
This calculation assumes that all dividends and distributions are reinvested at
net asset value on the reinvestment dates during the period. The "distribution
rate" is determined by annualizing the result of dividing the declared dividends
of a Fund during the period stated by the net asset value at the end of the
period.
In addition to average annual total returns, a Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Cumulative total returns may be quoted as a percentage or
as a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions, over any time period.
From time to time, in reports and promotional literature, a Fund's yield and
total return will be compared to indices of mutual funds and bank deposit
vehicles such as Lipper Analytical Services, Inc.'s "Lipper--Fixed Income Fund
Performance Analysis," a monthly publication which tracks net assets, total
return, and yield on fixed income mutual funds in the United States. Ibottson
and Associates, CDA Weisenberger and F.C. Towers are also used for comparison
purposes, as well as the Russell and Wilshire Indices.
Performance rankings and ratings reported periodically in, and excerpts from,
national financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK,
THE WALL STREET JOURNAL, MICROPAL, INC., MORNINGSTAR, STANGER'S and BARRON'S,
etc. will also be utilized. A Fund's promotional and sales literature may make
reference to the Fund's "beta." Beta reflects the market-related risk of the
Fund by showing how responsive the Fund is to the market.
55
The performance of a Fund is not fixed or guaranteed. Performance quotations
should not be considered to be representations of performance of a Fund for any
period in the future. The performance of a Fund is a function of many factors
including its earnings, expenses and number of outstanding shares. Fluctuating
market conditions; purchases, sales and maturities of portfolio securities;
sales and redemptions of shares of beneficial interest; and changes in operating
expenses are all examples of items that can increase or decrease a Fund's
performance.
BROKERAGE ALLOCATION
Decisions concerning the purchase and sale of portfolio securities and the
allocation of brokerage commissions are made by the Adviser, any Sub-adviser and
the officers of the Trust pursuant to recommendations made by its investment
committee, which consists of officers and directors of the Adviser and
affiliates and officers and Trustees who are interested persons of the Funds.
Orders for purchases and sales of securities are placed in a manner which, in
the opinion of the Adviser or Sub-adviser, will offer the best price and market
for the execution of each such transaction. Purchases from underwriters of
portfolio securities may include a commission or commissions paid by the issuer
and transactions with dealers serving as market makers reflect a "spread." Debt
securities are generally traded on a net basis through dealers acting for their
own account as principals and not as brokers; no brokerage commissions are
payable on these transactions.
In the U.S. Government securities market, securities are generally traded on a
"net" basis with dealers acting as principal for their own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. On occasion, certain money market instruments and agency
securities may be purchased directly from the issuer, in which case no
commissions or premiums are paid. In other countries, both debt and equity
securities are traded on exchanges at fixed commission rates. Commissions on
foreign transactions are generally higher than the negotiated commission rates
available in the U.S. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the U.S.
Each Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with the foregoing primary policy, the
Conduct Rules of the NASDAQ and other policies that the Trustees may determine,
the Adviser or Sub-Adviser may consider sales of shares of the Funds as a factor
in the selection of broker-dealers to execute a Fund's portfolio transactions.
Purchases of securities for Bond Fund, Strategic Income Fund and High Yield Bond
Fund are normally principal transactions made directly from the issuer or from
an underwriter or market maker for which no brokerage commissions are usually
paid. Purchases from underwriters will include a commission or concession paid
by the issuer to the underwriter, and purchases and sales from dealers serving
as market makers will usually include a mark up or mark down. Purchases and
sales of exchange-traded options and futures will be effected through brokers
who charge a commission for their services.
To the extent consistent with the foregoing, each Fund will be governed in the
selection of brokers and dealers, and the negotiation of brokerage commission
rates and dealer spreads, by the reliability and quality of the services,
including primarily the availability and value of research information and to a
lesser extent statistical assistance furnished to the Adviser or relevant
Sub-adviser of the Fund, and their value and expected contribution to the
performance of the Fund. It is not possible to place a dollar value on
information and services to be received from brokers and dealers, since it is
56
only supplementary to the research efforts of the Adviser or relevant
Sub-adviser. The receipt of research information is not expected to reduce
significantly the expenses of the Adviser or relevant Sub-adviser. The research
information and statistical assistance furnished by brokers and dealers may
benefit the Life Company or other advisory clients of the Adviser or relevant
Sub-adviser, and conversely, brokerage commissions and spreads paid by other
advisory clients of the Adviser or relevant Sub-adviser may result in research
information and statistical assistance beneficial to the Funds. The Funds will
not make commitments to allocate portfolio transactions on any prescribed basis.
While the Adviser's officers will be primarily responsible for the allocation of
each Fund's brokerage business, the policies and practices of the Adviser in
this regard must be consistent with the foregoing and will at all times be
subject to review by the Trustees.
- --------------------------------------------------------------------------------
1998 Broker 1999 Broker 2000 Broker
Funds Commissions Commissions Commissions
- --------------------------------------------------------------------------------
International $31,688 $44,805 $10,693
- --------------------------------------------------------------------------------
Regional Bank 15,933 13,672 65,029
- --------------------------------------------------------------------------------
Financial Industries 85,961 107,541 16,755
- --------------------------------------------------------------------------------
Small Cap Growth 10,790 15,451 55,411
- --------------------------------------------------------------------------------
Mid Cap Growth 4,603 7,790 23,319
- --------------------------------------------------------------------------------
Large Cap Growth 28,768 55,628 24,172
- --------------------------------------------------------------------------------
Relative Value 67,087 113,466 49,360
- --------------------------------------------------------------------------------
Core Equity 15,467 43,018 152,533
- --------------------------------------------------------------------------------
Sovereign Investors 34,227 38,021 49,746
- --------------------------------------------------------------------------------
500 Index 8,110 4,016 54,708
- --------------------------------------------------------------------------------
Bond 0 0 0
- --------------------------------------------------------------------------------
Strategic Income 455 12 120
- --------------------------------------------------------------------------------
High Yield Bond 2,778 1,613 3,598
- --------------------------------------------------------------------------------
Technology 0 0 10,693
- --------------------------------------------------------------------------------
As permitted by Section 28(e) of the Securities Exchange Act of 1934, a Fund may
pay to a broker which provides brokerage and research services to the Fund an
amount of disclosed commission in excess of the commission which another broker
would have charged for effecting that transaction. This practice is subject to a
good faith determination by the Trustees that the price is reasonable in light
of the services provided and to policies that the Trustees may adopt from time
to time. During the fiscal year ended December 31, 2000, Core Equity, 500 Index,
Financial Industries, Bond, High Yield Bond, International, Sovereign Investors,
Strategic Income did not directed commissions in the amounts of to compensate
brokers for research services such as industry, economics and company reviews
and evaluations of securities. During the fiscal year ended December 31, 2000,
Regional Bank, Small Cap Growth, Large Cap Growth, Relative Value, Mid Cap
Growth and Technology directed commissions in the amounts of $4,670, $4,369,
$29,295, 37,662, $11,649, and $1,391, respectively, to compensate brokers for
research services such as industry, economics and company reviews and
evaluations of securities.
The Adviser's indirect parent, the Life Company, is the indirect sole
shareholder of Signator Investors, Inc., a broker-dealer (until January 1, 1999,
John Hancock Distributors, Inc.) ("Signator" or "Affiliated Broker"). Credit
Agricole, IIIS parent, has several affiliates engaged in the brokerage business
in Europe and Asia: Credit Agricole Indosuez Cheuvreux; CPR Action (ex-Schelcher
Prince Cheuvreux de Virieu International Ltd, London; Cheuvreux de Virieu,
Nordic AB, Stockholm, Cheuvreux de Virieu, Espana, Madrid, Credit Agricole
Indosuez Cheuvreux Deutschland GMBH, Frankfourt/ Main; Caboto Sim in Italy; Carr
Securities; Carr Futures SNC. (Paris) and Carr Futures PTE, Singapore (all
"Affiliated Brokers"). Pursuant to procedures determined by the Trustees and
consistent with the above policy of obtaining best net results, the Funds may
execute portfolio transactions with or through Affiliated Brokers. During the
fiscal years ending December 31, 1998, 1999 and 2000, the Funds did not execute
any portfolio transactions with Affiliated Brokers.
57
Affiliated Brokers may act as broker for a Fund on exchange transactions,
subject, however, to the general policy of the Funds set forth above and the
procedures adopted by the Trustees pursuant to the Investment Company Act.
Commissions paid to an Affiliated Broker must be at least as favorable as those
which the Trustees believe to be contemporaneously charged by other brokers in
connection with comparable transactions involving similar securities being
purchased or sold. A transaction would not be placed with an Affiliated Broker
if a Fund would have to pay a commission rate less favorable than the Affiliated
Broker's contemporaneous charges for comparable transactions for its other most
favored, but unaffiliated, customers except for accounts for which the
Affiliated Broker acts as clearing broker for another brokerage firm, and any
customers of the Affiliated Broker not comparable to a Fund as determined by a
majority of the Trustees who are not interested persons (as defined in the
Investment Company Act) of the Fund, the Adviser or the Affiliated Broker.
Because the Adviser, which is affiliated with the Affiliated Broker, has, as an
investment adviser to the Funds, the obligation to provide investment management
services, which includes elements of research and related investment skills such
research and related skills will not be used by the Affiliated Broker as a basis
for negotiating commissions at a rate higher than that determined in accordance
with the above criteria.
Other investment advisory clients advised by the Adviser may also invest in the
same securities as the Funds. When these clients buy or sell the same securities
at substantially the same time, the Adviser may average the transactions as to
price and allocate the amount of available investments in a manner which the
Adviser believes to be equitable to each client, including the Funds. Because of
this, client accounts in a particular style may sometimes not sell or acquire
securities as quickly or at the same prices as they might if each were managed
and traded individually.
For purchases of equity securities, when a complete order is not filled, a
partial allocation will be made to each account pro rata based on the order
size. For high demand issues (for example, initial public offerings), shares
will be allocated pro rata by account size as well as on the basis of account
objective, account size ( a small account's allocation may be increased to
provide it with a meaningful position), and the account's other holdings. In
addition, an account's allocation may be increased if that account's portfolio
manager was responsible for generating the investment idea or the portfolio
manager intends to buy more shares in the secondary market. For fixed income
accounts, generally securities will be allocated when appropriate among accounts
based on account size, except if the accounts have different objectives or if an
account is too small to get a meaningful allocation. For new issues, when a
complete order is not filled, a partial allocation will be made to each account
pro rata based on the order size. However, if a partial allocation is too small
to be meaningful, it may be reallocated based on such factors as account
objectives, duration benchmarks and credit and sector exposure. In some
instances, this investment procedure may adversely affect the price paid or
received by the Fund or the size of the position obtainable for it. On the other
hand, to the extent permitted by law, the Adviser or Sub-Adviser may aggregate
securities to be sold or purchased for the Fund with those to be sold or
purchased for other clients managed by it in order to obtain best execution.
SHAREHOLDER SERVICING AGENT
John Hancock Annuity Servicing Office, 529 Main Street, (X-4) Charlestown, MA
02129, a division of the Life Company, is the shareholder servicing agent for
the Funds. Currently, the Funds pay no fee.
58
CUSTODY OF PORTFOLIO
Portfolio securities of the International Fund, Money Market Fund and 500 Index
Fund are held pursuant to a custodian agreement between the Trust and State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02205.
Portfolio securities of the other Funds are held pursuant to a custodian
agreement between the Trust and Investors Bank & Trust Company, 200 Clarendon
Street, Boston, MA 02117. Under the custodian agreements, the custodians perform
custody, portfolio and fund accounting services.
INDEPENDENT AUDITORS
Ernst & Young LLP, 200 Clarendon Street Boston, Massachusetts 02116, is the
independent auditor of the Trust. The financial statements of the Funds have
been audited by Ernst & Young LLP for the periods indicated in their report
thereon appearing elsewhere herein, and have been included in reliance on their
report given on their authority as experts in accounting and auditing.
59
APPENDIX
Description of Bond Ratings
The ratings of Moody's Investors Service, Inc. and Standard & Poor's Ratings
Group represent their opinions as to the quality of various debt instruments
they undertake to rate. It should be emphasized that ratings are not absolute
standards of quality. Consequently, debt instruments with the same maturity,
coupon and rating may have different yields while debt instruments of the same
maturity and coupon with different ratings may have the same yield.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment at some time in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack the characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represented obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues as
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
A-1
STANDARD & POOR'S RATINGS GROUP
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B: Debt rated BB, and B is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
CCC: Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
CC: The rating 'CC' is typically applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' rating.
C: The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an active or implied 'CCC-' debt rating. The 'C' debt rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
FITCH INVESTORS SERVICE ("Fitch")
AAA, AA, A, BBB - Bonds rated AAA are considered to be investment grade and of
the highest quality. The obligor has an extraordinary ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are considered to be investment grade and high quality.
The obligor's ability to pay interest and repay principal, while very strong, is
somewhat less than for AAA rated securities or more subject to possible change
over the term of the issue. Bonds rated A are considered to be investment grade
and of good quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB are considered to be investment grade and of satisfactory quality. The
obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to weaken this ability than bonds with higher ratings.
A-2
CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS
Moody's - Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Prime-1, indicates highest quality repayment capacity of
rated issue and Prime-2 indicates higher quality.
S&P - Commercial Paper ratings are a current assessment of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
Issuers rated A have the greatest capacity for a timely payment and the
designation 1,2 and 3 indicates the relative degree of safety. Issues rated
"A-1=" are those with an "overwhelming degree of credit protection."
Fitch - Commercial Paper ratings reflect current appraisal of the degree of
assurance of timely payment. F-1 issues are regarded as having the strongest
degree of assurance for timely payment. (=) is used to designate the relative
position of an issuer within the rating category. F-2 issues reflect an
assurance of timely payment only slightly less in degree than the strongest
issues. The symbol (LOC) may follow either category and indicates that a letter
of credit issued by a commercial bank is attached to the commercial paper note.
Other Considerations - The ratings of S&P, Moody's, and Fitch represent their
respective opinions of the quality of the municipal securities they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, municipal securities with the same
maturity, coupon and ratings may have different yields and municipal securities
of the same maturity and coupon with different ratings may have the same yield.
A-3
FINANCIAL STATEMENTS
The financial statements listed below are included and incorporated by reference
into Part B of the Registration Statement from the 2001 Annual Report to
Shareholder's for the year ended December 31, 2000 (filed electronically on
March 1, 2001, accession number 0000928816-01-000098, file no. 811-07437 and
33-64465).
John Hancock Declaration Trust
Statement of Assets and Liabilities as of December 31, 2000.
Statement of Operations for the year ended of December 31, 2000.
Statement of Changes in Net Assets for each of the two years in the period
ended December 31, 2000.
Financial Highlights for each of the two years in the period ended
December 31, 2000.
Schedule of Investments as of December 31, 2000.
Notes to Financial Statements.
Report of Independent Auditors.
F-1
The latest report from your
Fund's management team
ANNUAL REPORT
Declaration Trust
Equity V.A. Core Equity Fund
V.A. 500 Index Fund
V.A. Large Cap Growth Fund
V.A. Mid Cap Growth Fund
V.A. Relative Value Fund
(formerly V.A. Large Cap Value Fund)
V.A. Small Cap Growth Fund
V.A. Sovereign Investors Fund
- ------------------------------------------------------
International V.A. International Fund
- ------------------------------------------------------
Sector V.A. Financial Industries Fund
V.A. Regional Bank Fund
V.A. Technology Fund
- ------------------------------------------------------
Income V.A. Bond Fund
V.A. High Yield Bond Fund
V.A. Money Market Fund
V.A. Strategic Income Fund
DECEMBER 31, 2000
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
Table of Contents
Page
1) CEO Corner 3
2) Portfolio Manager Commentary
This commentary reflects the views of the portfolio managers or
portfolio management teams through the end of the period discussed in
this report. Of course, the managers' or team's views are subject to
change as market and other conditions warrant.
Equity
V.A. Core Equity Fund 4
V.A. 500 Index Fund 7
V.A. Large Cap Growth Fund 10
V.A. Mid Cap Growth Fund 13
V.A. Relative Value Fund 16
V.A. Small Cap Growth Fund 19
V.A. Sovereign Investors Fund 22
International
V.A. International Fund 25
Sector
V.A. Financial Industries Fund 28
V.A. Regional Bank Fund 31
V.A. Technology Fund 34
Income
V.A. Bond Fund 37
V.A. High Yield Bond Fund 40
V.A. Money Market Fund 43
V.A. Strategic Income Fund 45
3) Financial Statements 48
4) Notes to Financial Statements 121
TRUSTEES
Dennis S. Aronowitz*
Stephen L. Brown
Richard P. Chapman, Jr.
William J. Cosgrove*
Leland O. Erdahl
Richard A. Farrell
Maureen R. Ford
Gail D. Fosler
William F. Glavin
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
* Members of the Audit Committee
OFFICERS
Stephen L. Brown
Chairman
Maureen R. Ford
Vice Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Susan S. Newton
Vice President and Secretary
James J. Stokowski
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIANS
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
V.A. Bond Fund
V.A. Core Equity Fund
V.A. Financial Industries Fund
V.A. High Yield Bond Fund
V.A. Large Cap Growth Fund
V.A. Mid Cap Growth Fund
V.A. Regional Bank Fund
V.A. Relative Value Fund
V.A. Small Cap Growth Fund
V.A. Sovereign Investors Fund
V.A. Strategic Income Fund
V.A. Technology Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
V.A. 500 Index Fund
V.A. International Fund
V.A. Money Market Fund
TRANSFER AGENT
John Hancock Annuity Servicing Office
529 Main Street (X-4)
Charlestown, Massachusetts 02129
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUB-INVESTMENT ADVISERS
American Fund Advisors, Inc.
1415 Kellum Place
Garden City, New York 11530
V.A. Technology Fund
Nicholas-Applegate Capital Management LP
600 West Broadway
San Diego, California 92101
V.A. International Fund
Independence Investment Associates, Inc.
53 State Street
Boston, Massachusetts 02109
V.A. Core Equity Fund
ISSUER
John Hancock Life Insurance Company
John Hancock Variable Life Insurance Company*
200 Clarendon Street
Boston, Massachusetts 02117
*Not Licensed in New York
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116-5072
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Vice Chairman and Chief Executive
Officer, flush right next to second paragraph.]
DEAR SHAREHOLDERS:
After providing investors with positive returns since 1991, and
double-digit returns since 1995, the stock market brought investors down
to earth in 2000. High-priced technology stocks plunged from their
record highs, and rising interest rates produced a slowing economy by year
end. The tech-heavy NASDAQ Composite Index ended the year losing 39.29%,
while the Standard & Poor's 500 Index fell 9.10%.
If nothing else, the year 2000 served as a reminder for investors to set
more realistic expectations, especially given how unusual the string of
strong returns was between 1995 and 1999. It also highlighted the
importance of having a diversified portfolio and maintaining a long-term
perspective, particularly during tempestuous market times, to avoid
making emotional, perhaps costly, investment decisions.
We begin 2001 with a new U.S. president, new possibilities and lingering
uncertainties. Questions remain about how successful the Federal Reserve
will be in achieving the sought-after "soft landing" for the economy. As
this story unfolds, the impact of a slower-growing economy on corporate
profits will emerge. Even though the Fed remains a key driver of the
market's direction, we are also watching Washington, D.C. as President
George W. Bush takes control and attempts to enact tax cuts.
Market moves aside, this is a time of year when many investors' thoughts
often turn to more taxing matters. As part of your tax-planning
strategy, we encourage you to work with your investment professional to
consider the various options for minimizing and deferring tax payments
- -- in an effort to maximize results. These include focusing on
tax-exempt funds, contributing the maximum to retirement plans,
establishing or adding to IRAs and funding a variable annuity. These
concrete steps, coupled with a rededication to the tenets of long-term
investing, are good ways to get the new year off to the right start.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, VICE CHAIRMAN CHIEF EXECUTIVE OFFICER
BY PAUL MCMANUS FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
V.A. Core Equity Fund
Slowing economy, dimming earnings prospects sink stocks
The year 2000 was marked by unprecedented volatility, as the markets
fell sharply in the spring, rallied over the summer and plunged again
during the final four months of the year. The Federal Reserve Board,
which had already hiked interest rates three times in 1999, added three
more increases in the first half of 2000, including a 0.50% increase in
May. With share prices in technology, telecommunications and
biotechnology stocks reflecting unrealistically optimistic expectations,
the Fed's actions were enough to puncture the speculative bubble and
bring the popular market averages lower. The tech-heavy NASDAQ Composite
Index was particularly vulnerable, shedding a whopping 39.29% in 2000.
"On a relative
basis, we
were helped
by our
holdings in
health
care..."
At the time of the Fed's final increase on May 16, there was scant
evidence of decelerating growth in corporate earnings or the overall
economy. Accordingly, the markets rallied during the summer, buoyed by
investors' belief that interest rates were stabilizing and their hope
that higher rates would cool the economy without doing significant
damage to earnings.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is General Electric 4.6%, the
second is Citigroup 4.4%, the third Pfizer 3.6%, the fourth
Merck 3.2% and the fifth ExxonMobil 3.0%. A note below the
table reads "As a percentage of net assets on December 31,
2000."]
That hope was shattered in the fall. Prominent companies in a broad
variety of sectors issued warnings that fourth-quarter profits would be
substantially lower than previously expected. At the same time, data on
industrial production, retail sales, employment and consumer confidence
all gave evidence of a slowing economy. As a result, sellers took
control and the markets plummeted. Defensive sectors like health care,
consumer nondurables and financial services managed to buck the trend,
as did energy, but growth stocks in most sectors had an extremely
difficult year in 2000.
Performance summary
The Fund continued to implement its strategy of buying undervalued
stocks of companies with improving fundamentals. In sectors such as
technology, however, it was more a question of identifying the companies
that appeared to suffer the least deterioration in fundamentals. The
Fund had a losing year but finished ahead of the S&P 500 Index,
primarily due to favorable stock selection. For the 12 months ended
December 31, 2000, John Hancock V.A. Core Equity Fund had a return of
- -7.11% at net asset value. In comparison, the S&P 500 returned -9.10%,
including reinvested dividends. However, the Fund trailed the 1.15%
return of the average variable annuity growth and income fund, according
to Lipper, Inc. Many funds in the Lipper average have a heavier emphasis
on value-oriented investments, which were the place to be, especially
during the second half of the period. Longer-term performance
information can be found on page six.
Health care, financials help returns
On a relative basis, we were helped by our holdings in health care, a
sector we steadily increased throughout the year. Compared with
companies in other sectors, health-care firms, especially pharmaceutical
companies, had generally superior earnings growth prospects. One of the
best performers, Warner-Lambert, rose sharply as a result of being the
target of a bidding war between Pfizer and American Home Products
(Pfizer ultimately won). Merck, Pharmacia, Bristol-Myers Squibb and
Schering-Plough were other drug stocks that made meaningful
contributions to performance.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 2% with -10% at the bottom and 2% at the top.
The first bar represents the -7.11% total return for John
Hancock V.A. Core Equity Fund. The second bar represents the
1.15% total return for Average variable annuity growth and
income fund. A note below the chart reads "The total return
for John Hancock V.A. Core Equity Fund is at net asset value
with all distributions reinvested. The average variable
annuity growth and income fund is tracked by Lipper, Inc. See
the following page for historical performance information."]
Financial stocks were another area of strength, helped by the growing
consensus that a weakening economy would bring lower interest rates.
Both stock selection and a marginal overweighting aided performance
relative to our benchmark. One of our top performers, Fannie Mae, also
benefited when Congress lost interest in an initiative that would have
removed the competitive advantages Fannie Mae enjoys because of its
status as a quasi-government organization. Another holding in the sector
meriting mention is Citigroup, which continued to post consistently good
earnings growth through its favorable mix of banking, brokerage and
insurance businesses.
Technology and telecommunications hit the skids
Leading the list of negative contributors were many names that made
positive contributions a year ago. Microsoft was hurt earlier in the
year by the Justice Department's antitrust lawsuit, then by slowing
demand for personal computers. We reduced the position to below market
weight in the first half of the period, but the stock still hurt
performance substantially. Lucent Technologies was a different story. We
liked the stock for the first half of the year, but it subsequently
became apparent to us that the company was slipping behind competitors
in some key technological areas. Consequently, we sold the entire
position in the fourth quarter. Long-distance provider WorldCom
reflected the intense competition for telephone services of all kinds,
as did Sprint and AT&T, two other lackluster performers. Despite the
carnage, we maintained roughly a market weighting in technology. The
Fund stresses diversification and attempts to keep its risk profile
similar to that of the S&P 500 Index.
"...we would
not be
surprised to
see a
series of
interest-rate
reductions."
Looking ahead
Amid considerable pessimism about stocks, the Fed surprised investors by
cutting interest rates on January 3, just after the period ended. It
appears that the primary challenge facing investors over the short term
will be balancing the positive effects of lower rates with the negative
ramifications of slower earnings growth. Through its actions, the Fed
has served notice that it intends to be aggressive about addressing the
current slowdown, so we would not be surprised to see a series of
interest-rate reductions. Furthermore, history has shown that the stock
market responds well to multiple rate cuts by the Fed. We will consider
these and many other factors as we continue our search for undervalued
stocks of companies with improving fundamentals.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (7.11%) 98.43%
Average Annual Total Returns(1) (7.11%) 17.11%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
since inception would have been 16.69%. The expense limitation did not
impact the one-year performance.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Core Equity Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Core Equity
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
two lines. The first line represents the Standard & Poor's
500 Index and is equal to $22,043 as of December 31, 2000.
The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Core Equity
Fund on August 29, 1996 and is equal to $19,844 as of
December 31, 2000.
BY ROGER HAMILTON, CFA, PORTFOLIO MANAGER
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. 500 Index Fund. Caption below reads "Roger Hamilton."]
John Hancock
V.A. 500 Index Fund
Tech stock sell-off causes S&P 500 Index
to post weak performance
During 2000, the Standard & Poor's 500 Index posted one of its largest
losses in more than a decade, declining 9.10% for the year. But the
Index's losses seem worse than they really were. While technology and
telecommunications stocks -- two of the most influential groups within
the Index -- suffered painful declines during the year, more than 249
out of 444 stocks that were in the Index at the start of 2000 actually
posted gains for the year. Among the year's bright spots were groups
like drugs, electric utilities, energy, insurance, food and thrifts.
Possibly the most notable trend in 2000 was the shift away from
high-growth tech and telecommunications companies into more defensive,
value-oriented stocks. After bidding up their prices in 1998, 1999 and
the first quarter of 2000, investors suddenly and dramatically soured on
both tech and telecom as they became increasingly concerned that the
business fundamentals of most of these companies didn't justify their
sky-high valuations. That's not to say that tech and telecom stocks were
the year's only disappointments. Retailers, automotive companies and
basic-material producers also posted losses as concerns about a slowing
economy weighed heavily on these groups.
"...the biggest
story of
2000 was the
reversal of
fortune of
tech and
telecommuni-
cations
stocks."
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is General Electric 4.1%, the
second is ExxonMobil 2.5%, the third Pfizer 2.4%, the fourth
Cisco Systems 2.2% and the fifth Citigroup 2.1%. A note below
the table reads "As a percentage of net assets on December
31, 2000."]
Fund performance
John Hancock V.A. 500 Index Fund had a total return of -9.28% at net
asset value. By comparison, the average variable annuity S&P 500 Index
objective fund had a total return of -9.32%, according to Lipper, Inc.
Historical performance information can be found on page nine.
In managing the Fund, our goal is to have our holdings closely track
those of the S&P 500 Index, while minimizing the costs associated with
buying and selling shares of stocks. Although there are frequent changes
in the composition of the Index, we re-balance the Fund's holdings less
frequently to minimize transaction costs. When we get additional money
into the Fund that cannot immediately be deployed into Index components,
we buy S&P 500 Index futures, which allow us to participate in the
Index's performance without incurring the higher transaction costs of
buying stocks.
Incidentally, 2000 was one of those years when there were many changes
in the composition of the Index. As a result of a variety of factors,
including mergers and acquisitions, financial failures or others, more
than 56 new companies were added to the Index during the year.
[Bar chart at the top of left hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with -10% at the bottom and 0% at the top.
The first bar represents the -9.28% total return for John
Hancock V.A. 500 Index Fund. The second bar represents the
- -9.10% total return for S&P 500 Index. The third bar
represents the -9.32% total return for Average variable
annuity S&P 500 Index objective fund. A note below the chart
reads "The total return for John Hancock V.A. 500 Index Fund
is at net asset value with all distributions reinvested. The
average variable annuity S&P 500 Index objective fund is
tracked by Lipper, Inc. See the following page for historical
performance information."]
"Given the
slowing
economy,
we could
see more
disappointing
earnings
results."
Leaders and laggards
Undoubtedly, the biggest story of 2000 was the reversal of fortune of
tech and telecommunications stocks. After posting eye-popping gains in
1999 and the first quarter of 2000, the tech stock mania stalled. From
Internet-related companies to software makers to hardware manufacturers,
investors increasingly sold tech stocks as evidence mounted that the
slowing economy was eating away at profits. Losses suffered by Internet
access providers Yahoo! and AOL took a big toll on the Index's
performance on a capitalization weighted basis, losing more than 85% and
54%, respectively, for the year. Lucent Technologies posted a loss of
nearly 81%. Shares of the beleaguered e-tailer Amazon.com slid almost
80% as investors worried that holiday sales would weaken. WorldCom and
AT&T both suffered losses in excess of 65% in the wake of falling
long-distance prices. Dell Computer and Intel lost 65% and 27%,
respectively, due to slower-than-expected demand for personal computers.
Microsoft tumbled more than 62% on worries about the antitrust suit
against the company, coupled with weaker demand for its software.
But outside the tech and telecommunications sectors, nowhere was the S&P
500 Index's health more evident than in the financial and drug sectors.
Finance company Washington Mutual and insurance giant American
International Group posted gains of 105% and 36% in response to
expectations that falling interest rates in 2001 would boost their
financial results. Likewise, Fannie Mae got a lift from the prospect of
falling rates, and posted a gain of more than 38%. Citigroup, up 22%,
was also boosted by the prospect of lower interest rates. Within the
drug sector, Pfizer and Merck each rose about 40% on investors' growing
desire for defensive stocks and on expectations that the demand for
established drugs will remain steady. Higher oil prices lifted energy
stocks, particularly Enron, which rose more than 87% during the year.
Rounding out the Index's top 10 biggest contributors for 2000 were two
consumer products companies nearly left for dead in 1999. Philip Morris
surged more than 91% and PepsiCo gained roughly 40%.
Outlook
The first half of 2001 could continue to be a difficult period for the
stock market. Given the slowing economy, we could see more disappointing
earnings results. But after the Fed's surprise move to cut rates just
days after the year ended, and with the prospect of more rate cuts in
the offing, we are hopeful that it could provide the impetus for better
stock-market performance in the second half of the year. No matter what
the direction of the market, our goal will be to closely track the
performance of the S&P 500 Index, and our performance will be dictated
by the Index. The past year has served as a useful reminder that S&P 500
Index funds are susceptible to market downturns, and, as a result, the
Fund's share price will rise and fall in response to gains or losses
posted by the underlying stocks in the Index.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (9.28%) 103.25%
Average Annual Total Returns(1) (9.28%) 17.75%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) and the management fee to 0.l0% of the Fund's
daily average net assets. Without the limitation of expenses, the
average annual total return for the one-year period and since inception
would have been (9.86%) and 17.20%, respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. 500 Index Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. 500 Index Fund,
representing the growth of a hypothetical $10,000 investment
over the life of the fund. Within the chart are two lines.
The first line represents the Standard & Poor's 500 Index and
is equal to $22,043 as of December 31, 2000. The second line
represents the value of the hypothetical $10,000 investment
made in the John Hancock V.A. 500 Index Fund on August 29,
1996 and is equal to $20,326 as of December 31, 2000.
BY WILLIAM L. BRAMAN AND ROBERT UEK FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
V.A. Large Cap Growth Fund
Tough going for Fund and stock market in 2000
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Large Cap Growth Fund. Caption below reads "Will Braman."]
The bears were out in full force during the past 12 months, particularly
in the technology arena. Volatility began early on and continued in
prolonged bouts as the period progressed. Speculation about the
economy's direction and the sustainability of corporate profits
dominated investors' concerns. By year's end, all the major stock
indexes were down considerably, as was John Hancock V.A. Large Cap
Growth Fund.
"...all the
major stock
indexes were
down..."
Fund performance
For the 12 months ended December 31, 2000, the Fund produced a total
return of -31.30% at net asset value. By comparison, the Fund's
benchmark index, the Russell Top 200 Growth Index, returned -24.53%,
the tech-heavy NASDAQ Composite Index returned -39.29% and the broader
market, as measured by the Standard & Poor's 500 Index, returned
- -9.10%. In the same period, the average variable annuity growth fund
returned -9.22%, according to Lipper, Inc. Historical performance
information can be found on page 12. The Fund's performance lagged its
peers primarily because of our heavy stake in technology, particularly
the more aggressive companies, which we maintained throughout much of
the year. As the earnings of many technology companies decelerated,
their stock prices came back down to earth.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is Pfizer 5.3%, the second is
General Electric 4.7%, the third Cisco Systems 4.1%, the
fourth Oracle Systems 3.6% and the fifth Tyco International
3.6%. A note below the table reads "As a percentage of net
assets on December 31, 2000."]
Technology struggles
For a long time, we have been espousing the dynamic long-term growth
prospects of many technology stocks and, indeed, the sector itself. We
firmly believe technology companies will continue to drive not only the
United States' economy but the world's as well, thereby providing
investors with considerable long-term growth potential. The strength of
the technology stock sector in recent years is certainly a testament to
this belief. However, with each interest rate increase by the Federal
Reserve Board this past spring -- and then with each new economic report
suggesting a slowdown -- investors began to question the ability of
companies, particularly technology firms, to continue meeting the very
high earnings expectations of the past few years. Consequently, it grew
increasingly difficult for many investors to justify the high stock
prices in exchange for the potential payback. When a company posted
disappointing earnings -- as many did -- the stock price was pummeled.
As the stock prices in the tech and biotech sec tors dropped, fears
arose about the possible price declines of other richly valued stocks.
Investors harvested whatever profits they could and ran for cover in the
United States Treasury market.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with -35% at the bottom and 0% at the top.
The first bar represents the -31.30% total return for John
Hancock V.A. Large Cap Growth Fund. The second bar represents
the -9.22% total return for Average variable annuity growth
fund. A note below the chart reads "The total return for John
Hancock V.A. Large Cap Growth Fund is at net asset value with
all distributions reinvested. The average variable annuity
growth fund is tracked by Lipper, Inc. See the following page
for historical performance information."]
Tech holdings reduced
Throughout the period, a large amount of the Fund's net assets remained
in the technology sector, with the weighting peaking in September at
around 60% of net assets. By period's end, however, the stake was
reduced to 43%. While the sector's downturn had a hand in bringing that
figure down, we also eliminated many holdings from the Fund. Our reasons
had more to do with the possibility of further stock price volatility
than with any concerns we had about the business fundamentals or
long-term growth prospects of many of the companies we sold.
In trimming the Fund's weighting, we targeted many names relating to
personal computer hardware. Issues we sold included IBM, Microsoft,
Gateway, Dell and Hewlett Packard. We also eliminated positions in
commodity semiconductors and semiconductor equipment by selling Intel,
Texas Instruments, Applied Materials and Micron. Other high-priced
stocks that demonstrated an increased risk of price declines were sold
as well. In the biotechnology sector, we moved out of Immunex and Amgen.
We held on to, and even purchased, some stocks in the computer
networking and communications sub sectors as stock prices became
increasingly attractive. We bought such issues as Juniper Networks,
CIENA, JDS Uniphase and Nortel Networks.
Health care, finance increased
As the period progressed, we added to the Fund's weighting in
health-care and financial stocks. In health care, it was the
pharmaceuticals we sought. This past year, investors prized the earnings
predictability of large drug companies. These steady growers are also
defensive in nature, as they are relatively insulated from economic
changes. We increased the size of our stakes in Pfizer, Pharmacia and
Johnson & Johnson and initiated a new position in Merck. As technology
stock prices dropped, drug stocks soared.
"...we are
mindful that
plenty of
volatility may
well lie
ahead."
Our financial focus has been fairly broad-based, though we emphasized
insurance names slightly. In addition to the relatively attractive stock
prices, the business cycle and pricing environment among property
casualty and insurance companies has been improving. We also thought it
prudent for the Fund to have exposure to the mortgage-lending and
consumer-lending sub sectors. The stocks that caught our attention
include AFLAC, American General, Wells Fargo, Fannie Mae, MBNA,
Citigroup and State Street Corp.
Outlook
Shortly after the close of the period, the Fed cut the fed funds rate by
one-half a percent. As encouraged as we are by the Fed's recent actions,
we are mindful that plenty of volatility may well lie ahead. In our
opinion, investors will need quite a bit more convincing before
returning to growth stocks. First-quarter earnings reports will be
somewhat of a guidepost. The good news is that tech stock prices are now
more attractive than they have been in years. While the stock prices of
many companies have been taken down by 60% to 70%, many are still
growing their earnings by anywhere from 30% to 50%. With that in mind,
we are now inclined to selectively increase the Fund's technology
exposure and position for what we believe will be an eventual rebound.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (31.30%) 10.87%
Average Annual Total Returns(1) (31.30%) 2.41%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
since inception would have been 1.72%. The expense limitation did not
impact the one-year performance.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Large Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Russell Top 200 Growth Index -- an
unmanaged index which measures the performance of the Russell Top 200
companies with higher price-to-book ratios and higher forecasted growth
values. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Large Cap
Growth Fund, representing the growth of a hypothetical
$10,000 investment over the life of the fund. Within the
chart are two lines. The first line represents the Russell
Top 200 Growth Index and is equal to $22,269 as of December
31, 2000. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A.
Large Cap Growth Fund on August 29, 1996 and is equal to
$11,087 as of December 31, 2000.
BY BARBARA C. FRIEDMAN, CFA, PORTFOLIO MANAGEMENT TEAM LEADER
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Mid Cap Growth Fund. Caption below reads "Barbara Friedman."]
John Hancock
V.A. Mid Cap Growth Fund
Mid caps sink along with market
Mid-cap growth stocks held up well in the volatile first half of 2000,
but eventually faltered amid a sharp slowdown in economic growth. Early
in the year, mid-cap stocks, with their strong earnings and more
reasonable valuations, remained in favor. In March, however, investors
abandoned technology stocks, concerned that they had reached
unsustainably high prices in light of rising interest rates and a
potential deceleration in the economy. Growth stocks of all sizes
suffered, while safer haven sectors like finance, health care, energy
and utilities took off. By the fourth quarter, there was evidence of
much slower economic growth. Weaker consumer and corporate spending hurt
sales in many sectors. Stock prices fell, with the Russell Midcap Growth
Index returning -11.75% for 2000.
[Table at bottom left hand column entitled "Top Five Stock
Holdings." The first listing is Waters Corp. 2.3%, the second
is Millennium Pharmaceuticals 1.9%, the third Aeroflex 1.8%,
the fourth AFLAC, Inc. 1.8% and the fifth McLeodUSA 1.8%. A
note below the table reads "As a percentage of net assets on
December 31, 2000."]
Strategy and performance review
In this difficult environment, John Hancock V.A. Mid Cap Growth Fund
maintained its long-term focus on mid-size companies with strong
earnings growth prospects and market capitalizations in the range of the
Russell Midcap Growth Index. The Fund's above-average stake in both
technology and telecommunications stocks, along with weak performance
among radio stocks, resulted in a -11.73% return at net asset value for
the year ended December 31, 2000. By comparison, the average variable
annuity mid-cap fund, which includes funds that invest in both mid-cap
growth and value stocks, returned 5.21%, according to Lipper, Inc.
Historical performance information appears on page 15.
"We lightened
up on
technology
over the
summer, but
kept a market
weighting..."
Telecom and radio disappointments
The Fund maintained a high stake in competitive local exchange carriers
(CLECs) such as Global Crossing, McLeodUSA, XO Communi cations (formerly
NEXTLINK) and Allegiance Telecom. Concerns that some CLECs would be
unable to obtain funding to build out their systems hurt the entire
sector, sending stock prices down 50% or more for the year. We held on
to CLECs that were fully funded through 2001 and, in many cases, beyond.
In addition, most of our companies ended the year in better shape
fundamentally than a year earlier, having added new customers and access
lines faster than anticipated. Radio stocks also declined significantly
last year, as investors anticipated a huge slowdown in advertising
spending in 2001. We sold smaller, specialized names like Radio One last
summer. But during the fall, we added shares of leading broadcasters
like Clear Channel Com munications and His panic Broadcasting, believing
that inves tors had overreacted to what should be a less precipitous
drop in ad spending.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with -15% at the bottom and 10% at the top.
The first bar represents the -11.73% total return for John
Hancock V.A. Mid Cap Growth Fund. The second bar represents
the 5.21% total return for Average variable annuity mid-cap
fund. A note below the chart reads "The total return for John
Hancock V.A. Mid Cap Growth Fund is at net asset value with
all distributions reinvested. The average variable annuity
mid-cap fund is tracked by Lipper, Inc. See the following
page for historical performance information."]
"...we have
distributed
the Fund's
assets across
a wider array
of sectors..."
Technology bright spots
We lightened up on technology over the summer, but kept a market
weighting because we expect technology spending to continue to outpace
the growth rate of the overall economy. We focused on stocks in the
fast-growing areas of data storage and fiber optics. Companies like
Brocade Communications Systems, which provides switches for storage
systems, benefited as the Internet explosion increased data storage
demands. Many top performers for the year were fiber-optics-related
businesses, including Corning, a leading fiber supplier, which we sold
mid-year; E-Tek Dynamics, an equipment manufacturer, which was bought
out; and Applied Micro Circuits, which sells integrated circuits.
Comverse Technology also did quite well as demand grew for the
profitable, value-added services (like voice mail) that it provides to
telephone companies. Unfortunately, we had our share of technology
disappointments, including Lexmark International, which makes printers.
As PC demand failed to pick up this fall, the stock got hammered,
causing us to sell.
Strength in finance and health care
We used the proceeds from our technology sales to add to our finance and
health-care investments. Finance stocks climbed largely in anticipation
of declining interest rates. Concord EFS, a company that specializes in
electronic transaction processing for credit cards, also soared as
demand for its services increased. USA Education (formerly Sallie Mae),
which makes student loans, benefited from a favorable competitive
environment and a recent acquisition. Other strong performers included
Ambac Financial Group, a municipal bond insurer that is expanding
internationally, and Golden West Financial, a California savings and
loan with a sizable mortgage business. In the health-care area, Waters
Corp. and Applera Corp.--Applied Biosystems Group posted strong gains as
demand increased for the analytical equipment they supply to biotech
companies. We added health-care service names like Community Health
Systems, a well-managed chain of rural hospitals that took off after
going public this summer. Allergan, a drug company that specializes in
eye diseases, also boosted performance as investors looked for
safer-haven investments.
Outlook for 2001
As we start 2001, we believe the environment will be one of uncertainty,
continued volatility and more modest gains. We expect more companies to
announce earnings disappointments related to the rapid deceleration in
economic growth. But economic growth, though low, should remain
positive, as business in many sectors remains strong. Inflation should
also remain under control. The fact that the Federal Reserve acted
quickly after year end to cut interest rates bodes well for the economy
- -- and for the market. Going forward, we expect a variety of sectors to
participate in any market upturn, although there will also be more
distinct winners and losers within each sector. For this reason, we have
distributed the Fund's assets across a wider array of sectors with a
focus on the strongest mid-cap stocks in each sector -- names that
should be among the first to rebound in an economic recovery.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (1/7/98)
---------- ----------
Cumulative Total Returns (11.73%) 52.13%
Average Annual Total Returns(1) (11.73%) 15.12%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been (11.83%) and
13.55%, respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Mid Cap Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in both the Standard & Poor's 500 Index and the
Russell Midcap Growth Index. The Standard & Poor's 500 Index is an
unmanaged index that includes 500 widely traded common stocks and is a
commonly used measure of stock market performance. The Russell Midcap
Growth Index is an unmanaged index that contains those securities from
the Russell Midcap Index with a greater-than-average growth orientation.
It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Mid Cap Growth
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
three lines. The first line represents the Russell Midcap
Growth Index and is equal to $15,737 as of December 31, 2000.
The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Mid Cap
Growth Fund on January 7, 1998 and is equal to $15,213 as of
December 31, 2000. The third line represents the Standard &
Poor's 500 Index and is equal to $14,148 as of December 31,
2000.
BY TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGEMENT TEAM LEADER,
AND R. SCOTT MAYO, CFA, PORTFOLIO MANAGER
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Relative Value Fund. Caption below reads "Timothy
Quinlisk."]
John Hancock
V.A. Relative Value Fund
Stock market declines as economic growth slows
The past year was a difficult one for stock investors. Early on,
technology and telecommunications stocks -- the leading growth sectors
- -- reached what seemed to be unsustainable prices, while investors
ignored value sectors like finance and utilities. This situation began
to reverse in March, when signs of slower economic growth raised
concerns about whether the high-fliers would be able to meet earnings
expectations. Investors bolted out of technology in search of safer
havens, boosting finance, energy, health-care and utilities stocks.
Throughout the summer and into the fall, value stocks continued to lead.
The market remained volatile and took a sharp downturn in the fourth
quarter amid increasing signs that the economy might be headed for a
hard landing. As consumer and corporate spending slowed, the Standard &
Poor's 500 Index tumbled, returning -9.10% in 2000.
"We're
especially
interested in
companies
where there
is a catalyst
...that can
unlock the
stock's
intrinsic
value."
Fund stays the course
A weak stock market gives us more opportunities to buy great businesses
that have the ability to grow and create value over a long period at a
time when their stocks are selling at bargain prices. We're especially
interested in companies where there is a catalyst -- such as a
restructuring, new management or new product -- that can unlock the
stock's intrinsic value. For the year ended December 31, 2000, John
Hancock V.A. Relative Value Fund stayed ahead of the market, returning
- -4.80% at net asset value. However, the Fund's above-average investment
in beaten-down technology stocks caused us to lag the average variable
annuity growth and income fund, which returned 1.15%, according to
Lipper, Inc. For historical performance information, please see page 18.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is Parametric Technology Corp.
5.3%, the second is AT&T-Liberty Media Group 5.1%, the third
Hughes Electronics 5.0%, the fourth Tyco International 4.9%
and the fifth Sprint Corp. 4.4%. A note below the table reads
"As a percentage of net assets on December 31, 2000."]
Technology nosedives
The Fund's largest stake was in the technology sector, where nearly all
stocks -- strong and weak alike -- posted significant declines. Our
biggest disappointments included Lucent Technologies, which failed to
meet investors' expectations regarding a new product launch; Conexant
Systems, which experienced weakening demand from personal computer
manufacturers that buy its semiconductors; and Computer Associates
International, which saw demand soften as mainframe software customers
waited for IBM's newest mainframe product to come out. We held on
because we believe these stocks will be among the first to benefit once
corporations step up spending again. In a related area, Hughes
Electronics, a direct television operator, also saw its stock price sink
as subscriber growth weakened.
[Bar chart at the top of left hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with -5% at the bottom and 5% at the top.
The first bar represents the -4.80% total return for John
Hancock V.A. Relative Value Fund. The second bar represents
the 1.15% total return for Average variable annuity growth
and income fund. A note below the chart reads "The total
return for John Hancock V.A. Relative Value Fund is at net
asset value with all distributions reinvested. The average
variable annuity growth and income fund is tracked by Lipper,
Inc. See the following page for historical performance
information."]
Finance and capital goods deliver
Fortunately, our sizable investments in finance and capital goods helped
buoy the Fund. In the finance area, we focused on names with strong
earnings growth, including Ace, Ltd. and XL Capital, Ltd., property and
casualty insurers that benefited as investors anticipated improved
pricing. Ambac Financial Group, a municipal bond insurer, also did well,
thanks to new market opportunities abroad and growing demand. In the
capital goods sector, many of our investments profited from strong
demand, including PerkinElmer, a company that supplies health-care
testing equipment; Millipore, which provides filtration products for the
pharmaceutical, biotechnology, and semiconductor markets; Corning, the
leading provider of fiber for fiber-optic networks; and Amphenol, an
electronics company that makes connectors for the aerospace, cable and
wireless industries. As these stocks reached full valuations, we took
profits.
Diverse operations gain
Our investments in multi-industry companies like Tyco International and
Honeywell International also bolstered performance. Tyco, a company with
a diverse mix of businesses and strong execution, spun off some assets
in the second half of the year, which helped unlock the stock's value.
Honeywell, whose management was under tremendous pressure to better
integrate its Allied-Signal acquisition, benefited when General Electric
announced it was buying the company late in the year. ACNielsen, which
provides market research to retailers, and Etec Systems, a semiconductor
equipment provider, also were strong performers, thanks to buyouts
during the period. Finally, local telephone providers CenturyTel and
Verizon Communications did well as investors began to focus on the value
of their core local telephone businesses.
"We are
positioning
the Fund for
a recovery,
but think
it will be
different from
the past."
Volatility yields opportunity
As we head into 2001, the economic slowdown most likely means more
companies will miss earnings expectations, causing increased market
volatility. Fortunately, shortly after the new year began, the Federal
Reserve began lowering interest rates. Any further rate cuts, along with
tax decreases under the new administration, could help re-ignite
economic growth. We are positioning the Fund for a recovery, but think
it will be different from the past. Typically, the first stocks to
benefit are early cyclicals -- retailers, home builders and auto parts
stocks, for example, that do well once consumers start spending again.
This time, because there is little pent-up consumer demand, we expect
more corporate-oriented businesses to be among the first to move. With
that in mind, we've begun taking money out of finance and shifting it
into beaten-down media, telecom and technology stocks. We've added to
our stakes in names like Parametric Technology, a mechanical design
maker, and AT&T Corp. -- Liberty Media Group, the largest cable
television provider in the United States. We've also made some new
purchases including Viacom, the leading media company worldwide, and
Sprint, a telephone company with strong local assets as well as long
distance and wireless services. We believe our focus on great businesses
that are selling at bargain prices will continue to benefit the Fund.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (1/6/98)
---------- ----------
Cumulative Total Returns (4.80%) 81.03%
Average Annual Total Returns(1) (4.80%) 22.01%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net
assets.Without the limitation of expenses, the average annual total
return since inception would have been 21.92%. The expense limitation
did not impact the one-year performance.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Relative Value Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Relative Value
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
two lines. The first line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A.
Relative Value Fund on January 6, 1998 and is equal to
$18,103 as of December 31, 2000. The second line represents
the Standard & Poor's 500 Index and is equal to $14,148 as of
December 31, 2000.
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
ANURAG PANDIT, CFA, PORTFOLIO MANAGER
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Small Cap Growth Fund. Caption below reads "Bernice Behar."]
John Hancock
V.A. Small Cap Growth Fund
Growth stocks fall from favor as technology stumbles in 2000
After a very strong 1999, small-cap growth stocks sank under the weight
of falling technology and telecommunications stocks in 2000. Rising
interest rates and growing earnings concerns in the face of a slowing
economy caused investors to flee these high-priced sectors that had held
their undivided attention until mid March. This reversal sent the
tech-heavy NASDAQ Composite Index down 39.29% for the year, as investors
became more focused on less expensive and more defensive segments of the
market like health care, financial and energy stocks. Value stocks
replaced growth stocks as the place to be. The result was a huge gap in
performance between two of the major indexes that track small-cap
stocks, with the Russell 2000 Value Index gaining 22.83% and the Russell
2000 Growth Index losing 22.43% for the year ended December 31, 2000.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is Newfield Exploration 1.5%,
the second is Corporate Executive Board 1.5%, the third
Bindley Western Industries 1.4%, the fourth AmeriSource
Health Corp. 1.4% and the fifth LifePoint Hospitals 1.3%. A
note below the table reads "As a percentage of net assets on
December 31, 2000."]
Fund performance
John Hancock V.A. Small Cap Growth Fund performed in line with its
benchmark Russell 2000 Growth Index, posting a total return of -22.33%
at net asset value for the year ended December 31, 2000. That compared
with the 0.24% return of the average variable annuity small-cap fund,
according to Lipper, Inc. Our relative underperformance stems from the
fact that this Lipper group includes funds that were able to invest in
more value-oriented stocks. Furthermore, while we were underweight in
technology versus our benchmark index, we remained overweighted versus
the peer group. We also suspect that some of our peers held on to more
of the stocks that recently graduated from small-cap to mid-cap status
on their strong performance, since mid-cap companies produced some of
the best relative earnings growth. In contrast, we typically sell
companies once they grow too big for our small-cap focus.
"...we built
our weighting
across a
number of
health-care
industries..."
Individual tech standouts
Despite the tech and telecom group's difficult run this year, good
individual stock picking provided us with some standouts, including
Internet software company Interwoven and telecommunications equipment
companies Virata and Powerwave. While these helped us to outperform the
index in the technology category, the group's results were still
negative and held us back, especially in the Internet area. Some big
detractors were Mediaplex and Broadbase Software, both of which help
companies develop their Web sites and target their advertising; they
were hurt as the Internet advertising model started to come into
question. At appropriate times we sold some of these stocks.
[Bar chart at the top of left hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with -25% at the bottom and 5% at the top.
The first bar represents the -22.33% total return for John
Hancock V.A. Small Cap Growth Fund. The second bar represents
the 0.24% total return for Average variable annuity small-cap
fund. A note below the chart reads "The total return for John
Hancock V.A. Small Cap Growth Fund is at net asset value with
all distributions reinvested. The average variable annuity
small-cap fund is tracked by Lipper, Inc. See the following
page for historical performance information."]
"Even with
a slowing
economy, we
remain confi-
dent in our
ability to find
good small
companies..."
Going defensive: health care, financials, energy
As questions arose over the year about the strength of user demand
across all technology and telecom subsectors, we pared our stakes and
put the proceeds into more defensive areas where we felt the relative
earnings growth potential appeared more certain for the foreseeable
future. These included health care, financials and energy.
A large piece of our health-care stake was in biotechnology companies,
where a string of good news -- from the completion of the Human Genome
Project, to a flood of new products, increased spending and a favorable
capital markets environment -- bodes well for the group. Although
biotech stocks have a tendency to be volatile, many of our biotech
companies served us well on balance for the year, including CV
Therapeutics, COR Therapeutics, NPS Pharmaceuticals and Alkermes. In
fact, by the end of the year, we took some profits in our biotech stake
not only to lock in gains, but also to position the Fund more
defensively and reduce our risk level.
In addition to biotech, we built our weighting across a number of
health-care industries, including medical device companies such as
Wilson Greatbatch Technologies and distributors such as AmeriSource
Health and Bindley Western Industries, which received a takeover
proposal from one of the largest health-care distributors. We also upped
our stake in rural hospital companies LifePoint Hospitals and Province
Healthcare. Their results have improved, and their stock prices too,
through a combination of aggressive management of the hospitals they run
and positive pricing trends.
We brought our weighting in financial stocks up to our benchmark's level
by buying several regional banks with strong growth rates, such as Texas
banks Southwest Bancorp and Sterling Bancshares. We also added several
specialty property and casualty companies like HCC Insurance and title
insurance company Fidelity National, all of which we believe will
benefit from a lower interest-rate environment.
With rising oil prices and a pickup in exploration, we added to energy
companies like Lone Star Technologies, Pride International and Newfield
Exploration. Companies serving the natural gas industry, like Universal
Compression, did especially well.
A look ahead
In the short term, we expect small-cap stocks to remain volatile while
the economy continues to slow and companies adjust their earnings
downward. We're more optimistic about later in the year, however, as
small-cap growth stock valuation levels are more attractive now and
companies will have a better chance of beating lowered expectations.
This is especially true in the wake of the Fed's surprise cut in
short-term interest rates just days after the year ended to prevent the
economy from stalling. Even with a slowing economy, we remain confident
in our ability to find good small companies with accelerating and
sustainable earnings growth, dominant positions and strong management.
We believe we will be rewarded for holding such companies over the long
term.
- ----------------------------------------------------------------
See the prospectus for a discussion of the risks of investing in
small-cap stocks.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (22.33%) 57.38%
Average Annual Total Returns(1) (22.33%) 11.02%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been (22.43)% and
10.03%, respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Small Cap Growth Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Russell 2000 Index and the Russell
2000 Growth Index. The Russell 2000 Index is an unmanaged small-cap
index that is comprised of 2,000 U.S. stocks. The Russell 2000 Growth
Index is an unmanaged index that contains Russell 2000 Index stocks with
a greater-than-average growth orientation. It is not possible to invest
in an index.
Line chart with the heading John Hancock V.A. Small Cap
Growth Fund, representing the growth of a hypothetical
$10,000 investment over the life of the fund. Within the
chart are three lines. The first line represents the Russell
2000 Index and is equal to $16,219 as of December 31, 2000.
The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Small Cap
Growth Fund on August 29, 1996 and is equal to $15,738 as of
December 31, 2000. The third line represents the Russell 2000
Growth Index and is equal to $14,370 as of December 31, 2000.
BY JOHN F. SNYDER, III, PORTFOLIO MANAGEMENT TEAM LEADER, AND
BARRY H. EVANS, CFA, AND PETER M. SCHOFIELD, PORTFOLIO MANAGERS
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Sovereign Investors Fund. Caption below reads "John Snyder."]
John Hancock
V.A. Sovereign Investors Fund
A significant shift in the market bolsters the Fund's approach
The stock market experienced a significant shift at the end of the first
quarter of 2000. In the first quarter, market averages skyrocketed,
bolstered by a very narrow group of technology and telecommunications
stocks that many investors believed were immune to the vicissitudes of
the economy. Lulled into complacency, many investors ignored the kind of
fundamental research that is the foundation of our approach -- looking
for growth at a reasonable price. Instead, they looked for growth at any
price, choosing to pay extremely high prices for a clique of tech and
telecom stocks based only on the speculation that these companies would
continue to promise or offer vibrant growth.
"As of July 1,
2000, the
Fund has
been able to
invest up to
35% of its
stocks in
non-dividend
performers."
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is Citigroup 2.7%, the second is
Chevron 2.6%, the third Interpublic Group 2.6%, the fourth
Chase Manhattan 2.5% and the fifth Minnesota Mining &
Manufacturing 2.4%. A note below the table reads "As a
percentage of net assets on December 31, 2000."]
All of that changed during the second quarter and as we progressed
through the year. The economy softened, the speculative bubble burst,
issues of credit quality plagued the financial markets and corporate
spending fell sharply. Corporate announcements of earnings shortfalls
became more widespread. In response, there was a dramatic selloff in the
overvalued technology and telecommunications sectors, and the market
began to broaden as investor attitudes changed. No longer cavalier about
risk, investors turned toward attractively valued companies with steady
growth that are perceived to be havens safe from an economic downturn --
precisely the kinds of stocks that populated the Fund. When all was said
and done, the Standard & Poor's 500 Index, a common proxy for stock
market performance, suffered a loss in value of 9.10% for the year ended
December 31, 2000.
Understanding performance
John Hancock V.A. Sovereign Investors Fund produced better results than
the broad market, remaining essentially flat, with a total return of
- -0.33% at net asset value for the year ended December 31, 2000. By
comparison, the average variable annuity equity income fund returned
6.74% for the same period, according to Lipper, Inc. Historical
performance information can be found on page 24.
The Fund lagged its competitors because of its lack of technology
holdings during the first quarter in a tech-driven market. However, the
market shift that started in the second quarter of 2000, combined with
the Fund's newly implemented flexibility, helped it begin to outpace
its peer group. As more reasonably valued stocks rebounded, so did many
of the stocks in the Fund, including consumer staple stocks like PepsiCo
and Anheuser-Busch, health-care firms like Baxter International and
Abbott Laboratories, and financials like Fannie Mae, Freddie Mac and
supplemental insurance company AFLAC. On the other hand, even though we
reduced the Fund's retail exposure, we did suffer some losses from our
holdings in Target, Home Depot and Lowe's. With consumer spending down,
advertising revenues fell off, hurting our investments in Gannett and
Interpublic Group. An underweighted position in the solid-performing
electric utilities sector also ate into the Fund's performance relative
to its peers.
[Bar chart at the top of left hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 2% with -2% at the bottom and 8% at the top.
The first bar represents the -0.33% total return for John
Hancock V.A. Sovereign Investors Fund. The second bar
represents the 6.74% total return for Average variable
annuity equity income fund. A note below the chart reads "The
total return for John Hancock V.A. Sovereign Investors Fund
is at net asset value with all distributions reinvested. The
average variable annuity equity income fund is tracked by
Lipper, Inc. See the following page for historical
performance information."]
Enhancing the Fund's investment flexibility
Earlier in the year, the Fund's Board of Trustees approved an amendment
that we believe will enhance the Fund's investment flexibility. As
shareholders know, since inception the Fund has invested 100% of its
stock investments in what we call "dividend performers" -- companies
that have increased their dividends for at least ten consecutive years.
As of July 1, 2000, the Fund has been able to invest up to 35% of its
stocks in non-dividend performers.
The reason for this modification is simple. Historically, companies have
been measured largely on their ability to consistently produce and
increase dividends. Today, however, many companies have different views
on the importance of dividends as a measure of corporate health. In
fact, the number of companies that raise their dividends year after year
is shrinking. Instead of paying for dividend increases, many companies
are using cash flow to reinvest in their businesses through stock
buybacks, acquisitions or restructurings. The rising-dividend
requirement that has served shareholders so well is still valid.
However, as the market has evolved, blind adherence to it would threaten
our ability to deliver returns.
We want to stress that this modification will not change the Fund's
fundamental objective. However, it will give us the flexibility to keep
the stocks we like even if their rising-dividend pattern is interrupted.
In addition, we will now have the opportunity to consider a broader
universe of attractive companies that fit our fundamental criteria --
strong management, financial soundness, stable earnings and
profitability, brand-name recognition and reasonable valuations -- even
if they do not meet our ten-year rising dividend test.
"We expect
continued
weakening in
the U.S.
economy
during the
first part of
2001..."
Outlook 2001
We expect continued weakening in the U.S. economy during the first part
of 2001 due in part to reduced capital spending, a softening global
economy, weakening offshore demand for U.S. products and lower consumer
spending. In fact, the combination of these factors in an environment of
very low inflation led the Federal Reserve Board to cut short-term
interest rates just days into 2001. Since economic growth slowed so
quickly in late 2000, we anticipate that the Fed will continue to be
aggressive, looking to once again achieve the maestro touch of
successfully engineering another soft landing.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (0.33%) 68.23%
Average Annual Total Returns(1) (0.33%) 12.73%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual return since
inception would have been 12.42%. The expense limitation did not impact
the one-year performance.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Sovereign Investors Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Sovereign
Investors Fund, representing the growth of a hypothetical
$10,000 investment over the life of the fund. Within the
chart are two lines. The first line represents the Standard &
Poor's 500 Index and is equal to $22,043 as of December 31,
2000. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A.
Sovereign Investors Fund on August 29, 1996 and is equal to
$16,824 as of December 31, 2000.
John Hancock
V.A. International Fund
Overseas markets stumble in 2000
On December 14, 2000, Nicholas-Applegate Capital Management assumed
management responsibility for the Fund under a new subadvisory agreement
that shareholders will be asked to formally approve in an upcoming proxy
solicitation. Founded in 1984, Nicholas-Applegate is a recognized leader
in U.S. equity, global and international equity management and currently
manages more that $35 billion for institutional and individual
investors.
The discussion below provides a summary of the Fund's performance for
the year, followed by commentary from the new managers on their
investment style and strategies going forward.
The year 2000 was a difficult one for foreign stock markets as a group,
led by a significant downturn in Japan, where economic problems
prevailed, its currency fell and its main market index -- the Nikkei --
suffered from a reshuffling that upped the technology weighting. The
year began on the same high that closed out 1999, as the "TMT" sectors
- -- technology, media and telecommunications -- were soaring. But the
tide turned in March, when TMT stocks worldwide began a dramatic plunge
as fears grew that many of these stocks were far too expensive in the
face of a potential slowdown in the global economy and earnings growth.
In a major reversal of fortunes, the more cyclical, attractively valued
old-economy stocks began to make a comeback.
[Pie chart at bottom left-hand column with heading "Portfolio
Diversification." The chart is divided into seven sections
(from top to left): Pacific Rim ex-Japan 8%, Short-Term
Investments & Other 28%, Latin America 1%, U.K. & Ireland
11%, Continental Europe 26%, Canada 5% and Japan 21%. A note
below the chart reads "As a percentage of net assets on
December 31, 2000."]
"Our
bottom-up
process
guided us
to begin
cutting the
Fund's stake
in Japan..."
A number of factors continued to keep overseas markets volatile -- and
their results contained -- through the year's end. These included rising
oil prices, rising interest rates -- first in the United States and then
in Europe and elsewhere -- a slowdown in the U.S. economy later in the
year and the growing downturn in the U.S. stock market. What's more,
declines in many of emerging Asia's currencies and the continuing drop
in the value of the euro hurt U.S.-based investors. Overall, overseas
markets, as measured by the Fund's benchmark, the MSCI All Country World
Free Ex-U.S. Index, lost ground, returning -16.34% for the year ended
December 31, 2000.
Fund performance
For the year ended December 31, 2000, John Hancock V.A. International
Fund posted a total return of -25.17% at net asset value, compared with
the -14.72% return of the average variable annuity international fund,
according to Lipper, Inc. Historical performance information can be
found on page 27.
The Fund's relative underperformance came mainly from its timing in the
volatile TMT sectors. Although overweight versus the MSCI index, the
Fund had a lighter weighting than its peers when the tech group
skyrocketed early in the year. After boosting the TMT stake, the Fund
was hit by having an overweighted position -- particularly in Japan and
Europe -- as the stocks came back down to earth in the tumultuous months
of March and April. Some of the Fund's biggest detractors came from the
tech and telecom sectors, including Japanese companies Sony, Hikari
Tsushin and NTT DoCoMo Communications. The Fund was also hurt by its
large stake in European telecom giant Vodafone, which was pounded after
its announced plan to acquire Mannesman, although Mannesman's stock rose
on the news and was one of the Fund's best performers. Nortel Networks
and British Telecom were two telecom companies that plunged following
profit warnings.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with -30% at the bottom and 0% at the top.
The first bar represents the -25.17% total return for John
Hancock V.A. International Fund. The second bar represents
the -14.72% total return for Average variable annuity
international fund. A note below the chart reads "The total
return for John Hancock V.A. International Fund is at net
asset value with all distributions reinvested. The average
international fund is tracked by Lipper, Inc. See the
following page for historical performance information."]
"Many of the
uncertainties
haunting
the world's
markets in
2000 may
linger in
2001."
New management: strategies and changes
By Randall Kahn, CFA, and Loretta Morris,
for the Portfolio Management Team
On December 14, 2000, Nicholas-Applegate Capital Management assumed
management of the Fund. The cornerstone of our investment philosophy
rests on identifying investment opportunities that have three core
attributes. We look for companies that are poised to benefit from
positive change -- such as innovation, new leadership or
higher-than-expected earnings; that are in a position to sustain this
positive change over time; and that are beginning to be recognized by
the market through rising stock prices. When all three criteria are met,
we seek to invest in a timely fashion to maximize gains.
We are first and foremost bottom-up stock pickers, focusing on selecting
individual stocks with superior earnings potential. But we also have a
strict process in place to regularly assess political, economic,
monetary and technology factors in each country. This active approach to
country allocation guides our decisions on whether to overweight or
underweight specific countries in the portfolio.
Upon assuming management of the Fund on December 14, 2000, we began to
gradually transition the portfolio to be consistent with our investment
approach. We moved to pare the number of holdings in order to maintain
larger positions in fewer names and to make the Fund less country and
sector neutral. We also further reduced the Fund's exposure to the
volatile technology sector. Our bottom-up process guided us to begin
cutting the Fund's stake in Japan -- particularly in the construction
and banking sectors -- as we foresee little growth in that country in
the coming months. The shift out of Japan will continue in the new year.
In its place, we have identified more attractive opportunities in the
United Kingdom and have begun to shift some assets there. Due to
year-end liquidity issues, these moves are being made with deliberate
slowness.
A look ahead
Many of the uncertainties haunting the world's markets in 2000 may
linger in 2001. Technology stocks may remain under pressure in the
coming quarters, as valuations for many technology leaders remain high.
In addition, although global central banks seem to be done hiking
interest rates, the lagged effects of their tightenings will continue to
slow world activity well into 2001, according to International Strategy
and Investment. Going forward, we are focusing on companies that are
posting strong earnings, and we will take a more defensive stance by
investing in the food, pharmaceutical, utilities, financials and
energy/oil service sectors.
- -----------------------------------------------------------------------
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns (25.17%) 28.90%
Average Annual Total Returns(1) (25.17%) 6.02%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been (27.26%) and
4.40%, respectively.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. International Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Morgan Stanley Capital International
(MSCI) All Country World Free Ex-U.S. Index, which measures the
performance of a broad range of developed and emerging stock markets.
The index represents securities that are freely traded on a variety of
equity exchanges around the world. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. International
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
two lines. The first line represents the MSCI All Country
World Free Ex-U.S. Index and is equal to $13,601 as of
December 31, 2000. The second line represents the value of
the hypothetical $10,000 investment made in the John Hancock
V.A. International Fund on August 29, 1996 and is equal to
$12,889 as of December 31, 2000.
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
THOMAS M. FINUCANE AND THOMAS C. GOGGINS, PORTFOLIO MANAGERS
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Financial Industries Fund. Caption below reads "Jim Schmidt."]
John Hancock
V.A. Financial Industries Fund
Financial stocks rebound as rates stabilize and mergers pick up
After struggling in 1999, financial stocks produced some of the market's
best results in 2000, as market leadership changed dramatically and
high-flying technology stocks fell sharply beginning in March. With
growing signs that the economy was slowing from its torrid pace,
investors became increasingly concerned that the business fundamentals
of many technology and telecommunications companies didn't justify their
sky-high valuations. Financial stocks were the beneficiaries of this
important market change, as investors sought out more attractively
valued companies. This interest-rate sensitive group also benefited from
the growing perception that the Federal Reserve was nearing the end of
its cycle of raising interest rates. A summer wave of merger activity in
the wake of financial reform legislation also lifted the group.
"Some of our
biggest con-
tributors to
performance
were our
brokerage and
asset manager
stocks."
For the first 10 months of the year, the best performers in the
financial group were the asset managers and brokerage houses, while some
banks reported earnings disappointments. But as the year progressed and
less expensive value stocks became even more desirable as market turmoil
grew, the more growth-oriented broker and asset managers gave back some
of their gains and banks moved into the lead. With the favorable turn in
financial stocks' fortunes this year, the Standard & Poor's Financial
Index rose 26.1% for the year ended December 31, 2000, while the broader
market, as measured by the Standard & Poor's 500 Index, lost 9.1%.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is Fifth Third Bancorp 4.1%, the
second is AFLAC 3.7%, the third Ambac Financial Group 3.7%,
the fourth Wells Fargo 3.6% and the fifth American
International Group 3.5%. A note below the table reads "As a
percentage of net assets on December 31, 2000."]
Fund performance and strategy update
John Hancock V.A. Financial Industries Fund benefited fully from the
upswing in financial stocks, producing a total return of 27.16% at net
asset value for the year ended December 31, 2000. That compared with the
26.56% return of the average open-end financial services fund and the
0.63% return of the average variable annuity sector/miscellaneous fund,
according to Lipper, Inc. See page 30 for historical performance
information.
The Fund continues to seek capital appreciation by investing in a broad
range of U.S. and foreign financial services companies of any size.
During the year, shareholders voted to eliminate a restriction that had
required the Fund to invest more than 25% of its assets in the banking
industry. This change provides the Fund with added flexibility.
Brokers, asset managers strong
Some of our biggest contributors to performance were our brokerage and
asset manager stocks. They rode a wave of high-priced takeovers that
emerged in the wake of the Gramm-Leach-Bliley Act -- legislation that
dropped the barriers preventing banks, brokers and insurers from
affiliating. Over the summer, Chase Manhattan bank bought J.P. Morgan,
UBS announced plans to buy investment banker PaineWebber and Credit
Suisse Group bought Donaldson, Lufkin and Jenrette.
[Bar chart at the top of left hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with 0% at the bottom and 0% at the top. The
first bar represents the 27.16% total return for John Hancock
V.A. Financial Industries Fund. The second bar represents the
26.56% total return for Average open-end financial services
fund. The third bar represents the 0.63% total return for
Average variable annuity sector/miscellaneous fund. A note
below the chart reads "The total return for John Hancock V.A.
Financial Industries Fund is at net asset value with all
distributions reinvested. The average open-end financial
services fund and variable annuity sector/miscellaneous fund
are tracked by Lipper, Inc. See the following page for
historical performance information."]
We also benefited from having shifted away from the regional brokers
last year to the wire house brokerage names like Morgan Stanley Dean
Witter and Merrill Lynch, which were top performers for the year despite
their pullback in the last two months. Although it was our belief that
underwriting, trading and merger activity would slow in the next several
quarters, we are still positive on the group because the level of
investment banking activity is still very good and the underwriting
calendar should pick up again once the market firms up. The top
contributor to the Fund's performance was Amvescap, an asset manager
that increased its stature this year through the success of asset
gathering at its AIM and Invesco subsidiaries. The stalwart insurance
broker Marsh & McLennan also served us well, partly because of the
upturn in the property and casualty insurance business, and also because
of its strong mutual fund arm.
Property and casualty makes a comeback
For much of the year, our life insurance companies, including AXA
Financial and AFLAC were better performers than the property and
casualty insurers, which have struggled for the last five years in a
very competitive pricing environment. But in the latter part of the
year, the global pricing cycle for property and casualty companies
finally began to turn upward, so we started to shift some of our
insurance assets back to this group.
Bank selections mostly help
For the most part, we focused on the trust banks like State Street
Corp., Bank of New York and Northern Trust Corp. which did well because
of their recurring revenue streams from their main advisory and custody
businesses. Our regional banks were mixed. Wells Fargo and FleetBoston
Financial did well, as they successfully navigated their way through
acquisitions. On the other hand, First Tennessee and Marshal & Ilsley
were tarnished by earnings disappointments. During the year we upped our
stake in several attractively priced regionals, such as Fifth Third
Bancorp and Wells Fargo, and that served us well toward the end of the
year.
"The prospects
for financial
stocks remain
bright."
A look ahead
The prospects for financial stocks remain bright. With the economy
slowing dramatically in the fourth quarter, the Fed moved just days into
the new year to cut interest rates in an aggressive signal that it
intended to prevent an economic stall. Investors tend to favor financial
stocks more in an environment of lower rates and slower, steadier
economic growth. It remains to be seen if the Fed will succeed in
pulling off another soft landing for the economy, but we believe it's
the most likely outcome. What's more, we have only just begun to see the
powerful results of the merger trend spawned by financial reform
legislation and we expect more consolidation to follow.
- ------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (4/30/97)
---------- ----------
Cumulative Total Returns 27.16% 88.73%
Average Annual Total Returns(1) 27.16% 18.90%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
since inception would have been 18.84%. The expense limitation did not
impact the one-year performance.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Financial Industries Fund would be worth, assuming all
distributions were reinvested for the period indicated. For comparison,
we've shown the same $10,000 investment in the Standard & Poor's 500
Index -- an unmanaged index that includes 500 widely traded common
stocks and is often used as a measure of stock market performance. It is
not possible to invest in an index.
Line chart with the heading John Hancock V.A. Financial
Industries Fund, representing the growth of a hypothetical
$10,000 investment over the life of the fund. Within the
chart are two lines. The first line represents the value of
the hypothetical $10,000 investment made in the John Hancock
V.A. Financial Industries Fund on April 30, 1997 and is equal
to $18,873 as of December 31, 2000. The second line
represents the Standard & Poor's 500 Index and is equal to
$17,339 as of December 31, 2000.
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
THOMAS M. FINUCANE AND THOMAS C. GOGGINS, PORTFOLIO MANAGERS
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Regional Bank Fund. Caption below reads "Jim Schmidt."]
John Hancock
V.A. Regional Bank Fund
Bank stocks stage a rebound in second half of 2000
Bank stocks did an about-face in 2000 and far surpassed the broader
market's results, finally re-gaining investors' attention as interest
rates stopped going up and technology stocks tanked. In the first three
months of the year, investors only had eyes for technology. But starting
in March, with the first hint of cracks in the robust economy, investors
saw the light and moved out of the technology and telecommunications
sectors, where stock prices had reached the stratosphere. Financial
stocks of all stripes were the beneficiaries of this important market
shift, as investors sought out more attractively valued companies. This
interest-rate sensitive group was also boosted by a growing sense that
the Federal Reserve was done raising rates to cool the economy.
Even with their rally, bank stocks had a few setbacks along the way as
earnings shortfalls and increases in non-performing loans were announced
at some prominent banks. But regional banks and thrifts came on strong
in November and December, when continued signs that the economy had
rapidly slowed convinced investors that the Fed's next move would be a
rate cut to prevent the economy from stalling. Three days after the year
ended, the Fed did just that in a surprising and aggressive move, and
also signaled more cuts could be coming. With the favorable turn in
financial stocks' fortunes this year, the Standard & Poor's Financial
Index rose 26.1% for the year ended December 31, 2000, while the broader
market, as measured by the Standard & Poor's 500 Index, lost 9.1%.
[Table at bottom left hand column entitled "Top Five Stock
Holdings." The first listing is Mid-State Bancshares 3.9%,
the second is Valley National Bancorp 3.8%, the third Fifth
Third Bancorp 3.7%, the fourth Commerce Bancshares 3.7% and
the fifth Independent Bank Corp. 3.4%. A note below the table
reads "As a percentage of net assets on December 31, 2000."]
"...we still
anticipate
average 2001
bank earnings
growth to be
about 8%
higher than
this year's."
Fund performance
For the year ended December 31, 2000, John Hancock V.A. Regional Bank
Fund posted a strong return of 17.91% at net asset value, due largely to
its second-half rally when it rose 30%. In comparison, the average
open-end financial services fund returned 26.56% and the average
sector/miscellaneous fund returned 0.63% for the year, according to
Lipper, Inc. See page 33 for historical performance information.
While significantly outperforming the broad market, the Fund lagged the
Lipper group of financial services funds, many of which invested in the
securities brokers, asset managers and larger diversified financial
firms, which were the better performers until the last two months of the
year. Furthermore, although most of our holdings posted earnings results
in line with our expectations, we did experience earnings shortfalls
among some of our larger holdings. The problems either stemmed from an
increase in non-performing loans -- at such banks as UnionBanCal Corp.,
Bank of America, Marshal & Ilsley, Bank of the Ozarks and Lamar Capital
- -- and/or from merger integration issues.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with 0% at the bottom and 30% at the top.
The first bar represents the 17.91% total return for John
Hancock V.A. Regional Bank Fund. The second bar represents
the 26.56% total return for Average open-end financial
services fund. The third bar represents the 0.63% total
return for Average variable annuity sector/miscellaneous
fund. A note below the chart reads "The total return for John
Hancock V.A. Regional Bank Fund is at net asset value with
all distributions reinvested. The average open-end financial
services fund and variable annuity sector/miscellaneous fund
are tracked by Lipper, Inc. See the following page for
historical performance information."]
"Interest rates
have started
to come
down, which
tends to
boost
investors'
confidence
in bank
stocks...."
Focus on asset quality
As we mentioned in our last report, after a lengthy period of an
expanding economy and a favorable lending environment, it is no surprise
that as the economy slowed this year there was a pickup in the level of
non-performing assets. But even with the increase, the level of problem
loans still remains low at 0.70% of total assets, according to FDIC
statistics. The area experiencing much of the deteriorating credit
quality is syndicated loans -- large loans shared among a consortium of
banks. While the non-performing loan rate could rise some more, we
expect that it should remain at a low level (below 1% of total assets)
and that the banking industry is establishing adequate loan loss
reserves. On an ongoing basis, our team continues to carefully
scrutinize the credit risks and prospects of our banks.
Fundamentals intact; mergers still a trend
Even with an increase in non-performing assets, a slowdown in loan
growth and flat net interest margins, we still anticipate average 2001
bank earnings growth to be about 8% higher than this year's. This year,
our biggest contributor to the Fund's performance was Texas bank
Southwest Bancorp. The largest bank left headquartered in Texas, it
gained significant market share and benefited from the state's
energy-induced boom. Texas bank Cullen Frost also rode this wave, and we
sold it to lock in profits during the year.
Although bank merger activity slowed in 2000, the consolidation trend
remains solidly in place. More recently there was a resurgence of
activity, with FleetBoston Financial's announced purchase of Summit
Bank, and Firstar's acquisition of U.S. Bancorp. Both of these
transactions were priced at more realistic levels, thus boosting the
chances of success. We could see more consolidation as banks, struggling
to increase revenues, use mergers as a means of improving profits
through gained operating efficiencies.
A look ahead
We are encouraged by the recent turn of events for bank stocks. Even
though further asset- quality announcements could roil the group, there
are several factors working in our favor. Interest rates have started to
come down, which tends to boost investors' confidence in bank stocks,
and prospects for further merger activity are good. While it's still not
clear that the Fed has achieved the sought-after soft landing, we
believe the potential for this not-too-fast, not-too-slow outcome for
the economy remains quite real, as the Fed has made clear -- with its
interest-rate cut days after the year's end -- that it is intent on
preventing an economic meltdown. Finally, even though the stocks have
outperformed the market by a wide margin lately, their valuations remain
reasonable, which means there's more room for them to advance.
- ------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (5/1/98)
---------- ----------
Cumulative Total Returns 17.91% 4.96%
Average Annual Total Returns(1) 17.91% 1.83%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
since inception would have been 1.80%. The expense limitation did not
impact the one-year performance.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Regional Bank Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Regional Bank
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
two lines. The first line represents the Standard & Poor's
500 Index and is equal to $12,291 as of December 31, 2000.
The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Regional
Bank Fund on May 1, 1998 and is equal to $10,496 as of
December 31, 2000.
BY BARRY GORDON, MARC H. KLEE, CFA, AND ALAN LOEWENSTEIN, CFA,
PORTFOLIO MANAGERS
[A 3" x 2" photo at bottom right side of page of John Hancock
V.A. Technology Fund. Caption below reads "Technology Fund
management team members (l-r): Barry Gordon, Marc Klee and
Alan Loewenstein."]
John Hancock
V.A. Technology Fund
Tech stocks stumble in 2000 following eye-popping gains in 1999
"Even some
of the
technology
sector's
first-half
stalwarts
gave way in
the final
months..."
After skyrocketing throughout 1998, 1999 and the first calendar quarter
of 2000, technology stocks came plunging back to earth from March
through December 2000. In 1998, the technology-laden NASDAQ Composite
Index posted an impressive 40% gain, followed by an 86% rise in 1999 and
another 24% gain from January 1 through March 10, 2000. But after
peaking in mid-March, tech stocks suffered a tumble that would last
until the end of the year. The downtrend was prompted by a number of
difficulties, including the prospects for a slowing economy brought on
by higher interest rates, weaker corporate profitability and investors'
growing dislike of Internet-related stocks. Those stocks led the tech
selloff, although they were later joined in the fourth quarter by many
other technology segments. Once it became clear that consumers were
buying fewer personal computers and corporations were cutting spending
on technology and telecommunications products from servers to switches
to software, the selling accelerated. From the Fund's inception on May 1
through the end of 2000, the NASDAQ Composite Index fell 26%.
[Table at bottom left-hand column entitled "Top Five Stock
Holdings." The first listing is Mercury Interactive 4.0%, the
second is BEA Systems 3.1%, the third Solectron Corp. 3.1%,
the fourth EMC Corp. 3.1% and the fifth Cisco Systems 2.9%. A
note below the table reads "As a percentage of net assets on
December 31, 2000."]
Fund performance
John Hancock V.A. Technology Fund posted a total return of -26.56% at
net asset value from its May 1 inception through December 31, 2000. In
the same period, the average open-end science and technology fund
returned -36.72% and the average variable annuity sector/miscellaneous
fund returned -4.64%, according to Lipper, Inc.
Few places to hide
Semiconductor and related companies, which suffered a major retrenchment
in the second half of 2000 in response to slowing demand for computers,
were among our hardest hit during the period. In the early stages of the
Fund's operations, our view was that the demand for chips -- driven
primarily by the strength in the personal computer and
telecommunications sectors -- would remain robust. That proved to be the
case early on, when chip manufacturers posted strong profit gains and
were among our best performers.
Beginning in late summer, however, chip demand contracted in response to
worries over slower economic growth. Chip makers such as Micron
Technology, Integrated Device Technology and Cypress Semiconductor Corp.
were hit fairly hard. The stocks of companies that make the machines
and tools needed to make a chip, including KLA-Tencor and PRI
Automation, also were disappointments.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "From inception
May 1, 2000 through December 31, 2000." The chart is scaled in
increments of 5% with -40% at the bottom and 0% at the top.
The first bar represents the -26.56% total return for John
Hancock V.A. Technology Fund. The second bar represents the
- -36.72% total return for Average open-end science and
technology fund. The third bar represents the -4.64% total
return for Average variable annuity sector/miscellaneous
fund. A note below the chart reads "The total return for John
Hancock V.A. Technology Fund is at net asset value with all
distributions reinvested. The average open-end science and
technology fund and variable annuity sector/miscellaneous
fund are tracked by Lipper, Inc. See the following page for
historical performance information."]
Even some of the technology sector's first-half stalwarts gave way in
the final months of 2000 to concerns about weakening demand for
computers and related products. After exiting the summer months in
reasonably good shape, PC makers including Dell Computer and Gateway
Inc., network company Cisco Systems and on-line company America Online
all had succumbed to the market's worries by year end.
Bright spots emerge
Despite the gloom and doom, a few of our holdings posted significant
gains during the period. The stock of BEA Systems rose more than 45%.
The company is a leader in an industry known as application services, a
provider of a middle layer of software that companies use to develop
Web-based programs that work with many types of hardware and software.
We also saw strong gains from our holdings in fiber-optical networking
company CIENA Corp. It was buoyed by rapidly expanding demand for
long-haul, high-speed bandwidth. Also strong were the stocks of Web
performance management program maker Mercury Interactive and software
maker i2 Technologies.
Another plus for performance was our decision to hold onto any new money
that came into the Fund in the final months of the year. While we did
make some new investments as we saw compelling values, we sidelined some
cash to wait for a time when we think that most of the pain is behind
us. That's why our cash position stood at an unusually high 30% of
assets at year end.
"...tech stocks
are priced
much more
attractively."
Outlook
We're optimistic about tech stocks' prospects in the year 2001. Although
the initial impact of a slowing economy on tech stocks was
overwhelmingly negative, we believe its ultimate effect will be
positive. History suggests that during periods of slow, but positive,
economic growth, tech stocks fare well because investors look to them
for better-than-average earnings growth. We are also encouraged by the
Federal Reserve's intent to cut interest rates. Just after the period
ended, the Fed surprised most market observers by cutting interest rates
one-half of a percentage point on January 3, 2001. We think that further
interest-rate cuts are in store and that they will stimulate economic
growth. Looking at 1995, the technology sector was the
third-best-performing sector in the market after the Fed had
successfully engineered a "soft landing" through a series of
interest-rate cuts the previous year. Now that a lot of the excessive
valuation that existed in the tech sector in late 1999 and early 2000
has been wrung out, tech stocks are priced much more attractively. Not
that lower valuations, per se, are a reason to own tech stocks. But
coupled with potential strong earnings gains, they give us plenty of
reason for optimism. Also, because many tech companies provide
productivity enhancements, we think they are poised to benefit from the
need by corporate America to be leaner in a slower economy.
- ------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
INCEPTION
(5/1/00)
----------
Cumulative Total Return (26.56%)
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the total return since inception
would have been (27.55%).
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Technology Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an
unmanaged index that includes 500 widely traded common stocks and is
often used as a measure of stock market performance. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Technology
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
two lines. The first line represents the Standard & Poor's
500 Index and is equal to $9,162 as of December 31, 2000. The
second line represents the value of the hypothetical $10,000
investment made in the John Hancock V.A. Technology Fund on
May 1, 2000 and is equal to $7,344 as of December 31, 2000.
BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
BENJAMIN A.MATTHEWS, PORTFOLIO MANAGER
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Bond Fund. Caption below reads "James Ho."]
John Hancock
V.A. Bond Fund
Fund closes year on strength as interest rates fall
and Treasury bonds soar
The broad fixed-income market had a better time of it this year than
last, although corporate bonds experienced a fair amount of volatility
and uncertainty. John Hancock V.A. Bond Fund's heavy weighting in U.S.
government and agency issues was the primary driver of Fund performance,
as this fixed-income segment produced the best results. Selectivity and
in-depth research proved essential in the corporate area as well,
particularly given the turbulence caused by the slowing economy.
Overall, it was flexibility in asset allocation that enabled the Fund to
post solid gains.
Fund performance
For the year ended December 31, 2000, John Hancock V.A. Bond Fund
produced a total return of 11.89% at net asset value. This compares
favorably with the 9.79% return of the average variable annuity
corporate debt A-rated fund, according to Lipper, Inc. For historical
performance information, please turn to page 39.
[Table at bottom left-hand column entitled "Top Five
Sectors." The first listing is U.S. Government 37%, the
second is U.S. Agencies 24%, the third Mortgage Banking 6%,
the fourth Utilities 6% and the fifth Finance 4%. A note below
the table reads "As a percentage of net assets on December
31, 2000."]
Defensive approach defines portfolio composition
Early in the year, we began to build in some more defensive
characteristics into the Fund's portfolio and further enhanced that
approach as the period progressed. Calendar 2000 was the year in which
the Treasury market was king. The run on Treasury securities,
particularly longer-term issues, began in February and continued
unabated through period's end. The U.S. government's budget surplus
prompted the Treasury to propose a buyback of millions of dollars worth
of bonds in coming years, jumpstarting a dramatic rally in its long-term
bonds. The Federal Reserve Board continued to raise interest rates
through mid-May, further strengthening the rally as investors looked
past the rate hikes to their intended effect -- a slowdown in the
economy. Stock market volatility simply stoked the fire as investors
rushed to the relatively safe haven of U.S. government securities.
"We focused
more on
industries
that tend to
be relatively
stable and
insulated
from an
economic
slowdown."
Our strategy in the Treasury arena was at first to cluster assets at
both the long-end and short-end of the Treasury yield curve, reflecting
our belief that the yield curve would flatten. (The yield curve is a
plotting of yields across the maturity spectrum.) By early summer, with
the curve having flattened, we not only increased the Fund's exposure to
Treasury securities but moved some assets into intermediate-term issues
so that by period's end we had a laddered approach in place. We also
bolstered the Fund's weighting in mortgage-backed and agency securities.
All performed extremely well.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with 0% at the bottom and 15% at the top.
The first bar represents the 11.89% total return for John
Hancock V.A. Bond Fund. The second bar represents the 9.79%
total return for Average variable annuity corporate debt A-
rated fund. A note below the chart reads "The total return
for John Hancock V.A. Bond Fund is at net asset value with
all distributions reinvested. The average variable annuity
corporate debt A-rated fund is tracked by Lipper, Inc. See
the following page for historical performance information."]
"While nothing
is guaranteed,
the outlook
for corporate
bonds
appears much
improved."
Upgraded credit quality
Credit quality concerns played a big role in investor sentiment this
past year. As the economy showed concrete signs of not only slowing, but
perhaps slowing too much, investors became increasingly skittish about
the creditworthiness of corporate issuers. This fear, combined with the
strength of the Treasury market, caused credit yield spreads to widen
dramatically. As you may know, credit spreads represent the difference
in yield between bonds of different credit quality. The more credit
sensitive an issue was, the greater the downward pressure. Over the
period, we focused our attention on higher-quality issues within both
the investment-grade and high-yield arenas. One such holding is General
Electric Capital Corp. For the most part, we held smaller positions in
the longer-maturity securities represented in the Fund, though at times
we swapped into the shorter-term debt of corporate issuers that we
already owned.
Decreased high-yield exposure
The high-yield sector suffered the most. Any corporate issuer that had
even a hint of difficulty in meeting earnings projections witnessed the
floor dropping out from under its bond prices. Defaults increased
substantially. We trimmed the portfolio's exposure to high-yield debt by
selling among other bonds those issued by telecommunication companies.
These included Global Crossing, NEXTLINK Communications and Focal
Communications.
Troubled names sold early
Thorough research and daily monitoring of securities proved vital to
performance as the economy weakened. We were able to move out of several
troubled names before the brunt of negative sentiment and price declines
were realized. Holdings we sold included Dillard's Inc., Conseco, FINOVA
Capital Group and two beaten down California utility companies --
Pacific Gas & Electric and Southern California Edison.
Utilities, defense, healthcare, energy emphasized
We focused more on industries that tend to be relatively stable and
insulated from an economic slowdown. These include utility, defense,
healthcare, and energy-related issues, such as Verizon, Keyspan,
CalEnergy, NRG, Lockheed Martin, Raytheon, Tenet Healthcare, Hospital
Corporation of America, Amerada Hess and Apache. We also maintained
sizable positions in high-demand media names such as Continental
Cablevision.
Outlook
Shortly after the close of 2000, the Fed cut short-term interest rates
by one-half a percentage point. Bond prices rose and corporate spreads
narrowed. While nothing is guaranteed, the outlook for corporate bonds
appears much improved. Investors seem to be now anticipating the
possibility of economic strengthening and greater corporate
profitability down the road. Though we are encouraged, we will watch the
economy closely to determine whether or not too much weakness has
already set in. We shall move ahead with cautious optimism and consider
opportunities to add selectively to high-yield and cyclical issues. Our
duration, or interest rate sensitivity, remains relatively neutral,
though we have begun to shorten it slightly, believing that yields in
the government sector don't have much room to fall further.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns 11.89% 38.98%
Average Annual Total Returns(1) 11.89% 7.88%
YIELD
For the period ended December 31, 2000
SEC 30-DAY
YIELD
----------
John Hancock V.A. Bond Fund(1) 5.84%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been 11.72% and
6.95%, respectively, and the yield would have been 5.63%.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Bond Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Lehman Brothers Corporate Bond Index --
an unmanaged index that mirrors the investment objectives and
characteristics of the Fund. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Bond Fund,
representing the growth of a hypothetical $10,000 investment
over the life of the fund. Within the chart are two lines.
The first line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Bond Fund on
August 29, 1996 and is equal to $13,897 as of December 31,
2000. The second line represents the Lehman Brothers
Corporate Bond Index and is equal to $13,466 as of December
31, 2000.
BY ARTHUR N. CALAVRITINOS, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
JANET L. CLAY, CFA, FREDERICK L. CAVANAUGH, JR. AND DANIEL S. JANIS,
PORTFOLIO MANAGERS
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. High Yield Bond Fund. Caption below reads "Arthur
Calavritinos."]
John Hancock
V.A. High Yield Bond Fund
Slowing economy, liquidity woes hurt high-yield bonds
It was a difficult year for high-yield bonds. The impact of rising
interest rates in the first half of 2000 finally began to take hold in
the shape of a slowing economy. A growing number of companies began to
miss their earnings targets, sending shock waves through the financial
markets, especially the technology-heavy NASDAQ Composite Index. The
number of defaults among high-yield companies, defined as those rated
below investment grade, also rose. Telecommunications companies, whose
prices had risen to stratospheric levels, were particularly hard hit. As
these companies fell short in their business plans and faced diminished
prospects for getting their next round of funding in the equity market,
their prices tumbled. Since this sector makes up the largest component
of the high-yield market, its downfall was a significant drag on the
group. High-yield companies also were hurt by a growing lack of
liquidity, or ease of trading, that was caused by the mergers of several
investment-banking firms.
"With fuel
prices
spiking, we
increased our
weighting in
oil and gas
and related
service
companies."
[Pie chart at bottom left-hand column with heading "Portfolio
Diversification." The chart is divided into six sections
(from top to left): Common Stock 9%, Short-Term Investments &
Other 25%, Convertible Bonds 3%, Preferred Stock 3%, Foreign
Corporate Bonds 16% and U.S. Corporate Bonds 44%. A note
below the chart reads "As a percentage of net assets on
December 31, 2000."]
The struggles of these higher-risk bonds stood in marked contrast to
U.S. government bonds, which benefited from stabilizing rates, reduced
supply, the prospects of a slowing economy and their status as a safe
haven in the face of growing stock-market and presidential election
uncertainties. By the end of the year, the difference in yield between
high-yield bonds and Treasury bonds had widened significantly.
High-yield bond yields averaged 14.12%, as measured by the Merrill Lynch
High Yield Master II Index, compared with the 5.11% yield of the 10-year
Treasury bond.
Fund performance
For the year ended December 31, 2000, John Hancock V.A. High Yield Bond
Fund posted a total return of -6.08% at net asset value. By comparison,
the average variable annuity high current yield fund returned -7.03%,
according to Lipper, Inc. Historical performance information can be
found on page 42.
Telecommunications cut
Although telecommunications is the Fund's largest sector concentration,
we continue to maintain an underweighting compared to our peers since so
many high-yield telecom companies are only several years old and have
yet to deliver results. During the year, we became increasingly
convinced that the telecom market was reaching a point of too much
capacity and not enough demand -- for everything from equipment to
services. As a result, we pared our stake from 23% a year ago to 14% at
the end of December. We sold Internet Web-hosting companies PSI Net and
Exodus Communications and sold the common stock of Viatel, a competitive
local exchange carrier (CLEC) in Europe. Although we sold these and
other names before their prices fell even more, we still had some
disappointments. KMC Telecom Holdings was a prime example of the
problems facing many telecom start-ups. A CLEC serving the Southeast, it
provides telephone, cable and Internet access to companies in direct
competition with the Baby Bells. While it has a good set of assets, it
also has a large amount of debt, needs more money to grow, and is being
pinched in its ability to access capital to continue executing its
business plan.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 5% with -10% at the bottom and 0% at the top.
The first bar represents the -6.08% total return for John
Hancock V.A. High Yield Bond Fund. The second bar represents
the -7.03% total return for Average variable annuity high
current yield fund. A note below the chart reads "The total
return for John Hancock V.A. High Yield Bond Fund is at net
asset value with all distributions reinvested. The average
variable annuity high current yield fund is tracked by
Lipper, Inc. See the following page for historical
performance information."]
Credit specific issues hurt
Our biggest disappointments came from several company-specific problems,
such as Asia Pulp & Paper (APP) which sparked market concerns and lost
credibility when it announced that it needed to extend its debt
maturities. Cargo operator Fine Air Services filed for bankruptcy
protection after failing to execute its business plan because of
operational difficulties.
Energy grows
With fuel prices spiking, we increased our weighting in oil and gas and
related service companies. We are particularly interested in the natural
gas market, since that is where we see the biggest potential for further
exploration and development, as well as price gains, given the low
supply and growing demand. We added to our stakes in oil drilling
company Grey Wolf and Gothic Production, a natural gas exploration and
production company that was recently acquired by Chesapeake. Key Energy
Services, the major player in the well-servicing business, has performed
admirably. We sold our Key Energy stock, but still hold a significant
stake in its bonds. We also added a stake in CHC Helicopter, a Canadian
company that provides helicopter service to offshore rigs and coastal
rescue operations.
"...investors
are soon
bound to
recognize
the value
that exists in
the high-yield
sector."
Outlook
We remain cautious about the near-term prospects for high-yield bonds.
It's likely that we could see more failures in the telecommunications
group in 2001. We are also waiting for liquidity to return to the
high-yield market, which should eventually happen. But we also see a
silver lining. As investors recover from the "irrational exuberance"
that gripped high-yield telecommunications bonds as well as stocks, we
believe they will reassess the risks and rewards of investing in various
asset classes. While this takes time, a return to a more rational mode
of investing will inevitably serve us well, especially if the stock
market remains dicey. With high-yield bond prices low and their yields
at very high levels compared to Treasuries, investors are soon bound to
recognize the value that exists in the high-yield sector.
- ------------------------------------------------------------------------
See the prospectus for the risks of investing in high-yield bonds.
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (1/6/98)
---------- ----------
Cumulative Total Returns (6.08%) (4.16%)
Average Annual Total Returns(1) (6.08%) (1.41%)
YIELD
For the period ended December 31, 2000
SEC 30-DAY
YIELD
----------
John Hancock V.A. High Yield Bond Fund(1) 14.03%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return for
the one-year period and since inception would have been (6.47%) and
(1.70%), respectively, and the yield would have been 13.64%.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. High Yield Bond Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Lehman Brothers High Yield Bond Index
- -- an unmanaged index of fixed-income securities that are similar, but
not identical, to the bonds in the Fund's portfolio. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. High Yield Bond
Fund, representing the growth of a hypothetical $10,000
investment over the life of the fund. Within the chart are
two lines. The first line represents the Lehman Brothers High
Yield Bond Index and is equal to $9,819 as of December 31,
2000. The second line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A.
High Yield Bond Fund on January 6, 1998 and is equal to
$9,591 as of December 31, 2000.
BY DAWN BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
[A 1 1/2" x 3" photo at bottom middle of page of John Hancock
V.A. Money Market Fund. Caption below reads "Dawn Baillie."]
John Hancock
V.A. Money Market Fund
Short-term interest rates rise through May,
then stabilize as the economy starts to slow
It was a good year for money-market fund investors, who saw their yields
rise and their returns beat those of most stock-fund investors. In the
first half of the year, money-market yields rose along with interest
rates. This occurred after all signs pointed to a very robust U.S.
economy in January, with soaring consumer confidence and a booming stock
market sparking concerns of an uptick in inflation. As a result, the
Federal Reserve switched to its inflation-fighting mode again, raising
the federal funds rate that banks charge each other for overnight loans
by one-quarter percentage point in February and again in March in an
effort to cool the economy and block inflation. When that didn't deter
the economy, or the stock market, the Fed took the unusual step of
raising rates by one-half a percentage point in May. Shortly after, the
economy began to show signs of slowing, while inflation remained
relatively benign. This trend continued through the year's end, so the
Fed stayed on the sidelines and the federal funds rate ended the year at
6.50%, up from 5.50% a year earlier. After rising in the first half of
the year, money-market yields remained fairly level, since the federal
funds rate is a key pricing benchmark for money-market securities.
In the second half of the year, the effects of the slowing economy began
to show up in earnest in the form of earnings disappointments -- which
sent the stock market reeling -- and slowdowns in manufacturing, housing
and consumer spending. So by the end of the year, the Fed actually
returned to its neutral stance and investors even began to anticipate
rate cuts in 2001.
7-day effective yield
On December 31, 2000, John Hancock V.A. Money Market Fund had a 7-day
effective yield of 6.17%. By comparison, the average taxable
money-market fund had a 7-day effective yield of 5.91%, according to
Lipper, Inc.
"It was a good
year for
money-market
fund
investors..."
Staying short
For the first nine months of 2000, we kept the Fund's maturity slightly
shorter than average, believing that rates were on the rise, as the Fed
remained intent on slowing the economy and preventing inflation through
a series of rate hikes. This conservative stance meant that our money
was not tied up for as long, so we were able to move more quickly into
higher-yielding securities as rates rose.
Our thinking changed by the end of September, as we began to see a
marked and consistent slowdown in housing, manufacturing and the
consumer and producer price indexes. Believing that a slowing economy
would keep the Fed on hold, or even cause it to reverse course and lower
rates, we extended our maturity in October to be on the average. We
stayed that way through year end, mostly to take advantage of the
year-end bargains and higher yields that we can generally find as
traders clear out their inventory of money-market securities.
[Bar chart at the top of left-hand column with heading "7-Day
Effective Yield." Under the heading is a note that reads "As
of December 31, 2000." The chart is scaled in increments of
2% with 0% at the bottom and 8% at the top. The first bar
represents the 6.17% total return for John Hancock V.A. Money
Market Fund. The second bar represents the 5.91% total return
for Average taxable money-market fund. A note below the chart
reads "The average taxable money-market fund is tracked by
Lipper, Inc. Past performance is no guarantee of future
results."]
"With the
prospect for
additional
rate cuts
real, we plan
to extend our
maturity..."
A look ahead
With the economy slowing down so rapidly, we had anticipated that the
Fed would begin lowering rates at its next meeting in late January. In
fact, just three days after the Fund's year ended, the Fed took the
surprise step of lowering rates by one-half a percentage point in an
aggressive effort to avoid a serious economic downturn. In doing so, the
Fed cited weaker sales, production, consumer confidence and financial
markets, while core inflation remained tame. Even before this move, we
had confidence that the Fed would continue to nimbly manage the
economy's growth and prevent a recession, and this recent action further
bolsters that view. With the prospects for additional rate cuts real, we
plan to extend our maturity to slightly longer than average in an effort
to lock in higher rates. As always, we will continue to focus not only
on providing the Fund with a competitive yield, but also on preserving
stability of principal.
- ------------------------------------------------------------------------
The Fund is neither insured nor guaranteed by the U.S. government.
Although the Fund seeks to maintain a net asset value of $1.00 per
share, it is possible to lose money by investing in the Fund.
BY FREDERICK CAVANAUGH, MANAGEMENT TEAM LEADER,
AND ARTHUR N. CALAVRITINOS, CFA, JANET L. CLAY, CFA, AND DANIEL S. JANIS,
PORTFOLIO MANAGERS
[A 1 1/2" x 3" photo at bottom right side of page of John Hancock
V.A. Strategic Income Fund. Caption below reads "Fred
Cavanaugh."]
John Hancock
V.A. Strategic Income Fund
Treasury securities advance, while high-yield bonds stumble
The past year was a good one for U.S. Treasury securities, which were
boosted initially by the government's debt buyback program and later by
expanding signs that the U.S. economy was slowing. Despite the Federal
Reserve's effort to stave off inflation by raising interest rates
through May 2000, Treasury prices rose as the government scaled back the
frequency and size of its auctions of new debt and bought back billions
of dollars of outstanding debt. Continued debt reduction efforts,
coupled with mounting evidence that economic growth had slacked off and
inflation was non-existent, added steam to the Treasury market in the
second half. By year's end, the market increasingly anticipated that the
Fed would stop raising interest rates in recognition of receding
inflationary pressures, and perhaps even cut them in the near future.
Meanwhile, concern about the outlook for the economy and corporate
profits eroded investor confidence in the high-yield sector. That was
particularly true among high-yield bonds in the telecommunications
sector.
[Table at bottom left-hand column entitled "Top Five
Sectors." The first listing is U.S. Government 49%, the
second is Telecommunications 14%, the third Foreign
Governments 10%, the fourth Utilities 3% and the fifth Media
2%. A note below the table reads "As a percentage of net
assets on December 31, 2000."]
For the most part, foreign government bond markets remained relatively
uninteresting from our standpoint. Western Europe and Asia didn't offer
a lot of value, since their bond yields typically were lower than those
offered in the United States. One foreign bright spot was Canada, which
benefited from relatively low and stable inflation. There also was some
good news out of some Latin American countries, which enjoyed improving
credit fundamentals thanks to the rise in oil prices.
"The high-yield
market's
slump was
difficult to
escape..."
Fund performance
For the 12 months ended December 31, 2000, John Hancock V.A. Strategic
Income Fund posted a total return of 1.40% at net asset value, compared
with the 4.64% return of the average variable annuity general bond fund
income fund, according to Lipper Inc. Historical performance information
can be found on page 47.
Defensive stance
Given the ongoing difficulties suffered by the high-yield market and our
view that more problems may be in store over the near-term, we
continually expanded our defensive posture throughout 2000. By year-end,
we had reduced our exposure to high-yield bonds to about 23% of net
assets, and increasingly gravitated toward more stable, high-quality
investments. Our position in cash and other short-term securities rose
to 10% by the end of the period, up from 1% at the beginning of the
year.
[Bar chart at the top of left-hand column with heading "Fund
Performance." Under the heading is a note that reads "For the
year ended December 31, 2000." The chart is scaled in
increments of 1% with 0% at the bottom and 5% at the top. The
first bar represents the 1.40% total return for John Hancock
V.A. Strategic Income Fund. The second bar represents the
4.64% total return for Average variable annuity general bond
fund. A note below the chart reads "The total return for John
Hancock V.A. Strategic Income Fund is at net asset value with
all distributions reinvested. The average variable annuity
general bond fund is tracked by Lipper, Inc. See the
following page for historical performance information."]
We also increased our Treasury holdings to 49% at the end of the year,
up from 35% at the end of June 2000. We emphasized a combination of
short- and long-term holdings, which was a plus for performance.
Short-term securities rallied on expectations that the Fed would lower
short-term interest rates, while long-term Treasuries turned in strong
performance thanks to the government's buyback program and expectations
for lower interest rates.
"We expect to
maintain our
defensive
stance for
the time
being."
High-yield leaders and laggards
The high-yield market's slump was difficult to escape, although some of
our holdings held up much better than the others. Packaging company
Kappa Beheer, for example, surprised Wall Street with much better than
expected financial results. Natural gas service company Universal
Compression was lifted by the rising price of that fuel. Finally, French
billboard company Go Outdoors Systems Holding and British newspaper
company Regional Independent Media Group each benefited from reasonably
strong advertising and economic growth.
On the flip side, many of our biggest disappointments were
telecommunications holdings. As we mentioned earlier, this sector
stumbled because investors were worried about telecom companies' ability
to raise money to continue the build-out of their networks. Within that
group, the bond prices of Viatel, Primus Telecommunications Group and
Esprit Telecom Group all suffered substantial losses during 2000.
Changes in foreign holdings
Our increase in foreign securities basically was a function of our
purchases of Canadian and Venezuelan government bonds. Canadian bonds,
which were the best performers among foreign bond markets, offered
interest rates competitive with those of U.S. Treasuries and afforded us
the opportunity to increase our holdings in a high-quality market
characterized by low and stable inflation. Our Venezuelan holdings,
which we view as a short-term play, were boosted by the country's
improving creditworthiness as oil prices rose.
A look ahead
We expect to maintain our defensive stance for the time being.
High-yield bonds offer some very attractive values, including some bonds
carrying yields of nearly nine full percentage points more than U.S.
Treasuries. But we don't believe investors will rush back into the
market. We believe they'll take a "wait and see" attitude about how much
the economy will eventually slow and how much the Federal Reserve will
cut interest rates, which it began to do January 3 with a one-half
percentage point cut. But since no one can pinpoint the exact timing of
the next high-yield bond market rally, we'll continue to hold onto some
high-yield bonds that we think have good fundamental prospects and can
perform better once market sentiment turns more favorable. We are
prepared to move even more into lower-quality investments when we think
the time is right. Finally, we'll continue to look for attractive yields
in foreign markets, although we believe Canada still offers the best
value.
- -----------------------------------------------------------------------
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting.
A LOOK AT PERFORMANCE
For the period ended December 31, 2000
SINCE
ONE INCEPTION
YEAR (8/29/96)
---------- ----------
Cumulative Total Returns 1.40% 32.63%
Average Annual Total Returns(1) 1.40% 6.72%
YIELD
For the period ended December 31, 2000
SEC 30-DAY
YIELD
----------
John Hancock V.A. Strategic Income Fund(1) 7.94%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the
Fund's investments will fluctuate. As a result, your Fund's shares may
be worth more or less than their original cost, depending on when you
sell them.
Note to Performance
(1) The Adviser has agreed to limit the Fund's expenses to 0.25%
(excluding management fee) of the Fund's daily average net assets.
Without the limitation of expenses, the average annual total return
since inception would have been 6.30%. The expense limitation did not
impact the one-year performance.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Strategic Income Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown
the same $10,000 investment in the Lehman Brothers Government/Corporate
Bond Index -- an unmanaged index that measures the performance of U.S.
government bonds, U.S. corporate bonds and Yankee bonds. It is not
possible to invest in an index.
Line chart with the heading John Hancock V.A. Strategic
Income Fund, representing the growth of a hypothetical
$10,000 investment over the life of the fund. Within the
chart are two lines. The first line represents the Lehman
Brothers Government/Corporate Bond Index and is equal to
$13,760 as of December 31, 2000. The second line represents
the value of the hypothetical $10,000 investment made in the
John Hancock V.A. Strategic Income Fund on August 29, 1996
and is equal to $13,271 as of December 31, 2000.
FINANCIAL STATEMENTS
John Hancock Funds - Declaration Trust
Statements of Assets and Liabilities
December 31, 2000
- -------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A. V.A. V.A. V.A.
CORE EQUITY 500 INDEX LARGE CAP MID CAP RELATIVE SMALL CAP SOVEREIGN
FUND FUND GROWTH FUND GROWTH FUND VALUE FUND GROWTH FUND INVESTORS FUND
----------- ----------- ----------- ----------- ----------- ----------- --------------
Assets:
Investments at value - Note D:
Common stocks
(cost - $36,110,454,
$16,676,006, $12,655,003,
$10,826,748, $43,121,074,
$17,936,487 and
$42,749,147, respectively) $39,953,798 $23,960,835 $12,262,793 $11,416,600 $37,753,769 $19,721,586 $49,516,774
Bonds and U.S. government
Obligations (cost - none, none,
none, none, $401,957, none,
and $401,813, respectively) -- -- -- -- 82,500 -- 404,188
Joint repurchase agreements
(cost - $730,000, $1,121,000,
$95,000, none, none, $144,000
and $5,365,000, respectively) 730,000 1,121,000 95,000 -- -- 144,000 5,365,000
Corporate savings account 735 -- 402 -- -- 527 6
----------- ----------- ----------- ----------- ----------- ----------- -----------
40,684,533 25,081,835 12,358,195 11,416,600 37,836,269 19,866,113 55,285,968
Cash -- 75,533 -- -- -- -- --
Receivable for investments sold 125,803 -- -- 235,949 2,452,116 34,008 --
Receivable for shares sold -- -- -- -- 11,847 -- 26,525
Dividends and interest receivable 45,189 21,814 5,625 1,938 17,815 2,324 74,903
Deferred organization
expenses - Note B 1,413 1,413 1,413 -- -- 1,413 1,413
Receivable from John Hancock
Advisers, Inc. and
affiliates - Note C -- 11,986 -- -- -- -- --
Other Assets 596 705 293 49 352 1,039 721
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets 40,857,534 25,193,286 12,365,526 11,654,536 40,318,399 19,904,897 55,389,530
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities:
Due to custodian -- -- -- 79,105 428,258 -- --
Payable for investments
purchased -- -- -- 45,139 805,157 43,552 --
Payable for shares
repurchased 139,651 29,010 43,803 26,804 5,484 56,605 14,480
Payable for futures variation
margin -- 18,200 -- -- -- -- --
Payable to John Hancock
Advisers, Inc.
and affiliates - Note C 25,142 -- 8,534 5,938 20,643 6,715 29,736
Accounts payable and
accrued expenses 20,191 52,053 8,983 15,700 16,245 26,363 17,210
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities 184,984 99,263 61,320 172,686 1,275,787 133,235 61,426
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 37,693,541 17,418,746 14,462,393 11,596,579 42,471,127 20,227,806 50,814,015
Accumulated net realized gain
(loss) on investments,
financial futures contracts
and foreign currency
transactions (864,138) 367,594 (1,765,886) (704,573) 2,251,057 (2,241,167) (2,255,666)
Net unrealized appreciation
(depreciation) of investments,
financial futures contracts and
foreign currency transactions 3,843,344 7,302,676 (392,210) 589,852 (5,686,762) 1,785,099 6,770,002
Undistributed net investment
Income (distributions in
excess of net
investment income) (197) 5,007 (91) (8) 7,190 (76) (253)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Assets $40,672,550 $25,094,023 $12,304,206 $11,481,850 $39,042,612 $19,771,662 $55,328,098
=============================================================================================================================
Net Asset Value Per Share:
(Based on 2,321,942, 1,547,681,
1,197,751, 761,075 3,669,836,
1,372,971, 3,525,673 shares,
respectively, of beneficial
interest outstanding -
unlimited number of
shares authorized
with no par value) $17.52 $16.21 $10.27 $15.09 $10.64 $14.40 $15.69
=============================================================================================================================
The Statement of Assets and Liabilities is each Fund's balance sheet and
shows the value of what the Fund owns, is due and owes on December 31,
2000. You'll also find the net asset value per share as of that date.
See notes to financial statements.
Statements of Assets and Liabilities (continued)
December 31, 2000
- --------------------------------------------------------------
V.A.
INTERNATIONAL
FUND
-----------------
Assets:
Investments at value - Note D:
Common stocks (cost - $5,094,561) $5,299,410
Short-term investments (cost - $1,022,457) 1,022,457
-----------------
6,321,867
Cash 624
Foreign currency, at value
(cost - $68,187) 66,421
Receivable for investments sold 1,929,937
Dividends and interest receivable 11,621
Deferred organization expenses - Note B 1,413
Receivable from John Hancock Advisers,
Inc. and affiliates - Note C 8,832
Other assets 190
-----------------
Total Assets 8,340,905
- --------------------------------------------------------------
Liabilities:
Payable for shares repurchased 31,392
Payable for securities on loan 933,457
Accounts payable and accrued expenses 46,417
-----------------
Total Liabilities 1,011,266
- --------------------------------------------------------------
Net Assets:
Capital paid-in 7,723,198
Accumulated net realized loss on
investments and foreign currency
transactions (519,368)
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions 202,894
Distributions in excess of net
investment income (77,085)
-----------------
Net Assets $7,329,639
==============================================================
Net Asset Value Per Share:
(Based on 665,848 shares of beneficial
interest outstanding -- unlimited
number of shares authorized with no
par value) $11.01
==============================================================
See notes to financial statements.
Statements of Assets and Liabilities (continued)
December 31, 2000
- ----------------------------------------------------------------------------------------------------------
V.A. V.A. V.A.
FINANCIAL REGIONAL BANK TECHNOLOGY
INDUSTRIES FUND FUND FUND
----------------- ----------------- -----------------
Assets:
Investments at value - Note D:
Common stocks (cost - $48,938,306,
$10,935,579 and $14,432,054,
respectively) $67,939,052 $13,050,336 $10,542,962
Short-term investments (cost - none,
none and $1,499,369, respectively) -- -- 1,499,369
Joint repurchase agreements (cost -
$3,504,000, $679,000 and $2,747,789,
respectively) 3,504,000 679,000 2,747,789
Corporate savings account 879 382 792
----------------- ----------------- -----------------
71,443,931 13,729,718 14,790,912
Receivable for investments sold -- 36,611 --
Receivable for shares sold 608,712 -- 245,636
Dividends and interest receivable 55,035 26,914 2,290
Other assets 5,891 296 1
----------------- ----------------- -----------------
Total Assets 72,113,569 13,793,539 15,038,839
- ----------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 684,125 -- 969,180
Payable for shares repurchased -- 36,656 --
Payable to John Hancock Advisers, Inc.
and affiliates - Note C 46,510 9,115 6,564
Accounts payable and accrued expenses 16,338 14,338 21,051
----------------- ----------------- -----------------
Total Liabilities 746,973 60,109 996,795
- ----------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 55,845,481 14,564,298 18,123,471
Accumulated net realized loss on
investments, options and foreign
currency transactions (3,482,390) (2,945,521) (193,630)
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions 19,000,607 2,114,757 (3,889,092)
Undistributed net investment income
(distributions in excess of net
investment income) 2,898 (104) 1,295
----------------- ----------------- -----------------
Net Assets $71,366,596 $13,733,430 $14,042,044
==========================================================================================================
Net Asset Value Per Share:
(Based on 3,892,145, 1,389,168 and
1,916,254, respectively, of beneficial
interest outstanding -- unlimited
number of shares authorized with no
par value) $18.34 $9.89 $7.33
==========================================================================================================
See notes to financial statements.
Statements of Assets and Liabilities (continued)
December 31, 2000
- --------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
BOND HIGH YIELD MONEY MARKET STRATEGIC
FUND BOND FUND FUND INCOME FUND
----------------- ----------------- ----------------- -----------------
Assets:
Investments at value - Note D:
Common stocks (cost - none, $892,077,
none and $122,883, respectively) -- $680,118 -- $177,413
Preferred stocks and warrants (cost -
$51, $820,929, none and $178,105,
respectively) $475 626,607 -- 104,496
Bonds (cost - $22,605,396, $6,946,112,
none and $31,955,894, respectively) 23,225,973 4,572,675 -- 29,816,857
Short-term investments (cost - none,
none, 61,612,023 and none,
respectively) -- -- $61,612,023 --
Joint repurchase agreements (cost -
$1,606,000, $1,162,000, $6,307,000 and
$3,437,000, respectively) 1,606,000 1,162,000 6,307,000 3,437,000
Corporate savings account 749 951 -- 346
----------------- ----------------- ----------------- -----------------
24,833,197 7,042,351 67,919,023 33,536,112
Cash -- -- 281 --
Foreign currency, at value (cost -
none, $3,732, none and none,
respectively) -- 3,938 -- --
Receivable for shares sold 215,269 -- 6,046,686 145,909
Receivable for forward foreign currency
exchange contracts purchased - Note B -- 2,091 -- 13,525
Dividends and interest receivable 377,403 228,649 17,948 846,545
Deferred organization expenses --
Note B 1,413 -- 1,413 1,413
Other assets 234 129 3,037 1,548
----------------- ----------------- ----------------- -----------------
Total Assets 25,427,516 7,277,158 73,988,388 34,545,052
- --------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 224,459 -- -- --
Payable for shares repurchased -- 10,068 -- 1,258
Distributions payable -- -- 33,176 --
Payable for forward foreign currency
exchange contracts sold - Note B -- 34,228 -- 40,954
Payable to John Hancock Advisers, Inc.
and affiliates - Note C 14,274 2,986 30,177 17,336
Accounts payable and accrued expenses 16,066 11,242 7,703 13,705
----------------- ----------------- ----------------- -----------------
Total Liabilities 254,799 58,524 71,056 73,253
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 24,922,117 10,257,167 73,917,139 37,817,216
Accumulated net realized loss on
investments, options and foreign
currency transactions (391,881) (221,273) -- (1,029,019)
Net unrealized appreciation
(depreciation) of investments and
foreign currency transactions 621,001 (2,812,458) -- (2,190,200)
Undistributed net investment income
(distributions in excess of net
investment income) 21,480 (4,802) 193 (126,198)
----------------- ----------------- ----------------- -----------------
Net Assets $25,172,717 $7,218,634 $73,917,332 $34,471,799
================================================================================================================================
Net Asset Value Per Share:
(Based on 2,445,857, 1,080,247,
73,917,332 and 3,841,771 shares,
respectively, of beneficial interest
outstanding -- unlimited number of
shares authorized with no par value) $10.29 $6.68 $1.00 $8.97
================================================================================================================================
See notes to financial statements.
Statements of Operations
Year ended December 31, 2000
- -------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A. V.A. V.A. V.A.
CORE EQUITY 500 INDEX LARGE CAP MID CAP RELATIVE SMALL CAP SOVEREIGN
FUND FUND GROWTH FUND GROWTH FUND VALUE FUND GROWTH FUND INVESTORS FUND
----------- ----------- ----------- ----------- ----------- ----------- --------------
Investment Income:
Dividends (net of foreign
Withholding tax of $1,892,
$1,761, $438, $104,
$169, none and $1,865,
respectively) $492,956 $372,756 $55,135 $16,961 $172,226 $11,016 $745,879
Interest 73,783 27,843 18,183 59,766 193,222 46,062 282,891
Securities lending income 831 -- 621 510 27,459 33,144 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
567,570 400,599 73,939 77,237 392,907 90,222 1,028,770
----------- ----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Investment management
fee - Note C 306,248 116,127 148,433 99,566 257,116 213,759 295,467
Custodian fee 25,408 147,126 16,780 26,598 21,881 69,760 16,924
Auditing fee 19,431 15,164 13,432 12,000 18,164 15,000 18,000
Accounting and legal
services fee -Note C 8,230 6,221 3,705 2,504 8,056 5,347 9,273
Printing 4,589 2,048 1,250 4,356 2,174 4,189 1,873
Trustees' fee 2,693 2,236 1,293 439 2,345 1,275 3,214
Miscellaneous 2,163 16,092 1,059 607 2,021 1,377 5,669
Organization expense - Note B 2,141 2,141 2,141 -- -- 2,141 2,141
Legal fees 399 280 169 124 368 230 401
Registration and filing fees 27 27 13 27 127 27 27
Interest Expense -- -- 2,054 79 26,328 1,736 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses 371,329 307,462 190,329 146,300 338,580 314,841 352,989
- -----------------------------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note C -- (191,146) -- (13,517) -- (29,736) --
- -----------------------------------------------------------------------------------------------------------------------------
Net Expenses 371,329 116,316 190,329 132,783 338,580 285,105 352,989
- -----------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 196,241 284,283 (116,390) (55,546) 54,327 (194,883) 675,781
- -----------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain
(Loss) on Investments,
Financial Futures Contracts and
Foreign Currency Transactions:
Net realized gain
(loss) on investments sold 153,575 571,901 (1,715,484) (691,193) 13,435,050 (2,221,923) (1,886,401)
Net realized loss on
financial futures
contracts -- (61,831) -- -- -- -- --
Net realized loss on
foreign currency
transactions -- -- -- -- (919) -- --
Change in net unrealized
Appreciation (depreciation)
of investments (3,702,349) (3,824,817) (4,414,002) (1,246,996) (15,297,492) (5,140,485) 1,083,527
Change in net unrealized
Appreciation (depreciation)
of financial futures
contracts -- 8,691 -- -- -- -- --
Change in net unrealized
Appreciation (depreciation)
of foreign currency
transactions -- -- -- -- 906 -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Realized and Unrealized
Loss on Investments, Financial
Futures Contracts and Foreign
Currency Transactions (3,548,774) (3,306,056) (6,129,486) (1,938,189) (1,862,455) (7,362,408) (802,874)
- -----------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ($3,352,533) ($3,021,773) ($6,245,876) $1,993,735) ($1,808,128) ($7,557,291) ($127,093)
- -----------------------------------------------------------------------------------------------------------------------------
The Statement of Operations summarizes for each of the Funds the
investment income earned and expenses incurred in operating the Fund. It
also shows net gains (losses) for the period stated.
See notes to financial statements.
Statements of Operations (continued)
Year ended December 31, 2000
- --------------------------------------------------------------
V.A.
INTERNATIONAL
FUND
-----------------
Investment Income:
Dividends (net of foreign withholding
tax of $15,166) $94,960
Interest 21,961
Securities lending income 4,860
-----------------
121,781
-----------------
Expenses:
Investment management fee - Note C 81,503
Custodian fee 188,289
Auditing fee 13,090
Printing 5,381
Organization expense - Note B 2,141
Accounting and legal services fee - Note C 1,697
Registration and filing fees 573
Trustees' fee 544
Miscellaneous 461
Legal fees 117
-----------------
Total Expenses 293,796
- --------------------------------------------------------------
Less Expense Reductions - Note C (189,610)
- --------------------------------------------------------------
Net Expenses 104,186
- --------------------------------------------------------------
Net Investment Income 17,595
- --------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Transactions:
Net realized loss on investments sold (435,585)
Net realized loss on foreign currency
transactions (15,739)
Change in net unrealized appreciation
(depreciation) of investments (2,178,286)
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions (952)
-----------------
Net Realized and Unrealized Loss
on Investments and Foreign Currency
Transactions (2,630,562)
- --------------------------------------------------------------
Net Decrease in Net Assets
Resulting from Operations ($2,612,967)
==============================================================
See notes to financial statements.
Statements of Operations (continued)
Year ended December 31, 2000
- ----------------------------------------------------------------------------------------------------------
V.A. V.A. V.A.
FINANCIAL REGIONAL BANK TECHNOLOGY
INDUSTRIES FUND FUND FUND
----------------- ----------------- -----------------
Investment Income:
Dividends (net of foreign withholding
tax of $12,422, none and $3,
respectively) $616,349 $375,640 $503
Interest 64,208 38,145 68,818
Securities lending income 5,313 1,734 87
----------------- ----------------- -----------------
685,870 415,519 69,408
----------------- ----------------- -----------------
Expenses:
Investment management fee - Note C 434,813 113,415 33,261
Custodian fee 18,441 11,464 33,980
Auditing fee 17,500 13,000 12,000
Accounting and legal services fee - Note C 10,269 2,660 810
Printing 3,971 1,036 2,276
Trustees' fee 3,058 1,096 61
Miscellaneous 2,209 296 200
Interest Expense 944 738 --
Legal fees 364 -- 61
Registration and filing fees 13 26 14
----------------- ----------------- -----------------
Total Expenses 491,582 143,731 82,663
- ----------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note C -- -- (39,008)
- ----------------------------------------------------------------------------------------------------------
Net Expenses 491,582 143,731 43,655
- ----------------------------------------------------------------------------------------------------------
Net Investment Income 194,288 271,788 25,753
- ----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Options and Foreign
Currency Transactions:
Net realized gain (loss) on investments
sold and options 692,941 (2,865,401) (193,630)
Net realized gain on foreign currency
transactions 3,958 -- --
Change in net unrealized appreciation
(depreciation) of investments 12,308,867 4,087,137 (3,889,092)
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions (2,383) -- --
----------------- ----------------- -----------------
Net Realized and Unrealized Gain (Loss)
on Investments, Options
and Foreign Currency Transactions 13,003,383 1,221,736 (4,082,722)
- ----------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $13,197,671 $1,493,524 ($4,056,969)
==========================================================================================================
See notes to financial statements.
Statements of Operations (continued)
Year ended December 31, 2000
- --------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
BOND HIGH YIELD MONEY MARKET STRATEGIC
FUND BOND FUND FUND INCOME FUND
----------------- ----------------- ----------------- -----------------
Investment Income:
Dividends (net of foreign withholding
tax of none, $3,900, none and none,
respectively) -- $123,442 -- $21,652
Interest $1,161,742 986,842 $2,511,902 2,640,081
----------------- ----------------- ----------------- -----------------
1,161,742 1,110,284 2,511,902 2,661,733
----------------- ----------------- ----------------- -----------------
Expenses:
Investment management fee - Note C 80,502 51,368 194,539 165,020
Custodian fee 46,140 16,651 16,717 22,549
Auditing fee 12,164 13,667 8,000 8,000
Accounting and legal services
fee - Note C 3,048 1,605 7,395 5,193
Printing 2,230 1,214 1,232 4,355
Organization expense - Note B 2,141 -- 2,141 2,141
Trustees' fee 835 576 1,950 1,457
Registration and filing fees 790 27 27 27
Miscellaneous 695 457 908 1,352
Legal fees 125 20,928 241 251
----------------- ----------------- ----------------- -----------------
Total Expenses 148,670 106,493 233,150 210,345
- --------------------------------------------------------------------------------------------------------------------------------
Less Expense Reductions - Note C (27,848) (33,670) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net Expenses 120,822 72,823 233,150 210,345
- --------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 1,040,920 1,037,461 2,278,752 2,451,388
- --------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
on Investments, Options and Foreign
Currency Transactions:
Net realized gain (loss) on investments
sold and options (153,038) 13,846 -- (980,624)
Net realized gain on foreign currency
transactions 988 127,478 -- 280,348
Change in net unrealized appreciation
(depreciation) of investments 1,086,406 (1,600,466) -- (1,250,037)
Change in net unrealized appreciation
(depreciation) of foreign currency
transactions (909) (65,941) -- (72,198)
----------------- ----------------- ----------------- -----------------
Net Realized and Unrealized Gain (Loss)
on Investments, Options
and Foreign Currency Transactions 933,447 (1,525,083) -- (2,022,511)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations $1,974,367 ($487,622) $2,278,752 $428,877
================================================================================================================================
See notes to financial statements.
Statements of Changes in Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
V.A. CORE EQUITY FUND V.A. 500 INDEX FUND V.A. LARGE CAP GROWTH FUND
--------------------------- --------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- --------------------------- ---------------------------
1999 2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $170,261 $196,241 $344,397 $284,283 ($40,884) ($116,390)
Net realized gain (loss) on
investments sold and financial
futures contracts 1,489,402 153,575 91,519 510,070 1,316,751 (1,715,484)
Change in net unrealized
appreciation (depreciation) of
investments and financial futures
contracts 3,097,564 (3,702,349) 5,755,226 (3,816,126) 1,878,149 (4,414,002)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations 4,757,227 (3,352,533) 6,191,142 (3,021,773) 3,154,016 (6,245,876)
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income (174,331) (199,287) (344,375) (279,659) -- --
Distributions in excess of net
investment income (86) -- -- -- -- --
Distributions from net realized
gain on investments sold and
financial futures contracts (895,808) (695,716) (231,893) (92,786) (491,445) (643,661)
Distributions in excess of net
realized gain on investments
sold, financial futures contracts -- (844,741) (15,178) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions to
Shareholders (1,070,225) (1,739,744) (591,446) (372,445) (491,445) (643,661)
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 21,277,999 11,671,817 13,349,010 2,172,521 10,666,325 5,563,562
Shares issued to shareholders in
reinvestment of distributions 1,070,225 1,739,743 591,446 372,407 491,445 643,661
----------- ----------- ----------- ----------- ----------- -----------
22,348,224 13,411,560 13,940,456 2,544,928 11,157,770 6,207,223
Less shares repurchased (7,735,163) (12,638,050) (8,044,099) (12,009,903) (2,320,226) (8,885,412)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) 14,613,061 773,510 5,896,357 (9,464,975) 8,837,544 (2,678,189)
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 26,691,254 44,991,317 26,457,163 37,953,216 10,371,817 21,871,932
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
($85), ($197), $335, $5,007,
($41) and ($91), respectively) $44,991,317 $40,672,550 $37,953,216 $25,094,023 $21,871,932 $12,304,206
----------- ----------- ----------- ----------- ----------- -----------
* Distributions to Shareholders:
Per share dividends from net
investment income $0.0861 $0.0888 $0.1710 $0.1530 -- --
----------- ----------- ----------- ----------- ----------- -----------
Per share dividends in excess of
net investment income $0.0001 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold
and financial futures contracts $0.4028 $0.6886 $0.1105 $0.0585 $0.3598 $0.5666
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions in excess
of net realized gain on
investments sold and financial
futures contracts -- -- $0.0072 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 1,133,853 601,375 816,451 123,028 738,312 376,363
Shares issued to shareholders in
reinvestment of distributions 55,765 99,280 34,866 21,738 31,974 62,310
----------- ----------- ----------- ----------- ----------- -----------
1,189,618 700,655 851,317 144,766 770,286 438,673
Less shares repurchased (410,573) (662,061) (490,081) (694,943) (158,856) (628,273)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) 779,045 38,594 361,236 (550,177) 611,430 (189,600)
=========== =========== =========== =========== =========== ===========
See notes to financial statements.
Statements of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
V.A. MID CAP GROWTH FUND V.A. RELATIVE VALUE FUND V.A. SMALL CAP GROWTH FUND
--------------------------- --------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- --------------------------- ---------------------------
1999 2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) ($6,426) ($55,546) $161,304 $54,327 ($82,296) ($194,883)
Net realized gain (loss) on
investments sold and foreign
currency transactions 187,318 (691,193) 5,322,397 13,434,131 2,352,183 (2,221,923)
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions 1,607,019 (1,246,996) 7,741,197 (15,296,586) 5,122,311 (5,140,485)
---------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations 1,787,911 (1,993,735) 13,224,898 (1,808,128) 7,392,198 (7,557,291)
---------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income -- -- (162,651) (42,822) -- --
Distributions from net realized
gain on investments sold and
foreign currency transactions (5,407) (78,273) (1,365,816) (15,128,734) (441,478) (1,193,201)
---------- ----------- ----------- ----------- ----------- -----------
Total Distributions to
Shareholders (5,407) (78,273) (1,528,467) (15,171,556) (441,478) (1,193,201)
---------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 3,390,736 12,664,811 12,838,972 13,227,216 7,383,931 18,612,044
Shares issued to shareholders in
reinvestment of distributions 5,407 78,273 1,528,467 15,171,557 441,478 1,193,201
---------- ----------- ----------- ----------- ----------- -----------
3,396,143 12,743,084 14,367,439 28,398,773 7,825,409 19,805,245
Less shares repurchased (594,918) (5,552,026) (4,666,018) (11,142,581) (2,141,408) (12,149,701)
---------- ----------- ----------- ----------- ----------- -----------
Net Increase 2,801,225 7,191,058 9,701,421 17,256,192 5,684,001 7,655,544
---------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 1,779,071 6,362,800 17,368,252 38,766,104 8,231,889 20,866,610
---------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
none, ($8), ($3,436), $7,190,
($40) and ($76), respectively) $6,362,800 $11,481,850 $38,766,104 $39,042,612 $20,866,610 $19,771,662
---------- ----------- ----------- ----------- ----------- -----------
* Distributions to Shareholders:
Per share dividends from net
investment income -- -- $0.0980 $0.0186 -- --
---------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions $0.0160 $0.1010 $0.6493 $6.5883 $0.4314 $0.9031
---------- ----------- ----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 257,673 699,219 949,975 744,370 499,482 888,422
Shares issued to shareholders in
reinvestment of distributions 329 5,222 91,349 1,406,946 23,955 86,905
---------- ----------- ----------- ----------- ----------- -----------
258,002 704,441 1,041,324 2,151,316 523,437 975,327
Less shares repurchased (49,945) (313,149) (334,023) (631,982) (153,686) (658,355)
---------- ----------- ----------- ----------- ----------- -----------
Net Increase 208,057 391,292 707,301 1,519,334 369,751 316,972
========== =========== =========== =========== =========== ===========
The Statement of Changes in Net Assets shows how the value of each
Fund's net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment and foreign
currency gains and losses, distributions paid to shareholders, if any,
and any increase or decrease in money shareholders invested in each
Fund. The footnotes illustrate the number of Fund shares sold,
reinvested and repurchased during the last two periods, along with the
per share amount of distributions made to shareholders of each Fund for
the periods indicated.
See notes to financial statements.
Statements of Changes in Net Assets (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
V.A. SOVEREIGN INVESTORS FUND V.A. INTERNATIONAL FUND V.A. FINANCIAL INDUSTRIES FUND
----------------------------- --------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- --------------------------- ---------------------------
1999 2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $651,984 $675,781 $38,442 $17,595 $385,825 $194,288
Net realized gain (loss) on
investments sold and foreign
currency transactions (211,594) (1,886,401) 681,683 (451,324) (3,550,224) 696,899
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions 1,075,319 1,083,527 1,497,165 (2,179,238) 3,537,348 12,306,484
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations 1,515,709 (127,093) 2,217,290 (2,612,967) 372,949 13,197,671
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income (651,984) (678,637) (46,076) (107,471) (362,866) (169,614)
Distributions in excess of net
investment income (617) -- (9,515) -- -- --
Distributions from net realized
gain on investments sold and
foreign currency transactions -- -- (259,599) (238,923) (153,776) --
Tax return of capital (2,297) -- -- -- (23,257) --
----------- ----------- ----------- ----------- ----------- -----------
Total Distributions to
Shareholders (654,898) (678,637) (315,190) (346,394) (539,899) (169,614)
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 19,084,625 16,811,905 1,131,817 1,932,741 10,055,880 20,739,283
Shares issued to shareholders in
reinvestment of distributions 654,898 678,636 315,190 346,394 539,899 169,614
----------- ----------- ----------- ----------- ----------- -----------
19,739,523 17,490,541 1,447,007 2,279,135 10,595,779 20,908,897
Less shares repurchased (4,515,757) (11,610,910) (1,175,008) (1,364,748) (15,685,364) (11,882,798)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) 15,223,766 5,879,631 271,999 914,387 (5,089,585) 9,026,099
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 34,169,620 50,254,197 7,200,514 9,374,613 54,568,975 49,312,440
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
($105), ($253), ($46,722),
($80,691), ($2,491) and $2,898,
respectively) $50,254,197 $55,328,098 $9,374,613 $7,329,639 $49,312,440 $71,366,596
----------- ----------- ----------- ----------- ----------- -----------
* Distributions to Shareholders:
Per share dividends from net
investment income $0.2404 $0.2077 $0.0791 $0.1684 $0.1078 $0.0450
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions in excess
of net investment income $0.0002 -- $0.0163 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments sold
and foreign currency transactions -- -- $0.4454 $0.3744 -- --
----------- ----------- ----------- ----------- ----------- -----------
Tax return of capital $0.0009 -- -- -- $0.0069 --
----------- ----------- ----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 1,204,042 1,103,469 86,360 131,349 691,929 1,252,923
Shares issued to shareholders in
reinvestment of distributions 42,073 44,976 21,633 31,955 38,926 9,578
----------- ----------- ----------- ----------- ----------- -----------
1,246,115 1,148,445 107,993 163,304 730,855 1,262,501
Less shares repurchased (285,296) (771,887) (92,089) (104,357) (1,096,716) (779,897)
----------- ----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) 960,819 376,558 15,904 58,947 (365,861) 482,604
=========== =========== =========== =========== =========== ===========
See notes to financial statements.
Statements of Changes in Net Assets (continued)
- -----------------------------------------------------------------------------------------------------------------
V.A.
TECHNOLOGY
V.A. REGIONAL BANK FUND FUND V.A. BOND FUND
--------------------------- ------------ ---------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED YEAR ENDED DECEMBER 31,
--------------------------- DECEMBER 31, ---------------------------
1999 2000 2000(1) 1999 2000
----------- ----------- ------------ ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $281,620 $271,788 $25,753 $740,529 $1,040,920
Net realized gain (loss) on
investments sold, options and
foreign currency transactions 232,178 (2,865,401) (193,630) (216,376) (152,050)
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions (1,578,109) 4,087,137 (3,889,092) (583,796) 1,085,497
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations (1,064,311) 1,493,524 (4,056,969) (59,643) 1,974,367
----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income (281,482) (275,181) (24,458) (740,530) (1,040,858)
Distributions from net realized
gain on investments sold, options
and foreign currency transactions (347,453) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total Distributions to
Shareholders (628,935) (275,181) (24,458) (740,530) (1,040,858)
----------- ----------- ----------- ----------- -----------
From Fund Share Transactions: **
Shares sold 7,383,736 1,198,441 18,589,255 5,640,516 13,994,748
Shares issued to shareholders in
reinvestment of distributions 628,935 275,181 24,458 740,530 1,040,858
----------- ----------- ----------- ----------- -----------
8,012,671 1,473,622 18,613,713 6,381,046 15,035,606
Less shares repurchased (6,280,747) (9,253,630) (490,242) (3,719,713) (3,326,986)
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) 1,731,924 (7,780,008) 18,123,471 2,661,333 11,708,620
----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 20,256,417 20,295,095 -- 10,669,428 12,530,588
----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income of $3,154, ($209), $1,295,
$21,494 and $21,556,
respectively) $20,295,095 $13,733,430 $14,042,044 $12,530,588 $25,172,717
----------- ----------- ----------- ----------- -----------
* Distributions to Shareholders:
Per share dividends from net
investment income $0.1190 $0.1686 $0.0143 $0.6448 $0.6434
----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain on investments
sold, options and foreign
currency transactions $0.1489 -- -- -- --
----------- ----------- ----------- ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 798,204 150,452 1,961,452 556,313 1,400,901
Shares issued to shareholders in
reinvestment of distributions 73,089 33,504 3,292 73,574 104,450
----------- ----------- ----------- ----------- -----------
871,293 183,956 1,964,744 629,887 1,505,351
Less shares repurchased (683,009) (1,166,423) (48,490) (367,396) (336,738)
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) 188,284 (982,467) 1,916,254 262,491 1,168,613
=========== =========== =========== =========== ===========
(1) Commenced operations on May 1, 2000.
See notes to financial statements.
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------------------------------------------------------
V.A. HIGH YIELD BOND FUND V.A. MONEY MARKET FUND V.A. STRATEGIC INCOME FUND
--------------------------- --------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------- --------------------------- ---------------------------
1999 2000 1999 2000 1999 2000
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $951,874 $1,037,461 $1,072,850 $2,278,752 $1,576,575 $2,451,388
Net realized gain (loss) on
investments sold, options and
foreign currency transactions 104,240 141,324 -- -- (156,823) (700,276)
Change in net unrealized
appreciation (depreciation) of
investments and foreign currency
transactions 59,411 (1,666,407) -- -- (534,751) (1,322,235)
----------- ----------- ----------- ------------ ----------- -----------
Net Increase (Decrease) in Net
Assets Resulting from Operations 1,115,525 (487,622) 1,072,850 2,278,752 885,001 428,877
----------- ----------- ----------- ------------ ----------- -----------
Distributions to Shareholders: *
Dividends from net investment
income (945,546) (1,039,972) (1,072,850) (2,278,752) (1,576,590) (2,359,734)
Tax Return of Capital -- -- -- -- -- (91,654)
Distributions from net realized
gain on investments sold, options
and foreign currency transactions (74,253) (241,224) -- -- -- (350,215)
----------- ----------- ----------- ------------ ----------- -----------
Total Distributions to
Shareholders (1,019,799) (1,281,196) (1,072,850) (2,278,752) (1,576,590) (2,801,603)
----------- ----------- ----------- ------------ ----------- -----------
From Fund Share Transactions: **
Shares sold 2,548,352 858,489 48,097,999 188,358,513 8,665,787 14,978,386
Shares issued in
reorganization - Note F -- -- -- -- 2,569,836 --
Shares issued to shareholders in
reinvestment of distributions 1,019,800 1,281,195 944,404 2,374,022 1,576,592 2,801,603
----------- ----------- ----------- ------------ ----------- -----------
3,568,152 2,139,684 49,042,403 190,732,535 12,812,215 17,779,989
Less shares repurchased (2,496,893) (2,438,764) (32,610,270) (149,766,710) (4,858,040) (3,217,447)
----------- ----------- ----------- ------------ ----------- -----------
Net Increase (Decrease) 1,071,259 (299,080) 16,432,133 40,965,825 7,954,175 14,562,542
----------- ----------- ----------- ------------ ----------- -----------
Net Assets:
Beginning of period 8,119,547 9,286,532 16,519,374 32,951,507 15,019,397 22,281,983
----------- ----------- ----------- ------------ ----------- -----------
End of period (including
undistributed net investment
income (distributions in excess
of net investment income) of
$5,028, $33,938, $52, $193,
($47,169) and ($126,198),
respectively) $9,286,532 $7,218,634 $32,951,507 $73,917,332 $22,281,983 $34,471,799
----------- ----------- ----------- ------------ ----------- -----------
* Distributions to Shareholders:
Per share dividends from net
investment income $0.8767 $0.9394 $0.0452 $0.0576 $0.7977 $0.8345
----------- ----------- ----------- ------------ ----------- -----------
Per share distributions from net
realized gain on investments
sold, options and foreign
currency transactions $0.0657 $0.2290 -- -- -- $0.0945
----------- ----------- ----------- ------------ ----------- -----------
** Analysis of Fund Share
Transactions:
Shares sold 305,760 110,078 48,097,999 188,358,513 872,439 1,598,355
Shares issued in
reorganization - Note F -- -- -- -- 253,313 --
Shares issued to shareholders in
reinvestment of distributions 122,160 172,859 94,404 2,374,022 159,651 302,236
----------- ----------- ----------- ------------ ----------- -----------
427,920 282,937 48,192,403 190,732,535 1,285,403 1,900,591
Less shares repurchased (297,910) (320,600) (32,610,270) (149,766,710) (491,471) (339,848)
----------- ----------- ----------- ------------ ----------- -----------
Net Increase (Decrease) 130,010 (37,663) 15,582,133 40,965,825 793,932 1,560,743
=========== =========== =========== ============ =========== ===========
See notes to financial statements.
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. CORE EQUITY FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $11.11 $14.11 $17.74 $19.70
------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.06 0.16 0.10 0.09 0.08
Net Realized and Unrealized
Gain (Loss) on Investments 1.12 3.23 3.90 2.36 (1.48)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 1.18 3.39 4.00 2.45 (1.40)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.06) (0.14) (0.10) (0.09) (0.09)
Distributions in Excess of
Net Investment Income -- -- -- --(3) --
Distributions from Net
Realized Gain on
Investments Sold (0.01) (0.25) (0.27) (0.40) (0.31)
Distributions in Excess of
Net Realized Gain on
Investments Sold -- -- -- -- (0.38)
------------- ------------- ------------- ------------- -------------
Total Distributions (0.07) (0.39) (0.37) (0.49) (0.78)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $11.11 $14.11 $17.74 $19.70 $17.52
============= ============= ============= ============= =============
Total Investment Return(4) 11.78%(5,6) 30.68%(6) 28.42% 13.89% (7.11%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,149 $8,719 $26,691 $44,991 $40,673
Ratio of Expenses to Average
Net Assets 0.95%(7) 0.95% 0.95% 0.83% 0.85%
Ratio of Adjusted Expenses
to Average Net Assets(8) 4.23%(7) 1.59% -- -- --
Ratio of Net Investment
Income to Average Net
Assets 1.60%(7) 1.24% 0.65% 0.47% 0.45%
Portfolio Turnover Rate 24% 53% 55% 77% 97%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the
periods shown.
The Financial Highlights summarizes the impact of the following factors
on a single share for each period indi cated: net investment income,
gains (losses), distributions and total investment return of each Fund.
It shows how the Fund's net asset value for a share has changed since
the end of the previous period. Additionally, important rela tionships
between some items presented in the financial statements are expressed
in ratio form.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. 500 INDEX FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $10.44 $12.62 $15.23 $18.09
------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.17 0.30 0.20 0.17 0.14
Net Realized and Unrealized
Gain (Loss) on Investments 0.98 2.72 3.37 2.98 (1.81)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 1.15 3.02 3.57 3.15 (1.67)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.16) (0.30) (0.20) (0.17) (0.15)
Distributions from Net
Realized Gain on
Investments Sold (0.55) (0.54) (0.76) (0.11) (0.06)
Distributions in Excess of
Net Realized Gain on
Investments Sold -- -- -- (0.01) --
------------- ------------- ------------- ------------- -------------
Total Distributions (0.71) (0.84) (0.96) (0.29) (0.21)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.44 $12.62 $15.23 $18.09 $16.21
============= ============= ============= ============= =============
Total Investment Return(3,4) 11.49%(5) 29.51% 28.44% 20.81% (9.28%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $4,049 $20,008 $26,457 $37,953 $25,094
Ratio of Expenses to Average
Net Assets 0.60%(6) 0.36% 0.35% 0.35% 0.35%
Ratio of Adjusted Expenses
to Average Net Assets(7) 1.31%(6) 0.83% 0.92% 0.75% 0.93%
Ratio of Net Investment
Income to Average Net
Assets 4.57%(6) 2.45% 1.44% 1.06% 0.86%
Portfolio Turnover Rate 0% 9% 47% 5% 7%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. LARGE CAP GROWTH FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $9.39 $10.73 $13.37 $15.77
------------- ------------- ------------- ------------- -------------
Net Investment Loss(2) (0.01) (0.04) --(3) (0.04) (0.08)
Net Realized and Unrealized
Gain (Loss) on Investments (0.60) 1.38 2.64 2.80 (4.85)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations (0.61) 1.34 2.64 2.76 (4.93)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Distributions from Net
Realized Gain on
Investments Sold -- -- -- (0.36) (0.57)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $9.39 $10.73 $13.37 $15.77 $10.27
============= ============= ============= ============= =============
Total Investment Return(4) (6.10%)(5,6) 14.27%(6) 24.60%(6) 20.71%(6) (31.30%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $994 $3,733 $10,372 $21,872 $12,304
Ratio of Expenses to Average
Net Assets 1.00%(7) 1.00% 1.00% 1.00% 0.96%
Ratio of Adjusted Expenses
to Average Net Assets(8) 4.76%(7) 2.37% 1.33% 1.02% --
Ratio of Net Investment Loss
to Average Net Assets (0.23%)(7) (0.39%) (0.00%) (0.25%) (0.59%)
Portfolio Turnover Rate 68% 136% 176% 172% 170%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------
V.A. MID CAP GROWTH FUND
-------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------
1998(1) 1999 2000
- -----------------------------------------------------------------------------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $11.03 $17.21
------------- ------------- -------------
Net Investment Income
(Loss)(2) 0.01 (0.03) (0.08)
Net Realized and Unrealized
Gain (Loss) on Investments 1.03 6.23 (1.94)
------------- ------------- -------------
Total from Investment
Operations 1.04 6.20 (2.02)
------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.01) -- --
Distributions from Net
Realized Gain on
Investments Sold -- (0.02) (0.10)
Tax Return of Capital --(3) -- --
------------- ------------- -------------
Total Distributions (0.01) (0.02) (0.10)
------------- ------------- -------------
Net Asset Value, End of
Period $11.03 $17.21 $15.09
============= ============= =============
Total Investment Return(4,5) 10.35%(6) 56.18% (11.73%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,779 $6,363 $11,482
Ratio of Expenses to Average
Net Assets 1.00%(7) 1.00% 1.00%
Ratio of Adjusted Expenses
to Average Net Assets(8) 4.23%(7) 2.36% 1.10%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.06%(7) (0.23%) (0.42%)
Portfolio Turnover Rate 103% 136% 155%
(1) Commenced operations on January 7, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------
V.A. RELATIVE VALUE FUND
-------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------
1998(1) 1999 2000
- -----------------------------------------------------------------------------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $12.03 $18.03
------------- ------------- -------------
Net Investment Income(2) 0.11 0.10 0.02
Net Realized and Unrealized
Gain (Loss) on Investments 2.02 6.65 (0.80)
------------- ------------- -------------
Total from Investment
Operations 2.13 6.75 (0.78)
------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.10) (0.10) (0.02)
Distributions from Net
Realized Gain on
Investments Sold -- (0.65) (6.59)
------------- ------------- -------------
Total Distributions (0.10) (0.75) (6.61)
------------- ------------- -------------
Net Asset Value, End of
Period $12.03 $18.03 $10.64
============= ============= =============
Total Investment Return(3) 21.39%(4,5) 56.65% (4.80%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $17,368 $38,766 $39,043
Ratio of Expenses to Average
Net Assets 0.85%(6) 0.77% 0.79%
Ratio of Adjusted Expenses
to Average Net Assets(7) 1.03%(6) -- --
Ratio of Net Investment
Income to Average Net
Assets 1.17%(6) 0.66% 0.13%
Portfolio Turnover Rate 242% 166% 164%
(1) Commenced operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total return would have been lower had certain expenses not been
reduced during the period shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the period shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. SMALL CAP GROWTH FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $9.32 $10.35 $12.00 $19.76
------------- ------------- ------------- ------------- -------------
Net Investment Income
(Loss)(2) 0.02 (0.02) (0.06) (0.10) (0.13)
Net Realized and Unrealized
Gain (Loss) on Investments (0.68) 1.05 1.71 8.29 (4.33)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations (0.66) 1.03 1.65 8.19 (4.46)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.02) --(3) -- -- --
Distributions from Net
Realized Gain on
Investments Sold -- -- -- (0.43) (0.90)
------------- ------------- ------------- ------------- -------------
Total Distributions to
Shareholders (0.02) -- -- (0.43) (0.90)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $9.32 $10.35 $12.00 $19.76 $14.40
============= ============= ============= ============= =============
Total Investment Return(4,5) (6.62%)(6) 11.06% 15.94% 68.52% (22.33%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $975 $3,841 $8,232 $20,867 $19,772
Ratio of Expenses to Average
Net Assets 1.00%(7) 1.00% 1.00% 1.00% 1.00%
Ratio of Adjusted Expenses
to Average Net Assets(8) 5.19%(7) 2.72% 1.63% 1.38% 1.10%
Ratio of Net Investment
Income (Loss) to Average
Net Assets 0.62%(7) (0.16%) (0.59%) (0.76%) (0.68%)
Portfolio Turnover Rate 31% 79% 93% 120% 104%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. SOVEREIGN INVESTORS FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $10.74 $13.59 $15.61 $15.96
------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.07 0.22 0.27 0.24 0.21
Net Realized and Unrealized
Gain (Loss) on Investments 0.76 2.82 2.00 0.35 (0.27)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.83 3.04 2.27 0.59 (0.06)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.07) (0.18) (0.25) (0.24) (0.21)
Distributions in Excess of
Net Investment Income -- -- -- --(3) --
Distributions from Net
Realized Gain on
Investments Sold (0.02) (0.01) -- -- --
Tax Return of Capital -- -- -- --(3) --
------------- ------------- ------------- ------------- -------------
Total Distributions (0.09) (0.19) (0.25) (0.24) (0.21)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.74 $13.59 $15.61 $15.96 $15.69
============= ============= ============= ============= =============
Total Investment Return(4) 8.30%(5,6) 28.43%(6) 16.88% 3.84% (0.33%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,111 $12,187 $34,170 $50,254 $55,328
Ratio of Expenses to Average
Net Assets 0.85%(7) 0.85% 0.74% 0.70% 0.72%
Ratio of Adjusted Expenses
to Average Net Assets(8) 3.78%(7) 1.16% -- -- --
Ratio of Net Investment
Income to Average Net
Assets 1.90%(7) 1.81% 1.88% 1.57% 1.37%
Portfolio Turnover Rate 17% 11% 19% 26% 46%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. INTERNATIONAL FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $11.23 $10.50 $12.18 $15.45
------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.07 0.05 0.07 0.07 0.03
Net Realized and Unrealized
Gain (Loss) on Investments 1.20 (0.13) 1.69 3.75 (3.93)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 1.27 (0.08) 1.76 3.82 (3.90)
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.04) (0.01) (0.07) (0.08) (0.17)
Dividends in Excess of Net
Investment Income -- -- (0.01) (0.02) --
Distributions from Net
Realized Gain on
Investments Sold -- (0.64) -- (0.45) (0.37)
------------- ------------- ------------- ------------- -------------
Total Distributions (0.04) (0.65) (0.08) (0.55) (0.54)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $11.23 $10.50 $12.18 $15.45 $11.01
============= ============= ============= ============= =============
Total Investment Return(3,4) 12.75%(5) (0.54%) 16.75% 31.55% (25.17%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $2,267 $3,792 $7,201 $9,375 $7,330
Ratio of Expenses to Average
Net Assets 1.15%(6) 1.15% 1.15% 1.15% 1.15%
Ratio of Adjusted Expenses
to Average Net Assets(7) 3.13%(6) 2.04% 3.13% 2.51% 3.24%
Ratio of Net Investment
Income to Average Net
Assets 2.03%(6) 0.43% 0.59% 0.52% 0.19%
Portfolio Turnover Rate 14% 273% 89% 116% 177%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------
V.A. FINANCIAL INDUSTRIES FUND
-------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------
1997(1) 1998 1999 2000
------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $13.44 $14.45 $14.46
------------- ------------- ------------- -------------
Net Investment Income(2) 0.11 0.18 0.11 0.06
Net Realized and Unrealized
Gain on Investments 3.39 0.97 0.06 3.87
------------- ------------- ------------- -------------
Total from Investment
Operations 3.50 1.15 0.17 3.93
------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.05) (0.14) (0.10) (0.05)
Distributions from Net
Realized Gain on
Investments Sold (0.01) --(3) (0.05) --
Tax Return of Capital -- -- (0.01) --
------------- ------------- ------------- -------------
Total Distributions (0.06) (0.14) (0.16) (0.05)
------------- ------------- ------------- -------------
Net Asset Value, End of
Period $13.44 $14.45 $14.46 $18.34
============= ============= ============= =============
Total Investment Return(4) 35.05%(5,6) 8.55% 1.23% 27.16%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $18,465 $54,569 $49,312 $71,367
Ratio of Expenses to Average
Net Assets 1.05%(7) 0.92% 0.90% 0.90%
Ratio of Adjusted Expenses
to Average Net Assets(8) 1.39%(7) -- -- --
Ratio of Net Investment
Income to Average Net
Assets 1.32%(7) 1.25% 0.77% 0.36%
Portfolio Turnover Rate 11% 38% 72% 41%
(1) Commenced operations on April 30, 1997.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the period shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------
V.A. REGIONAL BANK FUND
------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------
1998(1) 1999 2000
- -----------------------------------------------------------------------------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $9.28 $8.56
------------- ------------- -------------
Net Investment Income(2) 0.09 0.12 0.16
Net Realized and Unrealized
Gain (Loss) on Investments (0.74) (0.57) 1.34
------------- ------------- -------------
Total from Investment
Operations (0.65) (0.45) 1.50
------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.07) (0.12) (0.17)
Distributions from Net
Realized Gain on
Investments Sold --(3) (0.15) --
------------- ------------- -------------
Total Distributions (0.07) (0.27) (0.17)
------------- ------------- -------------
Net Asset Value, End of
Period $9.28 $8.56 $9.89
============= ============= =============
Total Investment Return(4) (6.43%)(5,6) (4.86%) 17.91%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $20,256 $20,295 $13,733
Ratio of Expenses to Average
Net Assets 1.05%(7) 1.00% 1.01%
Ratio of Adjusted Expenses
to Average Net Assets(8) 1.14%(7) -- --
Ratio of Net Investment
Income to Average Net
Assets 1.39%(7) 1.30% 1.92%
Portfolio Turnover Rate 28% 49% 32%
(1) Commenced operations on May 1, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the period shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ---------------------------------------------------
V.A. TECHNOLOGY FUND
--------------------
PERIOD ENDED
DECEMBER 31, 2000(1)
--------------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00
-------------
Net Investment Income(2) 0.03
Net Realized and Unrealized
Loss on Investments (2.69)
-------------
Total from Investment
Operations (2.66)
-------------
Less Distributions:
Dividends from Net
Investment Income (0.01)
-------------
Net Asset Value, End of
Period $7.33
=============
Total Investment Return(3,4) (26.56%)(5)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $14,042
Ratio of Expenses to Average
Net Assets 1.05%(6)
Ratio of Adjusted Expenses
to Average Net Assets(7) 1.99%(6)
Ratio of Net Investment
Income to Average Net
Assets 0.62%(6)
Portfolio Turnover Rate 75%
(1) Commenced operations on May 1, 2000.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total return would have been lower had certain expenses not been
reduced during the period shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the period shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. BOND FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $10.19 $10.36 $10.51 $9.81
------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.23 0.68 0.63 0.64 0.64
Net Realized and Unrealized
Gain (Loss) on Investments 0.21 0.24 0.32 (0.70) 0.50
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.44 0.92 0.95 (0.06) 1.12
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.23) (0.68) (0.63) (0.64) (0.64)
Distributions from Net
Realized Gain on
Investments Sold (0.02) (0.07) (0.17) -- --
------------- ------------- ------------- ------------- -------------
Total Distributions (0.25) (0.75) (0.80) (0.64) (0.64)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.19 $10.36 $10.51 $9.81 $10.29
============= ============= ============= ============= =============
Total Investment Return(3,4) 4.42%(5) 9.30% 9.41% (0.51%) 11.89%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $1,056 $3,682 $10,669 $12,531 $25,173
Ratio of Expenses to Average
Net Assets 0.75%(6) 0.75% 0.75% 0.75% 0.75%
Ratio of Adjusted Expenses
to Average Net Assets(7) 4.15%(6) 2.53% 1.34% 1.01% 0.92%
Ratio of Net Investment
Income to Average Net
Assets 6.69%(6) 6.57% 5.93% 6.39% 6.47%
Portfolio Turnover Rate 45% 193% 367% 307% 298%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------
V.A. HIGH YIELD BOND FUND
------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------
1998(1) 1999 2000
- -----------------------------------------------------------------------------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $8.22 $8.31
------------- ------------- -------------
Net Investment Income(2) 0.90 0.88 0.94
Net Realized and Unrealized
Gain (Loss) on Investments (1.82) 0.16 (1.40)
------------- ------------- -------------
Total from Investment
Operations (0.92) 1.04 (0.46)
------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.84) (0.88) (0.94)
Distributions from Net
Realized Gain on
Investments Sold -- (0.07) (0.23)
Tax Return of Capital (0.02) -- --
------------- ------------- -------------
Total Distributions (0.86) (0.95) (1.17)
------------- ------------- -------------
Net Asset Value, End of
Period $8.22 $8.31 $6.68
============= ============= =============
Total Investment Return(3,4) (9.80%)(5) 13.12% (6.08%)
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $8,120 $9,287 $7,219
Ratio of Expenses to Average
Net Assets 0.85%(6) 0.85% 0.85%
Ratio of Adjusted Expenses
to Average Net Assets(7) 1.15%(6) 1.03% 1.24%
Ratio of Net Investment
Income to Average Net
Assets 9.85%(6) 10.56% 12.12%
Portfolio Turnover Rate 102% 122% 56%
(1) Commenced operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. MONEY MARKET FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $1.00 $1.00 $1.00 $1.00 $1.00
------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.02 0.05 0.05 0.05 0.06
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.02) (0.05) (0.05) (0.05) (0.06)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $1.00 $1.00 $1.00 $1.00 $1.00
============= ============= ============= ============= =============
Total Investment Return(3) 1.61%(4,5) 4.88%(5) 4.87% 4.58% 5.90%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $207 $8,377 $16,519 $32,952 $73,917
Ratio of Expenses to Average
Net Assets 0.75%(6) 0.75% 0.74% 0.66% 0.60%
Ratio of Adjusted Expenses
to Average Net Assets(7) 27.48%(6) 1.27% -- -- --
Ratio of Net Investment
Income to Average Net
Assets 4.68%(6) 4.86% 4.70% 4.55% 5.86%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the
periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------
V.A. STRATEGIC INCOME FUND
-------------------------------------------------------------------------------------
PERIOD
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------------------------------
1996(1) 1997 1998 1999 2000
------------- ------------- ------------- ------------- -------------
Per Share Operating Performance
Net Asset Value, Beginning
of Period $10.00 $10.30 $10.47 $10.10 $9.77
------------- ------------- ------------- ------------- -------------
Net Investment Income(2) 0.27 0.91 0.85 0.80 0.83
Net Realized and Unrealized
Gain (Loss) on Investments 0.36 0.26 (0.35) (0.33) (0.71)
------------- ------------- ------------- ------------- -------------
Total from Investment
Operations 0.63 1.17 0.50 0.47 0.12
------------- ------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net
Investment Income (0.27) (0.91) (0.85) (0.80) (0.83)
Distributions from Net
Realized Gain on
Investments Sold (0.06) (0.09) (0.02) -- (0.09)
------------- ------------- ------------- ------------- -------------
Total Distributions (0.33) (1.00) (0.87) (0.80) (0.92)
------------- ------------- ------------- ------------- -------------
Net Asset Value, End of
Period $10.30 $10.47 $10.10 $9.77 $8.97
============= ============= ============= ============= =============
Total Investment Return(3) 6.45%(4,5) 11.77%(5) 4.92%(5) 4.82%(5) 1.40%
Ratios and Supplemental Data
Net Assets, End of Period
(000s omitted) $2,131 $5,540 $15,019 $22,282 $34,472
Ratio of Expenses to Average
Net Assets 0.85%(6) 0.85% 0.85% 0.85% 0.76%
Ratio of Adjusted Expenses
to Average Net Assets(7) 2.28%(6) 1.37% 0.93% 0.87% --
Ratio of Net Investment
Income to Average Net
Assets 7.89%(6) 8.77% 8.19% 8.06% 8.91%
Portfolio Turnover Rate 73% 110% 92% 53%(8) 53%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total returns would have been lower had certain expenses not
been reduced during the periods shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the
periods shown.
(8) Portfolio turnover rate excludes merger activity.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Core Equity Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Core Equity Fund on December 31, 2000. It is divided into
two main categories: common stocks and short-term investments. Common
stocks are further broken down by industry group. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCKS
Advertising (1.86%)
Interpublic Group of Cos., Inc. (The) 8,400 $357,525
Omnicom Group, Inc. 4,800 397,800
------------
755,325
------------
Aerospace (1.93%)
General Dynamics Corp. 3,700 288,600
United Technologies Corp. 6,300 495,338
------------
783,938
------------
Automobile/Trucks (1.01%)
Ford Motor Co. 12,800 300,000
Lear Corp.* 4,400 109,175
------------
409,175
------------
Banks - United States (6.08%)
Bank of America Corp. 10,000 458,750
Bank of New York Co., Inc. (The) 9,600 529,800
Comerica, Inc. 3,900 231,563
Firstar Corp. 8,500 197,625
FleetBoston Financial Corp. 15,800 593,488
J.P. Morgan Chase & Co. 1,800 297,900
Mellon Financial Corp. 3,300 162,319
------------
2,471,445
------------
Beverages (0.56%)
Anheuser-Busch Cos., Inc. 5,000 227,500
------------
Broker Services (0.47%)
Merrill Lynch & Co., Inc. 2,800 190,925
------------
Building (0.61%)
Black & Decker Corp. (The) 6,300 247,275
------------
Chemicals (1.14%)
Air Products & Chemicals, Inc. 5,200 213,200
Dow Chemical Co. 6,900 252,713
------------
465,913
------------
Computers (13.95%)
Adobe Systems, Inc. 1,700 98,919
America Online, Inc.* 10,600 368,880
Cisco Systems, Inc.* 27,600 1,055,700
Compaq Computer Corp. 5,700 85,785
EMC Corp.* 8,900 591,850
First Data Corp. 13,500 711,281
Hewlett-Packard Co. 6,600 208,312
International Business Machines Corp. 5,400 459,000
Microsoft Corp.* 17,900 776,413
Network Appliance, Inc.* 1,200 77,025
Oracle Corp.* 17,700 514,406
Siebel Systems, Inc.* 1,800 121,725
Sun Microsystems, Inc.* 11,400 317,775
VERITAS Software Corp.* 2,500 218,750
Yahoo! Inc.* 2,200 66,378
------------
5,672,199
------------
Diversified Operations (3.02%)
Honeywell International, Inc. 2,800 132,475
Illinois Tool Works, Inc. 3,100 184,644
Minnesota Mining & Manufacturing Co. 3,200 385,600
Tyco International Ltd. 9,500 527,250
------------
1,229,969
------------
Electronics (9.31%)
Altera Corp.* 3,000 78,937
Analog Devices, Inc.* 2,000 102,375
Applied Materials, Inc.* 3,100 118,381
General Electric Co. 39,300 1,883,944
Intel Corp. 23,600 709,475
Linear Technology Corp. 1,500 69,375
Maxim Integrated Products, Inc.* 2,200 105,187
Motorola, Inc. 7,600 153,900
Parker-Hannifin Corp. 3,700 163,262
Texas Instruments, Inc. 6,600 312,675
Xilinx, Inc.* 1,900 87,637
------------
3,785,148
------------
Fiber Optics (0.25%)
JDS Uniphase Corp.* 2,400 100,050
------------
Finance (4.40%)
Citigroup, Inc. 35,033 1,788,873
------------
Insurance (4.28%)
American International Group, Inc. 3,100 305,544
Hartford Financial Services Group, Inc. (The) 5,400 381,375
Lincoln National Corp. 5,200 246,025
Marsh & McLennan Cos., Inc. 1,300 152,100
St. Paul Cos., Inc. (The) 5,600 304,150
Torchmark Corp. 4,200 161,437
XL Capital Ltd. (Class A) 2,200 192,225
------------
1,742,856
------------
Leisure (0.48%)
Disney (Walt) Co. (The) 6,700 193,881
------------
Machinery (0.56%)
Ingersoll-Rand Co. 5,400 226,125
------------
Media (3.15%)
AT&T Corp. - Liberty Media Group* 12,900 174,956
Clear Channel Communications, Inc.* 4,700 227,656
Infinity Broadcasting Corp. (Class A)* 4,900 136,894
Time Warner, Inc. 3,000 156,720
Viacom, Inc. (Class B)* 12,507 584,702
------------
1,280,928
------------
Medical (18.01%)
Abbott Laboratories 7,900 382,656
Allergan, Inc. 3,200 309,800
ALZA Corp.* 5,400 229,500
American Home Products Corp. 5,700 362,235
Baxter International, Inc. 5,900 521,044
Bristol-Myers Squibb Co. 12,900 953,794
Johnson & Johnson 8,800 924,550
Lilly (Eli) & Co. 1,300 120,981
Merck & Co., Inc. 14,100 1,320,113
Pfizer, Inc. 32,100 1,476,600
Pharmacia Corp. 4,700 286,700
Schering-Plough Corp. 4,800 272,400
St. Jude Medical, Inc. * 2,700 165,881
------------
7,326,254
------------
Mortgage Banking (1.68%)
Fannie Mae 7,900 685,325
------------
Office (0.46%)
Avery Dennison Corp. 3,400 186,575
------------
Oil & Gas (7.40%)
Apache Corp. 3,300 231,206
Chevron Corp. 2,900 244,869
El Paso Energy Corp. 6,300 451,238
Exxon Mobil Corp. 14,112 1,226,862
Kerr-McGee Corp. 2,400 160,650
Royal Dutch Petroleum Co., American Depositary
Receipt (Netherlands) 8,900 539,006
USX - Marathon Group 5,600 155,400
------------
3,009,231
------------
Paper & Paper Products (0.62%)
Kimberly-Clark Corp. 3,600 254,484
------------
Retail (6.45%)
CVS Corp. 3,800 227,762
Home Depot, Inc. (The) 8,100 370,069
Intimate Brands, Inc. 4,500 67,500
Kohl's Corp.* 7,800 475,800
Limited, Inc. (The) 7,100 121,144
Lowe's Cos., Inc. 6,200 275,900
RadioShack Corp. 3,500 149,844
TJX Cos., Inc. 8,800 244,200
Wal-Mart Stores, Inc. 13,000 690,625
------------
2,622,844
------------
Soap & Cleaning Preparations (0.38%)
Procter & Gamble Co. (The) 2,000 156,875
------------
Telecommunications (4.37%)
Comverse Technology, Inc.* 1,500 162,937
Corning, Inc. 4,200 221,812
Nortel Networks Corp. (Canada) 12,200 391,163
Qwest Communications International, Inc.* 9,100 373,100
Sprint Corp. 7,900 160,469
Sprint PCS* 3,500 71,531
Verizon Communications, Inc. 7,900 395,988
------------
1,777,000
------------
Tobacco (0.72%)
Philip Morris Cos., Inc. 6,700 294,800
------------
Utilities (5.09%)
BellSouth Corp. 4,300 176,031
Dominion Resources, Inc. 5,500 368,500
Duke Energy Corp. 6,900 588,225
Exelon Corp. 4,900 344,029
SBC Communications, Inc. 12,400 592,100
------------
2,068,885
------------
TOTAL COMMON STOCKS
(Cost $36,110,454) (98.24%) 39,953,798
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.79%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.95% $730 730,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 735
------------
TOTAL SHORT-TERM INVESTMENTS (1.79%) 730,735
--------- ------------
TOTAL INVESTMENTS (100.03%) 40,684,533
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.03%) (11,983)
--------- ------------
TOTAL NET ASSETS (100.00%) $40,672,550
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. 500 Index Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. 500 Index Fund on December 31, 2000. It is divided into two
main categories: common stocks and short-term investments. Common
stocks are further broken down by industry group. Short-term investments,
which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCKS
Advertising (0.23%)
Interpublic Group of Companies, Inc. (The) 629 $26,772
Omnicom Group, Inc. 362 30,001
------------
56,773
------------
Aerospace (1.19%)
Boeing Co. (The) 1,817 119,922
General Dynamics Corp. 407 31,746
Goodrich (B.F.) Co. (The) 208 7,566
Lockheed Martin Corp. 881 29,910
Northrop Grumman Corp. 147 12,201
Raytheon Co. (Class B) 695 21,588
United Technologies Corp. 958 75,323
------------
298,256
------------
Automobile/Trucks (0.77%)
Cummins Engine Co., Inc. 85 3,225
Dana Corp. 302 4,624
Delphi Automotive Systems Corp. 1,145 12,881
Eaton Corp. 143 10,752
Ford Motor Co. 3,833 89,836
General Motors Corp. 1,155 58,833
PACCAR, Inc. 156 7,683
Ryder System, Inc. 122 2,028
Visteon Corp. 268 3,082
------------
192,944
------------
Banks - United States (5.60%)
AmSouth Bancorp. 768 11,712
Bank of America Corp. 3,329 152,718
Bank of New York Co., Inc. 1,514 83,554
Bank One Corp. 2,366 86,655
BB&T Corp. 811 30,260
Chase Manhattan Corp. 2,680 121,772
Comerica, Inc. 321 19,059
Fifth Third Bancorp 945 56,464
First Union Corp. 2,003 55,708
Firstar Corp. 1,943 45,175
FleetBoston Financial Corp. 1,851 69,528
Huntington Bancshares, Inc. 513 8,304
KeyCorp. 871 24,388
Mellon Financial Corp. 998 49,089
Morgan (J.P.) & Co., Inc. 327 54,118
National City Corp. 1,244 35,765
Northern Trust Corp. 454 37,029
Old Kent Financial Corp. 283 12,381
PNC Bank Corp. 591 43,180
Regions Financial Corp. 453 12,373
SouthTrust Corp. 344 13,997
State Street Corp. 330 40,989
Summit Bancorp. 357 13,633
SunTrust Banks, Inc. 606 38,178
Synovus Financial Corp. 581 15,651
U.S. Bancorp 1,540 44,949
Union Planters Corp. 276 9,867
Wachovia Corp. 416 24,180
Wells Fargo Co. 3,496 194,684
------------
1,405,360
------------
Beverages (2.28%)
Anheuser-Busch Cos., Inc. 1,845 83,947
Brown-Forman Corp. 140 9,310
Coca-Cola Co. (The) 5,072 309,075
Coca-Cola Enterprises, Inc. 855 16,245
Coors (Adolph) Co. (Class B) 75 6,023
PepsiCo, Inc. 2,952 146,309
------------
570,909
------------
Broker Services (1.67%)
Bear Stearns Cos., Inc. 218 11,050
Lehman Brothers Holdings, Inc. 488 33,001
Merrill Lynch & Co., Inc. 1,657 112,987
Morgan Stanley Dean Witter & Co. 2,292 181,641
Schwab (Charles) Corp. 2,830 80,301
------------
418,980
------------
Building (0.57%)
Black & Decker Corp. 166 6,515
Centex Corp. 121 4,545
Danaher Corp. 290 19,829
Fluor Corp. 155 5,125
Georgia-Pacific Corp. 460 14,317
Kaufman & Broad Home Corp. 88 2,964
Louisiana-Pacific Corp. 213 2,157
Masco Corp. 913 23,453
Pulte Corp. 83 3,502
Sherwin-Williams Co. 328 8,631
Snap-on, Inc. 119 3,317
Stanley Works (The) 176 5,489
Vulcan Materials Co. 207 9,910
Weyerhauser Co. 448 22,736
Willamette Industries, Inc. 223 10,467
------------
142,957
------------
Business Services - Misc. (0.40%)
Block, H & R, Inc. 187 7,737
Cendant Corp. * 1,491 14,351
Convergys Corp.* 315 14,273
Equifax, Inc. 290 8,319
Moody's Corp. 332 8,528
Paychex, Inc. 761 37,004
Robert Half International, Inc. 363 9,620
------------
99,832
------------
Chemicals (0.65%)
Air Products & Chemicals, Inc. 469 19,229
Dow Chemical Co. 1,388 50,835
Eastman Chemical Co. 157 7,654
Engelhard Corp. 261 5,318
FMC Corp. * 62 4,445
Great Lakes Chemical Corp. 103 3,830
Hercules, Inc. 220 4,194
PPG Industries, Inc. 345 15,978
Praxair, Inc. 324 14,378
Rohm & Haas Co. 449 16,304
Sigma-Aldrich Corp. 158 6,211
Union Carbide Corp. 276 14,852
------------
163,228
------------
Computers (12.22%)
Adaptec, Inc.* 202 2,070
Adobe Systems, Inc. 492 28,628
Apple Computer, Inc. * 665 9,892
Autodesk, Inc. 118 3,179
Automatic Data Processing, Inc. 1,291 81,736
BMC Software, Inc.* 502 7,028
Cabletron Systems, Inc.* 377 5,679
Ceridian Corp.* 298 5,941
Cisco Systems, Inc.* 14,719 563,002
Citrix Systems, Inc.* 379 8,527
Compaq Computer Corp. 3,477 52,329
Computer Associates International, Inc. 1,187 23,146
Computer Sciences Corp.* 344 20,683
Compuware Corp.* 747 4,669
Dell Computer Corp.* 5,291 92,262
Electronic Data Systems Corp. 956 55,209
EMC Corp.* 4,475 297,587
First Data Corp. 808 42,571
Gateway 2000, Inc.* 661 11,891
Hewlett-Packard Co. 4,044 127,639
IMS Health, Inc. 601 16,227
International Business Machines Corp. 3,588 304,980
Intuit, Inc.* 422 16,643
Lexmark International Group, Inc. (Class A)* 260 11,521
Mercury Interactive Corp.* 165 14,891
Microsoft Corp.* 10,905 473,004
NCR Corp.* 197 9,678
Network Appliance, Inc.* 646 41,495
Novell, Inc.* 671 3,502
Oracle Corp.* 11,448 332,708
Palm, Inc.* 1,157 32,758
Parametric Technology Corp.* 557 7,485
PeopleSoft, Inc.* 584 21,718
Sabre Holdings Corp.* 264 11,385
Sapient Corp.* 248 2,961
Siebel Systems, Inc.* 878 59,375
Sun Microsystems, Inc.* 6,585 183,557
Unisys Corp.* 640 9,360
VERITAS Software Corp.* 798 69,825
------------
3,066,741
------------
Consumer Products - Misc. (0.00%)
American Greetings Corp. (Class A) 130 1,227
------------
Containers (0.06%)
Ball Corp. 58 2,672
Bemis Co., Inc. 109 3,658
Pactiv Corp.* 323 3,997
Sealed Air Corp. * 171 5,216
------------
15,543
------------
Cosmetics & Personal Care (0.44%)
Alberto Culver Co. (Class B) 114 4,881
Avon Products, Inc. 487 23,315
Gillette Co. 2,154 77,813
International Flavors & Fragrances, Inc. 200 4,062
------------
110,071
------------
Diversified Operations (2.34%)
Crane Co. 123 3,498
Du Pont (E.I.) De Nemours & Co. 2,133 103,051
Fortune Brands, Inc. 316 9,480
Honeywell International, Inc. 1,631 77,167
Illinois Tool Works, Inc. 618 36,810
ITT Industries, Inc. 180 6,975
Johnson Controls, Inc. 176 9,152
Loews Corp. 202 20,920
Minnesota Mining & Manufacturing Co. 807 97,243
National Service Industries, Inc. 84 2,158
Textron, Inc. 291 13,532
TRW, Inc. 254 9,843
Tyco International Ltd. 3,577 198,524
------------
588,353
------------
Electronics (9.21%)
Advanced Micro Devices, Inc.* 641 8,854
Agilent Technologies, Inc.* 926 50,698
Altera Corp.* 811 21,339
American Power Conversion Corp.* 398 4,925
Analog Devices, Inc.* 731 37,418
Applied Materials, Inc.* 1,659 63,353
Broadcom Corp. (Class A)* 481 40,644
Conexant Systems, Inc.* 466 7,165
Emerson Electric Co. 874 68,882
General Electric Co. 20,265 971,453
Grainger (W.W.), Inc. 192 7,008
Intel Corp. 13,764 416,361
KLA-Tencor Corp.* 380 12,801
Linear Technology Corp. 648 29,970
LSI Logic Corp.* 653 11,160
Maxim Integrated Products, Inc.* 581 27,779
Micron Technology, Inc. 1,160 41,180
Molex Inc. 400 14,200
Motorola, Inc. 4,467 90,457
National Semiconductor Corp.* 365 7,346
Novellus Systems, Inc.* 269 9,667
Parker- Hannifin Corp. 238 10,502
PerkinElmer, Inc. 102 10,710
Power-One, Inc.* 161 6,329
QLogic Corp.* 187 14,399
Rockwell International Corp. 375 17,859
Sanmina Corp.* 310 23,754
Solectron Corp.* 1,302 44,138
Tektronix, Inc. 193 6,502
Teradyne, Inc.* 357 13,298
Texas Instruments, Inc. 3,538 167,613
Thomas & Betts Corp. 119 1,926
Vitesse Semiconductor Corp.* 367 20,300
Xilinx, Inc.* 674 31,088
------------
2,311,078
------------
Fiber Optics (0.72%)
Corning, Inc. 1,881 99,340
JDS Uniphase Corp.* 1,966 81,958
------------
181,298
------------
Finance (4.09%)
American Express Co. 2,720 149,430
Capital One Financial Corp. 403 26,522
Charter One Financial, Inc. 425 12,272
CIT Group, Inc. (The) (Class A) 536 10,787
Citigroup, Inc. 10,281 524,974
Franklin Resources, Inc. 498 18,974
Golden West Financial Corp. 324 21,870
Household International, Inc. 963 52,965
MBNA Corp. 1,742 64,345
Price (T. Rowe) Associates, Inc. 248 10,482
Providian Financial Corp. 585 33,638
Stilwell Financial, Inc. 455 17,944
USA Education, Inc. 336 22,848
Washington Mutual, Inc. 1,103 58,528
------------
1,025,579
------------
Food (1.42%)
Archer-Daniels-Midland Co. 1,295 19,425
Campbell Soup Co. 861 29,812
ConAgra, Inc. 1,091 28,366
General Mills, Inc. 578 25,757
Heinz (H.J.) Co. 709 33,633
Hershey Foods Corp. 278 17,896
Kellogg Co. 830 21,787
Quaker Oats Co. 268 26,097
Ralston Purina Group 628 16,407
Sara Lee Corp. 1,705 41,879
Unilever NV, American Depositary Receipts (ADR)
(Netherlands) 1,169 73,574
Wrigley (WM) Jr. Co. 231 22,133
------------
356,766
------------
Furniture (0.03%)
Leggett & Platt, Inc. 401 7,594
------------
Household (0.11%)
Maytag Corp. 157 5,073
Newell Rubbermaid, Inc. 545 12,399
Tupperware Corp. 118 2,412
Whirlpool Corp. 136 6,486
------------
26,370
------------
Instruments - Scientific (0.23%)
Applera Corp. - Applied Biosystems Group 430 40,447
Millipore Corp. 95 5,985
Thermo Electron Corp.* 368 10,948
------------
57,380
------------
Insurance (4.15%)
Aetna, Inc. 289 11,867
AFLAC, Inc. 542 39,126
Allstate Corp. (The) 1,496 65,169
Ambac Financial Group, Inc. 215 12,537
American General Corp. 514 41,891
American International Group, Inc. 4,761 469,256
Aon Corp. 524 17,947
Chubb Corp. (The) 358 30,967
CIGNA Corp. 314 41,542
Cincinnati Financial Corp. 329 13,016
Conseco, Inc. 665 8,770
Hartford Financial Services Group, Inc. (The) 461 32,558
Jefferson Pilot Corp. 211 15,772
Lincoln National Corp. 392 18,546
Marsh & McLennan Cos., Inc. 563 65,871
MBIA, Inc. 201 14,899
MetLife, Inc. 1,564 54,740
MGIC Investment Corp. 218 14,701
Progressive Corp. 150 15,544
SAFECO Corp. 261 8,580
St. Paul Cos., Inc. (The) 445 24,169
Torchmark Corp. 258 9,917
UnumProvident Corp. 493 13,249
------------
1,040,634
------------
Internet Services (0.83%)
America Online, Inc.* 4,777 166,240
BroadVision, Inc.* 550 6,497
Yahoo! Inc.* 1,142 34,456
------------
207,193
------------
Leisure (1.10%)
Brunswick Corp. 179 2,942
Carnival Corp. (Class A) 1,195 36,821
Disney (Walt) Co., (The) 4,263 123,361
Eastman Kodak Co. 614 24,176
Harley-Davidson, Inc. 620 24,645
Harrah's Entertainment, Inc. * 239 6,304
Hasbro, Inc. 352 3,740
Hilton Hotels Corp. 753 7,906
Marriott International, Inc. (Class A) 491 20,745
Mattel, Inc. 873 12,606
Starwood Hotels & Resorts Worldwide, Inc. 395 13,924
------------
277,170
------------
Machinery (0.38%)
Briggs & Stratton Corp. 44 1,952
Caterpiller Tractor, Inc. 703 33,261
Cooper Industries, Inc. 191 8,774
Deere & Co. 480 21,990
Dover Corp. 415 16,833
Ingersoll-Rand Co. 328 13,735
------------
96,545
------------
Media (2.19%)
Clear Channel Communications, Inc.* 1,196 57,931
Comcast Corp. 1,846 77,070
Dow Jones & Co., Inc. 179 10,136
Gannett Co., Inc. 539 33,991
Harcourt General, Inc. 150 8,580
Knight-Ridder, Inc. 150 8,531
McGraw-Hill Cos., Inc. (The) 400 23,450
Meredith Corp. 102 3,283
New York Times Co. (Class A) 333 13,341
Time Warner, Inc. 2,715 141,832
Tribune Co. 618 26,111
Viacom, Inc. (Class B)* 3,094 144,645
------------
548,901
------------
Medical (13.36%)
Abbott Laboratories 3,163 153,208
Allergan, Inc. 269 26,043
ALZA Corp.* 484 20,570
American Home Products Corp. 2,680 170,314
Amgen, Inc.* 2,113 135,100
Bard (C.R.), Inc. 104 4,842
Bausch & Lomb, Inc. 109 4,408
Baxter International, Inc. 602 53,164
Becton, Dickinson & Co. 518 17,936
Biogen, Inc.* 303 18,199
Biomet, Inc. 365 14,486
Boston Scientific Corp.* 829 11,347
Bristol-Myers Squibb Co. 3,999 295,676
Cardinal Health, Inc. 571 56,886
Chiron Corp. * 392 17,444
Forest Laboratories, Inc.* 179 23,785
Guidant Corp. 629 33,927
HCA-The Healthcare Co. 1,130 49,731
HEALTHSOUTH Corp.* 790 12,887
Humana, Inc.* 346 5,276
Johnson & Johnson 2,843 298,693
King Pharmaceuticals, Inc.* 345 17,832
Lilly (Eli) & Co. 2,305 214,509
Manor Care, Inc.* 210 4,331
McKesson HBOC, Inc. 581 20,852
MedImmune, Inc.* 431 20,553
Medtronic, Inc. 2,457 148,341
Merck & Co., Inc. 4,716 441,535
Pall Corp. 252 5,371
Pfizer Inc. 12,903 593,538
Pharmacia Corp. 2,638 160,918
Quintiles Transnational Corp.* 236 4,941
Schering-Plough Corp. 2,990 169,683
St. Jude Medical, Inc. * 174 10,690
Stryker Corp. 400 20,236
Tenet Healthcare Corp.* 648 28,796
UnitedHealth Group, Inc. 652 40,017
Watson Pharmaceutical, Inc.* 210 10,749
Wellpoint Health Networks, Inc.* 128 14,752
------------
3,351,566
------------
Metal (0.52%)
Alcan Aluminium Ltd. (Canada) 661 22,598
Alcoa Inc. 1,769 59,261
Barrick Gold Corp. (Canada) 810 13,268
Freeport-McMoran Copper & Gold, Inc. (Class B)* 304 2,603
Homestake Mining Co. 538 2,253
Inco, Ltd. (Canada) 372 6,235
Newmont Mining Corp. 344 5,869
Phelps Dodge Corp. 161 8,986
Placer Dome, Inc. (Canada) 670 6,449
Timken Co. (The) 123 1,860
Worthington Industries, Inc. 175 1,411
------------
130,793
------------
Mortgage Banking (1.15%)
Countrywide Credit Industries, Inc. 234 11,758
Fannie Mae 2,060 178,705
Freddie Mac 1,422 97,940
------------
288,403
------------
Office (0.16%)
Avery Dennison Corp. 226 12,402
Deluxe Corp. 148 3,740
Pitney Bowes, Inc. 516 17,093
Xerox Corp. 1,365 6,313
------------
39,548
------------
Oil & Gas (6.92%)
Amerada Hess Corp. 181 13,224
Anadarko Petroleum Corp. 509 36,180
Apache Corp. 253 17,726
Ashland, Inc. 143 5,132
Baker Hughes, Inc. 679 28,221
Burlington Resources, Inc. 440 22,220
Chevron Corp. 1,313 110,866
Coastal Corp. (The) 440 38,857
Conoco, Inc. (Class B) 1,275 36,895
Devon Energy Corp. 262 15,974
El Paso Energy Corp. 475 34,022
Enron Corp. 1,527 126,932
EOG Resources, Inc. 239 13,070
Exxon Mobil Corp. 7,109 618,039
Halliburton Co. 905 32,806
Kerr-McGee Corp. 193 12,919
McDermott International, Inc. 124 1,333
Nabors Industries, Inc.* 301 17,804
Occidental Petroleum Corp. 755 18,309
Phillips Petroleum Co. 522 29,689
Rowan Cos., Inc.* 193 5,211
Royal Dutch Petroleum Co. (ADR) (Netherlands) 4,385 265,567
Schlumberger Ltd. 1,171 93,607
Sunoco, Inc. 174 5,862
Texaco, Inc. 1,125 69,891
Tosco Corp. 296 10,046
Transocean Sedco Forex, Inc. 431 19,826
Unocal Corp. 497 19,228
USX - Marathon Group 635 17,621
------------
1,737,077
------------
Paper & Paper Products (0.56%)
Boise Cascade Corp. 117 3,934
International Paper Co. 984 40,159
Kimberly-Clark Corp. 1,092 77,193
Mead Corp. (The) 206 6,463
Potlatch Corp. 58 1,947
Temple-Inland, Inc. 101 5,416
Westvaco Corp. 206 6,013
------------
141,125
------------
Pollution Control (0.16%)
Allied Waste Industries, Inc.* 402 5,854
Waste Management, Inc. 1,271 35,270
------------
41,124
------------
Printing - Commercial (0.03%)
Donnelley (R.R.) & Sons 250 6,750
------------
Retail (6.32%)
Albertson's, Inc. 861 22,816
AutoZone, Inc.* 261 7,438
Bed Bath & Beyond, Inc.* 579 12,955
Best Buy Co., Inc.* 425 12,564
Circuit City Stores-Circuit City Group 420 4,830
Consolidated Stores Corp.* 228 2,422
Costco Wholesale Corp. 915 36,543
CVS Corp. 801 48,010
Darden Restaurants, Inc. 244 5,581
Dillards, Inc. 188 2,221
Dollar General Corp. 674 12,722
Federated Department Stores, Inc. * 413 14,455
Gap, Inc. (The) 1,738 44,319
Genuine Parts Co. 354 9,270
Home Depot, Inc. (The) 4,736 216,376
Kmart Corp.* 989 5,254
Kohl's Corp.* 678 41,358
Kroger Co.* 1,683 45,546
Limited, Inc. (The) 870 14,844
Longs Drug Stores Corp. 76 1,833
Lowe's Cos., Inc. 783 34,843
May Department Stores 609 19,945
McDonald's Corp. 2,682 91,188
Nordstrom, Inc. 264 4,802
Office Depot, Inc.* 609 4,339
Penney (J. C.) Co., Inc. 536 5,829
RadioShack Corp. 380 16,269
Reebok International Ltd. * 117 3,199
Safeway, Inc.* 1,025 64,063
Sears, Roebuck & Co. 683 23,734
Staples, Inc.* 929 10,974
Starbucks Corp.* 383 16,948
SUPERVALU, Inc. 271 3,760
SYSCO Corp. 1,367 41,010
Target Corp. 1,832 59,082
Tiffany & Co. 298 9,424
TJX Cos., Inc. 575 15,956
Toys "R" Us, Inc.* 417 6,959
Tricon Global Restaurants, Inc. * 299 9,867
Walgreen Co. 2,072 86,636
Wal-Mart Stores, Inc. 9,135 485,297
Wendy's International, Inc. 233 6,116
Winn-Dixie Stores, Inc. 285 5,522
------------
1,587,119
------------
Rubber - Tires & Misc. (0.04%)
Cooper Tire & Rubber Co. 148 1,572
Goodyear Tire & Rubber Co. (The) 322 7,403
------------
8,975
------------
Shoes & Related Apparel (0.12%)
Nike, Inc. (Class B) 552 30,809
------------
Soap & Cleaning Preparations (1.25%)
Clorox Co. 482 17,111
Colgate-Palmolive Co. 1,170 75,523
Ecolab, Inc. 260 11,229
Proctor & Gamble Co. (The) 2,666 209,114
------------
312,977
------------
Steel (0.05%)
Allegheny Technologies, Inc. 164 2,603
Nucor Corp. 159 6,310
USX-U.S. Steel Group, Inc. 182 3,276
------------
12,189
------------
Telecommunications (7.46%)
ADC Telecommunications, Inc.* 1,579 28,619
ALLTEL Corp. 639 39,898
Andrew Corp.* 166 3,610
AT&T Corp. 7,676 132,891
Avaya, Inc.* 569 5,868
BellSouth Corp. 3,821 156,422
CenturyTel, Inc. 288 10,296
Comverse Technology, Inc.* 337 36,607
Global Crossing Ltd.* (Bermuda) 1,811 25,920
Lucent Technologies, Inc. 6,830 92,205
Nextel Communications, Inc. (Class A)* 1,558 38,560
Nortel Networks Corp. (Canada) 6,335 203,116
QUALCOMM, Inc.* 1,529 125,665
Qwest Communications International, Inc.* 3,387 138,867
SBC Communications, Inc. 6,923 330,573
Scientific-Atlanta, Inc. 330 10,746
Sprint Corp. 1,809 36,745
Sprint PCS* 1,907 38,974
Symbol Technologies, Inc. 299 10,764
Tellabs, Inc.* 840 47,460
Verizon Communications, Inc. 5,520 276,690
WorldCom, Inc.* 5,888 82,432
------------
1,872,928
------------
Textile (0.05%)
Liz Claiborne, Inc. 106 4,412
VF Corp. 233 8,444
------------
12,856
------------
Tobacco (0.83%)
Philip Morris Cos., Inc. 4,547 200,068
UST, Inc. 333 9,345
------------
209,413
------------
Transport (0.64%)
AMR Corp.* 308 12,070
Burlington Northern Santa Fe Corp. 807 22,848
CSX Corp. 444 11,516
Delta Air Lines, Inc. 251 12,597
FedEx Corp.* 583 23,297
Navistar International Corp. * 121 3,169
Norfolk Southern Corp. 785 10,450
Southwest Airlines Co. 1,026 34,402
Union Pacific Corp. 507 25,730
US Airways Group, Inc.* 137 5,557
------------
161,636
------------
Utilities (2.98%)
AES Corp. (The)* 938 51,942
Allegheny Energy, Inc. 226 10,890
Ameren Corp. 281 13,014
American Electric Power Co., Inc. 659 30,643
Calpine Corp.* 576 25,956
Cinergy Corp. 325 11,416
CMS Energy Corp. 247 7,827
Consolidated Edison, Inc. 434 16,709
Constellation Energy Group, Inc. 308 13,879
Dominion Resources, Inc. 489 32,763
DTE Energy Co. 292 11,370
Duke Energy Corp. 754 64,278
Dynegy, Inc. (Class A) 661 37,057
Edison International 666 10,406
Entergy Corp. 456 19,294
Exelon Corp. 651 45,707
FirstEnergy Corp. * 461 14,550
FPL Group, Inc. 362 25,973
GPU, Inc. 248 9,129
KeySpan Corp. 275 11,653
Kinder Morgan, Inc. 234 12,212
Massey Energy Co. 155 1,976
Niagara Mohawk Holdings, Inc.* 328 5,474
NICOR, Inc. 93 4,016
NiSource, Inc. 417 12,823
ONEOK, Inc. 60 2,888
Peoples Energy Corp. 72 3,222
PG&E Corp. 792 15,840
Pinnacle West Capital Corp. 173 8,239
PPL Corp. 296 13,376
Progress Energy, Inc. 420 20,659
Public Service Enterprise Group, Inc. 438 21,298
Reliant Energy, Inc. 603 26,117
Sempra Energy 418 9,719
Southern Co. 1,382 45,952
TXU Corp. 528 23,397
Williams Cos., Inc. (The) 900 35,944
Xcel Energy, Inc. 697 20,257
------------
747,865
------------
TOTAL COMMON STOCKS
(Cost $16,676,006) (95.48%) 23,960,835
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.47%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01(Secured by U.S. Treasury
Bonds 10.750% and 13.875% due 02-15-03
and 05-15-11) - Note B 5.95% $1,121 $1,121,000
--------- ------------
TOTAL SHORT-TERM INVESTMENTS (4.47%) 1,121,000
--------- ------------
TOTAL INVESTMENTS (99.95%) 25,081,835
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.05%) 12,188
--------- ------------
TOTAL NET ASSETS (100.00%) $25,094,023
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Large Cap Growth Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Large Cap Growth Fund on December 31, 2000. It's divided into
two main categories: common stocks and short-term investments. Common
stocks are further broken down by industry groups. Short-term investments,
which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
Banks - United States (2.94%)
State Street Corp. 1,520 $188,799
Wells Fargo & Co. 3,115 173,467
------------
362,266
------------
Broker Services (0.61%)
Schwab (Charles) Corp. (The) 2,649 75,165
------------
Business Services - Misc. (0.53%)
Paychex, Inc. 1,350 65,644
------------
Computers (22.85%)
Adobe Systems, Inc. 1,900 110,556
BEA Systems, Inc.* 2,550 171,647
Brocade Communications Systems, Inc.* 1,300 119,356
Cisco Systems, Inc.* 13,100 501,075
Compaq Computer Corp. 7,720 116,186
EMC Corp.* 6,536 434,644
Juniper Networks, Inc.* 1,150 144,972
Oracle Corp.* 15,200 441,750
Palm, Inc.* 3,050 86,353
Redback Networks, Inc.* 1,000 41,000
Sun Microsystems, Inc.* 11,050 308,019
VeriSign, Inc.* 1,200 89,025
VERITAS Software Corp.* 2,050 179,375
Yahoo! Inc.* 2,250 67,887
------------
2,811,845
------------
Diversified Operations (8.33%)
General Electric Co. 12,170 583,399
Tyco International Ltd. 7,942 440,781
------------
1,024,180
------------
Electronics (4.87%)
Altera Corp.* 3,800 99,988
Analog Devices, Inc.* 1,807 92,496
Broadcom Corp. (Class A)* 1,600 134,400
Flextronics International Ltd. (Singapore)* 3,700 105,450
PMC-Sierra, Inc.* 800 62,900
Xilinx, Inc.* 2,250 103,781
------------
599,015
------------
Fiber Optics (4.14%)
CIENA Corp.* 1,600 130,000
JDS Uniphase Corp.* 3,200 133,400
SDL, Inc.* 500 74,094
Sycamore Networks, Inc.* 2,600 96,850
TyCom, Ltd. (Bermuda)* 3,345 74,844
------------
509,188
------------
Finance (4.16%)
Citigroup, Inc. 6,149 313,983
MBNA Corp. 5,346 197,468
------------
511,451
------------
Instruments - Scientific (2.01%)
Applera Corp. - Applied Biosystems Group 1,098 103,281
Waters Corp.* 1,723 143,870
------------
247,151
------------
Insurance (3.16%)
AFLAC, Inc. 1,513 109,220
American International Group, Inc. 2,834 279,326
------------
388,546
------------
Media (3.64%)
Clear Channel Communications, Inc.* 3,142 152,191
Time Warner, Inc. 5,668 296,096
------------
448,287
------------
Medical (21.53%)
Cardinal Health, Inc. 3,216 320,394
Genentech, Inc.* 2,056 167,564
Johnson & Johnson 2,408 252,991
Medtronic, Inc. 6,668 402,580
Merck & Co., Inc. 4,428 414,572
Millennium Pharmaceuticals, Inc.* 1,800 111,375
Pfizer, Inc. 14,080 647,680
Pharmacia Corp. 5,446 332,206
------------
2,649,362
------------
Mortgage Banking (1.24%)
Fannie Mae 1,765 153,114
------------
Retail (7.51%)
Bed Bath & Beyond, Inc.* 4,600 102,925
Home Depot, Inc. (The) 8,490 387,887
Wal-Mart Stores, Inc. 8,153 433,128
------------
923,940
------------
Telecommunications (11.11%)
American Tower Corp. (Class A)* 3,120 118,170
Comverse Technology, Inc.* 1,450 157,506
Corning, Inc. 4,703 248,377
McLeodUSA, Inc. (Class A)* 5,450 76,981
Nokia Corp., American Depositary Receipts
(Finland) 7,477 325,249
Nortel Networks Corp. 6,896 221,103
Scientific-Atlanta, Inc. 2,207 71,865
Verizon Communications, Inc. 2,942 147,468
------------
1,366,719
------------
Utilities (1.03%)
AES Corp. (The)* 2,292 126,920
------------
TOTAL COMMON STOCKS
(Cost $12,655,003) (99.66%) 12,262,793
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.77%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.95% $95 $95,000
------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 402
------------
TOTAL SHORT-TERM INVESTMENTS (0.78%) 95,402
--------- ------------
TOTAL INVESTMENTS (100.44%) 12,358,195
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.44%) (53,989)
--------- ------------
TOTAL NET ASSETS (100.00%) $12,304,206
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Mid Cap Growth Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Mid Cap Growth Fund on December 31, 2000. Common stocks
are broken down by industry groups.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCKS
Banks - United States (3.84%)
Fifth Third Bancorp 1,700 $101,575
Mellon Financial Corp. 3,453 169,844
Northern Trust Corp. 2,070 168,834
------------
440,253
------------
Beverages (0.82%)
Pepsi Bottling Group, Inc. 2,362 94,332
------------
Broker Services (1.17%)
Bear Stearns Cos., Inc. 831 42,121
Lehman Brothers Holdings, Inc. 1,364 92,240
------------
134,361
------------
Computers (21.07%)
Adobe Systems, Inc. 1,200 69,825
Ariba, Inc.* 1,700 91,162
Brocade Communications Systems, Inc.* 2,180 200,151
Commerce One, Inc. 2,000 50,625
DST Systems, Inc.* 704 47,168
EMC Corp.* 910 60,515
Emulex Corp.* 1,800 143,887
Exodus Communications, Inc.* 2,910 58,200
Fiserv, Inc.* 1,365 64,752
Handspring, Inc.* 2,200 85,663
i2 Technologies, Inc.* 3,340 181,612
Interwoven, Inc.* 1,000 65,938
Intuit, Inc.* 2,900 114,369
McDATA Corp. (Class B)* 50 2,738
Mercury Interactive Corp.* 1,270 114,617
Palm, Inc.* 4,250 120,328
Parametric Technology Corp.* 14,000 188,125
Rational Software Corp.* 3,220 125,379
Research in Motion Ltd.* (Canada) 1,010 80,800
Siebel Systems, Inc.* 1,600 108,200
SunGard Data Systems, Inc.* 2,834 133,552
TIBCO Software, Inc.* 2,300 110,256
VeriSign, Inc.* 1,800 133,538
VERITAS Software Corp.* 776 67,900
------------
2,419,300
------------
Electronics (12.68%)
Aeroflex, Inc.* 7,194 207,389
Alpha Industries, Inc.* 2,300 85,100
Amphenol Corp. (Class A)* 2,344 91,855
Analog Devices, Inc.* 985 50,420
Applied Micro Circuits Corp.* 680 51,032
Flextronics International Ltd.* (Singapore) 5,080 144,780
Jabil Circuit, Inc.* 3,571 90,614
Molex, Inc. 1,250 44,375
QLogic Corp.* 1,450 111,650
Sanmina Corp.* 1,320 101,145
Tektronix, Inc. 4,826 162,576
Vitesse Semiconductor Corp.* 930 51,441
Waters Corp.* 3,160 263,860
------------
1,456,237
------------
Fiber Optics (2.01%)
SDL, Inc.* 850 125,959
Sycamore Networks, Inc.* 2,800 104,300
------------
230,259
------------
Finance (4.38%)
Affiliated Managers Group, Inc.* 1,632 89,556
Concord EFS, Inc.* 2,470 108,526
Golden West Financial Corp. 2,378 160,515
USA Education, Inc. 2,120 144,160
------------
502,757
------------
Insurance (5.22%)
AFLAC, Inc. 2,833 204,507
Ambac Financial Group, Inc. 3,484 203,161
American General Corp. 458 37,327
Everest Re Group Ltd. (Bermuda) 2,158 154,567
------------
599,562
------------
Media (3.47%)
Clear Channel Communications, Inc.* 2,390 115,766
Hispanic Broadcasting Corp.* 3,544 90,372
Reader's Digest Association, Inc. (Class A) 2,544 99,534
Univision Communications, Inc. (Class A)* 2,258 92,437
------------
398,109
------------
Medical (17.00%)
Alkermes, Inc.* 1,800 56,475
Allergan, Inc. 1,181 114,336
ALZA Corp.* 3,688 156,740
Applera Corp. - Applied Biosystems Group 2,060 193,769
Cardinal Health, Inc. 1,874 186,697
Community Health Systems, Inc.* 2,439 85,365
Express Scripts, Inc. (Class A)* 750 76,688
Health Management Associates, Inc. (Class A)* 4,209 87,337
HEALTHSOUTH Corp.* 8,128 132,588
Human Genome Sciences, Inc.* 970 67,233
IDEC Pharmaceuticals Corp.* 400 75,825
Immunex Corp.* 3,680 149,500
MedImmune, Inc.* 1,740 82,976
Millennium Pharmaceuticals, Inc.* 3,440 212,850
Oxford Health Plans, Inc.* 3,100 122,450
Stryker Corp. 709 35,868
Trigon Healthcare, Inc.* 812 63,184
Wellpoint Health Networks, Inc.* 454 52,324
------------
1,952,205
------------
Oil & Gas (8.42%)
Baker Hughes, Inc. 2,960 123,025
BJ Services Co.* 2,580 177,697
Cooper Cameron Corp.* 1,620 107,021
El Paso Energy Corp. 2,632 188,517
R&B Falcon Corp.* 6,281 144,070
Santa Fe International Corp. 2,815 90,256
Weatherford International, Inc.* 2,889 136,505
------------
967,091
------------
Pollution Control (1.52%)
Waste Management, Inc. 6,296 174,714
------------
Retail (1.97%)
Bed Bath & Beyond, Inc.* 4,300 96,212
RadioShack Corp. 1,739 74,451
Staples, Inc.* 4,650 54,928
------------
225,591
------------
Telecommunications (12.90%)
Allegiance Telecom, Inc.* 5,580 124,242
American Tower Corp. (Class A)* 4,434 167,938
COLT Telecom Group Plc* American Depositary
Receipts (United Kingdom) 374 32,819
Comverse Technology, Inc.* 1,870 203,129
Crown Castle International Corp.* 4,060 109,874
Dobson Communications Corp. (Class A)* 11,480 167,895
Global Crossing Ltd.* (Bermuda) 5,963 85,345
McLeodUSA, Inc. (Class A)* 14,430 203,824
Scientific-Atlanta, Inc. 3,162 102,963
Western Wireless Corp. (Class A)* 3,850 150,872
XO Communications, Inc. (Class A)* 7,450 132,703
------------
1,481,604
------------
Utilities (2.96%)
Calpine Corp.* 3,966 178,718
Dynegy, Inc. (Class A) 1,214 68,060
Orion Power Holdings, Inc.* 2,220 54,668
TNPC, Inc.* 3,952 38,779
------------
340,225
------------
TOTAL COMMON STOCKS
(Cost $10,826,748) (99.43%) 11,416,600
--------- ------------
TOTAL INVESTMENTS (99.43%) 11,416,600
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.57%) 65,250
--------- ------------
TOTAL NET ASSETS (100.00%) $11,481,850
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
Portfolio Concentration
December 31, 2000 (Unaudited)
- -----------------------------------------------------------------------
The V.A. Mid Cap Growth Fund invests primarily in common stocks of U.S.
and foreign issuers. The performance of the Fund is closely tied to the
economic and financial conditions within the countries in which it
invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the schedule of
investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentages of the Fund's
investments at December 31, 2000 assigned to country categories.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- ------------------
Bermuda 2.09%
Canada 0.70
Singapore 1.26
United Kingdom 0.29
United States 95.09
-------
TOTAL INVESTMENTS 99.43%
=======
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Relative Value Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Relative Value Fund on December 31, 2000. It's divided into
two main categories: common stocks and bonds. Common stocks and bonds
are further broken down by industry groups.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCKS
Business Services - Misc. (5.70%)
Cendant Corp. * 100,000 $962,500
Iron Mountain, Inc.* 25,000 928,125
Moody's Corp. 13,000 333,937
------------
2,224,562
------------
Computers (16.24%)
Computer Associates International, Inc. 36,493 711,614
Dell Computer Corp.* 44,450 775,097
Hyperion Solutions Corp.* 14,000 216,125
IMS Health, Inc. 10,000 270,000
Microsoft Corp.* 22,000 954,250
MicroStrategy, Inc.* 50,000 475,000
Parametric Technology Corp.* 153,000 2,055,938
Viant Corp.* 25,000 99,220
Wind River Systems, Inc.* 22,950 783,169
------------
6,340,413
------------
Cosmetics & Personal Care (1.85%)
Gillette Co. 20,000 722,500
------------
Diversified Operations (4.90%)
Tyco International, Ltd. 34,500 1,914,750
------------
Electronics (12.62%)
Alpha Industries, Inc. 34,700 1,283,900
Conexant Systems, Inc.* 78,300 1,203,862
SBS Technologies, Inc.* 17,000 508,938
SCI Systems, Inc.* 15,840 417,780
Sony Corp. (Japan) 4,800 332,049
Vicor Corp.* 38,900 1,181,588
------------
4,928,117
------------
Finance (1.29%)
Citigroup, Inc. 9,841 502,506
------------
Food (0.62%)
Hain Celestial Group, Inc.* 7,500 243,750
------------
Insurance (7.11%)
Ace, Ltd. (Bermuda) 29,505 1,252,118
Ambac Financial Group, Inc. 10,000 583,125
Progressive Corp. 4,000 414,500
XL Capital, Ltd. (Class A) 6,032 527,046
------------
2,776,789
------------
Machinery (0.68%)
Applied Science & Technology, Inc.* 22,000 264,000
------------
Media (11.56%)
AT&T Corp. - Liberty Media Group (Class A)* 145,744 1,976,653
Clear Channel Communications, Inc.* 11,000 532,812
Pegasus Communications Corp.* 40,700 1,048,025
Viacom, Inc. (Class B)* 17,000 794,750
XM Satellite Radio Holdings, Inc. (Class A)* 10,000 160,625
------------
4,512,865
------------
Medical (5.37%)
Abbott Laboratories 15,500 750,781
Alpharma, Inc. (Class A) 12,000 526,500
Apogent Technologies, Inc.* 40,000 820,000
------------
2,097,281
------------
Oil & Gas (1.19%)
Unocal Corp. 12,000 464,250
------------
Pollution Control (2.13%)
Waste Management, Inc. 30,000 832,500
------------
Printing - Commercial (1.42%)
Valassis Communications, Inc.* 17,500 552,344
------------
Telecommunications (24.02%)
ANTEC Corp.* 57,750 456,589
CenturyTel, Inc. 35,000 1,251,250
CTC Communications Group, Inc.* 60,000 277,500
Hughes Electronics 85,000 1,955,000
Lucent Technologies, Inc. 95,953 1,295,365
Motient Corp.* 30,000 120,000
Nextel Partners, Inc. (Class A)* 28,000 470,750
Sprint Corp. 85,000 1,726,563
TeleCorp PCS, Inc. (Class A)* 30,000 671,250
Verizon Communications, Inc. 23,000 1,152,875
------------
9,377,142
------------
TOTAL COMMON STOCKS
(Cost $43,121,074) (96.70%) 37,753,769
--------- ------------
INTEREST CREDIT PAR VALUE
RATE RATING** (000s OMITTED)
----- -------- --------------
BONDS
Office (0.21%)
Danka Business Systems Plc,
Conv Note
(United Kingdom) 04-01-02 6.750% B+ $500 82,500
--------- ------------
TOTAL BONDS (Cost $401,957) (0.21%) 82,500
--------- ------------
TOTAL INVESTMENTS (96.91%) 37,836,269
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (3.09%) 1,206,343
--------- ------------
TOTAL NET ASSETS (100.00%) $39,042,612
========= ============
* Non-income producing security.
** Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investor Services or John Hancock Advisers, Inc.,
where Standard & Poor's ratings are not available.
Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer.
The percentage shown for each investment category is the total of that
category as a percentage of the nest assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Small Cap Growth Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Small Cap Growth Fund on December 31, 2000. It's divided
into two main categories: common stocks and short-term investments.
Common stocks are further broken down by industry groups. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCKS
Advertising (1.00%)
Getty Images, Inc.* 6,200 $198,400
------------
Banks - United States (3.42%)
Greater Bay Bancorp. 5,800 237,800
Investors Financial Services Corp. 2,000 172,000
Southwest Bancorp. of Texas, Inc.* 3,550 152,428
Sterling Bancshares, Inc. 5,800 114,550
------------
676,778
------------
Building (1.08%)
Standard-Pacific Corp. 4,350 101,681
Toll Brothers, Inc.* 2,750 112,406
------------
214,087
------------
Business Services - Misc. (6.19%)
Corporate Executive Board Co. (The)* 7,350 292,277
Forrester Research, Inc.* 4,500 225,281
Heidrick & Struggles International, Inc.* 3,800 159,837
Management Network Group, Inc. (The)* 9,150 108,656
On Assignment, Inc.* 8,450 240,825
Pivotal Corp.* 2,400 88,950
Quanta Services, Inc.* 3,379 108,762
------------
1,224,588
------------
Computers (9.97%)
Advent Software, Inc.* 3,950 158,247
Aspen Technology, Inc.* 1,900 63,175
AvantGo, Inc.* 2,600 16,250
Avocent Corp.* 2,450 66,150
Broadbase Software, Inc.* 4,850 30,312
Cerner Corp.* 3,300 152,625
Data Return Corp.* 10,250 38,437
DigitalThink, Inc.* 5,500 93,844
Embarcadero Technologies, Inc.* 3,600 162,000
Genomica Corp.* 1,350 7,130
IDX Systems Corp.* 5,750 143,750
IntraNet Solutions, Inc.* 2,650 135,150
Manugistics Group, Inc.* 3,500 199,500
M-Systems Flash Disk Pioneers Ltd.* (Israel) 8,350 116,378
National Instruments Corp.* 2,750 133,547
NetRatings, Inc.* 6,500 95,469
Novatel Wireless, Inc.* 8,450 104,569
Secure Computing Corp.* 11,100 109,613
TeleCommunication Systems, Inc. (Class A)* 3,800 12,825
WatchGuard Technologies, Inc.* 4,200 132,825
------------
1,971,796
------------
Consumer Products - Misc. (0.37%)
CoorsTek, Inc.* 2,300 72,162
------------
Electronics (14.14%)
Aeroflex, Inc.* 7,700 221,976
ATMI, Inc.* 5,800 113,100
Brooks Automation, Inc.* 2,850 79,978
Caliper Technologies Corp.* 1,200 56,400
Credence Systems Corp.* 3,750 86,250
DDi Corp.* 6,500 177,125
DuPont Photomasks, Inc.* 3,950 208,733
Elantec Semiconductor, Inc.* 2,250 62,437
Electro Scientific Industries, Inc.* 3,950 110,600
Exar Corp.* 4,350 134,782
Kent Electronics Corp.* 4,400 72,600
Merix Corp.* 5,750 76,906
Microsemi Corp.* 4,700 130,719
Nanometrics, Inc.* 5,650 78,041
Nu Horizons Electronics Corp.* 4,175 37,314
Pixelworks, Inc.* 3,950 88,381
Plexus Corp.* 4,000 121,562
PLX Technology, Inc.* 9,600 79,800
Powerwave Technologies, Inc.* 2,300 134,550
PRI Automation, Inc.* 5,400 101,250
Rudolph Technologies, Inc.* 5,350 161,503
Semtech Corp.* 5,700 125,756
Stratos Lightwave, Inc.* 6,500 110,906
Wilson Greatbatch Technologies, Inc.* 7,950 224,588
------------
2,795,257
------------
Finance (2.98%)
Actrade Financial Technologies, Ltd.* 5,750 126,859
Affiliated Managers Group, Inc.* 4,450 244,194
Medallion Financial Corp. 3,600 52,650
Metris Cos., Inc. 6,275 165,111
------------
588,814
------------
Instruments - Scientific (0.59%)
Varian, Inc.* 3,450 116,869
------------
Insurance (2.83%)
Fidelity National Financial, Inc. 6,850 253,022
HCC Insurance Holdings, Inc. 6,250 168,359
Philadelphia Consolidated Holding Corp.* 1,450 44,769
RenaissanceRe Holdings Ltd. (Bermuda) 1,200 93,975
------------
560,125
------------
Machinery (0.63%)
Hydril Co.* 7,100 124,694
------------
Media (3.07%)
Entercom Communications Corp.* 2,000 68,875
Pegasus Communications Corp.* 1,900 48,925
Radio One, Inc. (Class A)* 3,750 40,078
Radio One, Inc. (Class D)* 6,650 73,150
Regent Communications, Inc.* 19,000 112,813
Scholastic Corp.* 2,000 177,250
Westwood One, Inc.* 4,450 85,941
------------
607,032
------------
Medical (24.45%)
Accredo Health, Inc.* 4,700 235,881
Alexion Pharmaceuticals, Inc.* 2,500 162,344
Alkermes, Inc.* 4,450 139,619
Alpharma, Inc. (Class A) 4,500 197,437
AmeriSource Health Corp. (Class A)* 5,350 270,175
Arena Pharmaceuticals, Inc.* 400 6,200
Aurora Biosciences Corp.* 4,050 127,322
Bindley Western Industries, Inc. 6,800 282,625
Cell Therapeutics, Inc.* 3,050 137,441
COR Therapeutics, Inc.* 4,100 144,269
Corvas International, Inc.* 7,900 113,562
CV Therapeutics, Inc.* 2,750 194,562
Cytyc Corp.* 2,900 181,431
Exelixis, Inc.* 5,700 83,362
Genome Therapeutics Corp.* 550 3,833
Human Genome Sciences, Inc.* 1,350 93,572
Inhale Therapeutic Systems, Inc.* 4,400 222,200
Inspire Pharmaceuticals, Inc.* 4,700 122,494
Invitrogen Corp.* 2,500 215,938
LifePoint Hospitals, Inc.* 5,250 263,156
Lincare Holdings, Inc.* 3,750 213,984
NPS Pharmaceuticals, Inc.* 4,900 235,200
Physiometrix, Inc.* 8,300 132,281
Province Healthcare Co.* 6,100 240,188
Renal Care Group, Inc.* 6,850 187,840
Techne Corp.* 4,200 151,463
Titan Pharmaceuticals, Inc.* 4,300 152,091
Transgenomic, Inc.* 3,450 36,225
Vascular Solutions, Inc.* 5,450 40,194
Virologic, Inc.* 7,750 70,719
Visible Genetics, Inc.* (Canada) 4,650 175,538
------------
4,833,146
------------
Oil & Gas (9.38%)
Dril-Quip, Inc.* 2,750 94,016
Hanover Compressor Co.* 5,859 261,092
Marine Drilling Cos., Inc.* 9,000 240,750
Newfield Exploration Co.* 6,200 294,113
Patterson Energy, Inc.* 5,800 216,050
Pride International, Inc.* 9,900 243,788
Spinnaker Exploration Co.* 450 19,125
Stone Energy Corp.* 3,600 232,380
Universal Compression Holdings, Inc.* 6,700 252,506
------------
1,853,820
------------
Printing - Commercial (0.81%)
Houghton Mifflin Co. 3,450 159,994
------------
Retail (9.27%)
99 Cents Only Stores* 5,840 159,870
Brightpoint, Inc.* 19,850 69,475
Columbia Sportswear Co.* 3,950 196,512
Cost Plus, Inc.* 6,750 198,281
Gymboree Corp. (The)* 6,100 84,637
Insight Enterprises, Inc.* 6,675 119,733
P.F. Chang's China Bistro, Inc.* 1,800 56,588
Performance Food Group Co.* 2,200 112,784
RARE Hospitality International, Inc.* 7,375 164,555
ScanSource, Inc.* 4,450 173,550
Tech Data Corp.* 4,700 127,120
Too, Inc.* 6,250 78,125
Tweeter Home Entertainment Group, Inc.* 5,600 68,250
Whole Foods Market, Inc.* 3,650 223,106
------------
1,832,586
------------
Schools/Education (2.95%)
Corinthian Colleges, Inc.* 5,000 189,687
Education Management Corp.* 5,150 184,112
ProsoftTraining.com* 7,500 90,938
University of Phoenix Online* 3,650 117,712
------------
582,449
------------
Steel (1.26%)
Lone Star Technologies, Inc.* 6,450 248,325
------------
Telecommunications (3.54%)
AirGate PCS, Inc.* 4,350 154,425
o2wireless Solutions, Inc.* 1,400 13,038
Powertel, Inc.* 1,350 83,616
Rural Cellular Corp. (Class A)* 2,400 71,100
SBA Communications Corp.* 5,950 244,322
UbiquiTel, Inc.* 5,350 29,425
WJ Communications, Inc.* 7,350 104,738
------------
700,664
------------
Transport (1.82%)
Expeditors International of Washington, Inc. 3,300 177,169
Forward Air Corp.* 4,900 182,831
------------
360,000
------------
TOTAL COMMON STOCKS
(Cost $17,936,487) (99.75%) 19,721,586
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.73%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.95% $144 144,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 527
------------
TOTAL SHORT-TERM INVESTMENTS (0.73%) 144,527
--------- ------------
TOTAL INVESTMENTS (100.48%) 19,866,113
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.48%) (94,451)
--------- ------------
TOTAL NET ASSETS (100.00%) $19,771,662
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Sovereign Investors Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Sovereign Investors Fund on December 31, 2000. It is divided
into three main categories: common stocks, U.S. government obligations
and short-term investments. Common stocks are further broken down by
industry group. Short-term investments, which represent the Fund's
"cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCKS
Advertising (2.55%)
Interpublic Group of Cos., Inc. (The) 33,200 $1,413,075
------------
Banks - United States (7.37%)
Chase Manhattan Corp. (The)* 30,000 1,363,125
Mellon Financial Corp. 25,000 1,229,688
State Street Corp. 5,000 621,050
Wells Fargo Co. 15,500 863,156
------------
4,077,019
------------
Beverages (1.52%)
PepsiCo, Inc. 17,000 842,563
------------
Chemicals (1.48%)
Air Products & Chemicals, Inc. 20,000 820,000
------------
Computers (7.35%)
Automatic Data Processing, Inc. 8,000 506,500
Cisco Systems, Inc.* 25,000 956,250
Compaq Computer Corp. 30,000 451,500
Hewlett-Packard Co. 8,000 252,500
International Business Machines Corp. 12,500 1,062,500
Sun Microsystems, Inc.* 30,000 836,250
------------
4,065,500
------------
Diversified Operations (2.94%)
Minnesota Mining & Manufacturing Co. 11,200 1,349,600
Tyco International Ltd. 5,000 277,500
------------
1,627,100
------------
Electronics (6.67%)
Emerson Electric Co. 14,700 1,158,544
General Electric Co. 19,800 949,163
Intel Corp. 16,000 481,000
Motorola, Inc. 31,000 627,750
Texas Instruments, Inc. 10,000 473,750
------------
3,690,207
------------
Finance (4.93%)
Citigroup, Inc. 29,500 1,506,344
Household International, Inc. 15,000 825,000
Morgan Stanley Dean Witter & Co. 5,000 396,250
------------
2,727,594
------------
Furniture (0.65%)
Leggett & Platt, Inc. 19,000 359,813
------------
Insurance (5.45%)
AFLAC, Inc. 12,400 895,125
American General Corp. 15,000 1,222,500
American International Group, Inc. 9,093 896,229
------------
3,013,854
------------
Machinery (1.65%)
Dover Corp. 22,500 912,656
------------
Media (3.29%)
Gannett Co., Inc. 19,400 1,223,413
McGraw-Hill Cos., Inc. (The) 10,200 597,975
------------
1,821,388
------------
Medical (12.58%)
Abbott Laboratories 26,000 1,259,375
American Home Products Corp. 13,000 826,150
Bard (C.R.), Inc. 12,800 596,000
Baxter International, Inc. 11,100 980,269
Johnson & Johnson 9,000 945,563
Merck & Co., Inc. 9,000 842,625
Pfizer, Inc. 19,250 885,500
Schering-Plough Corp. 11,000 624,250
------------
6,959,732
------------
Mortgage Banking (4.22%)
Fannie Mae 15,000 1,301,250
Freddie Mac 15,000 1,033,125
------------
2,334,375
------------
Office (1.50%)
Avery Dennison Corp. 15,150 831,356
------------
Oil & Gas (6.78%)
Chevron Corp. 17,200 1,452,325
Conoco, Inc. (Class B) 30,000 868,125
Exxon Mobil Corp. 10,184 885,372
Royal Dutch Petroleum Co., American Depositary
Receipts (Netherlands) 9,000 545,063
------------
3,750,885
------------
Paper & Paper Products (2.43%)
Kimberly-Clark Corp. 19,000 1,343,110
------------
Retail (5.91%)
Home Depot, Inc. (The) 9,000 411,188
Lowe's Cos., Inc. 28,000 1,246,000
McDonald's Corp. 14,000 476,000
SYSCO Corp. 16,400 492,000
Target Corp. 20,000 645,000
------------
3,270,188
------------
Telecommunications (4.35%)
CenturyTel, Inc. 35,000 1,251,250
Verizon Communications, Inc. 23,000 1,152,875
------------
2,404,125
------------
Tobacco (1.99%)
Philip Morris Cos., Inc. 25,000 1,100,000
------------
Utilities (3.89%)
ALLTEL Corp. 17,000 1,061,434
SBC Communications, Inc. 22,844 1,090,800
------------
2,152,234
------------
TOTAL COMMON STOCKS
(Cost $42,749,147) (89.50%) 49,516,774
--------- ------------
INTEREST CREDIT PAR VALUE
RATE RATING** (000s OMITTED)
-------- -------- ------------
U.S. GOVERNMENT OBLIGATIONS
Government - U.S. (0.73%)
United States Treasury, Note 09-30-02 5.88% AAA $400 404,188
------------
TOTAL U.S. GOVERNMENT
AND AGENCIES SECURITIES
(Cost $401,813) (0.73%) 404,188
--------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.69%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.95% 5,365 5,365,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 6
------------
TOTAL SHORT-TERM INVESTMENTS (9.69%) 5,365,006
--------- ------------
TOTAL INVESTMENTS (99.92%) 55,285,968
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.08%) 42,130
--------- ------------
TOTAL NET ASETS (100.00%) $55,328,098
========= ============
* Non-income producing security.
** Credit ratings are rated by Moody's Investor Services or John
Hancock Advisers, Inc. where Standard and Poor's ratings are not
available.
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. International Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. International Fund on December 31, 2000. It's divided into
two main categories: common stocks and short-term investments. Common
stocks are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCKS
Australia (2.11%)
BHP, Ltd. (Diversified Operations) 3,797 $40,044
Lend Lease Corp., Ltd. (Real Estate Operations) 1,113 10,366
National Australia Bank, Ltd. (Banks - Foreign) 580 9,296
News Corp., Ltd. (The), American Depositary
Receipts (ADR) (Media) 3,580 27,884
OneSteel, Ltd.* (Steel) 1 1
Publishing & Broadcasting, Ltd. (Media) 1,195 8,674
ResMed, Inc.* (Medical) 900 3,652
Securenet, Ltd.* (Computers) 5,477 14,648
Telstra Corp., Ltd. (Telecommunications) 1,999 7,143
Westpac Banking Corp., Ltd. (Banks - Foreign) 805 5,909
Woodside Petroleum, Ltd. (Oil & Gas) 3,294 27,026
------------
154,643
------------
Belgium (0.41%)
Fortis (B) (Insurance) 378 4
UCB SA (Medical) 800 29,657
------------
29,661
------------
Brazil (1.09%)
Companhia Brasileira de Distribuicao Grupo Pao
de Acucar (ADR) (Retail) 720 26,280
Telecomunicacoes Brasileiras SA (ADR)
(Telecommunications) 380 27,693
Uniao de Bancos Brasileiros SA, Global Depositary
Receipts (GDR) (Finance) 890 26,199
------------
80,172
------------
Canada (4.86%)
BCE, Inc. (Telecommunications) 729 21,040
Bombardier, Inc. (Diversified Operations) 5,000 77,151
Celestica, Inc.* (Electronics) 580 31,314
Nortel Networks Corp. (Telecommunications) 3,369 108,348
Sun Life Financial Services of Canada (Insurance) 2,339 62,361
Thomson Corp. (Computers) 949 36,308
Weston (George) Ltd. (Food) 356 19,956
------------
356,478
------------
China (0.15%)
Shandong International Power Development Co.,
Ltd. (Utilities) 70,000 11,039
------------
Denmark (0.59%)
Vestas Wind Systems AS (Utilities) 800 43,310
------------
Finland (1.53%)
Nokia Oyj (Telecommunications) 2,520 112,398
------------
France (6.02%)
Alcatel SA (Telecommunications) 1,620 92,031
Dassault Systemes SA (Computers) 300 20,564
Renault SA (Automobile/Trucks) 720 37,522
Schneider Electric SA (Machinery) 360 26,266
Societe Generale (Banks - Foreign) 950 59,054
Total Fina Elf SA (Oil & Gas) 830 123,452
Vivendi SA (Diversified Operations) 1,250 82,280
------------
441,169
------------
Germany (3.72%)
Allianz AG (Insurance) 290 108,543
BASF AG (Chemicals) 617 27,908
Dresdner Bank AG (Banks - Foreign) 420 18,319
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance) 147 52,599
Siemens AG (Diversified Operations) 500 65,354
------------
272,723
------------
Greece (0.38%)
Hellenic Telecommunications Organization SA (ADR)
(Telecommunications) 3,800 27,550
------------
Hong Kong (2.34%)
Aeon Credit Service Co., Ltd. (Finance) 29,400 8,952
ASM Pacific Technology, Ltd. (Electronics) 3,500 4,981
Cathay Pacific Airways (Transport) 2,000 3,692
Cheung Kong Holdings, Ltd. (Real Estate
Operations) 2,000 25,578
China Everbright, Ltd. (Finance) 16,000 16,513
China Resources Enterprise, Ltd. (Diversified
Operations) 14,000 17,860
Giordano International, Ltd. (Retail) 4,000 1,846
Guoco Group, Ltd. (Finance) 4,000 11,924
Hang Seng Bank, Ltd. (Banks - Foreign) 700 9,423
Hongkong Electric Holdings, Ltd. (Utilities) 1,000 3,692
HSBC Holdings Plc (Banks - Foreign) 1,437 21,372
Hutchison Whampoa, Ltd. (Diversified Operations) 2,000 24,937
Sun Hung Kai Properties, Ltd. (Real Estate
Operations) 1,000 9,968
Swire Pacific, Ltd. (Class A) (Diversified
Operations) 1,500 10,770
------------
171,508
------------
India (0.43%)
Infosys Technologies, Ltd. (ADR) (Computers) 130 11,992
Videsh Sanchar Nigam, Ltd. (ADR)
(Telecommunications) 1,575 19,687
------------
31,679
------------
Ireland (0.52%)
CRH Plc (Building) 2,050 38,153
------------
Israel (0.32%)
Bank Hapoalim, Ltd. (Banks - Foreign) 8,100 23,498
------------
Italy (3.06%)
Assicurazioni Generali SpA (Insurance) 2,700 107,243
ENI SpA (Oil & Gas) 11,070 70,684
Riunione Adriatica di Sicurta SpA (Insurance) 2,982 46,510
------------
224,437
------------
Japan (21.09%)
Aiful Corp. (Finance) 300 24,484
Asahi Glass Co., Ltd. (Glass Products) 3,000 24,746
Daibiru Corp. (Real Estate Operations) 3,000 21,256
Daito Trust Construction Co., Ltd. (Real Estate
Operations) 2,000 35,864
Fuji Television Network, Inc. (Media) 3 20,889
Fujitsu, Ltd. (Computers) 2,000 29,461
Inax Corp. (Building) 4,000 20,189
Katokichi Co., Ltd. (Food) 2,000 52,484
Kirin Brewery Co., Ltd. (Beverages) 6,000 53,691
Kurita Water Industries, Ltd. (Pollution Control) 1,000 13,077
Kyocera Corp. (Electronics) 300 32,724
Maeda Corp. (Building) 15,000 51,566
Marui Co., Ltd. (Retail) 4,000 60,357
Matsushita Electric Industrial Co., Ltd.
(Electronics) 3,000 71,641
Max Co., Ltd. (Machinery) 2,000 19,244
Melco, Inc. (Computers) 600 12,544
Mitsubishi Estate Co., Ltd. (Real Estate
Operations) 2,975 31,749
Mitsui Fudosan Co., Ltd. (Real Estate Operations) 6,000 59,570
Murata Manufacturing Co., Ltd. (Electronics) 100 11,721
NEC Corp. (Electronics) 1,000 18,282
Nippon Meat Packers, Inc. (Food) 3,000 40,833
Nissan Motor Co., Ltd. (Automobile/Trucks) 8,000 46,046
Nissin Food Products Co., Ltd. (Food) 1,000 24,405
Nitto Denko Corp. (Electronics) 900 24,405
Nomura Securities Co., Ltd. (Broker Services) 2,000 35,952
NTT DoCoMo, Inc. (Telecommunications) 1 17,232
Orix Corp. (Leasing Companies) 100 10,024
Q.P. Corp. (Food) 9,000 74,633
Rohm Co., Ltd. (Electronics) 200 37,964
Santen Pharmaceutical Co., Ltd. (Medical) 1,000 19,769
Sekisui House, Ltd. (Building) 5,000 45,705
Sharp Corp. (Electronics) 1,000 12,054
Shin-Etsu Chemical Co., Ltd. (Chemicals) 1,000 38,488
Shiseido Co., Ltd. (Cosmetics & Personal Care) 3,000 33,459
Sony Corp. (Electronics) 1,000 69,104
Stanley Electric Co., Ltd. (Electronics) 3,000 27,292
Sumitomo Bakelite Co., Ltd. (Chemicals) 2,000 18,422
Sumitomo Metal Mining Co., Ltd. (Metal) 5,000 26,155
Takefuji Corp. (Finance) 300 18,894
Terumo Corp. (Medical) 1,000 21,868
Toho Gas Co., Ltd. (Oil & Gas) 13,000 23,312
Tokyo Electric Power Co., Inc. (Utilities) 2,400 59,517
Tokyu Corp. (Transport) 4,000 21,554
Toshiba Corp. (Electronics) 3,000 20,049
Toyota Motor Corp. (Automobile/Trucks) 2,200 70,241
Yamanouchi Pharmaceutical Co., Ltd. (Medical) 1,000 43,212
------------
1,546,128
------------
Malaysia (0.39%)
Petronas Gas Berhad (Oil & Gas) 17,000 28,855
------------
Mexico (0.20%)
Telefonos de Mexico SA (ADR) (Telecommunications) 320 14,440
------------
Netherlands (4.57%)
AEGON NV (Insurance) 1,400 57,921
Akzo Nobel NV (Chemicals) 630 33,838
ING Groep NV (Banks - Foreign) 1,050 83,885
Koninklijke Ahold NV (Retail) 2,245 72,433
Koninklijke Numico NV (Food) 720 36,238
Unilever Plc (Food) 5,900 50,552
------------
334,867
------------
New Zealand (0.13%)
Auckand International Airport, Ltd. (Transport) 3,900 5,419
Telecom Corp of New Zealand, Ltd.
(Telecommunications) 2,000 4,257
------------
9,676
------------
Norway (0.90%)
Tomra Systems ASA * (Machinery) 3,400 66,084
------------
Singapore (0.67%)
Capitaland, Ltd.* (Real Estate Operations) 2,000 3,464
DBS Group Holdings, Ltd. (Banks - Foreign) 1,000 11,316
Flextech Holdings, Ltd. (Electronics) 2,000 1,097
Keppel Capital Holdings, Ltd. (Finance) 1,250 1,653
Neptune Orient Lines, Ltd. (Transport) 4,000 3,141
Overseas Union Bank, Ltd. (Banks - Foreign) 1,000 4,677
Pacific Century Regional Developments, Ltd.
(Real Estate Operations) 5,000 2,555
Singapore Technologies Engineering, Ltd.
(Engineering/R&D Services) 7,000 11,276
United Overseas Bank, Ltd. (Banks - Foreign) 1,000 7,506
Wing Tai Holdings, Ltd. (Real Estate Operations) 3,000 2,182
------------
48,867
------------
South Africa (0.75%)
DataTec, Ltd.* (Computers) 5,000 23,788
Remgro, Ltd. (Diversified Operations) 4,600 31,307
------------
55,095
------------
South Korea (0.68%)
Samsung Electronics Co. (Electronics) 135 16,862
Shinhan Bank (Banks - Foreign) 1,700 13,976
SK Telecom Co., Ltd. (Telecommunications) 95 19,000
------------
49,838
------------
Sweden (1.36%)
Ericsson (LM) Telefonaktiebolaget
(Telecommunications) 5,800 66,056
Nordic Baltic Holding AB (Banks - Foreign) 4,250 33,522
------------
99,578
------------
Switzerland (2.47%)
Novartis AG (Medical) 68 120,192
Roche Holding AG (Medical) 6 61,114
------------
181,306
------------
Taiwan (0.89%)
Hon Hai Precision Industry Co., Ltd.
(Electronics) 2,000 10,145
Taiwan Semiconductor Manufacturing Co., Ltd.*
(Electronics) 12,000 28,804
United Microelectronics Corp.* (Electronics) 18,000 26,141
------------
65,090
------------
Thailand (0.11%)
Shin Satellite Pcl* (Telecommunications) 11,500 7,751
------------
Turkey (0.17%)
Dogan Yayin Holding AS* (Diversified Operations) 1,738,100 12,058
------------
United Kingdom (10.39%)
Barclay's Plc (Banks - Foreign) 900 27,884
BP Amoco Plc (Oil & Gas) 9,200 74,287
Centrica Plc (Utilities) 17,240 66,832
CGNU Plc (Insurance) 1,400 22,651
Energis Plc* (Telecommunications) 5,550 37,345
GlaxoSmithKline Plc* (Medical) 6,149 173,778
Granada Compass Plc (Diversified Operations) 3,000 32,680
HSBC Holdings Plc (Banks - Foreign) 9,000 132,558
Marconi Plc (Telecommunications) 2,500 26,878
Reckitt Benckiser Plc (Soap & Cleaning
Preparations) 3,000 41,360
Vodafone AirTouch Plc (Telecommunications) 34,080 125,106
------------
761,359
------------
TOTAL COMMON STOCKS
(Cost $5,094,561) (72.30%) 5,299,410
--------- ------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.21%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 10.750% and 13.875% due
02-15-03 and 05-15-11) - Note B 5.95% $89 89,000
------------
NUMBER
OF SHARES
---------
Cash Equivalents (12.74%)
Navigator Securities Lending Prime
Portfolio** 933,457 933,457
------------
TOTAL SHORT-TERM INVESTMENTS (13.95%) 1,022,457
--------- ------------
TOTAL INVESTMENTS (86.25%) 6,321,867
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (13.75%) 1,007,772
--------- ------------
TOTAL NET ASSETS (100.00%) $7,329,639
========= ============
* Non-income producing security.
** Represents investment of security lending collateral - Note A.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
Industry Diversification (Unaudited)
- -----------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other
countries. The performance of the Fund is closely tied to the economic
conditions within the countries in which it invests. The concentration
of investments by country for individual securities held by the Fund is
shown in the schedule of investments. In addition, the concentration of
investments can be aggregated by various industry groups. The table
below shows the percentages of the Fund's investments at December 31,
2000 assigned to the various investment categories.
MARKET VALUE AS A %
INVESTMENT CATEGORIES OF FUND NET ASSETS
- ----------------------- ------------------
Automobile/Trucks 2.10%
Banks - Foreign 6.30
Beverages 0.73
Broker Services 0.49
Building 2.12
Chemicals 1.62
Computers 2.04
Cosmetics & Personal Care 0.46
Diversified Operations 5.14
Electronics 6.06
Engineering/R&D Services 0.15
Finance 1.48
Food 4.08
Glass Products 0.34
Insurance 6.25
Leasing Companies 0.14
Machinery 1.52
Media 0.78
Medical 6.46
Metal 0.36
Oil & Gas 4.74
Pollution Control 0.18
Real Estate Operations 3.01
Retail 2.20
Soap & Cleaning Preparations 0.56
Steel 0.00
Telecommunications 10.01
Transport 0.46
Utilities 2.52
Short-Term Investments 13.95
-------
TOTAL INVESTMENTS 86.25%
=======
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Financial Industries Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Financial Industries Fund on December 31, 2000. It's
divided into two main categories: common stocks and short-term
investments. Common stocks are further broken down by industry groups.
Short-term investments, which represent the Fund's "cash" position, are
listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCK
Banks - Foreign (4.63%)
Bipop-Carire SpA (Italy) 107,000 $698,175
HSBC Holdings Plc (United Kingdom) 85,000 1,250,681
Nordic Baltic Holding (Sweden) 178,020 1,353,789
------------
3,302,645
------------
Banks - Midwest (7.22%)
Fifth Third Bancorp 49,250 2,942,688
Northern Trust Corp. 27,100 2,210,344
------------
5,153,032
------------
Banks - Money Center (3.36%)
Citigroup, Inc. 47,000 2,399,938
------------
Banks - Northeast (3.53%)
State Street Corp. 20,300 2,521,461
------------
Banks - Superregional (8.25%)
Bank of New York Co., Inc. 39,500 2,179,906
FleetBoston Financial Corp. 30,536 1,147,009
Wells Fargo & Co. 46,000 2,561,625
------------
5,888,540
------------
Broker Services (8.49%)
Legg Mason, Inc. 24,500 1,335,250
Merrill Lynch & Co., Inc. 33,500 2,284,280
Schwab (Charles) Corp. (The) 86,076 2,442,407
------------
6,061,937
------------
Computer - Services (9.32%)
Automatic Data Processing, Inc. 13,000 823,063
BISYS Group, Inc. (The)* 42,000 2,189,250
First Data Corp. 28,500 1,501,594
Fiserv, Inc.* 45,000 2,134,688
------------
6,648,595
------------
Computer - Software (1.35%)
Intuit, Inc.* 24,500 966,219
------------
Finance - Consumer Loans (7.25%)
American Express Co. 44,400 2,439,225
Household International, Inc. 17,000 935,000
MBNA Corp. 48,650 1,797,009
------------
5,171,234
------------
Finance - Investment Management (8.62%)
Amvescap Plc, American Depositary Receipts (ADR)
(United Kingdom) 53,000 2,305,500
Morgan Stanley Dean Witter & Co. 24,000 1,902,000
Price (T. Rowe) Associates, Inc. 46,000 1,944,218
------------
6,151,718
------------
Insurance - Brokers (2.79%)
Marsh & McLennan Cos., Inc. 17,000 1,989,000
------------
Insurance - Life (11.01%)
AFLAC, Inc. 37,000 2,670,938
American General Corp. 25,700 2,094,550
Protective Life Corp. 48,000 1,548,000
Reinsurance Group of America, Inc. 43,500 1,544,250
------------
7,857,738
------------
Insurance - Multi Line (3.29%)
Allmerica Financial Corp. 15,600 1,131,000
Fortis (NL) NV (Netherlands) 37,454 1,216,659
------------
2,347,659
------------
Insurance - Property & Casualty (13.35%)
Ambac Financial Group, Inc. 45,750 2,667,797
American International Group, Inc. 25,625 2,525,664
MBIA, Inc. 29,000 2,149,625
XL Capital Ltd. (Class A) 25,000 2,184,375
------------
9,527,461
------------
Mortgage & RE Services (2.74%)
Fannie Mae 22,500 1,951,875
------------
TOTAL COMMON STOCKS
(Cost $48,938,306) (95.20%) 67,939,052
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.91%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Date 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.95% $3,504 3,504,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 879
------------
TOTAL SHORT-TERM INVESTMENTS (4.91%) 3,504,879
--------- ------------
TOTAL INVESTMENTS (100.11%) 71,443,931
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.11%) (77,335)
--------- ------------
TOTAL NET ASETS (100.00%) $71,366,596
========= ============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
Portfolio Concentration
December 31, 2000 (Unaudited)
- -----------------------------------------------------------------------
The V.A. Financial Industries Fund invests primarily in equity
securities in the financial sector in the United States and abroad. The
concentration of investments by industry category for individual
securities held by the Fund is shown in the schedule of investments. In
addition, concentration of investments can be aggregated by various
countries. The table below shows the percentage of the Fund's
investments at December 31, 2000 assigned to the various countries.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- ------------------
Italy 0.98%
Netherlands 1.70
Sweden 1.90
United Kingdom 4.98
United States 90.55
-------
TOTAL INVESTMENTS 100.11%
=======
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Regional Bank Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Regional Bank Fund on December 31, 2000. It's divided into
two main categories: common stocks and short-term investments. Common
stocks are further broken down by industry groups. Short-term investments,
which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION, STATE SHARES VALUE
- -------------------------- ------------ ------------
COMMON STOCKS
Superregional Banks (6.87%)
Mellon Financial Corp. (PA) 8,500 $418,094
U.S. Bancorp (MN) 7,500 218,906
Wells Fargo & Co. (CA) 5,500 306,281
------------
943,281
------------
Banks - Money Center (4.92%)
Chase Manhattan Corp. (The) (NY) 7,000 318,062
Citigroup, Inc. (NY) 7,000 357,437
------------
675,499
------------
Banks - United States (79.05%)
BancFirst Corp. (OK) 1,500 59,531
BancWest Corp. (HI) 16,000 418,000
BB&T Corp. (NC) 4,000 149,250
Cascade Bancorp (OR) 33,010 445,635
Chittenden Corp. (VT) 7,500 227,344
City National Corp. (CA) 8,000 310,500
Comerica, Inc. (MI) 4,500 267,187
Commerce Bancshares, Inc. (MO) 12,047 511,998
Community First Bankshares, Inc. (ND) 10,000 188,750
Cullen/Frost Bankers, Inc. (TX) 6,500 271,781
Fifth Third Bancorp (OH) 8,592 513,372
Financial Institutions, Inc. (NY) 19,750 266,625
First Midwest Bancorp., Inc. (IL) 5,000 143,750
FirstMerit Corp. (OH) 5,000 133,672
Independent Bank Corp. (MI) 23,887 471,768
M & T Bank Corp. (NY) 4,500 306,000
Marshall & Ilsley Corp. (WI) 3,500 177,905
Mercantile Bankshares Corp. (MD) 9,500 410,281
Mid-State Bancshares (CA) 15,000 532,500
Mississippi Valley Bancshares, Inc. (MO) 10,350 304,031
National Commerce Bancorp. (TN) 14,465 358,009
Northrim Bank (AK) 16,695 169,037
Pacific Capital Bancorp. (CA) 13,500 379,688
PNC Financial Service Group (PA) 3,500 255,719
Prosperity Bancshares, Inc. (TX) 14,000 276,500
SJNB Financial Corp. (CA) 8,000 292,000
SouthTrust Corp. (AL) 4,000 162,750
Southwest Bancorp. of Texas, Inc.* (TX) 5,000 214,688
Sterling Bancshares, Inc. (TX) 12,000 237,000
Summit Bancshares, Inc. (TX) 14,800 320,975
Texas Regional Bancshares, Inc. (Class A) (TX) 11,000 357,500
Umpqua Holdings Corp. (OR) 38,000 323,000
Valley National Bancorp. (NJ) 15,700 523,006
Whitney Holding Corp. (LA) 5,500 199,719
Yardville National Bancorp. (NJ) 25,000 301,563
Zions Bancorp. (UT) 6,000 374,625
------------
10,855,659
------------
Thrifts (4.19%)
Charter One Financial, Inc. (OH) 6,017 173,741
First Financial Holdings, Inc. (SC) 12,300 242,156
Warren Bancorp., Inc. (MA) 20,000 160,000
------------
575,897
------------
TOTAL COMMON STOCKS
(Cost $10,935,579) (95.03%) 13,050,336
------------
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000s OMITTED)
- ------------------- -------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.94%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.95% $679 679,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Current
Rate 5.20% 382
------------
TOTAL SHORT-TERM INVESTMENTS (4.94%) 679,382
--------- ------------
TOTAL INVESTMENTS (99.97%) 13,729,718
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.03%) 3,712
--------- ------------
TOTAL NET ASSETS (100.00%) $13,733,430
========= ============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Technology Fund
Schedule of Investments
December 31, 2000
- ------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Technology Fund on December 31, 2000. It is divided into two
main categories: common stocks and short-term investments. Common stocks
are further broken down by industry group. Short-term investments,
which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- ------------ ------------
COMMON STOCKS
Computer - Graphics (1.34%)
Cadence Design Systems, Inc.* 6,850 $188,375
------------
Computer - Internet Services (10.56%)
America Online, Inc.* 10,325 359,310
Art Technology Group, Inc.* 3,800 116,138
Ask Jeeves, Inc.* 2,820 6,874
DoubleClick, Inc.* 700 7,700
Exodus Communications, Inc.* 7,700 154,000
Exult, Inc.* 3,400 45,050
Genuity, Inc.* 5,000 25,312
Infospace, Inc.* 6,750 59,696
Inktomi Corp.* 2,975 53,178
Openwave Systems, Inc.* 2,600 124,638
Portal Software, Inc.* 3,300 25,884
RealNetworks, Inc.* 5,750 49,953
ScreamingMedia, Inc.* 8,350 25,050
TIBCO Software, Inc.* 2,500 119,844
VeriSign, Inc.* 2,300 170,631
VerticalNet, Inc.* 3,000 19,969
Viant Corp.* 1,700 6,747
Vignette Corp.* 6,250 112,500
------------
1,482,474
------------
Computer - Local Networks (5.24%)
Cisco Systems, Inc.* 10,500 401,625
JNI Corp.* 3,300 74,869
Lucent Technologies, Inc. 2,600 35,100
Network Appliance, Inc.* 3,500 224,656
------------
736,250
------------
Computer - Memory Devices (6.97%)
EMC Corp.* 6,600 438,900
Emulex Corp.* 2,400 191,850
VERITAS Software Corp.* 3,775 330,312
Western Digital Corp.* 6,950 16,941
------------
978,003
------------
Computer - Micro/Macro (1.44%)
Dell Computer Corp.* 6,600 115,088
Gateway, Inc.* 4,800 86,352
------------
201,440
------------
Computer - Services (0.64%)
Unisys Corp.* 6,150 89,944
------------
Computer - Software (17.35%)
BEA Systems, Inc.* 6,550 440,897
Citrix Systems, Inc.* 10,300 231,750
i2 Technologies, Inc.* 4,300 233,812
Mercury Interactive Corp.* 6,075 548,269
Microsoft Corp.* 2,000 86,750
Oracle Corp.* 12,150 353,109
Networks Associates, Inc.* 3,000 12,562
Parametric Technology Corp.* 9,900 133,031
Rational Software Corp.* 5,650 219,997
SmartForce Plc,* American Depositary Receipt
(ADR) (Ireland) 4,700 176,544
------------
2,436,721
------------
Electronics - Components Misc. (5.37%)
Sanmina Corp.* 2,800 214,550
SCI Systems, Inc.* 3,800 100,225
Solectron Corp.* 12,950 439,005
------------
753,780
------------
Electronics - Products Misc. (1.70%)
Aeroflex, Inc.* 8,300 239,273
------------
Electronics - Semiconductor Components (10.70%)
Altera Corp.* 2,650 69,728
Amkor Technology, Inc.* 3,250 50,426
Analog Devices, Inc.* 5,350 273,853
Applied Materials, Inc.* 4,725 180,436
Applied Science & Technology, Inc.* 1,200 14,400
ASM Lithography Holding N.V.* (Netherlands) 3,500 78,969
Atmel Corp.* 13,250 154,031
Cypress Semiconductor Corp.* 4,750 93,516
Integrated Device Technology, Inc.* 4,150 137,469
Intel Corp. 2,000 60,125
KLA-Tencor Corp.* 2,800 94,325
Micron Technology, Inc. 7,100 252,050
PRI Automation, Inc.* 2,300 43,125
------------
1,502,453
------------
Fiber Optics (7.06%)
CIENA Corp.* 3,500 284,375
Corning, Inc. 5,900 311,594
Finisar Corp.* 7,050 204,450
JDS Uniphase Corp.* 3,100 129,231
Sycamore Networks, Inc.* 1,650 61,462
------------
991,112
------------
Media - Radio/TV (0.36%)
Infinity Broadcasting Corp. (Class A)* 1,800 50,287
------------
Telecom - Equipment (4.91%)
Advanced Fibre Communications, Inc.* 4,150 74,959
ANTEC Corp.* 1,220 9,646
Nokia Corp. (ADR) (Finland) 5,750 250,125
Nortel Networks Corp. (Canada) 6,400 205,200
QUALCOMM, Inc.* 1,550 127,391
Tut Systems, Inc.* 2,750 22,687
------------
690,008
------------
Telecom - Services (1.44%)
Global Crossing Ltd.* (Bermuda) 9,250 132,391
Global Light Telecommunications, Inc.* (Canada) 1,600 6,960
Metromedia Fiber Network, Inc. (Class A)* 5,300 53,663
Primus Telecommunications Group, Inc. * 4,250 9,828
------------
202,842
------------
TOTAL COMMON STOCKS
(Cost $14,432,054) (75.08%) 10,542,962
------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- --------------
SHORT-TERM INVESTMENTS
Government - U.S. Agencies (10.68%)
FHLMC Discount Note Due 01-02-01 5.05% $1,500 1,499,369
------------
Joint Repurchase Agreement (19.57%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.95 2,748 2,747,789
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 792
------------
TOTAL SHORT-TERM INVESTMENTS (30.25%) 4,247,950
--------- ------------
TOTAL INVESTMENTS (105.33%) 14,790,912
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (5.33%) (748,868)
--------- ------------
TOTAL NET ASSETS (100.00%) $14,042,044
========= ============
* Non-income producing security
Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
Portfolio Concentration
December 31, 2000 (Unaudited)
- -----------------------------------------------------------------------
The V.A. Technology Fund invests primarily in equity securities of
technology companies in the United States and abroad. The concentration
of investments by industry category for individual securities held by
the Fund is shown in the schedule of investments. In addition,
concentration of investments can be aggregated by various countries. The
table below shows the percentage of the Fund's investments at December 31,
2000 assigned to the various countries.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- ------------------
Bermuda 0.94%
Canada 1.51
Finland 1.78
Ireland 1.26
Netherlands 0.56
United States 99.28
-------
TOTAL INVESTMENTS 105.33%
=======
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Bond Fund
Schedule of Investments
December 31, 2000
- --------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Bond Fund on December 31, 2000. It is divided into three
main categories: bonds, warrants and short-term investments. Bonds and
warrants are further broken down by industry group. Short-term
investments, which represent the Fund's "cash" position, are listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- -------- ------- -------------- -------------
BONDS
Aerospace (0.70%)
Lockheed Martin Corp.,
Bond 12-01-29 8.500% BBB- $75 $84,880
Raytheon Co.,
Note 03-01-03 7.900 BBB- 40 41,017
Note 03-01-10 8.300 BBB- 45 49,135
-------------
175,032
-------------
Automobile/Trucks (0.66%)
ERAC USA Finance Co.,
Note 02-15-05 (R) 6.625 BBB+ 19 18,426
Note 12-15-09 (R) 7.950 BBB+ 35 36,094
Ford Capital B.V.,
Gtd Deb (Netherlands) 05-15-02 (Y) 9.875 A 50 52,044
Ford Motor Co.,
Note 07-16-31 7.450 A 65 60,161
-------------
166,725
-------------
Banks - Foreign (0.83%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom) 10-15-04 (Y) 8.200 AA- 30 31,849
Royal Bank of Scotland Plc,
Bond (United Kingdom) 03-31-05 (Y) 8.817 A- 30 31,641
Scotland International Finance No. 2,
B.V., Gtd Sub Note (Netherlands) 11-01-06 (R) (Y) 8.850 A 95 104,251
UBS PFD Funding Trust I,
Gtd Bond 10-01-49 8.622# AA- 40 41,905
-------------
209,646
-------------
Banks - United States (0.94%)
Bank of America Corp.,
Jr Sub Note 02-15-10 7.800 A 60 62,441
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 50 46,179
BNP Paribas Capital Trust,
Sub Note 12-27-49 (R) 9.003# A- 45 46,849
National Westminster Bank Plc --
New York Branch, Sub Note 05-01-01 9.450 A+ 5 5,041
NB Capital Trust IV,
Gtd Cap Security 04-15-27 8.250 A- 20 18,837
RBSG Capital Corp.,
Gtd Cap Note 03-01-04 10.125 A 15 16,467
Security Pacific Corp.,
Sub Note 03-01-01 11.000 A 40 40,260
-------------
236,074
-------------
Beverages (0.12%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 8.750 B+ 30 29,700
-------------
Chemicals (0.17%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R) 6.000 A- 45 43,614
-------------
Cosmetics & Personal Care (0.19%)
Procter & Gamble Co.,
Deb 01-15-26 6.450 AA 50 47,919
-------------
Energy (0.63%)
Enron Corp.,
Note 08-15-05 (R) 8.000 BBB+ 60 62,402
MidAmerican Energy Holdings,
Sr Bond 09-15-28 8.480 BBB- 60 64,901
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 30 30,000
-------------
157,303
-------------
Finance (4.32%)
Boeing Capital Corp.,
Sr Note 09-27-10 7.375 AA- 60 64,577
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 A- 30 29,859
Citigroup, Inc.,
Sub Note 10-01-10 7.250 A+ 85 87,958
EES Coke Battery Co., Inc.,
Sr Sec Note Ser A 04-15-02 (R) 7.125 BBB 3 3,194
Ford Credit Auto Owner Trust,
Pass Thru Ctf Ser 2000-F Class A-3 11-15-04 6.580 AAA 115 116,905
Ford Motor Credit Co.,
Note 04-28-03 6.125 A 35 34,771
General Electric Capital Corp.,
Med Term Note Ser A 11-15-10 6.875 AAA 65 68,044
General Motors Acceptance Corp.,
Note 07-15-05 7.500 A 60 61,726
Household Finance Corp.,
Note 11-01-02 5.875 A 70 69,431
Sr Unsub Note 02-01-09 5.875 A 30 27,572
HSBC Capital Funding, L.P.,
Gtd Note (Channel Islands) 12-31-49 (R) (Y) 9.547# A- 55 60,338
ING Capital Funding Trust III,
Gtd Trust Preferred Security 12-31-49 8.439# A 50 50,756
Marlin Water Trust/Marlin Water
Capital Corp., Sr Sec Note 12-15-01 (R) 7.090 BBB 30 30,039
Midland Funding Corp. I,
Deb Ser C-94 07-23-02 10.330 BBB- 7 6,882
Sec Deb Ser C-91 07-23-02 10.330 BBB- 9 9,584
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB+ 65 68,843
MMCA Automobile Trust,
Pass Thru Ctf Ser 2000-2 Class A-4 06-15-05 6.860 AAA 100 102,182
Nisource Finance Corp.,
Gtd Bond 11-15-10 (R) 7.875 BBB 55 57,528
Spear Leeds & Kellogg, L.P.,
Note 08-15-05 (R) 8.250 A+ 40 42,393
Toyota Auto Receivables Owner Trust,
Asset Backed Note Ser 2000-B Class A-4 04-15-07 6.800 AAA 90 91,800
Yanacocha Receivables Master Trust,
Pass Thru Cert Ser 1997-A 06-15-04 (R) 8.400 BBB- 3 2,972
-------------
1,087,354
-------------
Food (0.20%)
Earthgrains Co. (The),
Note 08-01-03 8.375 BBB 50 50,665
-------------
Government - Foreign (0.39%)
Nova Scotia, Province of,
Deb (Canada) 11-15-19 (Y) 8.250 A- 20 23,285
Quebec, Province of,
Deb (Canada) 09-15-29 (Y) 7.500 A+ 70 74,704
-------------
97,989
-------------
Government - U.S. (36.85%)
United States Treasury,
Bond 08-15-17 8.875 AAA 482 655,144
Bond 02-15-23 7.125 AAA 1,360 1,620,522
Bond 08-15-29 6.125 AAA 230 250,162
Note 08-15-03 5.750 AAA 1,665 1,689,192
Note 02-15-05 7.500 AAA 1,025 1,114,524
Note 07-15-06 7.000 AAA 1,142 1,242,998
Note 05-15-08 5.625 AAA 2,375 2,437,344
Note 08-15-10 5.750 AAA 255 267,232
-------------
9,277,118
-------------
Government - U.S. Agencies (24.03%)
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf 12-01-12 6.500 AAA 31 31,120
15 Yr Pass Thru Ctf 11-01-14 7.000 AAA 52 53,032
30 Yr Pass Thru Ctf 06-01-29 6.000 AAA 19 18,200
Note 04-15-03 5.750 AAA 310 310,629
Note 09-15-09 6.625 AAA 780 812,783
Note 01-15-30 7.125 AAA 240 268,649
Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22 6.940 AAA 3 2,684
Government National Mortgage Assn.,
30 Yr Pass thru Ctf 07-15-26 8.000 AAA 23 23,747
30 Yr Pass Thru Ctf 04-15-28 to 06-15-29 6.500 AAA 3,153 3,117,377
30 Yr Pass Thru Ctf 06-15-28 to 07-15-29 7.000 AAA 1,284 1,289,673
30 Yr Pass Thru Ctf 10-15-29 to 10-15-30 7.500 AAA 118 120,016
-------------
6,047,910
-------------
Insurance (0.61%)
AXA, Sub Note (France) 12-15-30 (Y) 8.600 A- 50 51,815
Equitable Life Assurance Society USA,
Surplus Note 12-01-05 (R) 6.950 A+ 15 15,099
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 5 4,928
MONY Group, Inc. (The),
Sr Note 12-15-05 7.450 A- 30 30,447
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 5 4,449
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 AA- 20 19,732
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 A- 25 25,989
-------------
152,459
-------------
Leisure (0.31%)
HMH Properties, Inc.,
Gtd Sr Note Ser A 08-01-05 7.875 BB 30 28,875
MGM Mirage, Inc.,
Gtd Sr Note 09-15-10 8.500 BBB- 30 30,749
Waterford Gaming LLC/Waterford
Gaming Finance Corp., Sr Note 03-15-10 (R) 9.500 B+ 20 19,100
-------------
78,724
-------------
Media (2.27%)
Adelphia Communications Corp.,
Sr Note Ser B 10-01-02 9.250 B+ 17 16,405
Sr Note Ser B 07-15-03 8.125 B+ 15 13,931
British Sky Broadcasting Group Plc,
Gtd Sr Note (United Kingdom) 07-15-09 (Y) 8.200 BB+ 40 37,638
Clear Channel Communications, Inc.,
Note 06-15-05 7.875 BBB- 40 41,337
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 A 60 62,316
CSC Holdings, Inc.,
Sr Note Ser B 07-15-09 8.125 BB+ 55 55,525
Sr Sub Deb 05-15-16 10.500 BB- 20 21,900
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 45 40,725
Jones Intercable, Inc.,
Sr Note 04-15-08 7.625 BBB 90 91,301
Lenfest Communications, Inc.,
Sr Note 11-01-05 8.375 BBB 40 42,822
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 8.500 B+ 20 18,300
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 20 18,418
TCI Communications, Inc.,
Sr Deb 02-15-26 7.875 A 45 42,261
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB 58 67,415
-------------
570,294
-------------
Medical (0.46%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 (Y) 10.750 B+ 37 35,520
Fresenius Medical Care
Capital Trust II, Gtd Trust Preferred Security
02-01-08 7.875 B+ 10 9,225
HCA - The Healthcare Co.,
Note 09-01-10 8.750 BB+ 20 21,050
Quest Diagnostics, Inc.,
Sr Sub Note 12-15-06 10.750 B+ 23 24,495
Tenet Healthcare Corp.,
Sr Note 01-15-05 8.000 BB+ 25 25,313
-------------
115,603
-------------
Metal (0.32%)
WMC Finance (USA), Ltd.,
Gtd Note (Australia) 11-15-03 (Y) 6.500 A 80 80,029
-------------
Mortgage Banking (5.52%)
AMRESCO Residential Securities Corp.
Mortgage Loan Trust, Pass Thru Ctf Ser 1998-1
Class A-6 08-25-27 6.510 AAA 150 149,555
Citibank Credit Card Master Trust I,
Class A Credit Card Part Cert Ser 1997-2
02-15-04 6.550 AAA 130 130,650
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-08 6.790 Aaa 73 74,577
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5 08-15-25 8.100 AAA 10 10,063
Credit Suisse First Boston Mortgage
Securities Corp.,
Commercial Mtg Pass Thru Ctf
Ser 1998-C1 Class A-1A 12-17-07 6.260 AAA 20 20,221
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9 02-15-29 6.570 AAA 145 144,297
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C1 Class A-2 09-15-06 6.853 Aaa 50 50,953
Pass Thru Ctf Ser 1997-C2 Class A-3 11-15-07 6.566 Aaa 175 174,631
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4 03-20-25 6.600 AAA 15 14,864
LB Commercial Conduit Mortgage Trust,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-07 6.410 Aaa 52 51,851
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7 12-15-38 6.485 AAA 16 15,840
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class A-1 10-15-06
(R) 6.830 AAA 228 230,773
Pass Thru Ctf Ser 1999-CAM1 Class A-3 11-15-08 6.920 AAA 140 143,866
Salomon Brothers Mortgage Securities
VII, Inc., Mtg Pass Thru Ctf Ser 1997-HUD2 Class
A-2 07-25-24 6.750 Aaa 6 5,987
Saxon Asset Securities Trust,
Pass Thru Ctf Ser 2000-2 Class AF-2 06-25-15 7.965 AAA 105 106,805
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8 06-15-28 7.220 AAA 9 9,103
Pass Thru Ctf Ser 1997-B Class A-6 10-15-28 6.900 AAA 55 55,453
-------------
1,389,489
-------------
Oil & Gas (1.90%)
Alberta Energy Co., Ltd.,
Note (Canada) 09-15-30 (Y) 8.125 BBB+ 45 48,028
Amerada Hess Corp.,
Bond 10-01-29 7.875 BBB+ 70 73,390
Apache Finance Canada Corp.,
Note (Canada) 12-15-29 (Y) 7.750 BBB+ 75 79,207
El Paso Energy Corp.,
Med Term Note 10-15-30 8.050 BBB 75 78,926
Louis Dreyfus Natural Gas Corp.,
Note 12-01-07 6.875 BBB 40 39,697
Occidental Petroleum Corp.,
Sr Deb 09-15-09 10.125 BBB- 15 17,837
Ocean Energy, Inc.,
Gtd Sr Sub Note Ser B 07-15-07 8.875 BB+ 20 20,700
Petroleum Geo-Services ASA,
Sr Note (Norway) 03-30-28 (Y) 7.125 BBB 50 40,692
Santa Fe Snyder Corp.,
Sr Sub Note 06-15-07 8.750 BBB+ 20 21,132
Tosco Corp.,
Note 02-15-30 8.125 BBB 55 59,173
-------------
478,782
-------------
Paper & Paper Products (0.19%)
International Paper Co.,
Note 07-08-05 (R) 8.125 BBB+ 45 46,637
-------------
Real Estate Investment Trust (0.57%)
American Health Properties, Inc.,
Note 01-15-07 7.500 BBB- 20 19,080
Cabot Industrial Properties, L.P.,
Note 05-01-04 7.125 BBB- 25 24,925
Camden Property Trust,
Sr Note 04-15-04 7.000 BBB 30 29,801
Liberty Property, L.P.,
Med Term Note 06-05-02 6.600 BBB- 40 41,037
ProLogis Trust,
Sr Note 04-15-04 6.700 BBB+ 25 24,756
TriNet Corporate Realty Trust, Inc.,
Note 05-15-01 7.300 BB 5 4,913
-------------
144,512
-------------
Telecommunications (2.01%)
BellSouth Capital Funding Corp.,
Deb 02-15-30 7.875 AA- 50 51,556
Clearnet Communications, Inc.,
Sr Disc Note, Step Coupon
(10.125%, 05-01-04) (Canada)
05-01-09 (A) (Y) Zero B3 30 24,000
Cox Communications, Inc.,
Note 11-01-10 7.750 BBB 40 41,321
Dominion Resources, Inc.,
Sr Note Ser A 06-15-10 8.125 BBB+ 60 65,217
LCI International, Inc.,
Sr Note 06-15-07 7.250 BBB+ 30 29,978
McLeodUSA, Inc.,
Sr Note 11-01-08 9.500 B+ 25 22,750
MetroNet Communications Corp.,
Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 15 16,500
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B 40 35,600
Qwest Capital Funding, Inc.,
Gtd Note 07-15-28 6.875 BBB+ 65 57,407
TeleCorp PCS, Inc.,
Sr Sub Disc Note, Step Coupon
(11.625%, 04-15-04)
04-15-09 (A) Zero B3 25 17,000
Verizon Global Funding Corp.,
Bond 12-01-30 (R) 7.750 A+ 70 72,073
VoiceStream Wireless Corp.,
Sr Note 09-15-09 11.500 CCC+ 20 21,950
Sr Note 11-15-09 10.375 B- 10 10,775
WorldCom, Inc.,
Note 05-15-06 8.000 A- 40 40,864
-------------
506,991
-------------
Transportation (2.55%)
America West Airlines,
Pass Thru Ctf Ser 1996-1B 01-02-08 6.930 A- 3 3,290
Burlington Northern & Santa Fe
Railway Co., Deb 08-15-30 7.950 BBB+ 70 72,758
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1997-2C 06-30-04 7.206 BBB 102 101,835
Pass Thru Ctf Ser 1999-1A 02-02-19 6.545 AA+ 58 56,722
Delta Air Lines, Inc.,
Pass Thru Ctf Ser 2000-1 Class A-2 11-18-10 7.570 AAA 45 47,655
Northwest Airlines, Inc.,
Gtd Note 03-15-04 8.375 BB 25 24,536
Pass Thru Ctf Ser 1996-1D 01-02-15 8.970 BBB- 5 4,772
NWA Trust,
Sr Note Ser A 12-21-12 9.250 AA 37 41,165
Railcar Trust No. 1992-1,
Pass Thru Ser 1992-1 Class A 06-01-04 7.750 AAA 61 62,568
United Air Lines, Inc.,
Pass Thru Ctf Ser 2000-1 Class A-1 01-01-14 7.783 AAA 75 78,191
Pass Thru Ctf Ser 2000-2 Class A-1 04-01-12 7.032 AAA 70 70,398
US Airways, Inc.,
Pass Thru Ctf Ser 1989-A2 01-01-13 9.820 BB- 40 35,650
Pass Thru Ctf Ser 1990-A1 03-19-05 11.200 BB- 35 35,994
Wisconsin Central Transportation Corp.,
Note 04-15-08 6.625 BBB- 8 7,479
-------------
643,013
-------------
Utilities (5.53%)
AES Corp.,
Sr Note 06-01-09 9.500 BB 35 36,225
Sr Note 09-15-10 9.375 BB 20 20,350
Sr Sub Note 07-15-06 10.250 B+ 10 10,400
AES Eastern Energy, L.P.,
Pass Thru Ctf Ser 1999-A 01-02-17 9.000 BBB- 25 25,755
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-02 (R) (Y) 6.730 BBB+ 40 39,693
Beaver Valley Funding Corp.,
Deb 06-01-07 8.625 BB- 60 62,145
Sec Lease Oblig Bond 06-01-17 9.000 BB- 23 25,081
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 BB- 5 5,512
Calpine Corp.,
Sr Note 08-15-05 8.250 BB+ 70 71,004
Sr Note 04-01-08 7.875 BB+ 15 14,700
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB+ 45 46,575
Sr Sec Note Ser D 11-01-17 7.880 BB+ 20 20,401
CMS Energy Corp.,
Sr Note 05-15-02 8.125 BB 60 60,023
Sr Note 10-15-07 9.875 BB 15 15,563
Sr Note Ser B 01-15-04 6.750 BB 55 51,975
Connecticut Light & Power Co.,
1st Mtg Ser C 06-01-02 7.750 BBB- 45 45,177
East Coast Power LLC,
Sr Sec Note 03-31-12 7.066 BBB- 30 28,730
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BBB- 38 42,370
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 25 24,523
Hydro-Quebec,
Gtd Bond (Canada) 02-01-21 (Y) 9.400 A+ 30 37,800
Gtd Bond Ser HY (Canada) 01-15-22 (Y) 8.400 A+ 20 23,636
Iberdrola International B.V.,
Note 10-01-02 7.500 AA- 35 35,833
Keyspan Corp.,
Note 11-15-10 7.625 A 45 47,768
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 40 39,800
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 44 46,317
North Atlantic Energy Corp.,
1st Mtg Ser A 06-01-02 9.050 BB+ 15 15,211
Northeast Utilities,
Note Ser A 12-01-06 8.580 BB+ 6 6,366
PECO Energy Transition Trust,
Pass Thru Ctf Ser 1999-A Class A-6 03-01-09 6.050 AAA 35 34,627
Pass Thru Ctf Ser 2000-A Class A-3 03-01-10 7.625 AAA 125 134,541
Pinnacle One Partners, L.P.,
Sr Note 08-15-04 (R) 8.830 BBB- 25 25,657
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB- 40 43,271
Puget Sound Energy, Inc.,
1st Mtg Med Term Note Ser C 02-01-11 7.690 A- 40 41,786
Sierra Pacific Resources,
Note 05-15-05 8.750 BBB 45 47,163
TXU Corp.,
Gtd Note 01-30-37 8.175 BBB- 35 33,121
Waterford 3 Funding Corp.,
Sec Lease Oblig Bond 01-02-17 8.090 BBB- 61 63,217
Xcel Energy, Inc.,
Sr Note 12-01-10 7.000 BBB+ 70 70,075
-------------
1,392,391
-------------
TOTAL BONDS
(Cost $22,605,396) (92.27%) 23,225,973
--------- -------------
NUMBER
OF WARRANTS
-----------
WARRANTS
Telecommunications (0.00%)
MetroNet Communications Corp. (Canada) (R) (Y) * 5 475
-------------
TOTAL WARRANTS
(Cost $51) (0.00%) 475
--------- -------------
INTEREST PAR VALUE
RATE (000s OMITTED)
--------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (6.38%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.950% $1,606 $1,606,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 749
------------
TOTAL SHORT-TERM INVESTMENTS (6.38%) 1,606,749
--------- ------------
TOTAL INVESTMENTS (98.65%) 24,833,197
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (1.35%) 339,520
--------- ------------
TOTAL NET ASSETS (100.00%) $25,172,717
========= ============
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $1,088,743 or 4.33% of
net assets as of December 31, 2000.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
* Non-income producing security.
** Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investor Services or John Hancock Advisers, Inc.,
where Standard & Poor's ratings are not available.
# Represents rate in effect on December 31, 2000.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. High Yield Bond Fund
Schedule of Investments
December 31, 2000
- -----------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. High Yield Bond Fund on December 31, 2000. It is divided
into four main categories: bonds, common stocks, pre ferred stocks and
warrants, and short-term investments. Bonds are further broken down by
industry group. Short-term invest ments, which represent the Fund's
"cash" position, are listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- ------------------------------------------ --------- ---------- -------------- -------------
BONDS
Aerospace (0.06%)
Compass Aerospace Corp.,
Gtd Sr Sub Note Ser D 04-15-05 10.125% CCC- $25 $4,250
-------------
Agricultural Operations (0.03%)
Iowa Select Farms L.P./ISF Finance, Inc.,
Sr Sub Note 12-01-05 (B) (R) 10.750 D 10 2,200
-------------
Automobile/Trucks (0.91%)
AM General Corp.,
Sr Note Ser B 05-01-02 12.875 B 50 46,500
J.B. Poindexter & Co., Inc.,
Sr Note 05-15-04 12.500 B 25 19,500
-------------
66,000
-------------
Building (0.24%)
Amatek Industries Property Ltd.,
Sr Sub Note (Australia) 02-15-08 (Y) 12.000 B 25 17,000
-------------
Business Services - Misc. (0.19%)
AP Holdings, Inc.,
Sr Disc Note, Step Coupon (11.25%, 03-15-03)
03-15-08 (A) Zero CCC+ 200 14,000
-------------
Chemicals (2.87%)
Huntsman ICI Chemicals LLC,
Sr Sub Note 07-01-09 10.125 B+ 100 95,000
Huntsman ICI Holdings LLC,
Sr Disc Note 12-31-09 Zero B+ 75 20,531
Trikem S.A.,
Bond (Brazil) 07-24-07 (R) (Y) 10.625 B+ 125 91,250
-------------
206,781
-------------
Consumer Products Misc. (0.82%)
Diamond Brands Operating Corp.,
Sr Sub Note 04-15-08 10.125 CCC 100 40,000
Indesco International, Inc.,
Sr Sub Note 04-15-08 9.750 D 100 19,000
-------------
59,000
-------------
Containers (3.71%)
Gaylord Container Corp.,
Sr Note Ser B 06-15-07 9.375 B- 15 9,450
Sr Sub Note Ser B 02-15-08 9.875 CCC+ 100 40,000
Kappa Beheer B.V.,
Sr Sub Bond (Netherlands) 07-15-09 (Y) 10.625 B 75 75,750
Sr Sub Bond, Step Coupon (12.50%, 07-15-04)
(Netherlands) 07-15-09 (A) (E) Zero B 100 64,232
Riverwood International Corp.,
Gtd Sr Sub Note 04-01-08 10.875 CCC+ 20 17,900
Stone Container Corp.,
Unit (Sr Sub Deb & Supplemental Int Cert)
04-01-02 12.250 B- 60 60,600
-------------
267,932
-------------
Cosmetics & Personal Care (0.08%)
Global Health Sciences, Inc.,
Gtd Sr Note 05-01-08 (B) 11.000 D 75 6,000
-------------
Diversified Operations (0.84%)
Diamond Holdings Plc,
Bond (United Kingdom) 02-01-08 # 10.000 B- 50 60,462
-------------
Energy (1.48%)
AEI Resources, Inc./AEI Resources Holdings, Inc.,
Gtd Note 12-15-05 (R) 10.500 CCC- 75 6,750
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 100 100,000
-------------
106,750
-------------
Food (3.11%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B 100 66,500
Mastellone Hermanos S.A.,
Sr Note (Argentina) 04-01-08 (Y) 11.750 B+ 125 86,250
RAB Holdings, Inc.,
Sr Note 05-01-08 (R) 13.000 Caa2 120 72,000
-------------
224,750
-------------
Insurance (0.62%)
Willis Corroon Corp.,
Gtd Sr Sub Note 02-01-09 9.000 B+ 50 44,750
-------------
Leisure (2.02%)
Claridge Hotel & Casino Corp.,
1st Mtg Note 02-01-02 (B) 11.750 Ca1 50 35,000
Fitzgeralds Gaming Corp.,
Gtd Sr Sec Note Ser B 12-15-04 (B) 12.250 Caa1 50 28,000
Production Resource Group LLC,
Sr Sub Note 01-15-08 11.500 CCC- 25 5,250
SC International Services, Inc.,
Sr Sub Note Ser B 09-01-07 9.250 B 30 28,500
Trump Atlantic City Associates,
1st Mtg Note 05-01-06 11.250 B- 75 49,125
-------------
145,875
-------------
Machinery (0.23%)
Glasstech, Inc.,
Sr Note Ser B 07-01-04 12.750 B3 25 16,250
-------------
Manufacturing (0.17%)
ICON Health & Fitness, Inc.,
Gtd Note 09-27-05 12.000 B 22 12,210
-------------
Media (3.31%)
DIVA Systems Corp.,
Sr Disc Note Ser B, Step Coupon (12.625%,
03-01-03) 03-01-08 (A) Zero B- 50 20,000
Pegasus Communications Corp.,
Sr Note Ser B 08-01-07 12.500 CCC+ 35 36,400
Regional Independent Media Group Plc,
Sr Disc Note, Step Coupon (12.875%, 07-01-03)
(United Kingdom) 07-01-08 (A) # Zero B- 20 23,737
Sr Note (United Kingdom) 07-01-08 (Y) 10.500 B- 5 5,112
Sirius Satellite Radio, Inc.,
Sr Disc Note, Step Coupon (15.00%, 12-01-02)
12-01-07 (A) Zero CCC+ 110 45,100
United International Holdings, Inc.,
Sr Disc Note, Step Coupon (10.75%, 02-15-03)
02-15-08 (A) Zero B- 75 29,250
XM Satellite Radio, Inc.,
Sr Sec Note 03-15-10 14.000 CCC+ 150 79,500
-------------
239,099
-------------
Medical (0.55%)
Total Renal Care Holdings, Inc.,
Conv Sub Note 05-15-09 (R) 7.000 B- 50 39,375
-------------
Metal (6.38%)
Apatief Freeport Finance Co. B.V. (P.T.),
Sr Note 04-15-01 9.750 CCC+ 280 263,200
Doe Run Resources Corp.,
Gtd Sr Note Ser B 03-15-03 13.070*** B- 25 12,500
Gtd Sr Note Ser B 03-15-05 11.250 B- 10 5,000
Freeport-McMoRan Copper & Gold, Inc.,
Sr Note 11-15-06 7.500 CCC+ 75 44,250
Golden Northwest Aluminum, Inc.,
1st Mtg Note 12-15-06 12.000 BB- 25 22,250
Great Lakes Acquisition Corp.,
Sr Disc Deb, Step Coupon (13.125%, 05-15-03)
05-15-09 (A) Zero B- 200 36,000
TVX Gold, Inc.,
Conv Sub Note (Canada) 03-28-02 (Y) 5.000 B- 100 77,000
-------------
460,200
-------------
Oil & Gas (8.99%)
Comstock Resources, Inc.,
Gtd Sr Note 05-01-07 11.250 B 75 77,438
Giant Industries, Inc.,
Sr Sub Note 11-15-03 9.750 B+ 25 24,312
Gothic Production Corp.,
Sr Sec Note Ser B 05-01-05 11.125 CCC 100 107,000
Key Energy Services, Inc.,
Conv Sub Note 09-15-04 5.000 B3 143 120,120
Conv Sub Note 09-15-04 (R) 5.000 B3 80 67,200
Sr Sub Note Ser B 01-15-09 14.000 B- 100 113,750
Mariner Energy, Inc.,
Sr Sub Note Ser B 08-01-06 10.500 B- 10 9,600
Ocean Rig Norway A.S.,
Gtd Sr Sec Note (Norway) 06-01-08 (Y) 10.250 B- 55 48,400
Universal Compression, Inc.,
Sr Disc Note, Step Coupon (9.875%, 02-15-03)
02-15-08 (A) Zero B 100 81,000
-------------
648,820
-------------
Paper & Paper Products (3.25%)
APP China Group Ltd.,
Unit (Sr Disc Note & Warrant) (Indonesia)
03-15-10 (R) (Y) 14.000 CCC+ 250 95,000
APP Finance (VII) Mauritius Ltd.,
Gtd Note (Indonesia) 04-30-03 (R) (Y) 3.500 CCC+ 10 3,100
Grupo Industrial Durango, S.A.,
Note (Mexico) 08-01-03 (Y) 12.625 BB- 125 126,563
Sappi BVI Finance Ltd.,
Gtd Conv Bond (South Africa) 08-01-02 (R) (Y) 7.500 BB- 10 9,745
-------------
234,408
-------------
Real Estate Operations (0.01%)
Signature Resorts, Inc.,
Conv Sub Note 01-15-07 (B) 5.750 Caa1 35 875
-------------
Retail (0.73%)
Imperial Home Decor Group, Inc,
Gtd Sr Sub Note 03-15-08 (B) 11.000 C 125 625
SpinCycle, Inc.,
Sr Disc Note, Step Coupon (12.75%, 05-01-01)
05-01-05 (A) Zero CCC+ 25 7,250
St. John Knits International, Inc.,
Sr Sub Note 07-01-09 12.500 B- 50 45,000
-------------
52,875
-------------
Steel (1.19%)
Gulf States Steel, Inc. of Alabama,
1st Mtg Bond 04-15-03 (B) 13.500 Caa3 100 250
LTV Corp. (The),
Gtd Sr Sub Note 11-15-09 11.750 B 50 7,750
Metallurg Holdings, Inc.,
Sr Disc Note, Step Coupon (12.75%, 07-15-03)
07-15-08 (A) Zero CCC+ 50 12,500
Metallurg, Inc.,
Gtd Sr Note Ser B 12-01-07 11.000 B- 30 23,400
NSM Steel, Inc./NSM Steel Ltd.,
Gtd Sr Sub Mtg Note Ser B 02-01-08 (B) (R) 12.250 D 75 750
Oregon Steel CF&I,
Note 03-31-03 (r) 9.500 B 56 41,218
-------------
85,868
-------------
Telecommunications (10.68%)
AMSC Acquisition Co., Inc.,
Sr Note Ser B 04-01-08 12.250 B- 40 17,600
CTI Holdings S.A.,
Sr Note, Step Coupon (11.25%, 04-15-03)
(Argentina) 04-15-08 (A) (Y) Zero B 75 28,500
Esprit Telecom Group Plc,
Sr Note (Germany) 06-15-08 # 11.000 BB- 40 192
Grupo Iusacell S.A. de C.V.,
Sr Note (Mexico) 12-01-06 (Y) 14.250 B+ 35 34,650
GT Group Telecom, Inc.,
Unit (Sr Disc Note & Warrant), Step Coupon
(13.25%, 02-01-05) 02-01-10 1.000 B- 100 42,000
ITC DeltaCom, Inc.,
Sr Note 11-15-08 9.750 B+ 100 76,000
Jazztel Plc,
Sr Note (United Kingdom) 12-15-09 (E) 13.250 CCC+ 50 30,475
McLeodUSA, Inc.,
Sr Note 03-15-08 8.375 B+ 35 30,450
Metromedia Fiber Network, Inc.,
Sr Note Ser B 11-15-08 10.000 B+ 75 62,437
Nextel Partners, Inc.,
Sr Disc Note, Step Coupon (14.00%, 02-01-04)
02-01-09 (A) Zero CCC+ 15 9,900
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B 50 44,500
Sr Note Ser B, Step Coupon (12.375%, 10-01-03)
10-01-08 (A) Zero B 100 55,000
ONO Finance Plc,
Sr Note (United Kingdom) 07-15-10 (E) (R) 14.000 CCC+ 50 35,633
Primus Telecommunications Group, Inc.,
Sr Note 10-15-09 12.750 B- 50 15,500
PTC International Finance II S.A.,
Gtd Sr Sub Note (Luxembourg) 12-01-09 (E) 11.250 B+ 25 22,622
Telewest Communications Plc,
Sr Disc Note, Step Coupon (9.875%, 04-15-04)
(United Kingdom) 04-15-09 (A) # Zero B+ 25 16,795
United Pan-Europe Communicatons N.V.,
Sr Disc Note Ser B, Step Coupon (13.375%,
11-01-04) (Netherlands) 11-01-09 (A) (E) Zero B- 30 9,565
Sr Note (Netherlands) 11-01-07 (E) 10.875 B- 50 30,475
Sr Note (Netherlands) 11-01-09 (E) 11.250 B- 25 15,238
Versatel Telecom International N.V.,
Sr Note (Netherlands) 05-15-08 (Y) 13.250 B- 125 76,250
Viatel, Inc.,
Sr Note (Germany) 04-15-08 # 11.150 Caa1 170 26,896
Sr Sec Note 04-15-08 11.250 B- 75 22,500
World Access, Inc.,
Sr Note Ser B 01-15-08 13.250 B- 100 68,000
-------------
771,178
-------------
Textile (1.58%)
Coyne International Enterprises Corp.,
Sr Sub Note 06-01-08 11.250 B- 75 54,000
Steel Heddle Group, Inc.,
Sr Disc Deb, Step Coupon (13.75%, 06-01-03)
06-01-09 (A) Zero Caa2 200 10,000
Steel Heddle Manufacturing Co.,
Gtd Sr Sub Note Ser B 06-01-08 10.625 Caa1 50 7,500
Tropical Sportswear International Corp.,
Sr Sub Note Ser A 06-15-08 11.000 B- 50 42,500
-------------
114,000
-------------
Transport (6.95%)
Amtran, Inc.,
Sr Note 08-01-04 10.500 B+ 50 45,250
Cenargo International Plc,
1st Mtg Note (United Kingdom) 06-15-08 (Y) 9.750 B+ 20 15,800
CHC Helicopter Corp.,
Sr Sub Note (Canada) 07-15-07 (E) 11.750 B 100 98,927
Fine Air Services, Inc.,
Sr Note 06-01-08 (B) 9.875 CC 105 5,247
North American Van Lines, Inc.,
Sr Sub Note 12-01-09 (R) 13.375 B- 75 61,500
Northwest Airlines Corp.,
Gtd Note 03-15-07 8.700 BB 100 96,592
Pacer International, Inc.,
Sr Sub Note 06-01-07 11.750 B- 50 48,250
Pacific & Atlantic Holdings, Inc.,
Sr Sec Note 12-31-07 (R) 10.500 CC 20 10,996
US Airways, Inc.,
Pass Thru Ctf Ser 1993-A3
03-01-13 10.375 BB- 50 44,500
Sr Note 02-01-01 9.625 CCC+ 75 74,875
-------------
501,937
-------------
Utilities (0.66%)
CMS Energy Corp.,
Sr Note 10-15-07 9.875 BB 25 25,937
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico) 11-15-09 (R) (Y) 9.625 BB+ 23 21,768
-------------
47,705
-------------
Waste Disposal Service & Equip (1.69%)
Allied Waste North America, Inc.,
Sr Sub Note Ser B 08-01-09 10.000 B+ 125 116,875
Waste Systems International, Inc.,
Gtd Sr Note 01-15-06 11.500 D 15 5,250
-------------
122,125
-------------
TOTAL BONDS
(Cost 6,946,112) (63.35%) 4,572,675
--------- -------------
NUMBER OF
SHARES OR
WARRANTS
--------
COMMON STOCKS
Abitibi-Consolidated, Inc., Common Stock
(Canada) (Y) 12,500 114,844
American Pacific Corp., Common Stock** 5,000 27,500
AMR Corp., Common Stock ** 2,000 78,375
Chesapeake Energy Corp., Common Stock** 772 7,865
Gaylord Container Corp. (Class A), Common Stock** 6,500 6,500
Grey Wolf, Inc., Common Stock** 28,850 169,494
International Wireless Communications Holdings,
Inc., Common Stock 2,417 1,329
KLM Royal Dutch Airlines N.V., Common Stock
(Netherlands) (Y) 78 1,755
Northwest Airlines Corp., Common Stock** 6,500 195,813
Pathmark Stores, Inc., Common Stock** 1,046 17,259
Star Gas Partners, L.P., Common Stock 3,300 57,750
Waste Systems International, Inc., Common
Stock** 8,715 1,634
-------------
TOTAL COMMON STOCKS
(Cost 892,077) (9.42%) 680,118
--------- -------------
PREFERRED STOCKS AND WARRANTS
Asia Pulp & Paper Co. Ltd., Warrant (R)** 250 3
DIVA Systems Corp., Warrant (R)** 150 263
Georgia-Pacific Corp., Unit (Common & Preferred
Shares) 3,000 02,938
Gothic Energy Corp., Warrant** 79 0
GT Group Telecom, Inc., Warrant** 100 7,000
HF Holdings, Inc., Warrant** 212 106
Hills Stores Co., Warrant** 35,000 0
Motient Corp., Warrant (R)** 40 400
Nakornthai Strip Mill Plc, Warrant (Thailand) (R) (Y)** 63,309 63
Nextel Communications, Inc., 11.125%, Ser E,
Preferred Stock 198 68,300
ONO Finance Plc, Warrant (United Kingdom) (R) (Y)** 50 3,000
Pacific & Atlantic Holdings, Inc., 7.50%,
Preferred Stock 1,172 5,860
Pathmark Stores, Inc., Warrant** 740 3,561
Smurfit-Stone Container Corp., 7.00%, Ser A,
Preferred Stock 3,000 49,500
SpinCycle, Inc., Warrant (R)** 25 0
TimberWest Forest Corp., Unit (Common &
Preferred Shares) (Canada) # 38,000 74,501
Waste Systems International, Inc., 8.00%, Ser E,
Preferred Stock 160 7,360
Waste Systems International, Inc., Warrant (R)** 225 2
XM Satellite Radio Holdings, Inc., Warrant (R)** 150 3,750
-------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $820,929) (8.68%) 626,607
--------- -------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (16.10%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.950% $1,162 $1,162,000
------------
Corporate Savings Account (0.01%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 951
------------
TOTAL SHORT-TERM INVESTMENTS (16.11%) 1,162, 951
--------- ------------
TOTAL INVESTMENTS (97.56%) 7,042,351
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (2.44%) 176,283
--------- ------------
TOTAL NET ASSETS (100.00%) $7,218,634
========= ============
* Credit ratings are unaudited and rated by Moody's Investors Service
or John Hancock Advisers, Inc. where Standard & Poor's ratings are not
available.
** Non-income producing security.
*** Represents rate in effect on December 31, 2000.
# Par value of foreign bonds and common stocks is expressed in local currency,
as shown parenthetically in security description.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(B) Non-income producing issuer, filed for protection under Federal
Bankruptcy Code or is in default of interest payment.
(E) Parenthetical disclosure of a country in the security description
represents country of issuer; however, security is euro-denominated.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $524,748 or 7.27% of net
assets as of December 31, 2000.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar-denominated.
(r) Direct placement securities are restricted as to resale. They have
been valued in accordance with procedures approved by the Trustees after
consideration of restrictions as to resale, financial condition and
prospects of the issuer, general market conditions and pertinent
information in accordance with the Fund's By-laws and the Investment
Company Act of 1940, as amended. The Fund has limited rights to
registration under the Securities Act of 1933 with respect to these
restricted securities.
Additional information on these securities is as follows:
MARKET MARKET
VALUE AS A VALUE AT
ACQUISITION ACQUISITION % OF FUND DECENBER 31,
ISSUER, DESCRIPTION DATE COST NET ASSETS 2000
- ------------------- ---- ---- ---------- ----
Oregon Steel CF&I 05-14-98 $54,039 0.57% $41,218
The percentage shown for each investment category is the total value of
that category expressed as a percentage of the net assets of the Fund.
See notes to financial statements.
Portfolio Concentration
December 31, 2000 (Unaudited)
- -------------------------------------------------------------------------
The V.A. High Yield Bond Fund invests primarily in securities issued in
the United States of America. The performance of this Fund is closely
tied to the economic and financial conditions of the countries within
which it invests. The concentration of investments by industry category
for individual securities held by the Fund is shown in the schedule of
investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentages of the Fund's
investments at December 31, 2000 assigned to country categories.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- ------------------
Argentina 1.59%
Australia 0.24
Brazil 1.26
Canada 7.83
Germany 0.38
Indonesia 1.36
Luxembourg 0.31
Mexico 2.53
Netherlands 3.79
Norway 0.67
South Africa 0.13
Thailand 0.00
United Kingdom 2.65
United States 74.82
-------
TOTAL INVESTMENTS 97.56%
=======
Additionally, the concentration of investments can be aggregated by the
quality rating for each debt security.
QUALITY DISTRIBUTION
- --------------------
BB 4.81%
B 41.87
CCC 15.49
CC 0.71
C 0.01
D 0.46
-------
TOTAL BONDS 63.35%
=======
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Money Market Fund
Schedule of Investments
December 31, 2000
- -----------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Money Market Fund on December 31, 2000.
INTEREST QUALITY PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- ------------------- --------- ---------- -------------- -------------
COMMERCIAL PAPER
Automobile/Trucks (7.97%)
Ford Motor Credit Co., 01-11-01 6.570% Tier 1 $800 $798,540
Ford Motor Credit Co., 01-16-01 6.530 Tier 1 2,100 2,094,286
General Motors Acceptance Corp., 01-10-01 6.560 Tier 1 1,500 1,497,540
General Motors Acceptance Corp., 01-10-01 6.510 Tier 1 1,000 998,372
General Motors Acceptance Corp., 01-11-01 6.520 Tier 1 500 499,094
-------------
5,887,832
-------------
Banks - Foreign (10.75%)
Abbey National North America Corp., 01-25-01 6.570 Tier 1 1,000 995,620
Abbey National North America Corp., 02-01-01 6.500 Tier 1 2,000 1,988,806
Deutsche Bank Financial, 02-07-01 6.510 Tier 1 2,000 1,986,618
Deutsche Bank Financial, 05-10-01 6.170 Tier 1 1,000 977,891
UBS Financial, Inc., 01-02-01 6.480 Tier 1 2,000 1,999,640
-------------
7,948,575
-------------
Banks - United States (4.03%)
Morgan (J.P.) & Co., Inc., 02-05-01 6.520 Tier 1 3,000 2,980,983
-------------
Beverages (3.34%)
Coca-Cola Co., 03-09-01 6.460 Tier 1 2,500 2,469,943
-------------
Broker Services (9.97%)
Bear Stearns Cos., Inc., 01-23-01 6.500 Tier 1 1,500 1,494,042
Bear Stearns Cos., Inc., 01-26-01 6.500 Tier 1 1,500 1,493,229
Goldman Sachs Group, L.P., 01-11-01 6.530 Tier 1 1,000 998,186
Goldman Sachs Group, L.P., 02-05-01 6.510 Tier 1 1,400 1,391,139
Merrill Lynch & Co., 01-19-01 6.510 Tier 1 1,400 1,395,443
Merrill Lynch & Co., 01-31-01 6.710 Tier 1 600 596,645
-------------
7,368,684
-------------
Building (2.97%)
Halifax Group PLC, 01-18-01 6.510 Tier 1 2,200 2,193,237
-------------
Finance (19.79%)
American Express Credit Corp., 01-12-01 6.530 Tier 1 3,000 2,994,014
Associates Corp. N. A., 01-12-01 6.540 Tier 1 2,500 2,495,004
CIT Group Holdings, Inc., 01-23-01 6.500 Tier 1 2,000 1,992,056
General Electric Capital Corp., 01-19-01 6.530 Tier 1 1,200 1,196,082
General Electric Capital Corp., 05-21-01 6.000 Tier 1 1,500 1,465,000
Household Financial Corp., 01-16-01 6.540 Tier 1 3,200 3,191,280
International Lease Finance,
01-23-01 6.500 Tier 1 1,300 1,294,836
-------------
14,628,272
-------------
Food (3.35%)
Heinz (H.J.) Co., 02-23-01 6.460 Tier 1 2,500 2,476,224
-------------
Insurance (2.96%)
American General Corp., 01-17-01 6.520 Tier 1 700 697,972
American General Corp., 02-08-01 6.510 Tier 1 1,500 1,489,693
-------------
2,187,665
-------------
Mortgage Banking (4.05%)
Countrywide Home Loans,
01-19-01 6.550 Tier 1 3,000 2,990,175
-------------
Utilities (2.16%)
Duke Energy Co., 01-04-01 6.480 Tier 1 1,600 1,599,136
-------------
TOTAL COMMERCIAL PAPER
(Cost $52,730,726) (71.34%) 52,730,726
-------------
CORPORATE INTEREST-BEARING OBLIGATIONS
Finance (0.68%)
General Electric Capital Corp., 05-04-01 6.020 Tier 1 500 499,199
-------------
TOTAL CORPORATE INTEREST-BEARING OBLIGATIONS
(Cost $499,199) (0.68%) 499,199
-------------
U.S. GOVERNMENT OBLIGATIONS
Government - U.S. Agencies (11.34%)
Federal Home Loan Bank, 06-15-01 5.930 Tier 1 5,000 4,864,104
Federal National Mortgage Assn., 03-15-01 5.625 Tier 1 600 598,832
Federal National Mortgage Assn., 06-14-01 5.915 Tier 1 3,000 2,919,162
-------------
8,382,098
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $8,382,098) (11.34%) 8,382,098
-------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $61,612,023) (83.36%) 61,612,023
-------------
JOINT REPURCHASE AGREEMENT (8.53%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 10.750% and 13.875%, due
02-15-03 and 05-15-11) - Note B 5.950% Tier 1 $6,307 $6,307,000
------------
TOTAL JOINT REPURCHASE AGREEMENT (8.53%) 6,307,000
--------- ------------
TOTAL INVESTMENTS (91.89%) 67,919,023
--------- ------------
OTHER ASSETS AND LIABILITIES, NET (8.11%) 5,998,309
--------- ------------
TOTAL NET ASSETS (100.00%) $73,917,332
========= ============
* Quality ratings indicate the categories of eligible securities, as
defined by Rule 2a-7 of the Investment Company Act of 1940, owned by the
Fund.
The percentage shown for each investment category is the total value of
that category expressed as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Strategic Income Fund
Schedule of Investments
December 31, 2000
- -----------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned
by the V.A. Strategic Income Fund on December 31, 2000. It is divided
into four main categories: bonds, common stocks, pre ferred stocks and
warrants, and short-term investments. Bonds are further broken down by
industry group. Short-term invest ments, which represent the Fund's
"cash" position, are listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- ------------------------------------------ --------- ---------- -------------- ----------------
BONDS
Advertising (0.32%)
Go Outdoor Systems Holding S.A.,
Sr Sub Note (France) 07-15-09 (E) 10.500% B- $100 $108,773
-------------
Building (0.26%)
Standard Pacific Corp.,
Sr Note 04-01-09 8.500 BB 100 90,000
-------------
Chemicals (0.28%)
Huntsman ICI Chemicals LLC,
Sr Sub Note 07-01-09 10.125 B+ 100 95,000
-------------
Computers (0.08%)
Unisys Corp.,
Sr Note 10-15-04 11.750 BB+ 25 26,313
-------------
Containers (0.49%)
Berry Plastics Corp.,
Sr Sub Note 04-15-04 12.250 B- 100 84,000
Consolidated Containers Co. LLC/Cons.
Container Capital, Inc., Sr Sub Note 07-15-09 10.125 B 100 85,500
-------------
169,500
-------------
Electronics (0.25%)
Communications Instruments, Inc.,
Sr Sub Note Ser B 09-15-04 10.000 B- 100 85,500
-------------
Energy (0.03%)
AEI Resources, Inc./AEI Resources
Holdings, Inc., Note 12-15-05 (R) 10.500 CCC- 100 9,000
-------------
Finance (0.26%)
PTC International Finance II S.A.,
Sr Sub Note (Luxembourg) 12-01-09 (E) (R) 11.250 B+ 100 90,488
-------------
Government - Foreign (10.03%)
Canada, Government of,
Government Bond (Canada) 09-01-02# 5.500 AAA 150 100,223
Government Bond (Canada) 12-01-05# 8.750 AAA 300 228,787
Government Bond (Canada) 12-01-06# 7.000 AAA 2,000 1,442,029
Government Bond (Canada) 06-01-09# 5.500 AAA 750 503,462
Government Bond (Canada) 06-01-10# 5.500 AA+ 300 201,624
Russia, Federation of,
Sr Unsub Note (Russia) 06-10-03 (Y) 11.750 B- 440 412,500
Unsub Note (Russia) 06-24-28 (Y) 12.750 B- 200 167,000
Venezuela, Republic of,
Floating Rate Bond Ser DL (Venezuela)
12-18-07 (Y) 6.813 B 500 402,496
-------------
3,458,121
-------------
Government - U.S. (48.73%)
United States Treasury,
Bond 08-15-01 13.375 AAA 7,000 7,320,460
Bond 08-15-05 6.500 AAA 400 422,936
Bond 08-15-05 10.750 AAA 400 490,876
Bond 02-15-16 9.250 AAA 615 849,278
Bond 08-15-19 8.125 AAA 1,340 1,732,164
Bond 08-15-23 6.250 AAA 1,100 1,189,716
Bond 02-15-27 6.625 AAA 1,100 1,256,409
Bond 11-15-28 5.250 AAA 750 717,893
Note 08-31-02 6.250 AAA 870 883,189
Note 08-15-04 7.250 AAA 590 630,745
Note 05-15-05 6.500 AAA 300 316,500
Note 08-15-07 6.125 AAA 940 989,792
-------------
16,799,958
-------------
Leisure (1.22%)
HMH Properties, Inc.,
Sr Note Ser B 08-01-08 7.875 BB 100 94,750
Jupiters Ltd.,
Sr Note (Australia) 03-01-06 (Y) 8.500 BB+ 150 144,375
Sun International Hotels Ltd.,
Sr Sub Note (Bahamas) 12-15-07 (Y) 8.625 B+ 100 91,000
Waterford Gaming LLC
Sr Note 03-15-10 (R) 9.500 B+ 95 90,725
-------------
420,850
-------------
Machinery (0.24%)
Columbus McKinnon Corp.,
Sr Sub Note 04-01-08 8.500 B 100 83,500
-------------
Media (2.16%)
American Media Operations, Inc.,
Sr Sub Note 05-01-09 10.250 B- 150 146,250
AMFM Operating, Inc.,
Sr Sub Deb 10-31-06 12.625 B- 64 70,866
Diamond Holdings Plc,
Bond (United Kingdom) 02-01-08# 10.000 B- 50 60,462
DIVA Systems Corp.,
Sr Disc Note Ser B, Step Coupon (12.625%,
03-01-03) 03-01-08 (A) Zero B- 250 100,000
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 100 90,500
Regional Independent Media Group Plc,
Sr Note (United Kingdom) 07-01-08 (Y) 10.500 B- 175 178,938
STC Broadcasting, Inc.,
Sr Sub Note 03-15-07 11.000 B- 100 96,000
-------------
743,016
-------------
Metal (0.77%)
Euramax International Plc,
Sr Sub Note (United Kingdom) 10-01-06 (Y) 11.250 B 100 78,000
P.T. Alatief Freeport Finance Co. B.V.,
Sr Note (Netherlands) 04-15-01 9.750 CCC+ 200 188,000
-------------
266,000
-------------
Oil & Gas (1.60%)
Chesapeake Energy
Sr Note Ser B 05-01-05 9.625 B 200 206,000
Comstock Resources, Inc.,
Sr Note 05-01-07 11.250 B 100 103,250
Gothic Production Corp.,
Sr Sec Note Ser B 05-01-05 11.125 CCC 150 160,500
Universal Compression, Inc.,
Sr Disc Note, Step Coupon (9.875%, 02-15-03)
02-15-08 (A) Zero B 100 81,000
-------------
550,750
-------------
Paper & Paper Products (1.73%)
Grupo Industrial Durango, S.A.,
Note (Mexico) 08-01-03 (Y) 12.625 BB- 200 202,500
Kappa Beheer BV,
Sr Sub Note (Netherlands) 07-15-09 (E) (R) 10.625 B 150 144,171
Packaging Corp. of America,
Sr Sub Note Ser B 04-01-09 9.625 BB- 200 207,000
Stone Container Corp.,
Unit (Sr Sub Deb & Supplemental Int Cert)
04-01-02 12.250 B- 41 41,410
-------------
595,081
-------------
Retail (0.40%)
United Stationers Supply Co.,
Sr Sub Note 04-15-08 8.375 B 150 139,500
-------------
Telecommunications (6.51%)
Allegiance Telecom, Inc.,
Sr Disc Note, Ser B, Step Coupon
(11.75%, 02-15-03) 02-15-08 (A) Zero B 250 152,500
AMSC Acquisition Co., Inc.,
Sr Note Ser B 04-01-08 12.250 B- 100 44,000
Comunicacion Celular S.A.,
Sr Def Bond (Colombia) 03-01-05 (R) (Y) 14.125 B 100 77,000
Esprit Telecom Group Plc,
Sr Note (United Kingdom) 12-15-07 (Y) 11.500 D 100 2,000
Sr Note (Deutsche Mark) 06-15-08# 11.000 BB- 140 671
Exodus Comm., Inc.,
Sr Note (United States) 12-15-09 (E) 10.750 B- 200 163,160
Grupo Iusacell S.A. de C.V.,
Sr Note (Mexico) 12-01-06, (Y) 14.250 B+ 200 198,000
GT Group Telecom, Inc.,
Sr Disc Note, Step Coupon (13.25%, 02-01-05)
(Canada) 02-01-10 (A) Zero B- 200 84,000
Intercel, Inc.,
Unit (Sr Discount Note & Warrant), Step Coupon
(12.00%, 02-01-01) 02-01-06 (A) Zero B 200 200,000
Ionica PLC,
Sr Disc Note, Step Coupon (15.00%, 05-01-02)
(United Kingdom) 05-01-07 (A) (Y) Zero Ca 200 3,000
MetroNet Communications Corp.,
Sr Discount Note, Step Coupon (10.75%, 11-01-02)
(Canada) 11-01-07 (A) (Y) Zero BBB 200 161,944
Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 50 55,000
Nextel International, Inc.,
Sr Note 08-01-10 (R) 12.750 B- 100 80,000
NorthEast Optic Network, Inc.,
Sr Note 08-15-08 12.750 B- 100 60,000
ONO Finance Plc,
Sr Note (United Kingdom) 07-15-10 (E) 14.000 CCC+ 200 142,530
Sr Sub Note (United Kingdom) 05-01-09 (E) 13.000 CCC+ 100 70,328
Pronet Inc.,
Sr Sub Note 06-15-05 11.875 CCC 280 229,600
Spectrasite Holdings, Inc.,
Sr Disc Note, Step Coupon
(11.25%, 04-15-04) 04-15-09 (A) Zero B- 200 104,000
Telecorp PCS, Inc.,
Sr Sub Disc Note, Step Coupon (11.625%, 04-15-04)
04-15-09 (A) Zero B3 175 119,000
Telewest Communication Plc,
Sr Disc Note, Step Coupon (9.25%, 04-15-04)
(United Kingdom) 04-15-09 (A) (Y) Zero B+ 100 67,181
Sr Note (United Kingdom) 02-01-10 (R) # 9.875 B+ 100 121,671
VoiceStream Wireless Corp.,
Sr Note 09-15-09 11.500 CCC+ 100 109,750
-------------
2,245,335
-------------
Telecommunications - Services (7.88%)
Clearnet Communications Inc.,
Sr Disc Note, Step Coupon (10.40%, 05-15-03)
(Canada) 05-15-08 (A)# Zero BBB+ 150 83,885
Sr Disc Note, Step Coupon (10.125%, 05-01-04)
(Canada) 05-01-09 (A) (Y) Zero B3 150 120,000
COLT Telecom Group Plc, (United Kingdom)
Sr Note (Deutsche Mark) 07-31-08# 7.625 B 300 130,167
Crown Castle International Corp.,
Sr Disc Note, Step Coupon (10.625%, 11-15-02)
11-15-07 (A) Zero B 150 119,250
Energis Plc,
Sr Note (United Kingdom) 06-15-09 (R)# 9.500 B+ 130 180,492
Jazztel Plc,
Sr Note (United Kingdom) 12-15-09 (E) 13.250 CCC+ 200 121,901
Level 3 Communications, Inc.,
Conv Sub Note 03-15-10 6.000 CCC+ 50 23,500
Sr Note (United States) 03-15-08 (E) 10.750 B 100 77,829
Sr Note 05-01-08 9.125 B 100 80,000
McLeodUSA, Inc.,
Sr Note 07-15-07 9.250 B+ 100 91,000
Sr Note 11-01-08 9.500 B+ 50 45,500
Metromedia Fiber Network, Inc.,
Sr Note 11-15-08 10.000 B+ 300 249,750
Sr Note (United States) 12-15-09 (E) 10.000 B+ 100 78,767
Nextel Communications, Inc.,
Sr Disc Note, Step Coupon (9.95%, 02-15-03)
02-15-08 (A) Zero B 125 90,000
Nextel Partners, Inc.,
Sr Disc Note, Step Coupon (14.00%, 02-01-04)
02-01-09 (A) Zero CCC+ 165 108,900
Sr Note 03-15-10 11.000 CCC+ 100 96,000
NEXTLINK Communications, Inc.,
Sr Disc Note, Step Coupon (12.125%, 12-01-04)
12-01-09 (A) Zero B 100 44,500
Sr Note 11-15-08 10.750 B 100 81,500
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B 100 89,000
Sr Note, Ser B, Step Coupon (12.375%, 10-01-03)
10-01-08 (A) Zero B 150 82,500
Orion Network Systems,
Sr Note 01-15-07 11.250 CCC+ 100 35,000
Primus Telecommunications Group, Inc., Sr Note
10-15-09 12.750 B- 250 77,500
Qwest Communications International, Inc., Sr
Note Ser B 04-01-07 10.875 BBB+ 65 71,466
Time Warner Telecom LLC,
Sr Note 07-15-08 9.750 B- 100 92,250
Tritel PCS, Inc.,
Sr Disc Note, Step Coupon (12.75%,
05-15-04) 05-15-09 (A) Zero B3 100 67,000
United Pan-Europe Communicatons N.V.,
Sr Disc Note, Step Coupon (13.375%, 11-01-04)
(Netherlands) 11-01-09 (A) (E) Zero B- 100 31,882
Sr Note (Netherlands) 11-01-07 (E) 10.875 B- 100 60,951
Sr Note (Netherlands) 11-01-09 (E) 11.250 B- 100 60,951
Versatel Telecom International NV,
Sr Note (Netherlands) 05-15-08 (Y) 13.250 B- 100 61,000
Sr Note Ser EU (Netherlands) 07-15-09 (E) 11.875 B- 100 58,606
Viatel, Inc.,
Sr Note 04-15-08 11.250 B- 350 105,000
-------------
2,716,047
-------------
Transportation (0.59%)
CHC Helicopter Corp.,
Sr Sub Note (Canada) 07-15-07# (E) 11.750 B 200 197,855
Fine Air Services, Corp.,
Sr Note 06-01-08 (B) 9.875 CC 105 5,247
-------------
203,102
-------------
Utilities (2.67%)
Calpine Corp.,
Sr Note 04-01-08 7.875 BB+ 100 98,000
CMS Energy Corp.,
Sr Note 10-15-07 9.875 BB 200 207,500
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB+ 200 211,826
Deb Ser B 07-23-06 13.250 BB+ 150 166,094
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico) 11-15-09 (R) (Y) 9.625 BB+ 90 87,074
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 143 150,529
-------------
921,023
-------------
TOTAL BONDS
(Cost 31,955,894) (86.50%) 29,816,857
-------------
NUMBER OF
SHARES
OR WARRANTS
-----------
COMMON STOCKS
KLM Royal Dutch Airlines, N.V.
American Depositary Receipt (ADR) Common Stock
(Netherlands) 397 932
Nextel Communications, Inc. (Class A) Common
Stock** 464 11,484
Northeast Utilities, Common Stock 6,000 145,500
Versatel Telecom International NV* Common Stock
(ADR) (Netherlands)** 1,333 11,497
-------------
177,413
-------------
TOTAL COMMON STOCKS
(Cost $122,883) (0.52%) 177,413
-------------
PREFERRED STOCKS AND WARRANTS
Allegiance Telecom, Inc. Warrant** 250 16,250
Comunicacion Celular S.A. Warrant (Colombia)** 100 0
DIVA Systems Corp., Warrant (R)** 750 1,313
GT Group Telecom, Inc. Warrant (Canada) (R) ** 200 14,000
Loral Space & Communications Ltd. Warrant** 100 600
Motient Corp., Warrant (R)** 100 1,000
ONO Finance Plc, Warrant (United Kingdom) (R)
(E)** 50 2,813
ONO Finance Plc, Warrant (United Kingdom) (R)
(Y)** 50 3,000
XO Communications Inc., 14 Preferred Stock 2,340 65,520
-------------
104,496
-------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $178,105) (0.30%) 104,496
--------- -------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------- ------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.97%)
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 12-29-00, due
01-02-01 (Secured by U.S. Treasury
Bonds, 6.750% thru 8.875%, due
08-15-17 thru 08-15-26) - Note B 5.950% $3,437 $3,437,000
------------
Corporate Savings Account (0.00%)
Investors Bank & Trust Company Daily
Interest Savings Account Current Rate
5.20% 346
-------------
TOTAL SHORT-TERM INVESTMENTS (9.97%) 3,437,346
--------- -------------
TOTAL INVESTMENTS (97.29%) 33,536,112
--------- -------------
OTHER ASSETS AND LIABILITIES, NET (2.71%) 935,687
--------- -------------
TOTAL NET ASSETS (100.00%) $34,471,799
========= -------------
* Credit ratings are unaudited and rated by Moody's Investors Service
or John Hancock Advisers, Inc. where Standard & Poor's ratings are not
available.
** Non-income producing security.
# Par value of foreign bonds is expressed in local currency, as shown
parenthetically in security description.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(B) Non-income producing issuer, filed for protection under Federal
Bankruptcy Code or is in default of interest payment.
(E) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
euro-denominated.
(R) These securities are exempt from registration under rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $902,747 or 2.62% of the
Fund's net assets as of December 31, 2000.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer, however, security is
U.S. dollar-denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
Portfolio Concentration
December 31, 2000 (Unaudited)
- -------------------------------------------------------------------------
The V.A. Strategic Income Fund invests primarily in securities issued in
the United States of America. The performance of this Fund is closely
tied to the economic and financial conditions of the countries within which
it invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the schedule of
investments. In addition, con centration of investments can be
aggregated by various countries. The table below shows the percentages
of the Fund's investments at December 31, 2000 assigned to country
categories.
MARKET VALUE
AS A % OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- -----------------
Australia 0.42%
Bahamas 0.26
Canada 9.26
Colombia 0.22
France 0.32
Luxembourg 0.26
Mexico 1.41
Netherlands 1.82
Russia 1.68
United Kingdom 3.37
United States 77.10
Venezuela 1.17
-------
TOTAL INVESTMENTS 97.29%
=======
Additionally, the concentration of investments can be aggregated by the
quality rating for each debt security.
MARKET VALUE
AS A % OF
QUALITY DISTRIBUTION FUND'S NET ASSETS
- -------------------- -----------------
AAA 55.33%
AA 0.58
BBB 1.52
BB 4.46
B 20.82
CCC 3.76
CC 0.02
D 0.01
-------
TOTAL BONDS 86.50%
=======
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Declaration Trust
NOTE A--
ORGANIZATION
John Hancock V.A. Core Equity Fund ("V.A. Core Equity Fund"), John
Hancock V.A. 500 Index Fund ("V.A. 500 Index Fund"), John Hancock V.A.
Large Cap Growth Fund ("V.A. Large Cap Growth Fund"), John Hancock V.A.
Mid Cap Growth Fund ("V.A. Mid Cap Growth Fund"), John Hancock V.A.
Relative Value Fund ("V.A. Relative Value Fund," formerly John Hancock
V.A. Large Cap Value Fund), John Hancock V.A. Small Cap Growth Fund
("V.A. Small Cap Growth Fund"), John Hancock V.A. Sovereign Investors
Fund ("V.A. Sovereign Investors Fund"), John Hancock V.A. International
Fund ("V.A. International Fund"), John Hancock V.A. Financial Industries
Fund ("V.A. Financial Industries Fund"), John Hancock V.A. Regional Bank
Fund ("V.A. Regional Bank Fund"), John Hancock V.A. Technology Fund
("V.A. Technology Fund"), John Hancock V.A. Bond Fund ("V.A. Bond
Fund"), John Hancock V.A. High Yield Bond Fund ("V.A. High Yield Bond
Fund"), John Hancock V.A. Money Market Fund ("V.A. Money Market Fund")
and John Hancock V.A. Strategic Income Fund ("V.A. Strategic Income
Fund"), (each a "Fund," collectively the "Funds"), are separate series
of John Hancock Declaration Trust (the "Trust"), an open-end management
investment company, registered under the Investment Company Act of 1940.
The Trust, organized as a Massachusetts business trust in 1995, consists
of fifteen different series at December 31, 2000. Each Fund currently
has one class of shares with equal rights as to voting, redemption,
dividends and liquidation within its respective Fund. The Trustees may
authorize the creation of additional series from time to time to satisfy
various investment objectives. An insurance company issuing a Variable
Contract that participates in the Trust will vote shares of the Funds
held by the insurance company's separate accounts as required by law. In
accordance with current law and interpretations thereof, participating
insurance companies are required to request voting instructions from
policy owners and must vote shares of the Funds in proportion to the
voting instructions received.
The investment objective of the V.A. Core Equity Fund is to seek
above-average total return, consisting of capital appreciation and
income. The investment objective of the V.A. 500 Index Fund is to
provide investment results that correspond with the total return
performance of the Standard & Poor's 500 Stock Price Index (the "S&P 500
Index"). The investment objective of the V.A. Large Cap Growth Fund is
to seek long-term capital appreciation. The investment objective of the
V.A. Mid Cap Growth Fund is to seek long-term capital appreciation. The
investment objective of the V.A. Relative Value Fund is to seek the
highest total return (capital appreciation plus current income) that is
consistent with reasonable safety of capital. The investment objective
of the V.A. Small Cap Growth Fund is to seek long-term capital
appreciation. The investment objective of the V.A. Sovereign Investors
Fund is to seek long-term growth of capital and income without assuming
undue market risks. The investment objective of the V.A. International
Fund is to seek long-term growth of capital. The investment objective of
the V.A. Financial Industries Fund is to seek capital appreciation. The
investment objective of the V.A. Regional Bank Fund is to seek long-term
capital appreciation. The investment objective of the V.A. Technology
Fund is to seek long-term growth of capital. The investment objective of
the V.A. Bond Fund is to seek a high level of current income consistent
with prudent investment risk. The investment objective of the V.A. High
Yield Bond Fund is to seek maximum current income without assuming undue
risk. The investment objective of the V.A. Money Market Fund is to seek
maximum current income consistent with capital preservation and
liquidity. The investment objective of the V.A. Strategic Income Fund is
to seek a high level of current income.
NOTE B--
ACCOUNTING POLICIES
VALUATION OF INVESTMENTS Securities in the Funds' portfolios (except for
V.A. Money Market Fund) are valued on the basis of market quotations,
valuations provided by independent pricing services or at fair value as
determined in good faith in accordance with procedures approved by the
Trustees. Short-term debt investments maturing within 60 days are valued
at amortized cost, which approximates market value. All Portfolio
transactions initially expressed in terms of foreign currencies have
been translated into U.S. dollars as described in "Foreign Currency
Translation" below.
The V.A. Money Market Fund's portfolio of securities is valued at
amortized cost, in accordance with Rule 2a-7 of the Investment Company
Act of 1940, which approximates market value. The amortized cost method
involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the
difference between the principal amount due at maturity and the cost of
the security to the Funds. Interest income on certain portfolio
securities such as negotiable bank certificates of deposit and
interest-bearing notes is accrued daily and included in interest
receivable. The Funds may invest in indexed securities whose value is
linked either directly or inversely to changes in foreign currencies,
interest rates, indexes or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself,
but any loss is limited to the amount of the original investment.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other
registered investment companies having a management contract with John
Hancock Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The
Berkeley Financial Group, Inc., may participate in joint repurchase
agreement transactions. Aggregate cash balances are invested in one or
more large repurchase agreements, whose underlying securities are
obligations of the U.S. government and/or its agencies. The Funds'
custodian bank receives delivery of the underlying securities for the
joint account on the Funds' behalf. The Adviser is responsible for
ensuring that the agreement is fully collateralized at all times.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially
expressed in terms of foreign currencies are translated into U.S.
dollars based on London currency exchange quotations as of 5:00 p.m.,
London time, on the date of any determination of the net asset value of
the Funds. Transactions affecting statement of operations accounts and
net realized gain (loss) on investments are translated at the rates
prevailing at the dates of the transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized
gains or losses from investments.
Reported net realized foreign exchange gains or losses arise from sales
of foreign currency, currency gains or losses realized between the trade
and settlement dates on securities transactions and the difference
between the amounts of dividends, interest and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains
and losses arise from changes in the value of assets and liabilities
other than investments in securities, resulting from changes in the
exchange rate.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on
sales of investments are determined on the identified cost basis.
Capital gains realized on some foreign securities are subject to foreign
taxes, which are accrued as applicable.
DISCOUNT ON SECURITIES The Funds accrete discount from par value on
securities from either the date of issue or the date of purchase over
the life of the security.
EXPENSES The majority of the expenses are directly identifiable to an
individual fund. Expenses that are not readily identifiable to specific
Funds will be allocated in such a manner as deemed equitable, taking
into consideration, among other things, the nature and type of expense
and the relative size of the Funds.
ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five-year period that began with
the commencement of the investment operations of the Funds.
BANK BORROWINGS The Funds (except for V.A. Money Market Fund) are
permitted to have bank borrowings for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. The Funds have entered
into a syndicated line of credit agreement with various banks. This
agreement enables the Funds to participate with other funds managed by
the Adviser in an unsecured line of credit with banks which permit
borrowings up to $500 million, collectively. Interest is charged to each
Fund, based on its borrowing. In addition, a commitment fee is charged
to each Fund based on the average daily unused portion of the line of
credit and is allocated among the participating Funds.
The following Funds had borrowings under the line of credit during the
year ended December 31, 2000:
AVERAGE DAILY LOAN BALANCE
DURING THE PERIOD FOR WHICH WEIGHTED AVERAGE
FUND LOANS WERE OUTSTANDING INTEREST RATE INTEREST EXPENSE
- ----- --------------------------- ---------------- ----------------
V.A. Large Cap Growth $2,618,000 6.93% $5,152
V.A. Relative Value 911,750 7.02 1,217
V.A. Small Cap Growth 1,373,750 7.03 1,055
SECURITIES LENDING The Funds may lend their securities to certain
qualified brokers who pay the Funds negotiated lender fees. These fees
are included in interest income. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. As with other extensions of
credit, the Funds may bear the risk of delay of the loaned securities in
recovery or even loss of rights in the collateral, should the borrower
of the securities fail financially. At December 31, 2000, V.A. Relative
Value Fund loaned securities having a market value of $474,050
collateralized by securities in the amount of $500,149, V.A. Small Cap
Growth Fund loaned securities having a market value of $431,062
collateralized by securities in the amount of $441,188, V.A.
International Fund loaned securities having a market value of $886,726
collateralized by cash in the amount of $933,457 and V.A. Regional Bank
Fund loaned securities having a market value of $467,250 collateralized
by securities in the amount of $505,964. The cash collateral was
invested in a short-term instrument.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds (except for V.A.
Core Equity, V.A. 500 Index, V.A. Sovereign Investors and V.A. Money
Market Funds) may enter into forward foreign currency exchange contracts
as a hedge against the effect of fluctuations in currency exchange
rates. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date at a
set price. The aggregate principal amounts of the contracts are marked
to market daily at the applicable foreign currency exchange rates. Any
resulting unrealized gains and losses are included in the determination
of the Funds' daily net assets. The Funds record realized gains and
losses at the time the forward foreign currency exchange contracts are
closed out or offset by matching contracts. Risks may arise upon
entering these contracts from the potential inability of counterparties
to meet the terms of the contracts and from unanticipated movements in
the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the
unrealized gain or loss reflected in the Funds' Statements of Assets and
Liabilities. The Funds may also purchase and sell forward contracts to
facilitate the settlement of foreign currency denominated portfolio
transactions, under which they intend to take delivery of the foreign
currency. Such contracts normally involve no market risk if they are
offset by the currency amounts of the underlying transactions.
The Funds had the following open forward foreign currency exchange
contracts at December 31, 2000:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION/
CURRENCY COVERED BY CONTRACT MONTH (DEPRECIATION)
- -------- ------------------- ---------- ------------
V.A. HIGH YIELD BOND FUND
Buys
Euro Currency 23,343 Feb 01 $2,091
=======
Sells
Euro Currency 265,610 Jan 01 ($19,139)
Euro Currency 97,405 Feb 01 (8,891)
Euro Currency 55,903 Mar 01 (3,467)
Pound Sterling 12,500 Jan 01 (243)
Pound Sterling 64,050 Feb 01 (2,488)
-------
($34,228)
=======
V.A. STRATEGIC INCOME FUND
Buys
Australian Dollar 301,550 Feb 01 $11,115
Pound Sterling 49,876 Feb 01 2,410
-------
13,525
=======
Sells
Australian Dollar 301,550 Feb 01 ($10,521)
Pound Sterling 262,805 Jan 01 (5,103)
Pound Sterling 335,217 Feb 01 (13,021)
Pound Sterling 308,646 Mar 01 (12,309)
-------
($40,954)
=======
FINANCIAL FUTURES CONTRACTS The Funds (except for V.A. Money Market
Fund) may buy and sell financial futures contracts. Buying futures tends
to increase the Funds' exposure to the underlying instrument. Selling
futures tends to decrease the Funds' exposure to the underlying
instrument or hedge other Funds instruments. At the time each Fund
enters into a financial futures contract, it is required to deposit with
its custodian a specified amount of cash or U.S. government securities,
known as "initial margin," equal to a certain percentage of the value of
the financial futures contract being traded. Each day, the futures
contract is valued at the official settlement price of the board of
trade or U.S. commodities exchange on which it trades. Subsequent
payments to and from the broker, known as "variation margin," are made
on a daily basis as the market price of the financial futures contract
fluctuates. Daily variation margin adjustments, arising from this "mark
to market," are recorded by the Funds as unrealized gains or losses.
When the contracts are closed, the Funds recognize a gain or loss. Risks
of entering into futures contracts include the possibility that there
may be an illiquid market and/or that a change in the value of the
contracts may not correlate with changes in the value of the underlying
securities. In addition, the Funds could be prevented from opening or
realizing the benefits of closing out futures positions because of
position limits or limits on daily price fluctuation imposed by an
exchange.
For federal income tax purposes, the amount, character and timing of the
Funds' gains and/or losses can be affected as a result of futures
contracts.
The Funds had the following open financial futures contracts at
December 31, 2000:
UNREALIZED
OPEN APPRECIATION
EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- ---------- --------- -------- ------------
V.A. 500 INDEX FUND
Mar 01 4 S&P 500 Long $17,847
=======
At December 31, 2000, the V.A. 500 Index Fund had deposited $75,000 in a
segregated account to cover margin requirements on open futures
contracts.
OPTIONS The Funds (except for V.A. Money Market Fund) may enter into
option contracts. Listed options will be valued at the last quoted sales
price on the exchange on which they are primarily traded.
Over-the-counter options are valued at the mean between the last bid and
asked prices. Upon the writing of a call or put option, an amount equal
to the premium received by the Funds will be included in the Statements
of Assets and Liabilities as an asset and corresponding liability. The
amount of the liability will be subsequently marked to market to reflect
the current market value of the written option.
The Funds may use option contracts to manage their exposure to the price
volatility of financial instruments. Writing puts and buying calls will
tend to increase the Funds' exposure to the underlying instrument and
buying puts and writing calls will tend to decrease the Funds' exposure
to the underlying instrument, or hedge other Funds' investments.
The maximum exposure to loss for any purchased options will be limited
to the premium initially paid for the option. In all other cases, the
face (or "notional") amount of each contract at value will reflect the
maximum exposure of the Funds in these contracts, but the actual
exposure will be limited to the change in value of the contract over the
period the contract remains open.
Risks may also arise if counterparties do not perform under the
contracts' terms ("credit risk") or if the Funds are unable to offset a
contract with a counterparty on a timely basis ("liquidity risk").
Exchange-traded options have minimal credit risk as the exchanges act as
counterparties to each transaction, and only present liquidity risk in
highly unusual market conditions. To minimize credit and liquidity risks
in over-the-counter option contracts, the Funds will continuously
monitor the creditworthiness of all their counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Funds'
year-end Statements of Assets and Liabilities.
Written option transactions for the year ended December 31, 2000, were
as follows:
CONTRACTS
(000s OMITTED) PREMIUM
------------ -------
V.A. STRATEGIC INCOME FUND
Outstanding, beginning of period -- --
Options written -- Mexican Peso 3,750 $3,639
Options expired -- Mexican Peso (3,750) ($3,639)
------- -------
Outstanding, end of period -- --
CONTRACTS
(000s OMITTED) PREMIUM
------------ -------
V.A. TECHNOLOGY FUND
Outstanding, beginning of period -- --
Options written 2 $661
Options expired (2) ($661)
------- -------
Outstanding, end of period -- --
FEDERAL INCOME TAXES The Funds' policy is to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies. They will not be subject to federal
income tax on taxable earnings which are distributed to shareholders.
For federal income tax purposes, net currency gains and losses from
sales of foreign debt securities may be treated as ordinary income even
though such items are capital gains and losses for accounting purposes.
For federal income tax purposes, the following funds had capital loss
carryforwards available to the extent provided by regulations to offset
future net realized capital gains:
CAPITAL LOSS CARRYFORWARD EXPIRING POST 10/31/2000
------------------------------------ LOSS TREATED AS
FUND 12/31/2006 12/31/2007 12/31/2008 ARISING 1/1/2001
- ---- ---------- ---------- ---------- ----------------
V.A. Core Equity Fund -- -- -- $814,496
V.A. 500 Index Fund -- -- -- --
V.A. Large Cap Growth Fund -- -- $1,306,804 419,653
V.A. Mid Cap Growth Fund -- -- 633,415 --
V.A. Small Cap Growth Fund -- -- 2,089,105 --
V.A. Sovereign Investors Fund $157,877 $101,159 1,206,695 789,935
V.A. International Fund -- -- 265,560 277,503
V.A. Financial Industries Fund -- 2,140,648 1,313,228 --
V.A. Regional Bank Fund -- -- 2,212,041 638,852
V.A. Technology Fund -- -- 14,000 132,115
V.A. Bond Fund -- 67,593 215,568 8,807
V.A. High Yield Bond Fund -- -- -- 275,404
V.A. Strategic Income Fund 4,130 136,493 455,777 580,413
Expired capital loss carryforwards are reclassified to capital paid-in,
in the year of expiration. Additionally, net capital losses attributable
to security transactions occurring after October 31, 2000 are treated as
arising on the first day (January 1, 2001) of the Funds' next taxable
year.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds identify the
dividend. Interest income on investment securities is recorded on the
accrual basis. The Funds may place a debt obligation on non-accrual
status and reduce related interest income by ceasing current accruals
and writing off interest receivables when the collection of interest has
become doubtful. Foreign income may be subject to foreign withholding
taxes, capital gains and repatriation taxes imposed by certain countries
in which the Funds invest, that are accrued as applicable.
The Funds record all dividends and distributions to shareholders from
net investment income and realized gains on the ex-dividend date. Such
distributions are determined in conformity with income tax regulations,
which may differ from generally accepted accounting principles.
USE OF ESTIMATES The preparation of these financial statements, in
accordance with accounting principles generally accepted in the United
States of America, incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Funds. Actual results could differ from these estimates.
NOTE C--
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Funds have an investment management contract with the Adviser. Under
the investment management contract, the Funds pay a monthly management
fee to the Adviser equivalent, on an annual basis, as follows:
RATE AS A PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
- ---- ------------------------
V.A. Core Equity Fund 0.70%
V.A. 500 Index Fund 0.35
V.A. Large CapGrowth Fund 0.75
V.A. Mid Cap Growth Fund 0.75
V.A. Relative Value Fund 0.60
V.A. Small Cap Growth Fund 0.75
V.A. Sovereign Investors Fund 0.60
V.A. International Fund 0.90
V.A. Financial Industries Fund 0.80
V.A. Regional Bank Fund 0.80
V.A. Technology Fund 0.80
V.A. Bond Fund 0.50
V.A. High Yield Bond Fund 0.60
V.A. Money Market Fund 0.50
V.A. Strategic Income Fund 0.60
The V.A. Core Equity Fund and the Adviser have a subadvisory contract
with Independence Investment Associates, Inc. ("IIA"). IIA is a
wholly-owned indirect subsidiary of John Hancock Life Insurance Company
("JHLICo").
From January 1, 2000, until March 1, 2000, the V.A. International Fund
and the Adviser had subadvisory contracts with John Hancock Advisers
International Limited ("JHAI"), the Fund's original subadviser, and
Indocam International Investments Services ("IIIS"). The Adviser
terminated the contract with JHAI on March 1, 2000 and with IIIS on
December 14, 2000. Effective December 14, 2000, the Fund and the Adviser
entered into a subadvisory contract with Nicholas-Applegate Capital
Management LP, who is the Fund's sole subadviser.
The V.A. Technology Fund and the Adviser have a subadvisory contract
with American Fund Advisors, Inc.
The Funds are not responsible for payment of subadvisers' fees.
The Adviser has voluntarily agreed to limit the management fee on the
V.A. 500 Index Funds to 0.10% of the Funds' average daily net assets, at
least until April 30, 2001. Accordingly, the management fee reduction
amounted to $82,948 during the year ended December 31, 2000. The Adviser
reserves the right to terminate this limitation in the future.
The Adviser has voluntarily agreed to limit each Fund's expenses
(excluding the management fee), to 0.25% of each Fund's average daily
net assets at least until April 30, 2001. Accordingly, the reductions in
the Funds' expenses for the year ended December 31, 2000 were as
follows:
FUND FEE REDUCTION
- ---- -------------
V.A. 500 Index Fund $108,198
V.A. Mid Cap Growth Fund 13,517
V.A. Small Cap Growth Fund 29,736
V.A. International Fund 189,610
V.A. Technology Fund 39,008
V.A. Bond Fund 27,848
V.A. High Yield Bond Fund 33,670
The Adviser reserves the right to terminate this limitation in the future.
The Funds have an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the
year was at an annual rate of less than 0.02% of the average net assets
of each Fund.
The V.A. 500 Index Fund has an agreement with Standard & Poor's ("S&P")
to license certain trademarks and trade names of S&P and of the S&P 500
Index, which is determined, composed and calculated by S&P without
regard to the Adviser or the V.A. 500 Index Fund. (Requisite disclosure
regarding the use of the Standard & Poor's name is included in the
Funds' prospectus.)
Mr. Stephen L. Brown and Ms. Maureen R. Ford are directors and/or
officers of the Adviser and/or its affiliates, as well as Trustees of
the Funds. The compensation of unaffiliated Trustees is borne by the
Funds. The unaffiliated Trustees may elect to defer, for tax purposes,
their receipt of this compensation under the John Hancock Group of Fund
Deferred Compensation Plan. The Funds make investments into other John
Hancock funds, as applicable, to cover their liability for the deferred
compensation. Investments to cover the Funds' deferred compensation
liability are recorded on the Funds' books as an other assets. The
deferred compensation liability and the related other assets are always
equal and are marked to market on a quarterly basis to reflect any
income earned by the investments as well as any unrealized gains or
losses. The Deferred Compensation Plan investments had no impact on the
operations of the Funds.
The Adviser and other subsidiaries of John Hancock Life Insurance
Company owned the following shares of beneficial interest of the Funds
as of December 31, 2000:
FUND SHARES OF BENEFICIAL INTEREST
- ---- -----------------------------
V.A. Large Cap Growth Fund 102,341
V.A. Mid Cap Growth Fund 50,071
V.A. Relative Value Fund 52,777
V.A. Small Cap Growth Fund 102,547
V.A. International Fund 222,987
V.A. Regional Bank Fund 52,589
V.A. Technology Fund 50,000
V.A. Bond Fund 131,418
V.A. High Yield Bond Fund 264,334
V.A. Money Market Fund 120,098
V.A. Strategic Income Fund 523,521
NOTE D--
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities for the Funds, other
than short-term securities and obligations of the U.S. government,
during the year ended December 31, 2000, were as follows:
FUND PURCHASES SALES
- ---- ----------- -----------
V.A. Core Equity Fund $42,115,835 $41,675,001
V.A. 500 Index Fund 2,307,449 12,894,479
V.A. Large Cap Growth Fund 31,296,632 34,612,666
V.A. Mid Cap Growth Fund 26,398,947 18,795,733
V.A. Relative Value Fund 70,514,895 69,223,742
V.A. Small Cap Growth Fund 34,977,801 28,519,888
V.A. Sovereign Investors Fund 24,474,993 19,435,997
V.A. International Fund 14,985,994 15,776,436
V.A. Financial Industries Fund 29,716,172 22,019,465
V.A. Regional Bank Fund 4,345,596 12,035,766
V.A. Technology Fund 18,361,163 3,734,817
V.A. Bond Fund 37,105,046 31,197,443
V.A. High Yield Bond Fund 4,376,128 6,109,749
V.A. Strategic Income Fund 23,089,638 12,639,620
At December 31, 2000, the cost (excluding the corporate savings account)
and gross unrealized appreciation and depreciation in value of
investments owned by the Funds, as computed on a federal income tax
basis, were as follows:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- ----------- ------------ ------------ ------------
V.A. Core Equity Fund $36,890,096 $7,804,058 $4,010,356 $3,793,702
V.A. 500 Index Fund 17,840,933 8,398,062 1,697,160 7,240,902
V.A. Large Cap Growth Fund 12,789,433 2,239,349 2,670,989 (431,640)
V.A. Mid Cap Growth Fund 10,897,906 2,093,387 1,574,693 518,694
V.A. Relative Value Fund 43,590,186 4,854,560 10,608,477 (5,753,917)
V.A. Small Cap Growth Fund 18,232,549 5,165,484 3,532,447 1,633,037
V.A. Sovereign Investors Fund 48,515,960 10,191,217 3,421,215 6,770,002
V.A. International Fund 6,171,294 702,258 551,685 150,573
V.A. Financial Industries Fund 52,470,820 19,632,068 659,836 18,972,232
V.A. Regional Bank Fund 11,709,207 2,334,146 314,017 2,020,129
V.A. Technology Fund 18,726,727 401,010 4,337,617 (3,936,607)
V.A. Bond Fund 24,311,360 654,628 133,540 521,088
V.A High Yield Bond Fund 9,825,406 240,539 3,024,545 (2,784,006)
V.A. Money Market Fund 67,919,023 -- -- --
V.A. Strategic Income Fund 35,693,882 656,841 2,814,957 (2,158,116)
NOTE E--
RECLASSIFICATION OF ACCOUNTS
During the year ended December 31, 2000, reclassifications have been
made in each Fund's capital balances to report these balances on a tax
basis, excluding certain temporary differences, as of December 31, 2000.
Additional adjustments may be needed in subsequent reporting periods.
These reclassifications, which have no impact on the net asset value of
the Funds, are primarily attributable to certain differences in the
treatment of net operating losses, foreign currency gains and losses and
return of capital under federal tax rules versus generally accepted
accounting principles. The calculation of net investment income (loss)
per share in the financial highlights excludes these adjustments.
UNDISTRIBUTED ACCUMULATED
CAPITAL NET INVESTMENT NET REALIZED
FUND PAID-IN INCOME (LOSS) GAIN (LOSS)
- ---- ------- ------------- -----------
V.A. Core Equity Fund ($3,088) $2,934 $154
V.A. 500 Index Fund (177) 48 129
V.A. Large Cap Growth Fund (116,413) 116,340 73
V.A. Mid Cap Growth Fund (55,559) 55,538 21
V.A. Relative Value Fund (158) (879) 1,037
V.A. Small Cap Growth Fund (194,912) 194,847 65
V.A. Sovereign Investors Fund (2,880) 2,708 172
V.A. International Fund (39) 59,513 (59,474)
V.A. Financial Industries Fund (241) (19,285) 19,526
V.A. Regional Bank Fund (214) 135 79
V.A. Bond Fund (61) (76) 137
V.A. High Yield Bond Fund (47) (7,319) 7,366
V.A. Money Market Fund (141) 141 --
V.A. Strategic Income Fund (91,761) (79,029) 170,790
NOTE F --
REORGANIZATION
On March 18, 1999, the shareholders of John Hancock V.A. World Bond Fund
(VAWBF) approved a plan of reorganization between VAWBF and V.A.
Strategic Income Fund, providing for the transfer of substantially all
of the assets and liabilities of VAWBF to V.A. Strategic Income Fund in
exchange solely for shares of V.A. Strategic Income Fund. The
acquisition of VAWBF was accounted for as a tax-free exchange of 253,313
shares of V.A. Strategic Income for the net assets of VAWBF, which
amounted to $2,569,839, including $17,012 of unrealized depreciation,
after the close of business on March 26, 1999.
NOTE G --
CHANGE IN ACCOUNTING PRINCIPLE
The Funds will adopt the provisions of the AICPA Audit and Accounting
Guide for Investment Companies, as revised, effective for fiscal years
beginning after December 15, 2000. As required, the Funds will begin
amortizing premiums on debt securities effective January 1, 2001. Prior
to this date, the Funds did not amortize premiums on debt securities.
The cumulative effect of this accounting change will have no impact on
the total net assets of the Funds. The impact of this accounting change
has not been determined but will result in a reclassification between
the cost of securities and a corresponding reclassification in net
unrealized appreciation/depreciation, based on securities held as of
December 31, 2000.
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Contract Owners and Trustees of
John Hancock Declaration Trust
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of John Hancock Declaration
Trust (the Trust) (comprising, respectively, V.A. Core Equity Fund, V.A.
500 Index Fund, V.A. Large Cap Growth Fund, V.A. Mid Cap Growth Fund,
V.A. Relative Value Fund (formerly, V.A. Large Cap Value Fund), V.A.
Small Cap Growth Fund, V.A. Sovereign Investors Fund, V.A. International
Fund, V.A. Financial Industries Fund, V.A. Regional Bank Fund, V.A.
Technology Fund, V.A. Bond Fund, V.A. High Yield Bond Fund, V.A. Money
Market Fund and V.A. Strategic Income Fund) as of December 31, 2000, and
the related statements of operations for the year then ended, the
statements of changes in net assets and the financial highlights for
each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Trust's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2000, by
correspondence with the custodian and brokers, or by other appropriate
auditing procedures where replies from brokers were not received. 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, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the respective portfolios constituting the
John Hancock Declaration Trust at December 31, 2000, the results of
their operations for the year then ended, and the changes in their net
assets and the financial highlights for each of the periods indicated,
in conformity with accounting principles generally accepted in the
United States of America.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
February 9, 2001
TAX INFORMATION (UNAUDITED)
The Funds designated the following as long-term capital gain divi dends
during the fiscal year ended December 31, 2000.
Additionally, the following dividend distributions qualify for the
dividends received deduction available to corporations.
DIVIDENDS
CAPITAL GAINS RECEIVED
FUND DESIGNATED DEDUCTION
- ---- ----------- -----------
V.A. Core Equity Fund $1,330,264 67.30%
V.A. 500 Index Fund 92,786 99.99
V.A. Large Cap Growth Fund 323,779 12.13
V.A. Mid Cap Growth Fund 7,822 8.34
V.A. Relative Value Fund 3,679,699 1.58
V.A. Small Cap Growth Fund 315,995 0.91
V.A. Sovereign Investors Fund -- 100.00
V.A. International Fund 238,923 --
V.A. Financial Industries Fund -- 76.12
V.A. Regional Bank Fund -- 99.85
V.A. Technology Fund -- 1.87
V.A. High Yield Bond Fund -- 5.80
V.A. Strategic Income Fund -- 0.81
SHAREHOLDER MEETING (UNAUDITED)
On December 1, 2000, the shareholders of John Hancock V.A. Financial
Industries Fund approved a proposal to eliminate the investment
restriction requiring the Fund to invest more than 25% of its assets in
the banking industry (3,132,756 FOR, 131,200 AGAINST and 192,513
ABSTAINING).
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
This report is for the information of the shareholders of the John
Hancock Declaration Trust. It is not authorized for distribution to
prospective investors unless it is preceded or accompanied by the
current prospectus, which details charges, investment objectives and
operating policies.
A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."
DEC0A 12/00
2/01
SEMIANNUAL REPORT
Declaration Trust
Equity V.A. Core Equity Fund
V.A. Relative Value Fund
V.A. Sovereign Investors Fund
- ------------------------------------------------------
Sector V.A. Financial Industries Fund
V.A. Technology Fund
- ------------------------------------------------------
Income V.A. Bond Fund
V.A. Money Market Fund
V.A. Strategic Income Fund
JUNE 30, 2001
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
Table of Contents
Page
1) CEO Corner 3
2) Portfolio Manager Commentary
These commentaries reflect the views of the portfolio managers or
portfolio management teams through the end of the period discussed in
this report. Of course, the managers' or team's views are subject to
change as market and other conditions warrant.
Equity
V.A. Core Equity Fund 4
V.A. Relative Value Fund 7
V.A. Sovereign Investors Fund 10
Sector
V.A. Financial Industries Fund 13
V.A. Technology Fund 16
Income
V.A. Bond Fund 19
V.A. Money Market Fund 22
V.A. Strategic Income Fund 24
3) Financial Statements 27
4) Notes to Financial Statements 63
TRUSTEES
Dennis S. Aronowitz*
Richard P. Chapman, Jr.
William J. Cosgrove*
John M. DeCiccio
Richard A. Farrell*
Maureen R. Ford
Gail D. Fosler
William F. Glavin
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
* Members of the Audit Committee
OFFICERS
Maureen R. Ford
Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Richard A. Brown
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Senior Vice President and Secretary
William H. King
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIANS
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
V.A. Bond Fund
V.A. Core Equity Fund
V.A. Financial Industries Fund
V.A. Relative Value Fund
V.A. Sovereign Investors Fund
V.A. Strategic Income Fund
V.A. Technology Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
V.A. Money Market Fund
TRANSFER AGENT
John Hancock Annuity Servicing Office
529 Main Street (X-4)
Charlestown, Massachusetts 02129
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUB-INVESTMENT ADVISERS
American Fund Advisors, Inc.
1415 Kellum Place
Garden City, New York 11530
V.A. Technology Fund
Independence Investment LLC
53 State Street
Boston, Massachusetts 02109
V.A. Core Equity Fund
ISSUER
John Hancock
Life Insurance Company
John Hancock Variable
Life Insurance Company*
200 Clarendon Street
Boston, Massachusetts 02117
*Not Licensed in New York
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Chairman and Chief Executive Officer,
flush right next to first paragraph.]
DEAR SHAREHOLDERS:
The U.S. stock market has had a rough beginning in 2001, as last year's
downward spiral continued due to growing concern over the slowing economy
and a parade of disappointing earnings announcements. The Standard & Poor's
500 Index, a leading benchmark of large-cap stocks, fell by 6.69% in the
first six months of the year. The Federal Reserve aggressively began to
attack the economic slowdown with interest-rate cuts totaling 2.75
percentage points between January and the end of June. By April, investors
began to believe the worst might be over, prompting a sharp stock rally
that month. Bonds wound up outperforming stocks overall.
Even with the spring upturn, the stock market remains indecisive, as
investors try to get a clearer sense of the timetable for economic and
corporate recovery. More than ever, this is a time to keep a long-term
investment perspective and check in with your investment professional to
ensure that your portfolio is adequately diversified.
In the midst of this year's market disappointments, one significant event
occurred that has positive short- and long-term implications for
investors. On June 7, President George W. Bush signed into law the most
sweeping tax-cut bill in two decades. The bill's first benefit comes this
summer in the form of a tax refund, ranging from $300 to $600, to almost
everyone who filed a 2000 tax return. Gradual cuts in taxes will follow
the rebate checks. For investors, the bill also provides a number of extra
incentives for retirement and college savings through changes to IRA and
401(k) plan contributions and enhancements to Education IRAs, among other
things.
The new tax law has a variety of provisions, many of which are phased in
over a number of years. We encourage you to consult with your investment
professional to determine how to take the best, and most timely, advantage
of the benefits it contains.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY PAUL MCMANUS FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
V.A. Core Equity Fund
Fed cuts interest rates aggressively amid further slowing of the economy
The first half of 2001 witnessed a pitched battle between two powerful
forces. On the one hand, prices were undermined -- especially in February
and March -- by continued economic slowing and the resulting damage to
corporate earnings prospects. On the other hand, the Federal Reserve Board
weighed in with six reductions in short-term interest rates since the
beginning of the year in an aggressive effort to head off a recession. Two
of the cuts -- on January 3 and April 18 -- came between regularly
scheduled meetings of the Fed's Open Market Committee. Both surprise moves
gave all of the popular market averages a notable boost. The Standard &
Poor's 500 Index reached an interim peak on May 22, five business days
after the May 15 reduction. From there the Index drifted irregularly lower
until the end of the period, consolidating its recent gains.
"With a few
exceptions,
the stocks
that detracted
most from
performance
were technology
and telecommunications
stocks..."
Although announcements of corporate layoffs continued unabated during the
period, unemployment rose only modestly, and consumers continued to spend
freely. Accounting for approximately two-thirds of total economic
activity, consumer spending is considered vital to keep the economy
growing at a healthy rate. Energy prices, while still high, eased somewhat
from their extreme levels in the fall of 2000. Overall, inflation remained
well under control, allowing the Fed free rein to trim rates as it saw
fit.
[Table at bottom left hand column entitled "Top Five Stock Holdings." The
first listing is General Electric 4.7%, the second is Microsoft 4.5%, the
third Citigroup 4.2%, the fourth Pfizer 3.3% and the fifth ExxonMobil 3.0%.
A note below the table reads "As a percentage of net assets on June 30,
2001."]
Performance review
Technology and telecommunications stocks continued to fare poorly,
reflecting sagging demand and overbuilding of the telecom infrastructure
during the past few years. Meanwhile, investors flocked to defensive
market sectors such as consumer staples, financial services and health
care, especially the services segment. Energy stocks also did well, buoyed
by continued strength in crude oil and natural gas prices. The Fund's
strategy of diversification and buying undervalued stocks of companies
with improving fundamentals worked well in this environment, enabling us
to add value with stock selection in a number of sectors while remaining
close to our benchmark index in sector weightings and risk profile.
For the six months ended June 30, 2001, John Hancock V.A. Core Equity Fund
had a return of -4.68% at net asset value. In comparison, the S&P 500
Index returned -6.69%, including reinvested dividends. The Fund's returns,
while negative, also compared favorably with the average variable annuity
large-cap core fund's -7.92%, according to Lipper, Inc. Longer-term
performance information can be found on page six.
Mega-cap winners
Microsoft topped the list of stocks that helped the Fund's performance,
bucking the overall downward trend in technology. The company was one of
the first to preannounce lower-than-expected earnings last fall, and
investors likewise anticipated an early recovery relative to other stocks
in the sector. Another positive influence was the news near the end of
June that a federal appeals court had overturned the U.S. District Court
ruling that Microsoft must be split into two separate companies for
antitrust reasons. The likelihood of a new generation of personal
computers within the next year or so, which would trigger upgrades to a
more advanced version of Microsoft's Windows operating system, added still
another reason for investors to like the stock.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 2% with -10% at the bottom and
0% at the top. The first bar represents the -4.68% total return for John
Hancock V.A. Core Equity Fund. The second bar represents the -7.92% total
return for Average variable annuity large-cap core fund. A note below the
chart reads "The total return for John Hancock V.A. Core Equity Fund is at
net asset value with all distributions reinvested. The average variable
annuity large-cap core fund is tracked by Lipper, Inc. See the following
page for historical performance information."]
AOL Time Warner also made a positive contribution to performance. The
company's management appeared to be doing a good job of bringing to
fruition the anticipated synergies from the recent mega-merger of America
Online and Time Warner -- in spite of lower income from advertising, which
constitutes a large percentage of the company's revenue base. Finally,
Chevron and ExxonMobil reflected the ongoing strength in energy prices.
Tech and drug losers
With a few exceptions, the stocks that detracted most from performance
were technology and telecommunications stocks in which the Fund had
market-weighted or underweighted positions. Included in this category were
Cisco Systems, EMC, Oracle Systems, Sun Microsystems, Radio Shack,
Corning, Comverse Technology and QUALCOMM. In the case of Qwest
Communications, the Fund was hurt by being overweighted compared with the
Index. However, we felt justified in taking this position because of
Qwest's solid management, strong fundamental outlook, and the potential
benefits of the company's recent merger with SBC Communications.
A number of drug companies -- among them Merck, Bristol-Myers Squibb,
Pfizer and Schering-Plough -- also detracted significantly from
performance. While some of the drug industry's problems were attributable
to currency fluctuations, we believe that most of the weakness in these
stocks was due to a temporary, but widespread, lull in the product
development and approval process.
"...the
economy is
still giving
off very
mixed
signals."
Looking ahead
We are as positive on the U.S. stock market as we have been for quite a
while. Valuations are much more reasonable, investors are more
value-conscious, and the Fed is aggressively easing monetary conditions.
Short-term interest rates are now approximately two full percentage points
below long-term rates, historically an extremely bullish backdrop for
stocks. Consumer spending, an important driver of economic activity,
should be aided by the retroactive tax cut recently passed by Congress.
Despite all of these positive factors, however, we must point out that the
economy is still giving off very mixed signals. Patience and the
discipline to stick with our methodology of seeking out undervalued stocks
of companies with improving fundamentals should provide useful guidance in
this uncertain environment.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (8/29/96)
------- ------- -------
Cumulative Total Returns (4.68%) (12.02%) 89.14%
Average Annual Total Returns -- (12.02%) 14.09%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Core Equity Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Index -- an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. Core Equity Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
Standard & Poor's 500 Index and is equal to $20,142 as of June 30, 2001.
The second line represents the value of the hypothetical $10,000 investment
made in the John Hancock V.A. Core Equity Fund on August 29, 1996 and is
equal to $18,914 as of June 30, 2001.
BY TIMOTHY E. QUINLISK, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
JAMES S. YU, CFA, AND R. SCOTT MAYO, CFA, PORTFOLIO MANAGERS
John Hancock
V.A. Relative Value Fund
Stock market volatility continues as economy remains weak
The first half of 2001 was not what investors had hoped. The Federal
Reserve significantly lowered short-term interest rates between January
and June, but the economy remained sluggish. Corporations with declining
revenues and earnings cut back on spending, triggering earnings
disappointments for many suppliers. Tough year-over-year earnings
comparisons caused further volatility in the market, especially during the
first quarter when stock prices fell sharply. The market appeared to reach
bottom early in the second quarter, gaining some ground as investors began
buying stocks that would benefit from an improved economy. Many stocks in
sectors like technology and telecommunications, however, continued to
plummet. The Standard & Poor's 500 Index returned a disappointing -6.69%
for the six months ended June 30, 2001.
[Table at bottom left hand column entitled "Top Five Stock Holdings." The
first listing is Agere Systems 5.8%, the second is Pegasus Communications
5.2%, the third Sprint 4.5%, the fourth Parametric Technology 4.4% and the
fifth AT&T Corp.-Liberty Media Group 4.3%. A note below the table reads "As
a percentage of net assets on June 30, 2001."]
Stock picker's market
The market's volatility and weak economic environment forced investors to
focus on fundamentals, such as sales and earnings, as well as valuations
(or stock prices relative to earnings growth). Many growth stocks in the
technology and telecom sectors suffered, while investors favored value
stocks in areas like natural resources, energy and finance. Across all
industries, however, stock selection -- choosing companies that could meet
their earnings targets -- was key. Lower stock prices made sense where
sales had fallen severely or balance sheets carried too much debt. But too
often problems at one company triggered indiscriminate selling throughout
the industry. This created unique opportunities to buy great businesses at
bargain prices.
"We found the
best values
in the
technology,
telecom
and media
sectors."
Strong Fund performance
The market's volatility allowed us to build the Fund's stakes in
top-quality businesses with the ability to grow and create value over a
long period. Our focus was on companies where there was a catalyst -- such
as a restructuring, new management or new product -- that would help
unlock the stock's intrinsic value. Strong stock selection resulted in
John Hancock V.A. Relative Value Fund returning 5.87% at net asset value,
during the six months ended June 30, 2001. By comparison, the average
variable annuity multi-cap value fund returned 0.94%, according to Lipper,
Inc. For historical performance information, please see page nine.
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A.
Relative Value Fund. Caption below reads "Timothy Quinlisk."]
Winners in technology and media
The Fund had above-average investments in technology and media, where
selected stocks rebounded nicely. Microsoft and Dell Computer rallied as
investors regained confidence in their ability to meet earnings forecasts,
prompting us to take profits. Computer Associates International, a
mainframe software developer, benefited from improved accounting practices
and strong demand related to IBM's new mainframe offering. And ANTEC,
which makes equipment that enables companies to deliver telephone services
over cable, rebounded following a questionable acquisition. Media
companies like AT&T's Liberty Media, Clear Channel Communications, USA
Networks, Viacom and XM Satellite Radio Holdings also were strong
contributors to performance as investors began recognizing the value of
their assets. But our biggest gains came from Cendant, a company with
hotel franchising and real estate operations. The stock made a huge
comeback as management addressed past accounting problems and exceeded
earnings expectations. As the stock reached our price target, we took
profits.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 2% with 0% at the bottom and 6%
at the top. The first bar represents the 5.87% total return for John
Hancock V.A. Relative Value Fund. The second bar represents the 0.94% total
return for Average variable annuity multi-cap value fund. A note below the
chart reads "The total return for John Hancock V.A. Relative Value Fund is
at net asset value with all distributions reinvested. The average variable
annuity multi-cap value fund is tracked by Lipper, Inc. See the following
page for historical performance information."]
"While the
economy
remains
sluggish,
there are many
indications
that it could
be at or near
the bottom."
Disappointments in telecom
The Fund also had a sizable stake in telecom-related companies, many of
which declined 50% or more during the period as telecom spending came to a
screeching halt. Among our biggest casualties were Conexant Systems, which
makes semiconductors used in broadband and wireless communications;
Corning, which supplies the fiber for fiber-optics networks; Vicor, which
makes power converters used in the cellular infrastructure; and Lucent
Technologies, which makes telecom equipment. Nextel Communications, a
wireless operator, also took a severe beating despite maintaining high
monthly subscriber revenues. In addition, software stocks like Wind River
Systems and Parametric Technology disappointed as companies deferred
technology spending. Satellite companies like Pegasus Communications and
Hughes Electronics suffered from uncertainties surrounding their possible
acquisition.
Buying opportunities
We found the best values in the technology, telecom and media sectors.
Among our new additions were Agere Systems, a leading supplier of
communications semiconductors and optical components that was recently
spun off by Lucent Technologies at a very attractive price, and Concord
Communications, a small software company. We added substantially to our
stake in Sprint, a leading provider of local and long- distance services.
And we bought Cumulus Media, a company that buys and manages small radio
stations in small- and mid-size markets. Finally, cheap health-care
valuations and solid growth prospects prompted us to increase our stake in
large pharmaceuticals like Schering-Plough, as well as smaller specialty
drug companies like Alpharma.
A look ahead
We believe both the economy and the stock market are poised for recovery.
While the economy remains sluggish, there are many indications that it
could be at or near the bottom. U.S. economic growth in 2001 will not be
as robust as it was in early 2000, but it should still be good, especially
as lower interest rates kick in. We're also optimistic about stocks. A lot
of companies announced in advance that they would miss their second
quarter earnings targets, which means the bad news is already reflected in
their stock prices. Stock prices should benefit as year-over-year earnings
comparisons become easier and as the economic outlook improves. At current
levels, the market offers attractive buying opportunities for relative
value stock pickers like us.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (1/6/98)
------- ------- -------
Cumulative Total Returns 5.87% (4.99%) 91.66%
Average Annual Total Returns -- (4.99%) 20.56%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Relative Value Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Index -- an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. Relative Value Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
value of the hypothetical $10,000 investment made in the John Hancock V.A.
Relative Value Fund on January 6, 1998 and is equal to $19,166 as of June
30, 2001. The second line represents the Standard & Poor's 500 Index and is
equal to $13,201 as of June 30, 2001.
BY JOHN F. SNYDER, III, PORTFOLIO MANAGEMENT TEAM LEADER, AND
BARRY H. EVANS, CFA, AND PETER M. SCHOFIELD, PORTFOLIO MANAGERS
John Hancock
V.A. Sovereign Investors Fund
Stock market stays in negative territory
The stock market's malaise extended into 2001. Under the pressure of
corporate cost-cutting and layoffs as well as a sagging U.S. economy,
stocks continued their treacherous decline in the first quarter of the
year. Once again, technology and telecommunications stocks were among the
sectors hardest hit by the market slump. Investors continued their
migration to safer havens -- those stocks with steady earnings growth,
even in a slower economy, and more reasonable valuations.
"Once again,
technology and
telecommunications
stocks were
among the
sectors hardest
hit by the
market slump."
After four straight quarters of tumbling prices, investors finally got
some relief when stocks staged a springtime rally. With the Federal
Reserve's fifth interest-rate cut, investors began to believe that the
worst might finally be over for the U.S. economy. Although stocks surged
on the news, most experts remained skeptical about whether the rally
signaled the start of a sustained market recovery. At the end of the
period, doubt still pervaded the market and many gun-shy investors
continued to take a cautious wait-and-see attitude. The result was a
negative return for the broad Standard & Poor's 500 Index, which lost
6.69% in the first six months of 2001.
[Table at bottom left hand column entitled "Top Five Stock Holdings." The
first listing is Citigroup 3.5%, the second is IBM 2.6%, the third Johnson
& Johnson 2.3%, the fourth Chevron 2.3% and the fifth BellSouth 2.2%. A
note below the table reads "As a percentage of net assets on June 30,
2001."]
Performance scorecard
For the six months ended June 30, 2001, John Hancock V.A. Sovereign
Investors Fund returned -5.70% at net asset value. By comparison, the
average variable annuity equity income fund returned -1.79%, according to
Lipper, Inc. See page 12 for historical performance information.
What put a damper on the Fund's relative performance was our focus on
high-quality growth financials. As interest rates fell in the first half
of the year, investors flocked to lower-quality regional banks with hopes
that an economic uptick would eventually improve their credit situations.
On the flip side, our high-quality growth financials -- including American
International Group, AFLAC and Citigroup -- languished.
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A.
Sovereign Investors Fund. Caption below reads "John Snyder."]
Several of our longtime holdings also had a negative impact on
performance. Consumer products company Kimberly-Clark dropped under the
pressure of rising material costs, an increasingly competitive environment
and a strong U.S. dollar that hurt profits overseas. Given its reasonable
valuation and strong product line-up, we're sticking with our position.
Advertising giant Interpublic Group fell prey to a weak economy and
difficulty digesting several large acquisitions, and we've cut back on our
position.
In this difficult environment, we were once again reminded how important
stock selectivity is. For example, thanks to its strong product cycle and
accelerating earnings, Baxter International turned in a strong
performance, despite the declining health-care sector. At a time when most
technology stocks were still reeling from tremendous losses, IBM jumped
more than 30%. This is a testament to its solid fundamentals -- diverse
product line, strong earnings and reasonable valuation. Finally, our
largest energy holdings -- Chevron and ExxonMobil -- rose sharply thanks
to higher oil prices, strong earnings and the perception of their being
safe havens in a stormy market.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 2% with -6% at the bottom and
0% at the top. The first bar represents the -5.70% total return for John
Hancock V.A. Sovereign Investors Fund. The second bar represents the -1.79%
total return for Average variable annuity equity income fund. A note below
the chart reads "The total return for John Hancock V.A. Sovereign Investors
Fund is at net asset value with all distributions reinvested. The average
variable annuity equity income fund is tracked by Lipper, Inc. See the
following page for historical performance information."]
Fine-tuning the portfolio
Our strong focus on stock selectivity has led us to make several
adjustments to the portfolio during the first half of the year. Once
again, the Fund's unwavering investment philosophy has always led us to
invest in high-quality companies with steady earnings growth and
reasonable valuations. Given that, we've continued to pare our retail
holdings such as Home Depot and Lowe's. Our concern is that valuations
have become extended and there's a risk of softer consumer spending as
corporate layoffs become more widespread. High valuations also led us to
take profits in several of our longtime health-care holdings such as
pharmaceutical giant Schering-Plough and medical device maker Medtronic.
We viewed the lackluster performance of high-quality financials as a
buying opportunity, since we believe that investors will eventually
recognize the outstanding growth potential of these stocks. As a result,
we've added a position in PNC Bank, which stands to benefit from an
increase in its fee-based business. We've also beefed up our position in
capital goods and basic materials stocks, believing they will perform
strongly when the economy recovers. Our emphasis here is on companies such
as Rohm and Haas, and Tyco International, both of which have successfully
weathered the recent downturn and are well positioned to leverage the
eventual upturn in the economy.
"...it's clear
that the
Federal Reserve
is committed to
preventing the
economy from
hitting a hard
landing."
A look ahead
In the midst of this difficult market, we do see some positive signs on
the horizon. With its six interest-rate cuts so far this year, it's clear
that the Federal Reserve is committed to preventing the economy from
hitting a hard landing. We're also starting to see rates come down
overseas, which can only be positive for the United States. Probably the
most important factor is that inflation remains well under control,
despite the recent rate cuts and the surge in energy prices.
Does this mean the worst is over? Now more than ever, investors are
questioning when the stock market and the economy will turn the corner.
Since no one knows, we're not putting our efforts into trying to time the
turnaround, but rather we're maintaining our steadfast focus on
high-quality stocks with strong growth potential and reasonable
valuations.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (8/29/96)
------- ------- -------
Cumulative Total Returns (5.70%) (1.59%) 58.65%
Average Annual Total Returns -- (1.59%) 10.02%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Sovereign Investors Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. Sovereign Investors Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
Standard & Poor's 500 Index and is equal to $20,142 as of June 30, 2001.
The second line represents the value of the hypothetical $10,000 investment
made in the John Hancock V.A. Sovereign Investors Fund on August 29, 1996
and is equal to $15,865 as of June 30, 2001.
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
THOMAS M. FINUCANE AND THOMAS C. GOGGINS, PORTFOLIO MANAGERS
John Hancock
V.A. Financial Industries Fund
Financial stocks outperform the volatile stock market
It was a difficult six months for the stock market, which lost ground and
was fraught with heightened volatility. An economy that slowed
precipitously and a barrage of corporate earnings disappointments turned
investors into bears, especially in the first quarter. In response to the
sagging economy, the Federal Reserve began cutting interest rates. Between
January and the end of June, it lowered the federal funds rate that banks
charge each other for overnight loans by 2.75 percentage points in a bid
to avoid a recession. Financial stocks held up better than the market as a
whole, although the sector had its decided winners and losers. With the
market growing increasingly dicey, financial companies connected to the
stock market, like asset managers and brokerage houses, suffered, as did
those whose stocks had run up the most by late last year. In a reversal of
last year's fortunes, the smaller banks and those most sensitive to
interest-rate moves made a comeback. For the six months ended June 30,
2001, the Standard & Poor's Financial Index returned -2.52%, while the
Standard & Poor's 500 Index returned -6.69%.
[Table at bottom left hand column entitled "Top Five Stock Holdings." The
first listing is Fifth Third Bancorp 4.2%, the second is American
International Group 4.0%, the third Citigroup 4.0%, the fourth AFLAC 3.8%
and the fifth General Electric 3.7%. A note below the table reads "As a
percentage of net assets on June 30, 2001."]
Fund performance
For the six months ended June 30, 2001, John Hancock V.A. Financial
Industries Fund posted a total return -9.54% at net asset value. That
compared with the 0.54% return of the average open-end financial services
fund and the -14.72% return of the average variable annuity
specialty/miscellaneous fund, according to Lipper, Inc. See page 15 for
historical performance information.
"We also moved
to boost our
stake in U.S.
banks..."
Brokers, asset managers struggle
Our overweighting in the brokerage firms and asset managers, which helped
us significantly outperform our peers last year, accounted for our
relative performance lag so far this year. That included brokerage and
investment banking firms Charles Schwab, Merrill Lynch and Morgan Stanley,
whose fundamentals deteriorated as trading, IPO and merger activity slowed
in the negative market environment. Marsh McLennan, with its Putnam
asset-manager subsidiary, and American Express were similarly affected.
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A.
Financial Industries Fund. Caption below reads "Jim Schmidt."]
While we moved to cut our stake in these market-sensitive stocks, we did
not do so aggressively enough. But we believe the securities business is
close to a bottom, and will begin to look better later this year as the
economy stabilizes with lower rates.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 5% with -15% at the bottom and
10% at the top. The first bar represents the -9.54% total return for John
Hancock V.A. Financial Industries Fund. The second bar represents the 0.54%
total return for Average open-end financial services fund. The third bar
represents the -14.72% total return for Average variable annuity
specialty/miscellaneous fund. A note below the chart reads "The total
return for John Hancock V.A. Financial Industries Fund is at net asset
value with all distributions reinvested. The average open-end financial
services fund and variable annuity specialty/miscellaneous fund are tracked
by Lipper, Inc. See the following page for historical performance
information."]
Insurance
Several of our larger insurance company stocks that had been our best
performers last year also sold off, not because of any fundamental
changes, but simply because their valuations, as measured by
price-earnings ratios, had become too high for value-conscious investors.
Two examples were American International Group (AIG) and AFLAC. Furthering
the consolidation trend among life insurers, AIG made a successful bid for
American General during the period.
We continued to shift our insurance assets from life insurance companies
to property and casualty companies, since the pricing environment is
improving for property and casualty names like Allstate. Life insurance
companies, on the other hand, face some challenges the property and
casualty companies don't. These include stock-market and economic
sensitivity, a rash of new demutualization offerings that have put
pressure on stock prices, and the potential passage of estate-tax reform
legislation that could dampen variable life sales.
"...we expect
the U.S.
economy to
avoid a
recession and
produce modest
growth for the
rest of 2001."
Banks, finance companies boosted
We also moved to boost our stake in U.S. banks, since we had previously
been significantly underweighted there and anticipated that falling rates
would lift the stocks. We increased our exposure to the more interest-rate
sensitive, less expensive, banks, and they did well, including
FleetBoston. On the other hand, our emphasis on trust banks with less
interest-rate sensitivity, like State Street and Northern Trust Company,
held us back this period after serving us so well last year. Like some of
our premium insurance names, their higher valuations put them out of
investor favor.
Our effort to increase the Fund's exposure to stocks sensitive to falling
interest rates also prompted us to take larger positions in Fannie Mae and
Household International. They were both near the top of our performance
chart as loan and mortgage activity picked up. Toward the end of the
period, we also bought General Electric at an attractive price so that we
could tap into its subsidiary General Electric Credit Corp., a
well-managed company that provides a range of financial services including
consumer and commercial lending and life insurance.
REITs, foreign holdings cut
We upped our bank and finance company stakes by taking profits and nearly
eliminating our position in real estate investment trusts after their
strong runup last year. We also cut our foreign holdings and shifted our
emphasis there to asset managers such as Amvescap. They stand to benefit
most from the move in Europe to privatize pension funding.
Outlook
Although the Fed's aggressive stance to stabilize the economy appears to
be winding down, its efforts should begin to have a positive effect later
this year, and we expect the U.S. economy to avoid a recession and produce
modest growth for the rest of 2001. Once investors become more confident
in this scenario, we anticipate a pickup in trading, underwriting and
merger activity. This bodes well for all financial services stocks,
including the banks with exposure to market-related revenues, and we
believe the Fund is poised to benefit from the upturn.
- -----------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (4/30/97)
------- ------- -------
Cumulative Total Returns (9.54%) 8.78% 70.72%
Average Annual Total Returns -- 8.78% 13.70%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Financial Industries Fund would be worth, assuming all distributions
were reinvested for the period indicated. For comparison, we've shown the
same $10,000 investment in the Standard & Poor's 500 Index -- an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. Financial Industries Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
value of the hypothetical $10,000 investment made in the John Hancock V.A.
Financial Industries Fund on April 30, 1997 and is equal to $17,072 as of
June 30, 2001. The second line represents the Standard & Poor's 500 Index
and is equal to $16,178 as of June 30, 2001.
BY BARRY GORDON, MARC H. KLEE, CFA, AND ALAN LOEWENSTEIN, CFA,
PORTFOLIO MANAGERS
John Hancock
V.A. Technology Fund
Tech stocks suffer first quarter 2001 decline as economy weakens
Technology stocks declined sharply in the first three months of 2001,
although a spring rally helped erase some of those losses. In the
beginning of the year, technology stocks suffered steep losses as economic
growth slowed to a near crawl, leading corporations to dramatically
curtail their technology spending. This reminded investors that the tech
sector is a cyclical group whose fortunes are closely linked to the
economy's ups and downs. Consequently, tech companies were forced to lower
earnings and revenue expectations, causing the technology-dominated Nasdaq
Composite Index to shed more than 25% in the first quarter of 2001.
"Despite the
spring
rebound, most
tech stocks --
like the
Nasdaq -- ended
the period
with sizable
losses..."
In early April, however, the tide began to turn in favor of technology
stocks. Shrugging off signs that the economy remained weak, investors
became increasingly optimistic that the worst of the economic and stock
price deterioration was behind them, fueling hopes for a recovery. That
renewed enthusiasm was due in no small part to economically stimulative
moves by the Federal Reserve, which cut interest rates six times totaling
2.75 percentage points in the first half of the year. That helped tech
stocks rack up decent gains in April, with the Nasdaq posting a gain of
15% in the month of April alone. But the group remained volatile through
the end of June and the Nasdaq was still in negative territory through
June, losing 13% in the first six months of 2001.
[Table at bottom left hand column entitled "Top Five Stock Holdings."
The first listing is AOL Time Warner 4.0%, the second is Micron
Technology 3.4%, the third KLA-Tencor 3.4%, the fourth Applied Materials
3.0% and the fifth Mercury Interactive 2.9%. A note below the table reads
"As a percentage of net assets on June 30, 2001."]
Fund performance
For the six-month period ended June 30, 2001, John Hancock V.A. Technology
Fund posted a total return of -28.10% at net asset value, compared with
the -25.86% return of the average open-end science and technology fund and
the -14.72% return of the average variable annuity specialty/miscellaneous
fund, according to Lipper, Inc. See page 18 for historical performance
information.
[A 3" x 2" photo at bottom right side of page of John Hancock V.A. Technology
Fund. Caption below reads "Fund management team members (l-r): Barry Gordon,
Marc Klee and Alan Loewenstein."]
Leaders and laggards
Despite the spring rebound, most tech stocks -- like the Nasdaq -- ended
the period with sizable losses, most of which were sustained in the first
quarter. Among the few holdings that posted gains were semiconductor and
related companies KLA-Tencor, Applied Materials, Micron Technology and
Cypress Semiconductor. They bounced back this spring when global investors
started to adjust their portfolios toward cyclical and growth-oriented
stocks. Investors also reasoned that semiconductor stocks might be the
first to take off in a rally, just as they were the first to go down in
the sell-off. Some Internet-related stocks staged a bit of a comeback,
with AOL Time Warner advancing after the merger between the leading
Internet service provider and the media giant was approved. Amazon.com,
the world's largest online retailer, also posted strong returns thanks to
smaller-than-expected losses and the company's prediction that it will
pull into the black by year end. Microsoft's stock price surged more than
50% during the period, thanks in large part to its better-than-expected
quarterly earnings announced in mid-April, driven by strong sales of its
Windows 2000 product.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 10% with -30% at the bottom and
0% at the top. The first bar represents the -28.10% total return for John
Hancock V.A. Technology Fund. The second bar represents the -25.86% total
return for Average open-end science and technology fund. The third bar
represents the -14.72% total return for Average variable annuity
specialty/miscellaneous fund. A note below the chart reads "The total
return for John Hancock V.A. Technology Fund is at net asset value with all
distributions reinvested. The average open-end science and technology fund
and variable annuity specialty/miscellaneous fund are tracked by Lipper,
Inc. See the following page for historical performance information."]
On the flip side were the vast majority of tech stocks that posted sizable
losses. Among the biggest detractors from the Fund's performance were
storage companies EMC and Network Appliance. Last year, businesses had to
pay top dollar to warehouse the reams of data they generated. Even as the
rest of the tech sector suffered a slowdown, storage companies seemed
immune. But the sinking reality of the economy's slowdown began to take
its toll, and competition among storage vendors ratcheted up. Another
major detractor was Cisco Systems, the leading supplier of data networking
products to business. Its stock held up relatively well during most of
2000, but got hit hard in the first quarter of 2001 as the company's
growth rates dropped from 50% to 60% per year to showing year-over-year
declines. Computer software and service stocks also were hard hit.
Although many software projects remain under way, a growing number of
corporations have re-evaluated their spending at this time because of
economic conditions. Software companies i2 Technologies, BEA Systems and
Mercury Interactive all saw their stock prices at least halved during the
period. Despite these disappointing results, we continue to believe that
these stocks offer well-above-average growth prospects.
"...technology
stocks as a
whole are
reasonably
valued, with
excellent
growth
prospects."
The stock prices of communications equipment companies, including Corning
and JDS Uniphase, also posted sharp declines as many of their customers --
the telecommunications carriers -- faced problems. Without the necessary
capital, the carriers were forced to curtail spending to build out their
networks. Furthermore, the communications equipment industry's inability
to anticipate demand caused large inventory buildups that need to be
worked down.
Outlook
We're optimistic about the prospects for technology stocks. Despite the
April rally, technology stocks as a whole are reasonably valued, with
excellent growth prospects. Given the increasing reliance on technology by
consumers and corporations, our view is that five-year growth rates for
the tech sector will be higher than those of the broad S&P 500 Index. We
believe this is an attractive time to buy technology stocks, which
historically do well in a declining interest-rate environment. Finally, we
believe better economic growth later this year should spur technology
spending and provide a boost for the group.
- -----------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (5/1/00)
------- ------- -------
Cumulative Total Returns (28.10%) (52.22%) (47.20%)
Average Annual Total Returns -- (52.22%) (42.22%)
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Technology Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Index -- an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. Technology Fund, representing
the growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are two lines. The first line represents the Standard &
Poor's 500 Index and is equal to $8,549 as of June 30, 2001. The second
line represents the value of the hypothetical $10,000 investment made in
the John Hancock V.A. Technology Fund on May 1, 2000 and is equal to $5,280
as of June 30, 2001.
BY JAMES K. HO, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
BENJAMIN A. MATTHEWS, PORTFOLIO MANAGER
John Hancock
V.A. Bond Fund
Bonds outperform stocks in volatile market; slowing economy
increases individual credit disappointments
During the six months ended June 30, 2001, the broad fixed-income market
was helped by the Federal Reserve's rate-cutting efforts aimed at
preventing the economy from slipping into a recession, although the
widespread deterioration in corporate profits created somewhat of a
minefield. Many companies, particularly technology-related firms, found it
increasingly difficult to service the debt on their books. Throughout the
first half, we maintained the Fund's focus on individual, in-depth credit
research. Doing so enabled the Fund to participate in the positive events
taking place, while sidestepping many of the securities experiencing an
implosion of their creditworthiness.
Fund performance
For the six months ended June 30, 2001, John Hancock V.A. Bond Fund
produced a total return of 2.78% at net asset value. This compares with
the 3.10% return of the average variable annuity corporate debt A-rated
fund, according to Lipper, Inc. For historical performance information,
please turn to page 21.
[Table at bottom left hand column entitled "Top Five Sectors." The
first listing is U.S. Agencies 30%, the second is U.S. Government 28%, the
third Telecommunications 4%, the fourth Utilities 4% and the fifth Finance
4%. A note below the table reads "As a percentage of net assets on June 30,
2001."]
Credit spreads narrow
Since January, a greater-than-anticipated slowing of the economy has
assaulted the financial markets. To head off a recession, the Federal
Reserve Board got aggressive and cut short-term interest rates six times
during the period, totaling 2.75 percentage points. The federal funds rate
- -- the rate that banks charge each other for overnight loans -- stood at
3.75% on June 30, down from 6.50% on December 31, 2000. The Fed's
concerted efforts to inject liquidity into the markets and make it easier
for corporations to raise capital enabled credit spreads to contract. A
"spread" is the difference in yield between bonds of varying credit
quality. Bonds offering attractive risk premiums enjoyed renewed investor
interest as a result. These included investment-grade and high-yield
corporate issues, emerging-market bonds and government agency securities
such as mortgage-backed issues.
"Where and when
we could, we
added to or
initiated
positions in
corporate
bonds,
particularly
investment-grade
issues..."
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A. Bond
Fund. Caption below reads "James Ho."]
Throughout the period, we carefully bolstered the portfolio's stake in the
so-called spread products. We primarily targeted mortgage-backed issues,
such as Ginnie Mae and Fannie Mae to pursue the higher-yields and
participate in the narrowing of credit spreads.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 1% with 0% at the bottom and 4%
at the top. The first bar represents the 2.78% total return for John
Hancock V.A. Bond Fund. The second bar represents the 3.10% total return
for Average variable annuity corporate debt A-rated fund. A note below the
chart reads "The total return for John Hancock V.A. Bond Fund is at net
asset value with all distributions reinvested. The average variable annuity
corporate debt A-rated fund is tracked by Lipper, Inc. See the following
page for historical performance information."]
Corporate bond exposure increases selectively
Where and when we could, we added to or initiated positions in corporate
bonds, particularly investment-grade issues, but we also targeted select
high-yield securities. For the most part, our focus was economically
sensitive companies that we believe are well positioned to benefit first
from what we anticipate will be an eventual economic rebound. These
include such names as Northwest Airlines, Delphi Auto Systems, Newmont
Mining, Phelps Dodge, Georgia Pacific, AOL Time Warner, Viacom and Bank
One Corporation. We also slightly increased the Fund's weighting in
foreign bonds, purchasing Deutsche Telekom, France Telecom, Brazil
C-bonds, Colombia sovereign debt and BBVA Bancomer, a Mexican corporate
bond that we sold for profits by period's end.
"The Fed has
certainly
demonstrated
its commitment
to
jump-starting
an economic
recovery..."
We also maintained fair representation in recession-resistant industries
such as defense, utilities, health care, media and energy. Noteworthy
performers in this area include BellSouth, Qwest Communications, Progress
Energy, HEALTHSOUTH and Cox Communications.
Yield curve steepens throughout the period
With each interest-rate cut, U.S. Treasury bonds rallied. The shorter end
of the yield curve experienced the most price appreciation and the yield
curve finally returned to its historic steep slope. The Fund's Treasury
positions were laddered in varying maturities, all of which contributed to
performance throughout the period.
As 2001 began, our duration was relatively neutral, as we wanted to wait
and see how the interest-rate drama would unfold. Because duration
mathematically measures a Fund's sensitivity to interest rate changes,
actively managing it provides us with an additional means with which to
pursue performance. The surprising rapidity of the Fed's initial rate
reductions -- and the bond market's substantial response -- led us to
believe that investors had fully discounted further rate cuts. It appeared
long-term rates would not have much more room to fall. Looking beyond the
current environment as we often do, we slightly shortened the portfolio's
relative duration to position it for what we believed would be the next
turn in the road: a flattening of the yield curve. In hindsight, it seems
our move was a bit premature, as evidence of a protracted economic
slowdown -- and thus the need for additional financial stimulus --
continued to mount. The yield curve continued to steepen as the period
progressed.
Outlook
Our outlook for bonds is, for the most part, upbeat. The Fed has certainly
demonstrated its commitment to jump-starting an economic recovery and
there is no reason to believe it will fail to continue reducing short-term
rates if that is what the economy mandates. Furthermore, the current
scenario is not unlike that which preceded the dramatic corporate bond
rally between 1992 and 1996, with one exception: current credit spreads
are presently wider than they were back then, presenting discerning
investors with some attractive investment opportunities. Selectivity and
knowing what issues to buy and sell will be what separates those who
profit from those who do not.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (8/29/96)
------- ------- -------
Cumulative Total Returns 2.78% 10.38% 42.89%
Average Annual Total Returns -- 10.38% 7.66%
YIELD
For the period ended June 30, 2001
SEC 30-DAY
YIELD
-------
John Hancock V.A. Bond Fund 5.70%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Bond Fund would be worth, assuming all distributions were reinvested
for the period indicated. For comparison, we've shown the same $10,000
investment in the Lehman Brothers Corporate Bond Index -- an unmanaged
index that mirrors the investment objectives and characteristics of the
Fund. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. Bond Fund, representing the
growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are two lines. The first line represents the value of the
hypothetical $10,000 investment made in the John Hancock V.A. Bond Fund on
August 29, 1996 and is equal to $14,290 as of June 30, 2001. The second
line represents the Lehman Brothers Corporate Bond Index and is equal to
$14,149 as of June 30, 2001.
BY DAWN M. BAILLIE FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
V.A. Money Market Fund
Federal Reserve cuts interest rates six times to bolster the
lagging economy; money market yields fell in tandem
Money market yields fell in the first six months of 2001, as the Federal
Reserve embarked on an aggressive program to cut short-term interest rates
to prevent the economy from slipping into recession. With the economy
slowing precipitously, the Fed stepped in beginning in January, cutting
the federal funds rate by half a percentage point in a surprise move
between its regularly scheduled meetings. The effects of the slowing
economy began to show up in earnest in the form of corporate earnings
disappointments, sending the stock market reeling. The Fed cut rates five
more times through the end of June, sending the federal funds rate that
banks charge each other for overnight loans from 6.50% at the start of the
year to 3.75% by the end of June -- the lowest level in more than seven
years. The first five cuts were for a half a percentage point each, and
the last one in June was for one-quarter percentage point, an indication
that the Fed could be winding down its rate-cut, or easing, cycle. Money
market yields fell in this period, since the federal funds rate is also a
key pricing benchmark for money market securities.
"...we began to
lengthen the
Fund's average
maturity to
lock in
higher-yielding
securities for
a longer time
in the face of
falling rates."
7-day effective yield
On June 30, 2001, John Hancock V.A. Money Market Fund had a 7-day
effective yield of 3.67%. By comparison, the average taxable money market
fund had a 7-day effective yield of 3.38%, according to Lipper, Inc.
Lengthening maturity
As it became evident from the start of 2001 that the Fed, with its
concerns about a too-slow economy, would continue to cut rates, we began
to lengthen the Fund's average maturity to lock in higher-yielding
securities for a longer time in the face of falling rates. Although the
Fed clearly remained on its easing path, we did not extend the Fund's
maturity beyond our peers' average. As is typically the case during an
economic downturn, there are increased concerns about corporate defaults
and credit downgrades, so money market funds typically scale back their
exposure to longer-dated credits. In fact, we paid particular attention to
buying and holding only the highest-quality top-tier securities.
[A 1 1/2" x 2" photo at bottom middle of page of John Hancock V.A. Money
Market Fund. Caption below reads "Dawn Baillie."]
Uncertainty ahead
The Fed appears to be slowing down, or even nearing the end of, its
rate-cut cycle, as it waits to see the full impact of the steps it has
already taken this year. But it has maintained its easing bias and not yet
declared victory in its efforts to avert a recession, instead indicating
it still has concerns about the economy's ongoing weakness. The Fed's
stance will undoubtedly remain the same until there are clearer signs of
an upturn in both the U.S. and global economies, where a slowdown has
weighed on the U.S. economy. Other key elements to watch for are a rebound
in corporate earnings growth and corporate capital spending, which has
ground almost to a halt. In this uncertain environment, we'll keep the
Fund's maturity in line with, if not slightly shorter than, our peers,
until we have a clearer sense of the economy's health. As always, we will
also continue to focus on providing the Fund with a competitive yield and
on preserving stability of principal.
[Bar chart at the top of left hand column with heading "7-Day Effective
Yield." Under the heading is a note that reads "As of June 30, 2001." The
chart is scaled in increments of 1% with 0% at the bottom and 4% at the
top. The first bar represents the 3.67% total return for John Hancock V.A.
Money Market Fund. The second bar represents the 3.38% total return for
Average taxable money-market fund. A note below the chart reads "The
average taxable money-market fund is tracked by Lipper, Inc. Past
performance is no guarantee of future results."]
"The Fed
appears to be
slowing down,
or even nearing
the end of, its
rate-cut
cycle..."
The Fund is neither insured nor guaranteed by the U.S. government.
Although the Fund seeks to maintain a net asset value of $1.00 per share,
it is possible to lose money by investing in the Fund.
BY FREDERICK L. CAVANAUGH, JR., MANAGEMENT TEAM LEADER, AND
ARTHUR N. CALAVRITINOS, CFA, JANET L. CLAY, CFA, AND DANIEL S. JANIS,
PORTFOLIO MANAGERS
John Hancock
V.A. Strategic Income Fund
Falling interest rates lift U.S. bonds, as U.S. economy slows
The first six months of 2001 marked a significant shift for the global
bond markets. U.S. Treasuries had posted significant gains in 2000, as
investors began to anticipate that the Federal Reserve Board would cut
interest rates in response to slowing economic conditions. Although the
Fed cut rates six times for a total of 2.75 percentage points in the first
six months of 2001, U.S. Treasury securities posted mixed results in the
period. Short- and intermediate-term Treasury securities continued to
perform well in tandem with those rate cuts, with their yields falling and
their prices rising. Ironically, long-term Treasury bond yields and prices
were stalled throughout much of this spring as investors worried that the
Fed may have risked re-igniting inflationary pressures with its dramatic
rate cuts.
"Recognizing
that U.S.
Treasury
securities had
enjoyed a nice
run, we
reduced our
stake in
them."
In contrast, some high-yield bonds perked up a bit this year, after
posting significant losses in 2000. The catalyst for their better
performance was growing confidence that rate cuts would translate into
improved economic conditions and stronger corporate performance.
Furthermore, investors increasingly moved toward high-yield bonds in
search of cheap valuations and higher yields. But the somewhat better
performance of the broad high-yield sector masked continued disappointing
losses among telecommunications bonds, which have been depressed for more
than a year.
[Table at bottom left hand column entitled "Top Five Sectors." The first
listing is U.S. Government 39%, the second is Foreign Government 25%, the
third Telecommunications 6%, the fourth Media 5% and the fifth Oil & Gas
3%. A note below the table reads "As a percentage of net assets on June 30,
2001."]
In the foreign markets, performance was, as always, mixed. European bonds
languished, primarily because the European Central Bank, citing decent
economic growth on that continent, held interest rates steady.
Emerging-market bonds, however, posted good performances as conditions in
their markets generally improved, and Canadian bonds continued to benefit
from relatively low and stable inflation. Japanese bonds didn't attract
much attention throughout the year, due to the fact that their yields
remained substantially lower than in other parts of the world.
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A.
Strategic Income Fund. Caption below reads "Fred Cavanaugh."]
Fund performance
For the six months ended June 30, 2001, John Hancock V.A. Strategic Income
Fund posted a total return of 1.79% at net asset value. This compared with
the 1.70% return of the average variable annuity general bond fund,
according to Lipper, Inc. Historical performance information can be found
on page 26.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 1% with 0% at the bottom and 2%
at the top. The first bar represents the 1.79% total return for John
Hancock V.A. Strategic Income Fund. The second bar represents the 1.70%
total return for Average variable annuity general bond fund. A note below
the chart reads "The total return for John Hancock V.A. Strategic Income
Fund is at net asset value with all distributions reinvested. The average
variable annuity general bond fund is tracked by Lipper, Inc. See the
following page for historical performance information."]
Turning from defensive to opportunistic
Throughout much of 2000, we maintained a relatively defensive posture, but
by January 2001, we began to take on a more opportunistic approach.
Recognizing that U.S. Treasury securities had enjoyed a nice run, we
reduced our stake in them. At the same time, we increased our holdings in
emerging-market bonds. Not only were many dollar-denominated
emerging-market bonds attractively valued, but they also were benefiting
from some fundamental improvements, such as rising economic growth,
declining interest rates, falling inflation and improving trade balances.
Our increased exposure to government bonds issued by Mexico, Russia and
Peru generally helped performance. Fortunately, we did not own any
Argentinean bonds, which performed poorly as that country struggled with a
weak economy and high levels of debt.
The rest of the world
Apart from emerging-market bonds, few foreign markets offered attractive
value by our assessment. Because European bond yields remained below those
offered by U.S. Treasuries, and the European Central Bank refused to lower
interest rates, European bonds offered little upside potential for
investors. Most Asian bonds also were decidedly unattractive, offering
yields far lower than those found in the U.S. and emerging markets.
Canada, however, offered an attractive combination of high quality and
competitive yields.
High-yield winners and losers
Despite the choppy market, some of our high-yield holdings performed well.
Coal producer AEI Resources benefited from stronger demand for that fuel,
as well as a restructuring of its business. Columbia's Comunicacion
Cellular was buoyed by strong interest in the country's bonds. Canada's
MetroNet Communications was lifted by last year's merger with AT&T Canada.
The telecommunications sector continued to be plagued by doubts during the
past six months and handed us some of our biggest disappointments. Two-way
messaging company Metro Call filed for bankruptcy protection, while
fiber-optic company NorthEast Optic Network was hurt by weaker pricing in
its key markets. Finally, video-on-demand company DIVA Systems struggled
against slower-than-expected demand for its products and its failure to
complete a planned IPO.
"In our view,
the Federal
Reserve still
has some work
to do..."
Outlook
In our view, the Federal Reserve still has some work to do since the U.S.
economy continues to struggle. Overseas, Europe already is showing some
signs of weakening and Japan stands again at the brink of a recession, if
it hasn't already entered one. That's why we believe the Fed will remain
accommodative, perhaps cutting interest rates another three-quarters of a
percentage point from current levels. With that backdrop in mind, we
believe that emerging-market bonds will continue to perform well as
investors seek out higher yields and position themselves to benefit from
the fundamental economic and policy changes that are helping to improve
conditions in many countries. We'll also keep our eyes out for
attractively valued high-yield bonds. So far this year, a lack of
liquidity and other market-driven factors have limited our high-yield
purchases. If liquidity returns, we will look to expand our high-yield
allocation.
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting. See the prospectus for the risks of investing in high-yield
bonds.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (8/29/96)
------- ------- -------
Cumulative Total Returns 1.79% 1.95% 35.07%
Average Annual Total Returns -- 1.95% 6.41%
YIELD
For the period ended June 30, 2001
SEC 30-DAY
YIELD
-------
John Hancock V.A. Strategic
Income Fund 7.14%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Strategic Income Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Lehman Brothers Government/Credit Bond Index --
an unmanaged index that measures the performance of U.S. government bonds,
U.S. corporate bonds and Yankee bonds. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. Strategic Income Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
Lehman Brothers Government/Credit Bond Index and is equal to $14,278 as of
June 30, 2001. The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. Strategic Income Fund on
August 29, 1996 and is equal to $13,508 as of June 30, 2001.
FINANCIAL STATEMENTS
John Hancock Funds - Declaration Trust
Statements of Assets and Liabilities
June 30, 2001 (Unaudited)
- ---------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
CORE RELATIVE SOVEREIGN FINANCIAL
EQUITY VALUE INVESTORS INDUSTRIES
FUND FUND FUND FUND
----------- ----------- ----------- -----------
Assets:
Investments at value (cost -
$36,203,706, $53,741,513,
$57,496,454 and $68,696,240,
respectively) $40,984,082 $48,517,103 $61,866,211 $76,588,973
Joint repurchase agreements (cost -
$558,000, $2,863,000, $6,474,000
and $5,059,000, respectively) 558,000 2,863,000 6,474,000 5,059,000
----------- ----------- ----------- -----------
41,542,082 51,380,103 68,340,211 81,647,973
Cash 345 661 738 793
Receivable for investments sold 21,871 -- -- 44,308
Receivable for shares sold -- 605,015 -- 265,908
Dividends and interest receivable 41,627 29,903 194,185 93,093
Deferred organization expenses 360 -- 360 --
Other assets 594 353 710 5,889
----------- ----------- ----------- -----------
Total assets 41,606,879 52,016,035 68,536,204 82,057,964
- ---------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 305,411 -- -- --
Payable for shares repurchased 120,067 -- 19,636 --
Payable to affiliates 24,621 22,921 35,307 53,787
Accounts payable and accrued
expenses 20,788 6,303 13,432 14,582
----------- ----------- ----------- -----------
Total liabilities 470,887 29,224 68,375 68,369
- ---------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 40,153,629 52,889,850 67,695,696 73,522,524
Accumulated net realized gain
(loss) on investments and foreign
currency transactions (3,800,675) 4,322,497 (3,584,573) 340,035
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currencies. 4,780,376 (5,224,410) 4,369,757 7,892,324
Undistributed (distributions in
excess of) net investment income 2,662 (1,126) (13,051) 234,712
----------- ----------- ----------- -----------
Net assets $41,135,992 $51,986,811 $68,467,829 $81,989,595
===================================================================================================
Net Asset Value Per Share:
(Based on 2,469,310, 4,622,886,
4,664,964, and 4,941,476 shares,
respectively, of beneficial
interest outstanding - unlimited
number of shares authorized with
no par value) $16.66 $11.25 $14.68 $16.59
===================================================================================================
The Statement of Assets and Liabilities is each Fund's balance sheet and shows the value of
what the Fund owns, is due and owes on June 30, 2001. You'll also find the net asset value
per share as of that date.
See notes to financial statements.
Statements of Assets and Liabilities (continued)
June 30, 2001 (Unaudited)
- ---------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
TECHNOLOGY BOND MONEY MARKET STRATEGIC
FUND FUND FUND INCOME FUND
----------- ----------- ----------- -----------
Assets:
Investments at value (cost -
$26,597,872, $63,029,448,
$124,243,085 and $48,106,465,
respectively) $19,378,231 $63,141,671 $124,243,085 $45,878,321
Joint repurchase agreements (cost -
$2,658,000, $6,265,000,
$19,099,000 and $12,252,000,
respectively) 2,658,000 6,265,000 19,099,000 12,252,000
----------- ----------- ----------- -----------
22,036,231 69,406,671 143,342,085 58,130,321
Cash 270 935 508 831
Receivable for investments sold 6,300 1,400,073 -- 577,828
Receivable for shares sold 183,531 28,993 -- 371,520
Dividends and interest receivable 1,218 911,363 244,121 1,255,406
Receivable for forward foreign
currency exchange contracts sold -- -- -- 23,060
Deferred organization expenses -- 360 360 360
Other assets -- 227 3,037 1,548
----------- ----------- ----------- -----------
Total assets 22,227,550 71,748,622 143,590,111 60,360,874
- ---------------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 605,978 3,983,931 -- 7,457,921
Payable for shares repurchased 760 9,723 -- 9,288
Dividends payable -- 22,275 28,204 23,677
Payable for forward foreign
currency exchange contracts
purchased -- -- -- 7,045
Payable to affiliates 13,367 28,158 60,892 24,642
Accounts payable and accrued
expenses 26,164 12,674 6,173 2,091
----------- ----------- ----------- -----------
Total liabilities 646,269 4,056,761 95,269 7,524,664
- ---------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 30,789,537 67,763,216 143,494,649 57,331,052
Accumulated net realized loss on
investments and foreign currency
transactions (1,972,282) (117,077) -- (1,624,165)
Net unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currencies. (7,219,642) 112,223 -- (2,222,895)
Undistributed net investment income
(accumulated net investment loss) (16,332) (66,501) 193 (647,782)
----------- ----------- ----------- -----------
Net assets $21,581,281 $67,691,861 $143,494,842 $52,836,210
===================================================================================================
Net Asset Value Per Share:
(Based on 4,093,449, 6,582,826,
143,494,842 and 6,055,354 shares,
respectively, of beneficial
interest outstanding - unlimited
number of shares authorized with
no par value.) $5.27 $10.28 $1.00 $8.73
===================================================================================================
See notes to financial statements.
Statements of Operations
Six months ended June 30, 2001 (Unaudited)
- ---------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
CORE RELATIVE SOVEREIGN FINANCIAL
EQUITY VALUE INVESTORS INDUSTRIES
FUND FUND FUND FUND
----------- ----------- ----------- -----------
Investment Income:
Dividends (net of foreign
withholding tax of $1,473, $73,
$1,224, $14,006, respectively) $243,052 $91,109 $369,001 $494,937
Interest -- 78,419 -- --
Securities lending 23,934 30,035 313,191 57,233
----------- ----------- ----------- -----------
Total investment income 266,986 199,563 682,192 552,170
- ---------------------------------------------------------------------------------------------------
Expenses:
Investment management fee 137,988 120,565 178,874 283,808
Custodian fee 12,603 3,970 9,511 14,534
Auditing fee 10,198 9,157 8,927 10,319
Accounting and legal services fee 3,857 3,931 5,833 6,941
Miscellaneous 2,182 468 938 802
Printing 1,710 1,577 1,338 1,198
Trustees' fees 1,275 1,112 1,415 2,082
Organization expense 1,053 -- 1,053 --
Legal fees 233 252 279 516
Registration and filing fees 21 9 8 156
Interest expense -- 10,430 -- --
----------- ----------- ----------- -----------
Total expenses 171,120 151,471 208,176 320,356
- ---------------------------------------------------------------------------------------------------
Net investment income 95,866 48,092 474,016 231,814
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (2,936,537) 2,071,440 (1,328,907) 3,833,796
Foreign currency transactions -- -- -- (11,371)
Change in unrealized appreciation
(depreciation) on:
Investments 937,032 462,352 (2,400,245) (11,108,013)
Translation of assets and
liabilities in foreign currencies -- -- -- (270)
----------- ----------- ----------- -----------
Net realized and unrealized gain
(loss) (1,999,505) 2,533,792 (3,729,152) (7,285,858)
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations ($1,903,639) $2,581,884 ($3,255,136) ($7,054,044)
===================================================================================================
The Statement of Operations summarizes for each of the Funds the investment
income earned and expenses incurred in operating the Fund. It also shows
net gains (losses) for the period stated.
See notes to financial statements.
Statements of Operations (continued)
Six months ended June 30, 2001 (Unaudited)
- ---------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A.
TECHNOLOGY BOND MONEY MARKET STRATEGIC
FUND FUND FUND INCOME FUND
----------- ----------- ----------- -----------
Investment Income:
Dividends (net of foreign
withholding tax of $425, none,
none and none, respectively) $4,033 -- -- $8,332
Interest 61,129 $1,274,160 $2,597,886 1,604,967
Securities lending 1,931 -- -- --
----------- ----------- ----------- -----------
Total investment income 67,093 1,274,160 2,597,886 1,613,299
- ---------------------------------------------------------------------------------------------------
Expenses:
Investment management fee 64,569 103,111 255,409 116,449
Custodian fee 15,732 23,415 16,685 10,181
Auditing fee 5,951 5,495 4,336 4,796
Printing 2,217 2,127 932 577
Legal fees 1,603 284 612 154
Accounting and legal services fee 1,579 4,034 9,994 3,797
Trustees' fee 374 647 1,735 515
Miscellaneous 238 360 199 239
Registration and filing fees 8 8 7 21
Organization expense -- 1,053 1,053 1,053
----------- ----------- ----------- -----------
Total expenses 92,271 140,534 290,962 137,782
Less expense reductions (7,551) -- -- --
- ---------------------------------------------------------------------------------------------------
Net expenses 84,720 140,534 290,962 137,782
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) (17,627) 1,133,626 2,306,924 1,475,517
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (1,778,652) 274,804 -- (625,492)
Foreign currency transactions -- -- -- 30,346
Change in unrealized appreciation
(depreciation) on:
Investments (3,330,550) (541,491) -- (300,466)
Translation of assets and
liabilities in foreign currencies -- -- -- 37,333
----------- ----------- ----------- -----------
Net realized and unrealized loss (5,109,202) (266,687) -- (858,279)
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations ($5,126,829) $866,939 $2,306,924 $617,238
===================================================================================================
See notes to financial statements.
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A.
CORE EQUITY FUND RELATIVE VALUE FUND SOVEREIGN INVESTORS FUND
------------------------ ------------------------ ------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
DECEMBER 31, 2001 DECEMBER 31, 2001 DECEMBER 31, 2001
2000 (UNAUDITED) 2000 (UNAUDITED) 2000 (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $196,241 $95,866 $54,327 $48,092 $675,781 $474,016
Net realized gain (loss) 153,575 (2,936,537) 13,434,131 2,071,440 (1,886,401) (1,328,907)
Change in net unrealized
appreciation (depreciation) (3,702,349) 937,032 (15,296,586) 462,352 1,083,527 (2,400,245)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from operations (3,352,533) (1,903,639) (1,808,128) 2,581,884 (127,093) (3,255,136)
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
From net investment income (199,287) (93,007) (42,822) (56,408) (678,637) (486,814)
From net realized gain (695,716) -- (15,128,734) -- -- --
In excess of net realized gain (844,741) -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions to shareholders (1,739,744) (93,007) (15,171,556) (56,408) (678,637) (486,814)
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions:
Shares sold 11,671,817 6,436,466 13,227,216 37,266,291 16,811,905 22,295,811
Shares issued to shareholders in
reinvestment of distributions 1,739,743 93,007 15,171,557 56,408 678,636 486,814
Less shares repurchased (12,638,050) (4,069,385) (11,142,581) (26,903,976) (11,610,910) (5,900,944)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 773,510 2,460,088 17,256,192 10,418,723 5,879,631 16,881,681
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 44,991,317 40,672,550 38,766,104 39,042,612 50,254,197 55,328,098
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed (distributions in
excess of) net investment income
of ($197), $2,662, $7,190,
($1,126), ($253), and ($13,051),
respectively) $40,672,550 $41,135,992 $39,042,612 $51,986,811 $55,328,098 $68,467,829
=========== =========== =========== =========== =========== ===========
Distributions to Shareholders:
Per share dividends from net
investment income $0.0888 $0.0390 $0.0186 $0.0134 $0.2077 $0.1148
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain $0.6886 -- $6.5883 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
* Analysis of Fund Share Transactions:
Shares sold 601,375 384,016 744,370 3,395,712 1,103,469 1,506,526
Shares issued to shareholders in
reinvestment of distributions 99,280 5,717 1,406,946 5,499 44,976 33,495
Less shares repurchased (662,061) (242,365) (631,982) (2,448,161) (771,887) (400,730)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 38,594 147,368 1,519,334 953,050 376,558 1,139,291
=========== =========== =========== =========== =========== ===========
The Statement of Changes in Net Assets shows how the value of each Fund's
net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment and foreign
currency gains and losses, distributions paid to shareholders, if any, and
any increase or decrease in money shareholders invested in each Fund. The
footnotes illustrate the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the per share amount
of distributions made to shareholders of each Fund for the periods
indicated.
See notes to financial statements.
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A.
FINANCIAL INDUSTRIES FUND TECHNOLOGY FUND BOND FUND
------------------------ ------------------------- ------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
DECEMBER 31, 2001 DECEMBER 31, 2001 DECEMBER 31, 2001
2000 (UNAUDITED) 2000(1) (UNAUDITED) 2000 (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $194,288 $231,814 $25,753 ($17,627) $1,040,920 $1,133,626
Net realized gain (loss) 696,899 3,822,425 (193,630) (1,778,652) (152,050) 274,804
Change in net unrealized
appreciation (depreciation) 12,306,484 (11,108,283) (3,889,092) (3,330,550) 1,085,497 (541,491)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from operations 13,197,671 (7,054,044) (4,056,969) (5,126,829) 1,974,367 866,939
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
From net investment income (169,614) -- (24,458) -- (1,040,858) (1,188,894)
From net realized gain -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions to shareholders (169,614) -- (24,458) -- (1,040,858) (1,188,894)
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions:
Shares sold 20,739,283 23,159,825 18,589,255 14,331,670 13,994,748 46,649,420
Shares issued to shareholders in
reinvestment of distributions 169,614 -- 24,458 -- 1,040,858 1,166,619
Less shares repurchased (11,882,798) (5,482,782) (490,242) (1,665,604) (3,326,986) (4,974,940)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 9,026,099 17,677,043 18,123,471 12,666,066 11,708,620 42,841,099
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 49,312,440 71,366,596 -- 14,042,044 12,530,588 25,172,717
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (accumulated net
investment loss) of $2,898,
$234,712, $1,295, ($16,332),
$21,480 and ($66,501),
respectively) $71,366,596 $81,989,595 $14,042,044 $21,581,281 $25,172,717 $67,691,861
=========== =========== =========== =========== =========== ===========
Distributions to Shareholders:
Per share dividends from net
investment income $0.0450 -- $0.0143 -- $0.6434 $0.2961
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
* Analysis of Fund Share Transactions:
Shares sold 1,252,923 1,385,001 1,961,452 2,474,548 1,400,901 4,499,608
Shares issued to shareholders in
reinvestment of distributions 9,578 -- 3,292 -- 104,450 113,006
Less shares repurchased (779,897) (335,670) (48,490) (297,353) (336,738) (475,645)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 482,604 1,049,331 1,916,254 2,177,195 1,168,613 4,136,969
=========== =========== =========== =========== =========== ===========
(1) Commenced operations on May 1, 2000.
See notes to financial statements.
Statements of Changes in Net Assets (continued)
- ------------------------------------------------------------------------------------------------------
V.A. V.A.
MONEY MARKET FUND STRATEGIC INCOME FUND
------------------------- -------------------------
SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED
ENDED JUNE 30, ENDED JUNE 30,
DECEMBER 31, 2001 DECEMBER 31, 2001
2000 (UNAUDITED) 2000 (UNAUDITED)
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $2,278,752 $2,306,924 $2,451,388 $1,475,517
Net realized loss -- -- (700,276) (595,146)
Change in net unrealized
appreciation (depreciation) -- -- (1,322,235) (263,133)
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations 2,278,752 2,306,924 428,877 617,238
----------- ----------- ----------- -----------
Distributions to Shareholders: *
From net investment income (2,278,752) (2,306,924) (2,359,734) (1,766,663)
From net realized gain -- -- (350,215) --
Tax return of capital -- -- (91,654) --
----------- ----------- ----------- -----------
Total distributions to shareholders (2,278,752) (2,306,924) (2,801,603) (1,766,663)
----------- ----------- ----------- -----------
From Fund Share Transactions:
Shares sold 188,358,513 216,704,153 14,978,386 21,277,833
Shares issued to shareholders in
reinvestment of distributions 2,374,022 2,311,895 2,801,603 1,742,986
Less shares repurchased (149,766,710) (149,438,538) (3,217,447) (3,506,983)
----------- ----------- ----------- -----------
Net increase 40,965,825 69,577,510 14,562,542 19,513,836
----------- ----------- ----------- -----------
Net Assets:
Beginning of period 32,951,507 73,917,332 22,281,983 34,471,799
----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (loss) (distributions in
excess of net investment income)
of $193, $193, ($126,198) and
($647,782), respectively) $73,917,332 $143,494,842 $34,471,799 $52,836,210
=========== =========== =========== ===========
Distributions to Shareholders:
Per share dividends from net
investment income $0.0576 $0.0232 $0.8345 $0.3978
----------- ----------- ----------- -----------
Per share distributions from net
realized gain -- -- $0.0945 --
----------- ----------- ----------- -----------
* Analysis of Fund Share Transactions:
Shares sold 188,358,513 216,704,153 1,598,355 2,410,662
Shares issued to shareholders in
reinvestment of distributions 2,374,022 2,311,895 302,236 196,644
Less shares repurchased (149,766,710) (149,438,538) (339,848) (393,723)
----------- ----------- ----------- -----------
Net increase 40,965,825 69,577,510 1,560,743 2,213,583
=========== =========== =========== ===========
See notes to financial statements.
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------
V.A. CORE EQUITY FUND
--------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $11.11 $14.11 $17.74 $19.70 $17.52
-------- -------- -------- -------- -------- --------
Net Investment Income(2) 0.06 0.16 0.10 0.09 0.08 0.04
Net Realized and Unrealized Gain (Loss) on
Investments 1.12 3.23 3.90 2.36 (1.48) (0.86)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 1.18 3.39 4.00 2.45 (1.40) (0.82)
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.06) (0.14) (0.10) (0.09) (0.09) (0.04)
In Excess of Net Investment Income -- -- -- --(3) -- --
From Net Realized Gain (0.01) (0.25) (0.27) (0.40) (0.31) --
In Excess of Net Realized Gain -- -- -- -- (0.38) --
-------- -------- -------- -------- -------- --------
Total Distributions (0.07) (0.39) (0.37) (0.49) (0.78) (0.04)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $11.11 $14.11 $17.74 $19.70 $17.52 $16.66
======== ======== ======== ======== ======== ========
Total Investment Return(4) 11.78%(5,6) 30.68%(6) 28.42% 13.89% (7.11%) (4.68%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,149 $8,719 $26,691 $44,991 $40,673 $41,136
Ratio of Expenses to Average Net Assets 0.95%(7) 0.95% 0.95% 0.83% 0.85% 0.87%(7)
Ratio of Adjusted Expenses to Average Net
Assets(8) 4.23%(7) 1.59% -- -- -- --
Ratio of Net Investment Income to Average
Net Assets 1.60%(7) 1.24% 0.65% 0.47% 0.45% 0.49%(7)
Portfolio Turnover Rate 24% 53% 55% 77% 97% 43%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods shown.
The Financial Highlights summarizes the impact of the following factors on
a single share for each period indicated: net investment income, gains
(losses), distributions and total investment return of each Fund. It shows
how the Fund's net asset value for a share has changed since the end of the
previous period. Additionally, important relationships between some items
presented in the financial statements are expressed in ratio form.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
---------------------------------------------------------------------------------------------------------------
V.A. RELATIVE VALUE FUND
--------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------ 2001
1998(1) 1999 2000 (UNAUDITED)
-------- -------- -------- --------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $12.03 $18.03 $10.64
-------- -------- -------- --------
Net Investment Income(2) 0.11 0.10 0.02 0.01
Net Realized and Unrealized Gain (Loss) on
Investments 2.02 6.65 (0.80) 0.61
-------- -------- -------- --------
Total from Investment Operations 2.13 6.75 (0.78) 0.62
-------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.10) (0.10) (0.02) (0.01)
From Net Realized Gain -- (0.65) (6.59) --
-------- -------- -------- --------
Total Distributions (0.10) (0.75) (6.61) (0.01)
-------- -------- -------- --------
Net Asset Value, End of Period $12.03 $18.03 $10.64 $11.25
======== ======== ======== ========
Total Investment Return(3) 21.39%(4,5) 56.65% (4.80%) 5.87%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $17,368 $38,766 $39,043 $51,987
Ratio of Expenses to Average Net Assets 0.85%(6) 0.77% 0.79% 0.75%(6)
Ratio of Adjusted Expenses to Average Net
Assets(7) 1.03%(6) -- -- --
Ratio of Net Investment Income to Average
Net Assets 1.17%(6) 0.66% 0.13% 0.24%(6)
Portfolio Turnover Rate 242% 166% 164% 40%
(1) Commenced operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total return would have been lower had certain expenses not been
reduced during the period shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the period shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------
V.A. SOVEREIGN INVESTORS FUND
--------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.74 $13.59 $15.61 $15.96 $15.69
-------- -------- -------- -------- -------- --------
Net Investment Income(2) 0.07 0.22 0.27 0.24 0.21 0.12
Net Realized and Unrealized Gain (Loss) on
Investments 0.76 2.82 2.00 0.35 (0.27) (1.02)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 0.83 3.04 2.27 0.59 (0.06) (0.90)
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.07) (0.18) (0.25) (0.24) (0.21) (0.11)
In Excess of Net Investment Income -- -- -- --(3) -- --
From Net Realized Gain (0.02) (0.01) -- -- -- --
Tax Return of Capital -- -- -- --(3) -- --
-------- -------- -------- -------- -------- --------
Total Distributions (0.09) (0.19) (0.25) (0.24) (0.21) (0.11)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $10.74 $13.59 $15.61 $15.96 $15.69 $14.68
======== ======== ======== ======== ======== ========
Total Investment Return(4) 8.30%(5,6) 28.43%(6) 16.88% 3.84% (0.33%) (5.70%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,111 $12,187 $34,170 $50,254 $55,328 $68,468
Ratio of Expenses to Average Net Assets 0.85%(7) 0.85% 0.74% 0.70% 0.72% 0.70%(7)
Ratio of Adjusted Expenses to Average Net
Assets(8) 3.78%(7) 1.16% -- -- -- --
Ratio of Net Investment Income to Average
Net Assets 1.90%(7) 1.81% 1.88% 1.57% 1.37% 1.59%(7)
Portfolio Turnover Rate 17% 11% 19% 26% 46% 23%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------
V.A. FINANCIAL INDUSTRIES FUND
------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ---------------------------------------- 2001
1997(1) 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $13.44 $14.45 $14.46 $18.34
-------- -------- -------- -------- --------
Net Investment Income(2) 0.11 0.18 0.11 0.06 0.05
Net Realized and Unrealized Gain on
Investments 3.39 0.97 0.06 3.87 (1.80)
-------- -------- -------- -------- --------
Total from Investment Operations 3.50 1.15 0.17 3.93 (1.75)
-------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.05) (0.14) (0.10) (0.05) --
From Net Realized Gain (0.01) --(3) (0.05) -- --
Tax Return of Capital -- -- (0.01) -- --
-------- -------- -------- -------- --------
Total Distributions (0.06) (0.14) (0.16) (0.05) --
-------- -------- -------- -------- --------
Net Asset Value, End of Period $13.44 $14.45 $14.46 $18.34 $16.59
======== ======== ======== ======== ========
Total Investment Return(4) 35.05%(5,6) 8.55% 1.23% 27.16% (9.54%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $18,465 $54,569 $49,312 $71,367 $81,990
Ratio of Expenses to Average Net Assets 1.05%(7) 0.92% 0.90% 0.90% 0.90%(7)
Ratio of Adjusted Expenses to Average Net
Assets(8) 1.39%(7) -- -- -- --
Ratio of Net Investment Income to Average
Net Assets 1.32%(7) 1.25% 0.77% 0.36% 0.65%(7)
Portfolio Turnover Rate 11% 38% 72% 41% 53%
(1) Commenced operations on April 30, 1997.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown.
(7) Annualized.
(8) Does not take into consideration expense reductions during the period shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ----------------------------------------------------------------------------------
V.A. TECHNOLOGY FUND
--------------------------
SIX MONTHS
PERIOD ENDED
ENDED JUNE 30,
DECEMBER 31, 2001
2000(1) (UNAUDITED)
-------- --------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $7.33
-------- --------
Net Investment Income(2) 0.03 (0.01)
Net Realized and Unrealized Loss on
Investments (2.69) (2.05)
-------- --------
Total from Investment Operations (2.66) (2.06)
-------- --------
Less Distributions:
From Net Investment Income (0.01) --
-------- --------
Total Distributions (0.10) $5.27
-------- --------
Net Asset Value, End of Period $7.33 $11.25
======== ========
Total Investment Return(3,4) (26.56%)(5) (28.10%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $14,402 $21,581
Ratio of Expenses to Average Net Assets 1.05%(6) 1.05%(6)
Ratio of Adjusted Expenses to Average Net
Assets(7) 1.99%(6) 1.14%(6)
Ratio of Net Investment Income to Average
Net Assets 0.62%(6) (0.22%)(6)
Portfolio Turnover Rate 75% 21%
(1) Commenced operations on May 1, 2000.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the period shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the period shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
----------------------------------------------------------------------------------------------------------------------------
V.A. BOND FUND
-------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.19 $10.36 $10.51 $9.81 $10.29
-------- -------- -------- -------- -------- --------
Net Investment Income(2) 0.23 0.68 0.63 0.64 0.64 0.28
Net Realized and Unrealized Gain (Loss) on
Investments 0.21 0.24 0.32 (0.70) 0.50 0.01
-------- -------- -------- -------- -------- --------
Total from Investment Operations 0.44 0.92 0.95 (0.06) 1.12 0.29
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.23) (0.68) (0.63) (0.64) (0.64) (0.30)
From Net Realized Gain (0.02) (0.07) (0.17) -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions (0.25) (0.75) (0.80) (0.64) (0.64) (0.30)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $10.19 $10.36 $10.51 $9.81 $10.29 $10.28
======== ======== ======== ======== ======== ========
Total Investment Return(3) 4.42%(4,5) 9.30%(5) 9.41%(5) (0.51%)(5) 11.89%(5) 2.78%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,056 $3,682 $10,669 $12,531 $25,173 $67,692
Ratio of Expenses to Average Net Assets 0.75%(6) 0.75% 0.75% 0.75% 0.75% 0.68%(6)
Ratio of Adjusted Expenses to Average Net
Assets(7) 4.15%(6) 2.53% 1.34% 1.01% 0.92% --
Ratio of Net Investment Income to Average
Net Assets 6.69%(6) 6.57% 5.93% 6.39% 6.47% 5.50%(6,8)
Portfolio Turnover Rate 45% 193% 367% 307% 298% 195%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total return would have been lower had certain expenses not been
reduced during the period shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods shown.
(8) Had the Fund not amortized premiums on debt securities, the annualized
ratio of net investment income to average net assets would have been 5.77%.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------------
V.A. MONEY MARKET FUND
-------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- --------
Net Investment Income(2) 0.02 0.05 0.05 0.05 0.06 0.02
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.02) (0.05) (0.05) (0.05) (0.06) (0.02)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ========
Total Investment Return(3) 1.61%(4,5) 4.88%(5) 4.87% 4.58% 5.90% 2.33%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $207 $8,377 $16,519 $32,952 $73,917 $143,495
Ratio of Expenses to Average Net Assets 0.75%(6) 0.75% 0.74% 0.66% 0.60% 0.57%(6)
Ratio of Adjusted Expenses to Average Net
Assets(7) 27.48%(6) 1.27% -- -- -- --
Ratio of Net Investment Income to Average
Net Assets 4.68%(6) 4.86% 4.70% 4.55% 5.86% 4.52%(6)
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total return would have been lower had certain expenses not been
reduced during the period shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- -----------------------------------------------------------------------------------------------------------------------------
V.A. STRATEGIC INCOME FUND
-------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.30 $10.47 $10.10 $9.77 $8.97
-------- -------- -------- -------- -------- --------
Net Investment Income(2) 0.27 0.91 0.85 0.80 0.83 0.33
Net Realized and Unrealized Gain (Loss) on
Investments 0.36 0.26 (0.35) (0.33) (0.71) (0.17)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 0.63 1.17 0.50 0.47 0.12 0.16
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.27) (0.91) (0.85) (0.80) (0.83) (0.40)
From Net Realized Gain (0.06) (0.09) (0.02) -- (0.09) --
-------- -------- -------- -------- -------- --------
Total Distributions (0.33) (1.00) (0.87) (0.80) (0.92) (0.40)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $10.30 $10.47 $10.10 $9.77 $8.97 $8.73
======== ======== ======== ======== ======== ========
Total Investment Return(3) 6.45%(4,5) 11.77%(5) 4.92%(5) 4.82%(5) 1.40% 1.79%(4)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $2,131 $5,540 $15,019 $22,282 $34,472 $52,836
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85% 0.85% 0.85% 0.76% 0.71%(6)
Ratio of Adjusted Expenses to Average Net
Assets(7) 2.28%(6) 1.37% 0.93% 0.87% -- --
Ratio of Net Investment Income to Average
Net Assets 7.89%(6) 8.77% 8.19% 8.06% 8.91% 7.60%(6,8)
Portfolio Turnover Rate 73% 110% 92% 53%(9) 53% 47%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) Not annualized.
(5) The total return would have been lower had certain expenses not been
reduced during the period shown.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods shown.
(8) Had the Fund not amortized premiums on debt securities, the annualized
ratio of net investment income to average net assets would have been 9.10%
(9) Portfolio turnover rate excludes merger activity.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Core Equity Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Core Equity Fund on June 30, 2001. It is divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Aerospace (1.72%)
General Dynamics Corp. 3,800 $295,678
United Technologies Corp. 5,600 410,256
--------------
705,934
--------------
Automobile/Trucks (1.15%)
Ford Motor Co. 13,000 319,150
Lear Corp.* 4,400 153,560
--------------
472,710
--------------
Banks - United States (4.05%)
Bank of America Corp. 4,600 276,138
Comerica, Inc. 3,100 178,560
FleetBoston Financial Corp. 4,100 161,745
J.P. Morgan Chase & Co. 5,600 249,760
Mellon Financial Corp. 3,300 151,800
U.S. Bancorp 28,400 647,236
--------------
1,665,239
--------------
Beverages (1.08%)
Anheuser-Busch Cos., Inc. 4,600 189,520
PepsiCo, Inc. 5,800 256,360
--------------
445,880
--------------
Building (0.60%)
Black & Decker Corp. (The) 6,300 248,598
--------------
Chemicals (2.55%)
Air Products & Chemicals, Inc. 5,200 237,900
Dow Chemical Co. 16,200 538,650
Praxair, Inc. 5,800 272,600
--------------
1,049,150
--------------
Computers (14.07%)
Adobe Systems, Inc. 2,300 108,100
Cadence Design Systems, Inc.* 6,000 111,780
Cisco Systems, Inc.* 8,600 156,520
Dell Computer Corp.* 14,000 366,100
Electronic Data Systems Corp. 6,100 381,250
First Data Corp. 4,000 257,000
Fiserv, Inc.* 3,500 223,930
International Business Machines Corp. 6,300 711,900
Lexmark International, Inc.* 7,800 524,550
Microsoft Corp.* 25,500 1,861,500
Oracle Corp.* 17,100 324,900
PeopleSoft, Inc.* 3,000 147,690
Sabre Holdings Corp.* 3,800 190,000
SunGard Data Systems, Inc.* 14,100 423,141
--------------
5,788,361
--------------
Cosmetics & Personal Care (0.68%)
Avon Products, Inc. 6,000 277,680
--------------
Diversified Operations (7.27%)
General Electric Co. 39,300 1,915,875
Minnesota Mining & Manufacturing Co. 3,300 376,530
Tyco International Ltd. 12,800 697,600
--------------
2,990,005
--------------
Electronics (6.17%)
Analog Devices, Inc.* 4,200 181,650
Applied Materials, Inc.* 4,100 201,310
Intel Corp. 31,600 924,300
KLA-Tencor Corp.* 3,300 192,951
Linear Technology Corp. 4,900 216,678
LSI Logic Corp.* 7,000 131,600
Maxim Integrated Products, Inc.* 3,600 159,156
Parker- Hannifin Corp. 3,700 157,028
Texas Instruments, Inc. 7,800 245,700
Xilinx, Inc.* 3,100 127,844
--------------
2,538,217
--------------
Energy (0.47%)
Mirant Corp.* 5,600 192,640
--------------
Finance (5.84%)
Citigroup, Inc. 32,600 1,722,584
Concord EFS, Inc.* 4,100 213,241
Washington Mutual, Inc. 12,450 467,498
--------------
2,403,323
--------------
Food (0.56%)
Kraft Foods, Inc. (Class A)* 3,000 93,000
Unilever NV, American Depositary Receipt
(ADR) (Netherlands) 2,300 137,011
--------------
230,011
--------------
Insurance (4.35%)
American International Group, Inc. 5,600 481,600
Hartford Financial Services Group, Inc. (The) 4,900 335,160
Lincoln National Corp. 5,600 289,800
St. Paul Cos., Inc. (The) 6,500 329,485
Torchmark Corp. 4,300 172,903
XL Capital Ltd. (Class A) 2,200 180,620
--------------
1,789,568
--------------
Leisure (0.53%)
Disney (Walt) Co. (The) 7,500 216,675
--------------
Manufacturing (0.31%)
Danaher Corp. 2,300 128,800
--------------
Media (4.26%)
AOL Time Warner, Inc.* 20,600 1,091,800
AT&T Corp. - Liberty Media Group* 16,400 286,836
Viacom, Inc. (Class B)* 7,200 372,600
--------------
1,751,236
--------------
Medical (11.90%)
Abbott Laboratories 5,400 259,254
Allergan, Inc. 2,000 171,000
American Home Products Corp. 7,400 432,456
Bristol-Myers Squibb Co. 7,800 407,940
Invitrogen Corp.* 2,000 111,280
Johnson & Johnson 14,618 730,900
Laboratory Corp. of America
Holdings* 2,200 169,180
Lincare Holdings, Inc.* 5,400 162,054
Merck & Co., Inc. 9,400 600,754
Pfizer, Inc. 34,000 1,361,700
Pharmacia Corp. 3,600 165,420
Schering-Plough Corp. 4,100 148,584
Trigon Healthcare, Inc.* 2,700 175,095
--------------
4,895,617
--------------
Mortgage Banking (1.88%)
Fannie Mae 9,100 774,865
--------------
Office (0.45%)
Avery Dennison Corp. 3,600 183,780
--------------
Oil & Gas (7.25%)
Apache Corp. 2,500 126,875
Chevron Corp. 3,000 271,500
El Paso Corp. 2,300 120,842
Enron Corp. 7,000 343,000
Exxon Mobil Corp. 14,112 1,232,683
Kerr-McGee Corp. 2,400 159,048
Royal Dutch Petroleum Co. (ADR)
(Netherlands) 9,600 559,392
USX - Marathon Group 5,800 171,158
--------------
2,984,498
--------------
Paper & Paper Products (0.56%)
Kimberly-Clark Corp. 4,100 229,190
--------------
Retail (8.78%)
Abercrombie & Fitch Co. (Class A)* 4,100 182,450
Bed Bath & Beyond, Inc.* 5,600 168,000
CVS Corp. 4,600 177,560
Home Depot, Inc. (The) 6,600 307,230
Kohl's Corp.* 7,900 495,567
Lowe's Cos., Inc. 9,200 667,460
May Department Stores Co. (The) 7,400 253,524
Target Corp. 5,600 193,760
TJX Cos., Inc. 9,700 309,139
Walgreen Co. 3,900 133,185
Wal-Mart Stores, Inc. 14,800 722,240
--------------
3,610,115
--------------
Soap & Cleaning Preparations (1.07%)
Colgate-Palmolive Co. 4,100 241,859
Procter & Gamble Co. (The) 3,100 197,780
--------------
439,639
--------------
Telecommunications (6.15%)
Broadwing, Inc.* 6,700 163,815
Comverse Technology, Inc.* 1,800 102,780
QUALCOMM, Inc.* 4,500 263,160
Qwest Communications International, Inc. 17,000 541,790
Sprint Corp* 11,700 282,555
Telephone and Data Systems, Inc. 1,800 195,750
Verizon Communications, Inc. 18,300 979,050
--------------
2,528,900
--------------
Tobacco (1.92%)
Philip Morris Cos., Inc. 15,600 791,700
--------------
Utilities (4.01%)
Allegheny Energy, Inc. 4,400 212,300
Duke Energy Corp. 16,500 643,665
Exelon Corp. 8,100 519,372
SBC Communications, Inc. 6,900 276,414
--------------
1,651,751
--------------
TOTAL COMMON STOCKS
(Cost $36,203,706) (99.63%) 40,984,082
-------------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.36%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds, 10.625%
due 08-15-15 and 6.250% due 08-15-23,
U.S. Treasury Note 5.625% due 11-30-02) 3.97% 558 558,000
--------------
TOTAL SHORT-TERM INVESTMENTS (1.36%) 558,000
-------------- --------------
TOTAL INVESTMENTS (100.99%) 41,542,082
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.99%) (406,090)
-------------- --------------
TOTAL NET ASSETS (100.00%) $41,135,992
============== ==============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Relative Value Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Relative Value Fund on June 30, 2001. It's divided into three
main categories: common stocks, bonds and short-term investments. Common
stocks and bonds are further broken down by industry group. Short-term
investments, which represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Aerospace (1.53%)
Raytheon Co. 30,000 $796,500
--------------
Business Services - Misc. (0.84%)
Moody's Corp. 13,000 435,500
--------------
Computers (10.99%)
Computer Associates International, Inc. 51,493 1,853,748
Concord Communications, Inc.* 60,000 540,000
Hyperion Solutions Corp.* 14,000 210,000
MicroStrategy, Inc.* 50,000 140,000
Parametric Technology Corp.* 162,000 2,266,380
Viant Corp.* 22,500 42,075
Wind River Systems, Inc.* 37,950 662,607
--------------
5,714,810
--------------
Containers (0.70%)
Sealed Air Corp.* 9,829 366,130
--------------
Cosmetics & Personal Care (0.11%)
Gillette Co. (The) 1,900 55,081
--------------
Diversified Operations (2.75%)
Tyco International, Ltd. 26,200 1,427,900
--------------
Electronics (14.39%)
Agere Systems, Inc. (Class A)* 403,990 3,029,925
Alpha Industries, Inc. 44,200 1,306,110
Conexant Systems, Inc.* 90,350 808,633
Flextronics International, Ltd.*
(Singapore) 9,000 234,990
MKS Instruments, Inc.* 16,871 485,885
Sanmina Corp.* 8,000 187,280
SBS Technologies, Inc.* 12,000 227,040
Sony Corp. (Japan) 4,800 315,598
Texas Instruments, Inc. 8,000 252,000
Vicor Corp.* 38,900 634,070
--------------
7,481,531
--------------
Fiber Optics (2.87%)
Finisar Corp.* 80,000 1,494,400
--------------
Finance (1.81%)
Citigroup, Inc. 17,841 942,718
--------------
Food (0.32%)
Hain Celestial Group, Inc.* 7,500 165,000
--------------
Insurance (3.65%)
ACE, Ltd. (Bermuda) 17,505 684,270
Ambac Financial Group, Inc. 12,334 717,839
XL Capital, Ltd. (Class A) 6,032 495,227
--------------
1,897,336
--------------
Media (19.30%)
AT&T Corp. - Liberty Media Corp.
(Class A)* 128,244 2,242,988
Clear Channel Communications, Inc.* 11,000 689,700
Cumulus Media, Inc. (Class A)* 75,000 1,018,500
Pegasus Communications Corp.* 120,700 2,715,750
USA Networks, Inc.* 24,000 672,000
Viacom, Inc. (Class B)* 17,000 879,750
XM Satellite Radio Holdings, Inc.
(Class A)* 112,050 1,815,210
--------------
10,033,898
--------------
Medical (8.66%)
Abbott Laboratories 17,500 840,175
Alpharma, Inc. (Class A) 17,000 463,250
Apogent Technologies, Inc.* 32,500 799,500
Bristol-Myers Squibb Co. 10,000 523,000
I-STAT Corp.* 35,000 515,900
Schering-Plough Corp. 37,500 1,359,000
--------------
4,500,825
--------------
Oil & Gas (0.87%)
Unocal Corp. 13,300 454,195
--------------
Retail (1.56%)
McDonald's Corp. 30,000 811,800
--------------
Telecommunications (22.70%)
ANTEC Corp.* 57,750 716,100
CenturyTel, Inc. 10,000 303,000
Corning, Inc. 35,000 584,850
CTC Communications Group, Inc.* 60,000 183,600
Hughes Electronics Corp. 107,500 2,176,875
Lucent Technologies, Inc. 99,253 615,369
Motient Corp.* 30,000 32,100
Nextel Communications, Inc. (Class
A)* 98,200 1,718,500
Nextel Partners, Inc. (Class A)* 33,000 512,160
QUALCOMM, Inc.* 20,000 1,169,600
Sprint Corp. 110,000 2,349,600
TeleCorp PCS, Inc. (Class A)* 30,000 581,100
Verizon Communications, Inc. 16,000 856,000
--------------
11,798,854
--------------
TOTAL COMMON STOCKS
(Cost $53,300,555) (93.05%) 48,376,478
-------------- --------------
INTEREST CREDIT PAR VALUE
RATE RATING** (000s OMITTED)
-------------- -------------- --------------
BONDS
Office (0.27%)
Danka Business Systems Plc,
Conv Note (United Kingdom)
04-01-02 6.750% B+ $500 $140,625
--------------
TOTAL BONDS
(Cost $440,958) (0.27%) 140,625
-------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.51%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds, 6.250%
thru 10.625%, due 08-15-15 thru
08-15-23 and U.S. Treasury Notes,
5.625%, due 11-30-02) 3.970% 2,863 2,863,000
--------------
TOTAL SHORT-TERM INVESTMENTS (5.51%) 2,863,000
-------------- --------------
TOTAL INVESTMENTS (98.83%) 51,380,103
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (1.17%) 606,708
-------------- --------------
TOTAL NET ASSETS (100.00%) $51,986,811
============== ==============
* Non-income producing security.
** Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investor Services or John Hancock Advisers, Inc.,
where Standard & Poor's ratings are not available.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total of that
category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Sovereign Investors Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Sovereign Investors Fund on June 30, 2001. It is divided into
three main categories: common stocks, U.S. government obligations and
short-term investments. Common stocks are further broken down by industry
group. Short-term investments, which represent the Fund's "cash" position,
are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Advertising (1.07%)
Interpublic Group of Cos., Inc. (The) 25,000 $733,750
--------------
Banks - United States (6.79%)
FleetBoston Financial Corp. 22,000 867,900
Mellon Financial Corp. 25,000 1,150,000
PNC Bank Corp. 21,500 1,414,485
State Street Corp. 10,000 494,900
Wells Fargo & Co. 15,500 719,665
--------------
4,646,950
--------------
Beverages (1.10%)
PepsiCo, Inc. 17,000 751,400
--------------
Chemicals (4.43%)
Air Products & Chemicals, Inc. 20,000 915,000
Dow Chemical Co. 25,000 831,250
Rohm & Haas Co. 39,000 1,283,100
--------------
3,029,350
--------------
Computers (4.95%)
Automatic Data Processing, Inc. 8,000 397,600
Cisco Systems, Inc.* 31,000 564,200
Compaq Computer Corp. 30,000 464,700
International Business Machines Corp. 16,000 1,808,000
Sun Microsystems, Inc.* 10,000 157,200
--------------
3,391,700
--------------
Containers (1.47%)
Bemis Co., Inc. 25,000 1,004,250
--------------
Diversified Operations (2.38%)
Minnesota Mining & Manufacturing Co. 3,500 399,350
Tyco International Ltd. 22,500 1,226,250
--------------
1,625,600
--------------
Electronics (5.13%)
Emerson Electric Co. 12,700 768,350
General Electric Co. 28,800 1,404,000
Intel Corp. 40,000 1,170,000
Texas Instruments, Inc. 5,500 173,250
--------------
3,515,600
--------------
Finance (8.01%)
Citigroup, Inc. 45,225 2,389,689
Household International, Inc. 11,500 767,050
J.P. Morgan Chase & Co. 30,000 1,338,000
Merrill Lynch & Co., Inc. 7,500 444,375
Morgan Stanley Dean Witter & Co. 8,500 545,955
--------------
5,485,069
--------------
Food (0.74%)
Kraft Foods, Inc. (Class A)* 16,435 509,485
--------------
Insurance (2.28%)
AFLAC, Inc. 24,800 780,952
American International Group, Inc. 9,093 781,998
--------------
1,562,950
--------------
Media (1.52%)
Gannett Co., Inc. 5,500 362,450
McGraw-Hill Cos., Inc. (The) 10,200 674,730
--------------
1,037,180
--------------
Medical (10.07%)
Abbott Laboratories 21,000 1,008,210
American Home Products Corp. 23,000 1,344,120
Baxter International, Inc. 22,200 1,087,800
Johnson & Johnson 32,000 1,600,000
Merck & Co., Inc. 9,000 575,190
Pfizer, Inc. 19,250 770,963
Schering-Plough Corp. 14,000 507,360
--------------
6,893,643
--------------
Mortgage Banking (3.40%)
Fannie Mae 15,000 1,277,250
Freddie Mac 15,000 1,050,000
--------------
2,327,250
--------------
Office (1.50%)
Avery Dennison Corp. 20,150 1,028,658
--------------
Oil & Gas (8.22%)
Anadarko Petroleum Corp. 18,000 972,540
Chevron Corp. 17,200 1,556,600
Conoco, Inc. (Class B) 30,000 867,000
Exxon Mobil Corp. 10,184 889,572
Halliburton Co. 23,000 818,800
Royal Dutch Petroleum Co., American Depositary
Receipts (Netherlands) 9,000 524,430
--------------
5,628,942
--------------
Paper & Paper Products (1.55%)
Kimberly-Clark Corp. 19,000 1,062,100
--------------
Retail (2.37%)
Home Depot, Inc. (The) 9,000 418,950
Lowe's Cos., Inc. 7,000 507,850
SYSCO Corp. 16,400 445,260
Target Corp. 7,317 253,168
--------------
1,625,228
--------------
Telecommunications (2.19%)
Verizon Communications 28,000 1,498,000
--------------
Tobacco (1.85%)
Philip Morris Cos., Inc. 25,000 1,268,750
--------------
Utilities (5.48%)
BellSouth Corp. 38,000 1,530,260
SBC Communications, Inc. 22,844 915,130
Xcel Energy, Inc. 46,000 1,308,700
--------------
3,754,090
--------------
TOTAL COMMON STOCKS
(Cost $47,820,735) (76.50%) 52,379,945
-------------- --------------
INTEREST CREDIT PAR VALUE
RATE RATING** (000s OMITTED)
-------------- -------------- --------------
U.S. GOVERNMENT OBLIGATIONS
Government - U.S. (13.85%)
United States Treasury,
Bond 05-15-30 6.25% AAA $2,000 $2,118,420
Bond 02-15-31 5.38 AAA 2,000 1,895,000
Note 09-30-02 5.88 AAA 2,400 2,453,616
Note 02-28-03 4.63 AAA 3,000 3,019,230
--------------
9,486,266
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $9,675,719) (13.85%) 9,486,266
-------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.46%)
Investment in a joint repurchase
agreement transaction with
UBS Warburg, Inc. - Dated
06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds,
10.625% due 08-15-15 and
6.250% due 08-15-23,
U.S. Treasury Note 5.625%
due 11-30-02) 3.97% 6,474 6,474,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $6,474,000) (9.46%) 6,474,000
-------------- --------------
TOTAL INVESTMENTS (99.81%) 68,340,211
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.19%) 127,618
-------------- --------------
TOTAL NET ASSETS (100.00%) $68,467,829
============== ==============
* Non-income producing security.
** Credit ratings by Moody's Investors Service or John Hancock Advisers,
Inc. where Standard & Poor's ratings are not available.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Financial Industries Fund
Investors Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Financial Industries Fund on June 30, 2001. It's divided into two
main categories: common stocks and short-term investments. Common stocks
are further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Banks - Foreign (3.33%)
Banco Popular Espanol SA (Spain) 36,500 $1,275,847
Lloyds TSB Group Plc (United
Kingdom) 145,000 1,450,943
--------------
2,726,790
--------------
Banks - Midwest (7.01%)
Fifth Third Bancorp 57,250 3,437,862
Northern Trust Corp. 36,900 2,306,250
--------------
5,744,112
--------------
Banks - Money Center (5.85%)
Citigroup, Inc. 62,000 3,276,080
J.P. Morgan Chase & Co. 34,000 1,516,400
--------------
4,792,480
--------------
Banks - Northeast (2.60%)
State Street Corp. 43,100 2,133,019
--------------
Banks - Southeast (2.95%)
BB&T Corp. 65,900 2,418,530
--------------
Banks - Superregional (13.62%)
Bank of New York Co., Inc. (The) 44,500 2,136,000
FleetBoston Financial Corp. 66,536 2,624,845
PNC Financial Services Group. 15,000 986,850
U.S. Bancorp 106,260 2,421,665
Wells Fargo & Co. 64,500 2,994,735
--------------
11,164,095
--------------
Banks - West (2.45%)
Zions Bancorp. 34,000 2,006,000
--------------
Broker Services (11.21%)
Goldman Sachs Group, Inc. 26,500 2,273,700
Instinet Group Inc.* 3,450 64,308
Lehman Brothers Holdings, Inc. 32,500 2,526,875
Merrill Lynch & Co., Inc. 40,500 2,399,625
Schwab (Charles) Corp. (The) 126,076 1,928,963
--------------
9,193,471
--------------
Computer - Services (2.96%)
Fiserv, Inc.* 38,000 2,431,240
--------------
Diversified Operations (5.01%)
General Electric Co. 62,000 3,022,500
Tyco International Ltd. 20,000 1,090,000
--------------
4,112,500
--------------
Finance - Consumer Loans (8.92%)
American Express Co. 63,900 2,479,320
Household International, Inc. 42,000 2,801,400
MBNA Corp. 61,650 2,031,368
--------------
7,312,088
--------------
Finance - Investment Management (2.73%)
Amvescap Plc (United Kingdom) 129,000 2,240,601
--------------
Insurance - Brokers (3.51%)
Marsh & McLennan Cos., Inc. 28,300 2,858,300
Willis Group Holdings Ltd.* 1,240 22,010
--------------
2,880,310
--------------
Insurance - Life (4.48%)
AFLAC, Inc. 98,400 3,098,616
American General Corp. 12,400 575,980
--------------
3,674,596
--------------
Insurance - Multi Line (4.10%)
AXA (France) 48,000 1,367,371
Loews Corp. 31,000 1,997,330
--------------
3,364,701
--------------
Insurance - Property & Casualty (9.15%)
Allstate Corp. (The) 46,000 2,023,540
Ambac Financial Group, Inc. 37,750 2,197,050
American International Group, Inc. 38,125 3,278,750
--------------
7,499,340
--------------
Mortgage & Real Estate Services (3.53%)
Fannie Mae 34,000 2,895,100
--------------
TOTAL COMMON STOCKS
(Cost $68,696,240) (93.41%) 76,588,973
-------------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (6.17%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01 due 07-02-01
(Secured by U.S. Treasury Bonds,
10.625% due 08-15-15 and 6.250% due
08-15-23, U.S. Treasury Note 5.625% due
11-30-02) 3.97% $5,059 5,059,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (6.17%) 5,059,000
-------------- --------------
TOTAL INVESTMENTS (99.58%) 81,647,973
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.42%) 341,622
-------------- --------------
TOTAL NET ASETS (100.00%) $81,989,595
============== ==============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Technology Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Technology Fund on June 30, 2001. It is divided into three main
categories: common stocks, rights and short-term investments. Common stocks
are further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Advertising (0.29%)
DoubleClick, Inc.* 4,500 $62,820
--------------
Computer - Graphics (1.38%)
Cadence Design Systems, Inc.* 16,000 298,080
--------------
Computer - Integrated Systems (0.68%)
Redback Networks, Inc.* 16,500 147,180
--------------
Computer - Internet Services (6.18%)
Amazon.com, Inc.* 13,500 191,025
Art Technology Group, Inc.* 11,000 63,800
Exodus Communications, Inc.* 19,500 40,170
Infospace, Inc.* 14,000 53,760
Inktomi Corp.* 2,975 28,530
RealNetworks, Inc.* 9,850 115,738
ScreamingMedia, Inc.* 13,250 39,088
TIBCO Software, Inc.* 7,500 95,775
VeriSign, Inc.* 9,500 570,095
VerticalNet, Inc.* 3,400 8,466
Viant Corp.* 1,700 3,179
Vignette Corp.* 14,000 124,180
--------------
1,333,806
--------------
Computer - Local Networks (3.02%)
Cisco Systems, Inc.* 24,000 436,800
JNI Corp.* 7,000 98,000
Lucent Technologies, Inc. 3,600 22,320
Network Appliance, Inc.* 7,000 95,900
--------------
653,020
--------------
Computer - Memory Devices (6.87%)
EMC Corp.* 17,500 508,375
Emulex Corp.* 10,000 404,000
VERITAS Software Corp.* 8,000 532,240
Western Digital Corp.* 9,400 37,600
--------------
1,482,215
--------------
Computer - Micro/Macro (2.18%)
Dell Computer Corp.* 18,000 470,700
--------------
Computer - Services (0.82%)
Unisys Corp.* 12,000 176,520
--------------
Computer - Software (20.53%)
BEA Systems, Inc.* 15,500 476,005
Citrix Systems, Inc.* 15,500 540,950
i2 Technologies, Inc.* 16,000 316,800
Mercury Interactive Corp.* 10,500 628,950
Networks Associates, Inc.* 4,500 56,025
Oracle Corp.* 18,000 342,000
Parametric Technology Corp.* 23,000 321,770
Rational Software Corp.* 18,000 504,900
Siebel Systems, Inc.* 12,000 562,800
SmartForce Plc,* American Depositary Receipt
(ADR) (Ireland) 9,500 334,685
Sun Microsystems, Inc.* 22,000 345,840
--------------
4,430,725
--------------
Electronics - Components Misc. (6.03%)
Flextronics International Ltd.* (Singapore) 19,500 509,145
Sanmina Corp.* 17,000 397,970
Solectron Corp.* 21,500 393,450
--------------
1,300,565
--------------
Electronics - Products Misc. (0.80%)
Aeroflex, Inc.* 16,500 173,250
--------------
Electronics - Semiconductor Components (26.92%)
Amkor Technology, Inc.* 15,000 331,500
Analog Devices, Inc.* 11,000 475,750
Applied Materials, Inc.* 13,000 638,300
Applied Micro Circuits Corp.* 8,000 137,600
ASM Lithography Holding N.V.* (Netherlands) 15,500 344,875
Atmel Corp.* 20,500 276,545
Cypress Semiconductor Corp.* 22,500 536,625
Integrated Device Technology, Inc.* 15,000 475,350
Intel Corp. 4,000 117,000
KLA-Tencor Corp.* 12,000 701,640
Micron Technology, Inc.* 17,500 719,250
MKS Instruments, Inc.* 11,000 316,800
Novellus Systems, Inc.* 8,000 454,320
PRI Automation, Inc.* 300 5,557
Taiwan Semiconductor Manufacturing Co. Ltd.*
(ADR) (Taiwan) 14,995 227,774
Transmeta Corp.* 9,000 50,220
--------------
5,809,106
--------------
Fiber Optics (3.78%)
CIENA Corp.* 8,000 304,000
Finisar Corp.* 21,000 392,280
JDS Uniphase Corp.* 9,500 118,750
--------------
815,030
--------------
Media - Cable TV (3.93%)
AOL Time Warner, Inc.* 16,000 848,000
--------------
Telecom - Equipment (5.21%)
Ericsson (L.M.) Telephone Co. (Class B)
(ADR) (Sweden) 12,500 67,750
Nokia Corp. (ADR) (Finland) 22,500 495,900
QUALCOMM, Inc.* 9,500 555,560
Tut Systems, Inc.* 3,350 5,561
--------------
1,124,771
--------------
Telecom - Services (1.17%)
Global Crossing Ltd.* (Bermuda) 25,000 216,000
Global Light Telecommunications, Inc.* (Canada) 1,600 3,568
Metromedia Fiber Network, Inc. (Class A)* 13,000 26,520
Primus Telecommunications Group, Inc.* 7,750 6,355
--------------
252,443
--------------
TOTAL COMMON STOCKS
(Cost $26,597,872) (89.79%) 19,378,231
------------- --------------
RIGHTS
Seagate Technology, Inc. 5,200 $0
--------------
TOTAL RIGHTS
(Cost $0) (0.00%) 0
------------- --------------
INTEREST PAR VALUE
RATE (000s OMITTED)
-------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (12.32%)
Investment in a joint repurchase
agreement transaction with
UBS Warburg, Inc. - Dated 06-29-01,
due 07-02-01 (Secured by U.S. Treasury
Bonds, 6.250% thru 10.625% , due
08-15-15 thru 08-15-23 and U.S. Treasury
Notes 5.625% due 11-30-02) 3.97% $2,658 2,658,000
--------------
TOTAL SHORT-TERM INVESTMENTS (12.32%) 2,658,000
-------------- --------------
TOTAL INVESTMENTS (102.11%) 22,036,231
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (2.11%) (454,950)
-------------- --------------
TOTAL NET ASSETS (100.00%) $21,581,281
============== ==============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
Portfolio Concentration
June 30, 2001 (Unaudited)
- ---------------------------------------------------------------------------
The V.A. Technology Fund invests primarily in equity securities of
technology companies in the United States and abroad. The concentration of
investments by industry category for individual securities held by the Fund
is shown in the schedule of investments. In addition, concentration of
investments can be aggregated by various countries. The table below shows
the percentage of the Fund's investments at June 30, 2001 assigned to the
various countries.
MARKET VALUE
AS A % OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- -----------------
Bermuda 1.00%
Canada 0.02
Finland 2.30
Ireland 1.55
Netherlands 1.60
Singapore 2.36
Sweden 0.31
Taiwan 1.06
United States 91.91
-------
TOTAL INVESTMENTS 102.11%
=======
John Hancock Funds - Declaration Trust - V.A. Bond Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Bond Fund on June 30, 2001. It is divided into three main
categories: bonds, preferred stocks and warrants, and short-term
investments. Bonds are further broken down by industry group. Short-term
investments, which represent the Fund's "cash" position, are listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING** (000s OMITTED) VALUE
- ------------------- -------- ------ ------------ -------------
BONDS
Aerospace (0.79%)
BAE Systems Asset Trust,
Pass Thru Ctf Ser 2001 Class B
12-15-11 (R) 7.156% A $245 $245,159
Lockheed Martin Corp.,
Bond 12-01-29 8.500 BBB- 265 292,685
--------------
537,844
--------------
Agricultural Operations (0.35%)
Archer-Daniels-Midland Co.,
Sr Deb 02-01-31 7.000 A+ 155 149,566
Cargill, Inc.,
Note 05-01-06 (R) 6.250 A+ 85 85,163
--------------
234,729
--------------
Automobile/Trucks (1.49%)
Delphi Automotive Systems Corp.,
Note 06-15-06 6.550 BBB 240 239,755
ERAC USA Finance Co.,
Note 02-15-05 (R) 6.625 BBB+ 19 18,866
Note 06-15-08 (R) 7.350 BBB+ 120 119,290
Note 12-15-09 (R) 7.950 BBB+ 200 204,982
Ford Capital, B.V.,
Gtd Deb (Netherlands)
05-15-02 (Y) 9.875 A 50 51,896
Ford Motor Co.,
Note 07-16-31 7.450 A 65 62,460
Honda Auto Receivables Owner Trust,
Pass Thru Ctf Ser 2001-1 Class A-4
06-19-06 5.560 AAA 310 312,226
--------------
1,009,475
--------------
Banks - Foreign (0.76%)
Abbey National First Capital, B.V.,
Sub Note (United Kingdom)
10-15-04 (Y) 8.200 AA- 30 32,298
Barclays Bank Plc,
Sub Note (United Kingdom)
06-15-49 (R) (Y) 7.375# A+ 160 161,600
Royal Bank of Scotland Group Plc,
Bond (United Kingdom)
03-31-49 (Y) 8.817 A- 30 32,116
Scotland International Finance No. 2,
B.V., Gtd Sub Note (Netherlands)
11-01-06 (R) (Y) 8.850 A 95 104,396
UBS Preferred Funding Trust I,
Gtd Bond 10-01-49 8.622# AA- 165 180,799
--------------
511,209
--------------
Banks - United States (1.90%)
Bank of New York,
Cap Security 12-01-26 (R) 7.780 A- 50 50,356
Bank One Corp.,
Sub Note 08-01-10 7.875 A- 70 75,032
BNP Paribas Capital Trust,
Sub Note 12-27-49 (R) 9.003# A 160 175,101
Capital One Bank,
Sr Note 02-01-06 6.875 BBB- 60 58,792
Colonial Bank
Sub Note 06-01-11 9.375 BBB- 115 118,772
HSBC Holding Plc,
Sub Note (United Kingdom)
07-15-09 (Y) 7.500 A 55 57,491
RBSG Capital Corp.,
Gtd Cap Note 03-01-04 10.125 A 15 16,575
Sanwa Bank, Ltd.,
Sub Note 06-15-11 7.400 BBB 135 131,628
Skandinaviska Enskilda,
Jr Sub Note 12-29-49 (R) 6.500# BBB 250 250,493
Zions Financial Corp.,
Note 05-15-11 (R) 6.950# BBB- 350 353,276
--------------
1,287,516
--------------
Beverages (0.22%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 8.750 B+ 30 30,225
Fosters Finance Corp.,
Note 06-15-11 (R) 6.875 BBB+ 120 118,584
--------------
148,809
--------------
Broker Services (0.21%)
Goldman Sachs Group, Inc.,
Bond 01-15-11 6.875 A+ 85 84,464
Salomon Smith Barney Holdings, Inc.,
Note 03-15-06 5.875 A 55 54,552
--------------
139,016
--------------
Building (0.19%)
Vulcan Materials Co.,
Note 02-01-06 6.400 A+ 125 125,734
--------------
Chemicals (1.00%)
Akzo Nobel, Inc.,
Bond 11-15-03 (R) 6.000 A- 45 45,675
Equistar Chemicals L.P./Equistar
Funding Corp.,
Sr Note 02-15-04 8.500 BBB- 130 127,274
Millennium America, Inc.,
Sr Note 06-15-08 (R) 9.250 BBB- 65 65,325
Nova Chemicals Corp.,
Sr Note 05-15-06 7.000 BBB 130 129,180
Potash Corp.,
Note (Canada) 05-31-11 (Y) 7.750 BBB+ 300 311,385
--------------
678,839
--------------
Containers (0.27%)
Sealed Air Corp.,
Gtd Sr Note 07-01-08 (R) 8.750 BBB 80 78,873
Stone Container Corp.,
Sr Note 02-01-11 (R) 9.750 B 100 102,000
--------------
180,873
--------------
Cosmetics & Personal Care (0.17%)
International Flavors & Fragrances, Inc.,
Note 05-15-06 (R) 6.450 BBB+ 115 114,976
--------------
Energy (0.45%)
Enron Corp.,
Note 08-15-05 (R) 8.000 BBB+ 60 61,564
MidAmerican Energy Holdings,
Sr Bond 09-15-28 8.480 BBB- 60 64,083
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 24 25,140
Progress Energy, Inc.,
Sr Note 03-01-11 7.100 BBB 150 150,944
--------------
301,731
--------------
Finance (3.57%)
American Express Credit Account
Master Trust, Pass Thru Ctf
Ser 2000-1 Class A 09-17-07 7.200 AAA 280 296,624
Boeing Capital Corp.,
Sr Note 03-01-11 6.100 AA- 185 180,453
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 A- 30 30,324
Citigroup, Inc.,
Note 01-18-11 6.500 AA- 155 153,726
Ford Motor Credit Co.,
Note 02-01-06 6.875 A 140 142,713
General Motors Acceptance Corp.,
Note 07-15-05 7.500 A 60 62,997
Heller Financial, Inc.,
Sr Note 03-15-06 6.375 A- 115 116,006
Household Finance Corp.,
Sr Note 05-09-05 8.000 A 115 122,880
Note 01-24-06 6.500 A 150 152,407
Note 07-15-10 8.000 A 55 59,150
ING Capital Funding Trust III,
Gtd Trust Preferred Security
12-31-49 8.439# A 50 52,944
Marlin Water Trust/Marlin Water
Capital Corp.,
Sr Sec Note 12-15-01 (R) 7.090 BBB 30 30,263
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB+ 150 165,375
Pemex Project Funding Master Trust,
Gtd Bond 10-13-10 (R) 9.125 BB+ 190 199,346
Standard Credit Master Trust,
Ser 1995-1 Class A 01-07-07 8.250 AAA 400 433,124
Takefuji Corp.,
Sr Note (Japan) 04-15-11 (R) (Y) 9.200 A- 95 98,023
Verizon Global Funding Corp.,
Bond 12-01-30 (R) 7.750 A+ 110 114,510
Yanacocha Receivables Master Trust,
Pass Thru Ctf Ser 1997-A
06-15-04 (R) 8.400 BBB- 3 2,783
--------------
2,413,648
--------------
Food (0.08%)
Earthgrains Co. (The),
Sr Note 08-01-03 8.375 BBB 50 51,335
--------------
Government - Foreign (1.08%)
Brazil, Federal Republic of,
Bond (Brazil) 04-15-14 (Y) 8.000 BB- 339 250,592
Colombia, Republic of,
Gtd Note (Colombia) 04-09-11 (Y) 9.750 BBB 135 137,700
Nova Scotia, Province of,
Deb (Canada) 11-15-19 (Y) 8.250 A- 20 23,190
Quebec, Government of,
Deb (Canada) 01-22-11 (Y) 6.125 A+ 105 102,162
Quebec, Province of,
Deb (Canada) 09-15-29 (Y) 7.500 A+ 205 218,645
--------------
732,289
--------------
Government - U.S. (28.15%)
United States Treasury,
Bond 08-15-17 8.875 AAA 277 363,607
Bond 02-15-23 7.125 AAA 675 773,928
Bond 05-15-30 6.250 AAA 4,085 4,326,873
Infl Indxd Note 01-15-07 3.375 AAA 541 550,347
Note 08-15-03 5.750 AAA 5,655 5,815,772
Note 02-15-05 7.500 AAA 2,295 2,497,603
Note 07-15-06 7.000 AAA 1,582 1,715,980
Note 05-15-08 5.625 AAA 1,145 1,190,079
Note 08-15-10 5.750 AAA 1,780 1,821,207
--------------
19,055,396
--------------
Government - U.S. Agencies (29.71%)
Federal National Mortgage Assn.,
15 Yr Pass Thru Ctf
12-01-12 to 05-01-16 6.500 AAA 2,420 2,427,789
15 Yr Pass Thru Ctf
11-01-14 to 02-01-16 7.000 AAA 904 920,088
15 Yr Pass Thru Ctf 12-01-14 5.500 AAA 516 498,568
15 Yr Pass Thru Ctf
05-01-16 to 06-01-16 6.000 AAA 1,273 1,228,800
Note 03-15-11 5.500 AAA 1,780 1,692,104
Note 01-15-30 7.125 AAA 1,650 1,758,784
Pass Thru Ctf Ser 1997-M8
Class A-1 01-25-22 6.940 AAA 3 2,628
30 Yr Pass Thru Ctf
06-01-30 to 02-01-31 7.500 AAA 1,330 1,358,115
30 Yr Pass Thru Ctf
12-01-30 to 06-01-31 7.000 AAA 1,795 1,782,649
30 Yr Pass Thru Ctf
02-01-31 to 05-01-31 6.000 AAA 179 174,590
Government National Mortgage Assn.,
30 Yr Pass Thru Ctf 07-15-26 8.000 AAA 20 21,180
30 Yr Pass Thru Ctf
04-15-28 to 06-15-29 6.500 AAA 2,405 2,381,979
30 Yr Pass Thru Ctf
08-15-28 to 06-15-31 7.000 AAA 3,857 3,901,733
30 Yr Pass Thru Ctf 12-15-30 7.500 AAA 1,915 1,964,829
--------------
20,113,836
--------------
Insurance (0.67%)
AXA,
Sub Note (France) 12-15-30 (Y) 8.600 A- 95 106,238
Equitable Life Assurance Society USA,
Surplus Note 12-01-05 (R) 6.950 A+ 15 15,499
Hartford Life, Inc.,
Sr Note 03-01-31 7.375 A 55 55,370
Massachusetts Mutual Life Insurance Co.,
Surplus Note 11-15-23 (R) 7.625 AA 5 5,075
MONY Group, Inc. (The),
Sr Note 12-15-05 7.450 A- 215 220,313
New York Life Insurance Co.,
Surplus Note 12-15-23 (R) 7.500 AA- 5 4,878
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 AA- 20 21,046
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 AA+ 25 27,056
--------------
455,475
--------------
Leisure (0.68%)
Harrah's Operating Co., Inc.,
Note 06-01-07 (R) 7.125 BBB- 180 177,475
Gtd Sr Sub Note 12-15-05 7.875 BB+ 40 40,600
HMH Properties, Inc.,
Gtd Sr Sec Note Ser A 08-01-05 7.875 BB 30 29,325
MGM Mirage, Inc.,
Gtd Sr Note 09-15-10 8.500 BBB- 165 172,135
Station Casinos, Inc.,
Sr Note 02-15-08 8.375 BB- 20 20,100
Waterford Gaming LLC/Waterford
Gaming Finance Corp.,
Sr Note 03-15-10 (R) 9.500 B+ 20 19,600
--------------
459,235
--------------
Media (2.96%)
Adelphia Communications Corp.,
Sr Note 03-01-05 9.500 B+ 80 77,600
Sr Note 06-15-11 10.250 B+ 75 72,937
Sr Note Ser B 10-01-02 9.250 B+ 17 17,170
Sr Note Ser B 07-15-03 8.125 B+ 15 14,475
AOL Time Warner, Inc.,
Bond 04-15-31 7.625 BBB+ 165 164,959
British Sky Broadcasting Group Plc,
Gtd Sr Note (United Kingdom)
07-15-09 (Y) 8.200 BB+ 40 39,550
Charter Comm. Holdings, LLC/Charter
Comm. Holdings Capital Corp.,
Sr Note 01-15-11 11.125 B+ 20 21,000
Sr Note 05-15-11 (R) 10.000 B+ 60 60,000
Clear Channel Communications, Inc.,
Sr Note 06-15-05 7.875 BBB- 320 335,133
Continental Cablevision, Inc.,
Sr Note 05-15-06 8.300 A 120 129,203
CSC Holdings, Inc.,
Sr Note 04-01-11 (R) 7.625 BB+ 185 176,175
Sr Sub Deb 05-15-16 10.500 BB- 20 22,050
EchoStar DBS Corp.,
Sr Note 02-01-09 9.375 B+ 35 34,125
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 45 41,850
Jones Intercable, Inc.,
Sr Note 04-15-08 7.625 BBB 90 92,255
Lenfest Communications, Inc.,
Sr Note 11-01-05 8.375 BBB 40 43,022
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 8.500 B+ 20 18,900
Sr Note 01-15-13 (R) 9.500 B+ 85 81,387
News America Holdings, Inc.,
Gtd Sr Deb 08-10-18 8.250 BBB- 125 126,495
News America, Inc.,
Gtd Sr Note 04-30-28 7.300 BBB- 55 49,284
TCI Communications, Inc.,
Sr Deb 02-15-26 7.875 A 155 156,310
Time Warner, Inc.,
Deb 01-15-13 9.125 BBB+ 58 66,402
Viacom, Inc.,
Gtd Sr Note 01-30-06 6.400 A- 80 81,114
Gtd Sr Note 01-30-06 (R) 6.400 A- 85 85,000
--------------
2,006,396
--------------
Medical (1.15%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 (Y) 10.750 B+ 37 37,555
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security
02-01-08 7.875 B+ 10 9,750
Fresenius Medical Care Capital Trust IV,
Gtd Trust Preferred Security
06-15-11 (R) 7.875 B+ 95 92,625
HCA - The Healthcare Co.,
Sr Note 06-01-06 7.125 BB+ 340 332,772
Note 09-01-10 8.750 BB+ 35 37,187
HEALTHSOUTH Corp.,
Sr Note 02-01-08 8.500 BBB- 55 55,412
Quest Diagnostic, Inc.,
Gtd Sr Note 07-12-06 6.750 BBB- 135 133,694
Tenet Healthcare Corp.,
Sr Note 01-15-05 8.000 BB+ 20 20,525
Triad Hospitals, Inc.,
Gtd Sr Note 05-01-09 (R) 8.750 B- 60 61,050
--------------
780,570
--------------
Metal (0.48%)
Newmont Mining Corp.,
Note 05-15-11 8.625 BBB 100 98,155
Phelps Dodge Corp.,
Sr Note 06-01-11 8.750 BBB 150 148,447
WMC Finance (USA), Ltd.,
Gtd Note (Australia) 11-15-03 (Y) 6.500 A 80 81,391
--------------
327,993
--------------
Mortgage Banking (2.47%)
AMRESCO Residential Securities Corp.
Mortgage Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-6
08-25-27 6.510 AAA 143 144,462
Citibank Credit Card Master Trust I,
Class A Credit Card Part Cert
Ser 1997-2 02-15-04 6.550 AAA 130 131,665
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1
Class A-1 08-15-08 6.790 Aaa 70 72,135
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2
Class A-5 08-15-25 8.100 AAA 9 8,947
Credit Suisse First Boston Mortgage
Securities Corp.,
Commercial Mtg Pass Thru Ctf
Ser 1998-C1 Class A-1A 12-17-07 6.260 AAA 239 242,101
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9
02-15-29 6.570 AAA 145 146,029
GMAC Commercial Mortgage
Securities, Inc.,
Pass Thru Ctf Ser 1997-C1 Class A-2
07-15-29 6.853 Aaa 50 51,484
Pass Thru Ctf Ser 1998-C1 Class A-1
05-15-30 6.411 Aaa 244 246,751
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4
03-20-25 6.600 AAA 15 15,112
LB Commercial Conduit Mortgage Trust,
Pass Thru Ctf Ser 1999-C1 Class A-1
08-15-07 6.410 Aaa 50 51,424
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7
12-15-38 6.485 AAA 15 15,019
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class A-1
10-15-06 (R) 6.830 AAA 217 223,581
Pass Thru Ctf Ser 1999-CAM1 Class A-3
11-15-08 6.920 AAA 140 143,948
Salomon Brothers Mortgage
Securities VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2
Class A-2 07-25-24 6.750 Aaa 6 6,022
Saxon Asset Securities Trust,
Pass Thru Ctf Ser 2000-2 Class AF-2
06-25-15 7.965 AAA 105 106,804
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8
06-15-28 7.220 AAA 8 8,313
Pass Thru Ctf Ser 1997-B Class A-6
10-15-28 6.900 AAA 56 57,666
--------------
1,671,463
--------------
Oil & Gas (1.22%)
Alberta Energy Co., Ltd.,
Note (Canada) 09-15-30 (Y) 8.125 BBB+ 200 218,028
Anadarko Petroleum Corp.,
Deb 05-15-28 7.150 BBB+ 75 72,898
Chesapeake Energy Corp.,
Gtd Sr Note 04-01-11 (R) 8.125 B+ 45 41,962
Forest Oil Corp.,
Sr Note 06-15-08 (R) 8.000 BB 80 78,000
Louis Dreyfus Natural Gas Corp.,
Note 12-01-07 6.875 BBB 40 39,764
Occidental Petroleum Corp.,
Sr Deb 09-15-09 10.125 BBB- 15 17,936
Ocean Energy, Inc.,
Gtd Sr Sub Note Ser B 07-15-07 8.875 BB+ 20 21,070
Petrobras International Finance Co.,
Sr Note 07-06-11 (R)+ 9.750 Baa1 70 69,825
Petroleum Geo-Services ASA,
Sr Note (Norway) 03-30-28 (Y) 7.125 BBB- 50 41,356
Santa Fe Snyder Corp.,
Sr Sub Note 06-15-07 8.750 BBB+ 20 21,254
Transocean Sedco Forex, Inc.,
Note 04-15-31 (R) 7.500 A- 115 115,139
Valero Energy Corp.,
Note 06-15-05 8.375 BBB- 80 85,584
--------------
822,816
--------------
Paper & Paper Products (1.34%)
Georgia-Pacific Corp.,
Sr Note 05-15-06 7.500 BBB- 120 120,336
Sr Note 05-15-31 8.875 BBB- 135 136,505
International Paper Co.,
Sr Note 07-08-05 8.125 BBB 260 274,950
Stora Enso Oyj,
Sr Note (Finland) 05-15-11 (Y) 7.375 BBB+ 370 375,391
--------------
907,182
--------------
Real Estate Operations (0.31%)
EOP Operating, L.P.,
Sr Note 02-15-05 6.625 BBB+ 170 172,827
Liberty Property, L.P.,
Med Term Note 06-05-02 6.600 BBB 40 40,300
--------------
213,127
--------------
Real Estate Investment Trust (0.62%)
Cabot Industrial Properties, L.P.,
Note 05-01-04 7.125 BBB 25 25,319
Camden Property Trust,
Sr Note 04-15-04 7.000 BBB 30 30,510
Health Care Property Investors, Inc.,
Note 01-15-07 7.500 BBB+ 20 19,450
Healthcare Realty Trust, Inc.,
Sr Note 05-01-11 8.125 BBB- 105 105,262
Mack-Cali Realty, L.P.,
Sr Note 02-15-11 7.750 BBB 210 212,102
ProLogis Trust,
Sr Note 04-15-04 6.700 BBB+ 25 25,355
--------------
417,998
--------------
Retail (0.60%)
Delhaize America Inc.,
Note 04-15-11 (R) 8.125 BBB- 110 114,325
Kmart Corp.,
Sr Note 06-15-08 (R) 9.875 BB+ 125 122,812
Kohl's Corp.,
Note 03-01-11 (R) 6.300 A- 170 170,326
--------------
407,463
--------------
Telecommunications (4.48%)
AT&T Canada, Inc.,
Sr Disc Note, Step Coupon
(10.750%, 11-01-02) (Canada)
11-01-07 (A) Zero BBB 135 127,836
Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 15 16,350
AT&T Wireless Group,
Sr Note 03-01-31 (R) 8.750 BBB 260 270,150
BellSouth Capital Funding Corp.,
Deb 02-15-30 7.875 AA- 80 85,398
Citizens Communications Co.,
Sr Note 05-15-06 8.500 BBB 115 118,050
Sr Note 05-15-11 9.250 BBB 115 120,778
Cox Communications, Inc.,
Note 11-01-10 7.750 BBB 155 162,359
Crown Castle International Corp.,
Sr Note 05-15-11 9.000 B 30 26,400
Sr Note 08-01-11 (R) 9.375 B 65 58,012
Deutsche Telekom International
Finance B.V., Gtd Bond (Netherlands)
06-15-05 (Y) 7.750 A- 230 240,295
Gtd Bond (Netherlands)
06-15-30 (Y) 8.250 A- 130 131,891
Dominion Resources, Inc.,
Sr Note Ser A 06-15-10 8.125 BBB+ 60 64,725
France Telecom,
Bond (France) 03-01-31 (R) (Y) 8.500 A- 195 204,368
LCI International, Inc.,
Sr Note 06-15-07 7.250 BBB+ 30 29,945
Qwest Capital Funding, Inc.,
Bond 02-15-31 (R) 7.750 BBB+ 260 254,072
Sprint Capital Corp.,
Gtd Note 01-30-06 7.125 BBB+ 120 120,824
Gtd Sr Note 11-15-28 6.875 BBB+ 200 168,076
Telefonos de Mexico S.A. de C.V.,
Sr Note (Mexico) 01-26-06 (R) (Y) 8.250 BB+ 200 206,500
Telus Corp.,
Note 06-01-11 8.000 BBB+ 200 203,000
Triton PCS, Inc.,
Gtd Sr Sub Note 02-01-11 9.375 B- 30 28,800
VoiceStream Wireless Corp.,
Sr Note 09-15-09 11.500 A- 20 23,000
WorldCom, Inc.,
Bond 05-15-31 8.250 BBB+ 135 135,498
Note 05-15-06 8.000 BBB+ 225 233,154
--------------
3,029,481
--------------
Transportation (1.39%)
America West Airlines,
Pass Thru Ctf Ser 1996-1B
01-02-08 6.930 A- 3 3,275
Burlington Northern Santa Fe Corp.,
Deb 08-15-30 7.950 BBB+ 255 268,849
Continental Airlines, Inc.,
Pass Thru Ctf Ser 1997-2C
06-30-04 7.206 BBB 102 105,177
Pass Thru Ctf Ser 1999-1A
02-02-19 6.545 AA+ 56 54,377
Delta Air Lines, Inc.,
Note 12-15-05 7.700 BBB- 100 98,336
Northwest Airlines, Inc.,
Gtd Note 03-15-04 8.375 BB 25 24,571
Gtd Note 06-01-06 8.875 BB 115 109,250
Pass Thru Ctf Ser 1996-1D
01-02-15 8.970 BBB- 4 4,544
NWA Trust,
Sr Note Ser A 12-21-12 9.250 AA 36 39,337
Railcar Trust No. 1992-1,
Pass Thru Ser 1992-1 Class A
06-01-04 7.750 AAA 54 56,053
United Air Lines, Inc.,
Pass Thru Ctf Ser 2000-1 Class A-1
01-01-14 7.783 AAA 71 72,830
Pass Thru Ctf Ser 2000-2 Class A-1
04-01-12 7.032 AAA 66 66,184
US Airways, Inc.,
Pass Thru Ctf Ser 1990-A1
03-19-05 11.200 BB- 29 29,953
Wisconsin Central Transportation Corp.,
Note 04-15-08 6.625 BBB- 8 7,837
--------------
940,573
--------------
Utilities (4.13%)
AES Corp.,
Sr Note 06-01-09 9.500 BB 35 35,700
Sr Note 09-15-10 9.375 BB 20 20,200
Sr Sub Note 07-15-06 10.250 B+ 10 10,250
AES Eastern Energy, L.P.,
Pass Thru Ctf Ser 1999-A
01-02-17 9.000 BBB- 25 25,440
Avon Energy Partners Holdings,
Sr Note (United Kingdom)
12-11-02 (R) (Y) 6.730 BBB+ 40 40,201
Beaver Valley Funding Corp.,
Deb 06-01-07 8.625 BB- 60 62,098
Sec Lease Oblig Bond 06-01-17 9.000 BB- 23 25,188
BVPS II Funding Corp.,
Collateralized Lease Bond
06-01-17 8.890 BB- 5 5,521
Calpine Canada Energy Finance ULC,
Gtd Sr Note (Canada) 05-01-08 (Y) 8.500 BB+ 75 72,619
Calpine Corp.,
Sr Note 08-15-05 8.250 BB+ 65 64,215
Sr Note 04-01-08 7.875 BB+ 15 14,550
Sr Note 02-15-11 8.500 BB+ 60 57,625
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 BB+ 45 46,575
Sr Sec Note Ser D 11-01-17 7.880 BB+ 20 19,583
CMS Energy Corp.,
Sr Note 05-15-02 8.125 BB 60 60,588
Sr Note 10-15-07 9.875 BB 15 15,825
Sr Note 04-15-11 8.500 BB 25 24,262
Sr Note Ser B 01-15-04 6.750 BB 55 52,525
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 BBB- 38 41,325
Exelon Generation Co., LLC,
Sr Note 06-15-11 (R) 6.950 A- 245 244,811
GG1B Funding Corp.,
Deb 01-15-11 7.430 BBB- 23 23,149
HQI Transelec Chile SA,
Sr Note (Chile) 04-15-11 (R) (Y) 7.875 A- 130 129,499
Hydro-Quebec,
Gtd Bond Ser HY (Canada)
01-15-22 (Y) 8.400 A+ 20 23,040
Iberdrola International B.V.,
Note 10-01-02 7.500 AA- 35 36,136
KeySpan Corp.,
Sr Note 11-15-30 8.000 A 60 64,295
Long Island Lighting Co.,
Deb 03-15-23 8.200 A- 40 41,000
Mirant Americas Generation, Inc.,
Pass Thru Ctf Ser MIR 2001-14
06-15-04 (R) 7.200 BBB- 240 239,282
Sr Note 05-01-11 (R) 8.300 BBB- 100 100,279
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 43 44,418
Northeast Utilities,
Note Ser A 12-01-06 8.580 BBB 6 6,495
NRG Energy, Inc.,
Sr Note 04-01-11 7.750 BBB- 200 202,766
Pinnacle Partners,
Sr Note 08-15-04 (R) 8.830 BBB- 85 86,548
Pinnacle West Capital Corp.,
Sr Note 04-01-06 6.400 BBB 85 83,815
PNPP II Funding Corp.,
Deb 05-30-16 9.120 BB- 40 43,142
PSEG Energy Holdings, Inc.,
Sr Note 02-15-08 (R) 8.625 BBB- 55 55,623
PSEG Power LLC,
Sr Note 04-15-31 (R) 8.625 BBB 130 139,766
Sierra Pacific Power Co.,
1st Mtg Note 06-01-08 (R) 8.000 BBB+ 330 332,277
Sierra Pacific Resources,
Note 05-15-05 8.750 BBB- 45 45,879
TXU Electric Capital V,
Gtd Capital Sec 01-30-37 8.175 BBB- 35 34,428
Waterford 3 Funding Corp.,
Sec Lease Oblig Bond 01-02-17 8.090 BBB- 56 57,528
Xcel Energy, Inc.,
Sr Note 12-01-10 7.000 BBB+ 70 70,198
--------------
2,798,664
--------------
Waste Disposal Service & Equip. (0.04%)
Waste Management, Inc.,
Sr Note 08-01-10 7.375 BBB 30 29,935
--------------
TOTAL BONDS
(Cost 62,794,573) (92.93%) 62,905,626
--------- --------------
NUMBER OF
SHARES OR
WARRANTS
---------
PREFERRED STOCKS AND WARRANTS
CSC Holdings, Inc., 11.125% Ser M,
Preferred Stock 1,040 111,020
CSC Holdings, Inc., 11.750%, Ser H,
Preferred Stock 1,175 124,550
MetroNet Communications Corp.,
Warrant (Canada) (R) (Y)* 5 475
--------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $234,875) (0.35%) 236,045
--------- --------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (9.25%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds, 6.250%
thru 10.625%, due 08-15-15 thru 08-15-23
and U.S. Treasury Notes, 5.625%, due 11-30-02) 3.970% $6,265 6,265,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (9.25%) 6,265,000
-------------- --------------
TOTAL INVESTMENTS (102.53%) 69,406,671
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (2.53%) (1,714,810)
-------------- --------------
TOTAL NET ASSETS (100.00%) $67,691,861
============== ==============
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(R) These securities are exempt from registration under Rule 144A of
the Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from
registration. Rule 144A securities amounted to $6,955,627 or 10.28% of
net assets as of June 30, 2001.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U. S. dollar denominated.
* Non-income producing security.
** Credit ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investor Services or John Hancock Advisers, Inc.,
where Standard & Poor's ratings are not available.
*** A portion of these securities having an aggregate value of $424,471
or 0.63% of the Fund's net assets has been purchased as forward
commitments - that is, the Fund has agreed on trade date to take
delivery of and to make payment for this security on a delayed basis
subsequent to the date of this schedule. The purchase price and interest
rate of these securities are fixed at trade date, although the Fund does
not earn any interest on these securities until settlement date. The
Fund has instructed its Custodian Bank to segregate assets with a
current value at least equal to the amount of the forward commitments.
Accordingly, the market value of $433,997 of United States Treasury
Note, 5.750%, 08-15-03, has been segregated to cover the forward
commitments.
+ A portion of this security having an aggregate value of $59,849 or
0.09% of the Fund's net assets, has been purchased on a when-issued
basis. The purchase price and the interest rate of this security is
fixed at trade date, although the Fund does not earn any interest on
this security until settlement date. The Fund has instructed its
Custodian Bank to segregate assets with a current value at least equal
to the amount of its when-issued commitment. Accordingly, the market
value of $61,706 of United States Treasury Note, 5.750%, 08-15-03, has
been segregated to cover the when-issued commitment.
# Represents rate in effect on June 30, 2001.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Money Market Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Money Market Fund on June 30, 2001.
INTEREST QUALITY PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- -------- ------ -------------- --------------
COMMERCIAL PAPER
Banks - Foreign (7.23%)
Abbey National North America Corp.,
07-12-01 4.630% Tier 1 $2,500 $2,496,463
Deutsche Bank Financial,
07-09-01 4.635 Tier 1 4,000 3,995,880
UBS Finance, Inc.,
08-08-01 5.000 Tier 1 3,900 3,879,417
--------------
10,371,760
--------------
Banks - United States (3.19%)
Wells Fargo,
08-02-01 4.500 Tier 1 4,600 4,581,600
--------------
Beverages (3.81%)
Coca Cola Co.,
08-17-01 4.110 Tier 1 5,500 5,470,488
--------------
Broker Services (3.42%)
Goldman Sachs Group, L.P.,
01-07-02 3.720 Tier 1 5,000 4,901,833
--------------
Building (2.77%)
Halifax Group Plc,
08-23-01 4.140 Tier 1 4,000 3,975,620
--------------
Chemicals (2.63%)
Dow Chemical Co.,
07-06-01 4.220 Tier 1 3,778 3,775,786
--------------
Finance (8.32%)
CIT Group Holdings, Inc.,
09-13-01 3.680 Tier 1 7,000 6,947,049
Household Financial Corp.,
07-09-01 4.550 Tier 1 5,000 4,994,945
--------------
11,941,994
--------------
Insurance (3.48%)
American General Corp.,
07-16-01 4.630 Tier 1 5,000 4,990,354
--------------
Mortgage Banking (4.86%)
Countrywide Home Loans,
07-27-01 3.770 Tier 1 7,000 6,980,941
--------------
TOTAL COMMERCIAL PAPER
(Cost $56,990,376) (39.71%) 56,990,376
-------------- --------------
CORPORATE INTEREST-BEARING OBLIGATIONS
Banks - United States (2.11%)
First Chicago NBD Corp.,
11-01-01 6.300 Tier 1 3,000 3,024,748
--------------
Finance (5.20%)
Associates Corp. of N. A.,
10-15-01 6.450 Tier 1 4,415 4,446,933
General Electric Capital Corp.,
09-17-01 6.330 Tier 1 3,000 3,014,754
--------------
7,461,687
--------------
TOTAL CORPORATE INTEREST-BEARING OBLIGATIONS
(Cost $10,486,435) (7.31%) 10,486,435
-------------- --------------
U.S. GOVERNMENT OBLIGATIONS
Government - U.S. Agencies (39.56%)
Federal Home Loan Bank,
07-18-01 4.650 Tier 1 5,000 4,989,021
08-01-01 4.060 Tier 1 6,400 6,377,625
08-09-01 8.220 Tier 1 1,000 1,002,967
02-01-02 6.750 Tier 1 2,135 2,170,842
Federal Home Loan Mortgage Corp.,
07-05-01 4.570 Tier 1 5,000 4,997,461
08-09-01 3.880 Tier 1 6,500 6,472,678
Federal National Mortgage Assn.,
07-05-01 4.570 Tier 1 3,000 2,998,477
08-09-01 3.850 Tier 1 13,000 12,945,779
08-16-01 3.860 Tier 1 6,000 5,970,407
11-08-01 3.870 Tier 1 7,000 6,902,175
04-19-02 3.770 Tier 1 2,000 1,938,842
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $56,766,274) (39.56%) 56,766,274
-------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (13.31%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bond, 6.875%
due 08-15-25 and U.S. Treasury Note,
5.625% due 11-30-02) 3.970% 19,099 19,099,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (13.31%) 19,099,000
-------------- --------------
TOTAL INVESTMENTS (99.89% 143,342,085
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.11%) 152,757
-------------- --------------
TOTAL NET ASSETS (100.00%) $143,494,842
============== ==============
* Quality ratings indicate the categories of eligible securities, as
defined by Rule 2a-7 of the Investment Company Act of 1940, owned by the
Fund.
The percentage shown for each investment category is the total value of
that category expressed as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Strategic Income Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Strategic Income Fund on June 30, 2001. It is divided into four
main categories: bonds, common stocks, preferred stocks and warrants, and
short-term investments. Bonds are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are
listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING* (000s OMITTED) VALUE
- -------------------------- -------- ------ -------------- --------------
BONDS
Advertising (0.19%)
Go Outdoor Systems Holding S.A.,
Sr Sub Note (France)
07-15-09 (E) 10.500% B- $100 $99,099
--------------
Banks - United States (0.39%)
Colonial Bank,
Sub Note 06-01-11 9.375 BBB- 200 206,560
--------------
Chemicals (0.52%)
Huntsman ICI Chemicals LLC,
Sr Sub Note 07-01-09 10.125 B 150 147,000
Trikem S.A.,
Bond (Brazil) 07-24-07 (R) (Y) 10.625 B+ 200 130,000
--------------
277,000
--------------
Electronics (0.16%)
Communications Instruments, Inc.,
Sr Sub Note Ser B 09-15-04 10.000 B- 100 86,000
--------------
Energy (0.13%)
AEI Resources, Inc./AEI Resources
Holdings, Inc.,
Note 12-15-05 (B) (R) 10.500 D 100 70,000
--------------
Finance (0.17%)
PTC International Finance II S.A.,
Sr Sub Note (Luxembourg)
12-01-09 (E) (R) 11.250 B+ 100 88,088
--------------
Food (0.34%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B- 200 182,000
--------------
Government - Foreign (24.66%)
Arabia, Republic of,
Bond (Egypt) 07-11-11 (Y) 8.750 BBB- 300 301,800
Brazil, Federative Republic of,
Bond (Brazil) 01-11-06 (Y) 10.250 BB- 300 288,000
Bond (Brazil) 03-06-30 (Y) 12.250 BB- 750 631,500
Deb (Brazil) 04-15-14 (Y) 8.000 BB- 677 501,184
Unsub Note (Brazil) 07-26-07 (Y) 11.250 BB- 100 96,250
Unsub Note (Brazil) 10-15-09 (Y) 14.500 BB- 700 728,000
Bulgaria, Government of,
Bond (Variable Rate after
07-01-00) (Bulgaria) 07-28-12 (Y) 3.000 B+ 880 715,000
Canada, Government of,
Bond (Canada) 12-01-02 # 6.000 AA+ 275 184,246
Bond (Canada) 12-01-05 # 8.750 AAA 300 221,478
Bond (Canada) 12-01-06 # 7.000 AAA 2,000 1,396,372
Bond (Canada) 06-01-08 # 6.000 AAA 250 167,035
Bond (Canada) 06-01-09 # 5.500 AAA 750 483,344
Bond (Canada) 06-01-10 # 5.500 AA+ 575 368,857
Bond (Canada) 06-01-29 # 5.750 AA+ 75 47,691
Colombia, Republic of,
Note (Colombia) 06-13-06 (Y) 10.500 BB 300 309,258
Note (Colombia) 04-09-11 (Y) 9.750 BBB 500 510,000
Mexican, United States
Bond (Mexico) 03-12-13 (E) 7.375 BB+ 500 429,268
Note (Mexico) 01-14-11 (Y) 8.375 BB+ 475 477,375
Sr Note (Mexico) 03-12-08 (Y) 8.625 BB+ 250 259,500
New Zealand, Government of,
Bond (New Zealand) 04-15-03 # 5.500 AAA 500 199,650
Bond (New Zealand) 11-15-11 # 6.000 AAA 500 190,972
Panama, Republic of, Bond (Panama)
02-08-11 (Y) 9.625 BB+ 1,000 1,010,000
Peru, Republic of,
Deb (Variable Rate after 03-07-07)
(Peru) 03-07-17 (Y) 4.000 BB- 800 500,000
Russia, Federation of,
Unsub Note (Russia) 06-26-07 (Y) 10.000 B- 1,135 1,010,150
Unsub Note (Russia) 07-24-18 (Y) 11.000 B 1,125 973,125
Unsub Note (7.50% 03-31-07)
(Russia) 03-31-30 (Y) 5.000 B 650 307,450
Venezuela, Republic of,
Floating Rate Bond Ser DL (Venezuela)
12-18-07 (Y) 7.375 B 310 258,449
Bond (Venezuela) 09-15-27 (Y) 9.250 B 675 465,750
--------------
13,031,704
--------------
Government - U.S. (39.23%)
United States Treasury,
Bond 08-15-01 13.375 AAA 6,700 6,776,447
Bond 08-15-05 6.500 AAA 400 423,436
Bond 08-15-05 10.750 AAA 400 485,000
Bond 02-15-16 9.250 AAA 615 820,447
Bond 08-15-19 8.125 AAA 1,090 1,357,213
Bond 08-15-23 6.250 AAA 600 624,372
Bond 11-15-28 5.250 AAA 2,000 1,826,880
Note 08-31-02 6.250 AAA 3,870 3,967,369
Note 08-15-04 7.250 AAA 590 633,330
Note 05-15-05 6.500 AAA 1,300 1,374,542
Note 08-15-07 6.125 AAA 940 985,675
Note 02-15-11 5.000 AAA 1,500 1,455,225
--------------
20,729,936
--------------
Leisure (2.18%)
Ameristar Casinos, Inc.,
Sr Sub Note 02-15-09 (R) 10.750 B- 200 208,500
HMH Properties, Inc.,
Sr Note Ser B 08-01-08 7.875 BB 100 94,000
Jupiters Ltd.,
Sr Note (Australia) 03-01-06 (Y) 8.500 BB+ 150 147,750
Penn National Gaming, Inc.,
Sr Sub Note 03-01-08 (R) 11.125 B- 200 207,000
Station Casinos, Inc.,
Sr Note 02-15-08 (R) 8.375 BB- 200 201,000
Sun International Hotels Ltd.,
Sr Sub Note (Bahamas)
12-15-07 (Y) 8.625 B+ 100 100,500
Waterford Gaming LLC,
Sr Note 03-15-10 (R) 9.500 B+ 199 195,020
--------------
1,153,770
--------------
Machinery (0.17%)
Columbus McKinnon Corp.,
Sr Sub Note 04-01-08 8.500 B 100 87,000
--------------
Media (5.25%)
Adelphia Communications Corp.,
Sr Note 06-15-11 10.250 B+ 350 340,375
AMFM Operating, Inc.,
Sr Sub Deb 10-31-06 12.625 B- 64 71,025
Callahan Nordheim-Westfalen GmbH
Sr Note (Germany) 07-15-11 (E) 14.125 B- 500 353,622
Charter Communications Holdings LLC/
Charter Comm. Holdings Capital Corp.,
Sr Note 01-15-11 11.125 B+ 300 315,000
Sr Note 05-15-11 (R) 10.000 B+ 200 200,000
Diamond Holdings Plc,
Bond (United Kingdom)
02-01-08 # 10.000 B- 50 52,826
DIVA Systems Corp.,
Sr Disc Note Ser B, Step Coupon
(12.625%, 03-01-03)
03-01-08 (A) Zero B- 250 35,000
Fox Kids Worldwide, Inc.,
Sr Disc Note, Step Coupon
(10.25% 11-15-02) 11-01-07 (A) Zero B 400 356,000
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 B+ 200 186,000
Sr Sub Note Ser B 10-01-09 8.750 B+ 200 188,000
Innova S. de R.L.,
Sr Note (Mexico) 04-01-07 (Y) 12.875 B- 200 178,000
Pegasus Communications Corp.,
Sr Note Ser B 08-01-07 12.500 CCC+ 400 396,000
STC Broadcasting, Inc.,
Sr Sub Note 03-15-07 11.000 B- 100 99,500
--------------
2,771,348
--------------
Medical (0.28%)
Select Medical Corp.,
Sr Sub Note 06-15-09 (R) 9.500 B 150 147,750
--------------
Oil & Gas (2.51%)
Chesapeake Energy Corp.,
Sr Note 04-01-11 (R) 8.125 B+ 300 279,750
Comstock Resources, Inc.,
Sr Note 05-01-07 11.250 B 100 106,000
Ocean Rig Norway A.S.,
Sr Sec Note (Norway) 06-01-08 (Y) 10.250 CCC 200 176,000
Parker Drilling Co.,
Sr Note 11-15-06 9.750 B+ 300 304,500
PEMEX Project Funding Master Trust,
Gtd Note 02-15-08 (R) 8.500 BB+ 200 206,000
Pennzoil-Quaker State Co.,
Note 12-01-02 9.400 BB+ 250 252,410
--------------
1,324,660
--------------
Paper & Paper Products (1.61%)
Corporacion Durango S.A. de C.V.,
Sr Note (Mexico) 08-01-06 (Y) 13.125 BB- 300 300,000
Grupo Industrial Durango S.A.,
Note (Mexico) 08-01-03 (Y) 12.625 BB- 200 210,000
Kappa Beheer BV,
Sr Sub Note (Netherlands)
07-15-09 (E) (R) 10.625 B 150 135,308
Stone Container Corp.,
Sr Note 02-01-11 (R) 9.750 B 200 204,000
--------------
849,308
--------------
Telecommunications (3.73%)
American Cellular Corp.,
Sr Sub Note 10-15-09 (R) 9.500 B 200 188,000
Comunicacion Celular S.A.,
Sr Def Bond (Colombia)
03-01-05 (R) (Y) 14.125 B 100 91,000
Esprit Telecom Group Plc,
Sr Note (United Kingdom)
12-15-07 (B) (Y) 11.500 D 100 2,588
Sr Note (Deutsche Mark)
06-15-08 (B) # 11.000 D 140 1,213
Grupo Iusacell S.A. de C.V.,
Sr Note (Mexico) 12-01-06 (Y) 14.250 B+ 200 212,000
GT Group Telecom, Inc.,
Sr Disc Note, Step Coupon
(13.25%, 02-01-05) (Canada)
02-01-10 (A) (Y) Zero B- 200 56,000
Intercel, Inc.,
Unit (Sr Disc. Note & Warrant),
02-01-06 12.000 B 200 206,000
Ionica Plc,
Sr Disc Note, Step Coupon
(15.00%, 05-01-02) (United Kingdom)
05-01-07 (A) (Y) Zero Ca 200 2,250
McCaw International Ltd.,
Sr Disc Note, Step Coupon
(13.00%, 04-15-02) 04-15-07 (A) Zero B- 500 165,000
MetroNet Communications Corp.,
Sr Discount Note, Step Coupon
(10.75%, 11-01-02) (Canada)
11-01-07 (A) (Y) Zero BBB 200 189,386
Sr Note (Canada) 08-15-07 (Y) 12.000 BBB 50 54,500
Nextel International, Inc.,
Sr Note 08-01-10 (R) 12.750 B- 100 50,000
NorthEast Optic Network, Inc.,
Sr Note 08-15-08 12.750 B- 100 28,000
ONO Finance Plc,
Sr Sub Note (United Kingdom)
05-01-09 (E) 13.000 CCC+ 100 63,525
Sr Note (United Kingdom)
07-15-10 (E) 14.000 CCC+ 200 132,132
Pronet Inc.,
Sr Sub Note 06-15-05 11.875 D 280 28,000
TeleCorp PCS, Inc.,
Sr Sub Disc Note, Step Coupon
(11.625%, 04-15-04) 04-15-09 (A) Zero B3 175 106,750
Telewest Communications Plc,
Sr Disc Note, Step Coupon
(9.25%, 04-15-04)
(United Kingdom)
04-15-09 (A) (Y) Zero B+ 100 67,618
Sr Note (United Kingdom)
02-01-10 (R) # 9.875 B+ 100 114,105
Triton PCS, Inc.,
Sr Sub Note 02-01-11 (R) 9.375 CCC+ 100 96,000
VoiceStream Wireless Corp.,
Sr Note 09-15-09 11.500 B- 100 115,000
--------------
1,969,067
--------------
Telecommunications - Services (2.63%)
COLT Telecom Group Plc, (United Kingdom)
Sr Note (Deutsche Mark)
07-31-08# 7.625 B 300 105,235
Crown Castle International Corp.,
Sr Disc Note, Step Coupon
(10.625%, 11-15-02)
11-15-07 (A) Zero B 150 115,125
Energis Plc,
Sr Note (United Kingdom)
06-15-09 (R) # 9.500 B+ 130 164,818
Jazztel Plc,
Sr Note (United Kingdom)
12-15-09 (E) 13.250 CCC+ 200 62,678
Nextel Partners, Inc.,
Sr Disc Note, Step Coupon
(14.00%, 02-01-04)
02-01-09 (A) Zero CCC+ 390 218,400
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B- 100 67,000
Sr Note Ser B, Step Coupon
(12.375%, 10-01-03)
10-01-08 (A) Zero B- 150 63,000
Orion Network Systems,
Sr Note 01-15-07 11.250 B+ 100 40,000
Time Warner Telecom, Inc.
Sr Note 02-01-11 10.125 B- 200 179,000
Time Warner Telecom LLC,
Sr Note 07-15-08 9.750 B 200 177,000
Tritel PCS, Inc.,
Sr Sub Disc Note Step Coupon
(12.75%, 05-15-04) 05-15-09 (A) Zero B3 100 63,000
United Pan-Europe Communicatons N.V.,
Sr Disc Note, Step Coupon
(13.375%, 11-01-04) (Netherlands)
11-01-09 (A) (E) Zero B- 40 10,164
Sr Note (Netherlands)
11-01-07 (E) 10.875 B- 40 19,312
Sr Note (Netherlands)
11-01-09 (E) 11.250 B- 65 31,381
Versatel Telecom International NV,
Sr Note (Netherlands)
05-15-08 (Y) 13.250 B- 100 38,000
Sr Note Ser EU (Netherlands)
07-15-09 (E) 11.875 B- 100 33,033
--------------
1,387,146
--------------
Transportation (0.63%)
CHC Helicopter Corp.,
Sr Sub Note (Canada)
07-15-07 (E) 11.750 B2 200 189,728
Fine Air Services Corp.,
Sr Note 06-01-08 (B) 9.875 D 105 6,296
North American Van Lines, Inc.,
Sr Sub Note 12-01-09 (R) 13.375 B- 150 138,000
--------------
334,024
--------------
Utilities (1.60%)
CMS Energy Corp.,
Sr Note 10-15-07 9.875 BB 200 211,000
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 BB 200 220,500
Deb Ser B 07-23-06 13.250 BB 150 173,625
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico)
11-15-09 (R) (Y) 9.625 BB+ 90 93,841
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 BBB 141 145,650
--------------
844,616
--------------
TOTAL LONG-TERM DEBT
(Cost $47,783,506) (86.38%) 45,639,076
-------------- --------------
NUMBER OF
SHARES OR
WARRANTS
--------------
COMMON STOCKS
AT&T Canada, Inc., Common Stock
(Canada) (Y)** 2,000 60,260
GT Group Telecom, Inc. (Class B), Common Stock
(Canada) (Y)** 982 4,439
KLM Royal Dutch Airlines N.V.,
American Depositary Receipt (ADR)
Common Stock (Netherlands) (Y) 397 7,007
Kraft Foods, Inc. (Class A)** 1,540 47,740
Nortek, Inc., Common Stock** 704 21,979
Versatel Telecom International N.V.,
ADR Common Stock (Netherlands)
(Y)** 1,333 3,786
--------------
145,211
--------------
TOTAL COMMON STOCKS
(Cost $164,806) (0.27%) 145,211
-------------- --------------
PREFERRED STOCKS AND WARRANTS
Allegiance Telecom, Inc. Warrant** 250 15,000
Comunicacion Celular S.A., Warrant
(Colombia) (Y)** 100 0
DIVA Systems Corp. Warrant (R)** 750 938
Loral Space & Communications Ltd.
Warrant** 100 175
ONO Finance Plc, Warrant (United
Kingdom) (E) (R)** 50 1,271
ONO Finance Plc, Warrant (United
Kingdom) (R) (Y)** 50 1,500
XO Communications Inc., 14%
Preferred Stock 2,505 75,150
--------------
94,034
--------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $158,153) (0.18%) 94,034
-------------- --------------
INTEREST PAR VALUE MARKET
ISSUER, DESCRIPTION RATE (000s OMITTED) VALUE
- ------------------- -------------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (23.19%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds, 10.625%
due 08-15-15 and 6.250% due 08-15-23,
U.S. Treasury Note 5.625% due 11-30-02) 3.970% $12,252 $12,252,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $12,252,000) (23.19%) 12,252,000
-------------- --------------
TOTAL INVESTMENTS (110.02%) 58,130,321
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (10.02%) (5,294,111)
-------------- --------------
TOTAL NET ASSETS (100.00%) $52,836,210
============== ==============
* Credit ratings are unaudited and rated by Moody's Investor Service or
John Hancock Advisers, Inc. where Standard & Poor's ratings are not
available.
** Non-income producing security.
*** Represents rate in effect on June 30, 2001.
# Par value of foreign bonds is expressed in local currency, as
shown parenthetically in security description.
(A) Cash interest will be paid on this obligation at the stated
rate beginning on the stated date.
(B) Non-income producing issuer, filed for protection under
Federal Bankruptcy Code or is in default on interest payment.
(E) Parenthetical disclosure of a country in the security
description represents country of issuer; however, security is euro
denominated.
(R) These securities are exempt from registration under rule 144A
of the Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $3,211,889 or 6.08% of the fund's net
assets as of June 30, 2001.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of foreign issuer; however, security is U.S.
dollar denominated.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
Portfolio Concentration
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------
The V.A. Strategic Income Fund invests primarily in securities issued in
the United States of America. The performance of this Fund is closely tied
to the economic and financial conditions of the countries within which it
invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the schedule of
investments. In addition, concentration of investments can be aggregated
by various countries. The table below shows the percentages of the Fund's
investments at June 30, 2001 assigned to country categories.
MARKET VALUE
AS A % OF
COUNTRY DIVERSIFICATION FUND'S NET ASSETS
- ----------------------- -----------------
Australia 0.28%
Bahamas 0.19
Canada 6.48
Colombia 1.72
Egypt 0.57
France 0.19
Luxembourg 0.17
Mexico 4.09
Netherlands 0.53
Russia 4.34
United Kingdom 1.11
United States 88.97
Venezuela 1.38
-------
TOTAL INVESTMENTS 110.02%
=======
Additionally, the concentration of investments can be aggregated by the
quality rating for each debt security.
MARKET VALUE
AS A % OF
QUALITY DISTRIBUTION FUND'S NET ASSETS
- -------------------- -----------------
AAA 44.27%
AA 1.14
BBB 2.99
BB 14.25
B 21.07
CCC 2.46
D 0.20
-------
TOTAL BONDS 86.38%
=======
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Declaration Trust
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock V.A. Core Equity Fund ("V.A. Core Equity Fund"), John Hancock
V.A. Relative Value Fund ("V.A. Relative Value Fund"), John Hancock V.A.
Sovereign Investors Fund ("V.A. Sovereign Investors Fund"), John Hancock
V.A. Financial Industries Fund ("V.A. Financial Industries Fund"), John
Hancock V.A. Technology Fund ("V.A. Technology Fund"), John Hancock V.A.
Bond Fund ("V.A. Bond Fund"), John Hancock V.A. Money Market Fund ("V.A.
Money Market Fund") and John Hancock V.A. Strategic Income Fund ("V.A.
Strategic Income Fund") (each a "Fund," collectively, the "Funds") are
separate series of John Hancock Declaration Trust (the "Trust"), an
open-end management investment company registered under the Investment
Company Act of 1940. The Trust, organized as a Massachusetts business
trust in 1995, consists of fifteen different series as of June 30, 2001.
The other series of the Trust are reported in a separate shareholders'
report. Each Fund currently has one class of shares with equal rights as
to voting, redemption, dividends and liquidation within its respective
Funds. The Trustees may authorize the creation of additional series from
time to time to satisfy various investment objectives. An insurance
company issuing a Variable Contract that participates in the Trust will
vote shares of the Funds held by the insurance company's separate accounts
as required by law. In accordance with current law and interpretations
thereof, participating insurance companies are required to request voting
instructions from policy owners and must vote shares of the Funds in
proportion to the voting instructions received.
The investment objective of the V.A. Core Equity Fund is to seek
above-average total return, consisting of capital appreciation and income.
The investment objective of the V.A. Relative Value Fund is to seek the
highest total return (capital appreciation plus current income) that is
consistent with reasonable safety of capital. The investment objective of
the V.A. Sovereign Investors Fund is to seek long-term growth of capital
and income without assuming undue market risks. The investment objective
of the V.A. Financial Industries Fund is to seek capital appreciation. The
investment objective of the V.A. Technology Fund is to seek long-term
growth of capital. The investment objective of the V.A. Bond Fund is to
seek a high level of current income consistent with prudent investment
risk. The investment objective of the V.A. Money Market Fund is to seek
maximum current income consistent with capital preservation and liquidity.
The investment objective of the V.A. Strategic Income Fund is to seek a
high level of current income.
Significant accounting policies of the Funds are as follows:
VALUATION OF INVESTMENTS Securities in the Funds' portfolios (except for
V.A. Money Market Fund) are valued on the basis of market quotations,
valuations provided by independent pricing services or, if quotations are
not readily available, or the value has been materially affected by events
occurring after the closing of a foreign market, at fair value as
determined in good faith in accordance with procedures approved by the
Trustees. Short-term debt investments maturing within 60 days are valued
at amortized cost, which approximates market value. All portfolio
transactions initially expressed in terms of foreign currencies have been
translated into U.S. dollars as described in "Foreign Currency
Translation" below.
The V.A. Money Market Fund's portfolio of securities is valued at
amortized cost, in accordance with Rule 2a-7 of the Investment Company Act
of 1940, which approximates market value. The amortized cost method
involves valuing a security at its cost on the date of purchase and
thereafter assuming a constant amortization to maturity of the difference
between the principal amount due at maturity and the cost of the security
to the Fund. Interest income on certain portfolio securities such as
negotiable bank certificates of deposit and interest-bearing notes is
accrued daily and included in interest receivable.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other registered
investment companies having a management contract with John Hancock
Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley
Financial Group, Inc., may participate in a joint repurchase agreement
transaction. Aggregate cash balances are invested in one or more large
repurchase agreements, whose underlying securities are obligations of the
U.S. government and/or its agencies. The Funds' custodian bank receives
delivery of the underlying securities for the joint account on the Funds'
behalf. The Adviser is responsible for ensuring that the agreement is
fully collateralized at all times.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed
in terms of foreign currencies are translated into U.S. dollars based on
London currency exchange quotations as of 5:00 p.m., London time, on the
date of any determination of the net asset value of the Funds.
Transactions affecting statement of operations accounts and net realized
gain (loss) on investments are translated at the rates prevailing at the
dates of the transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on
the Funds' books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities, other than
investments in securities, resulting from changes in the exchange rate.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on sales
of investments are determined on the identified cost basis. Capital gains
realized on some foreign securities are subject to foreign taxes, which
are accrued, as applicable. Some securities may be purchased on a
"when-issued" or "forward delivery" basis, which means that the securities
will be delivered to the Funds at a future date, usually beyond customary
settlement date.
DISCOUNT AND PREMIUM ON SECURITIES The Funds accrete discount and amortize
premium from par value on securities from either the date of issue or the
date of purchase over the life of the security.
EXPENSES The majority of the expenses are directly identifiable to an
individual fund. Expenses that are not readily identifiable to a specific
fund will be allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five-year period that began with the
commencement of the investment operations of the Funds.
BANK BORROWINGS The Funds (except for V.A. Money Market Fund) are
permitted to have bank borrowings for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Funds have entered into a
syndicated line of credit agreement with various banks. This agreement
enables the Funds to participate with other funds managed by the Adviser
in an unsecured line of credit with banks, which permit borrowings up to
$500 million, collectively. Interest is charged to each fund, based on its
borrowing. In addition, a commitment fee is charged to each fund based on
the average daily unused portion of the line of credit and is allocated
among the participating Funds. The Funds had no borrowing activities under
the line of credit during the period ended June 30, 2001.
SECURITIES LENDING The Funds may lend securities to certain qualified
brokers who pay the Funds negotiated lender fees. These fees are included
in interest income. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. As with other extensions of credit, the Funds may bear
the risk of delay of the loaned securities in recovery or even loss of
rights in the collateral, should the borrower of the securities fail
financially. At June 30, 2001, the V.A. Relative Value and V.A. Technology
Funds loaned securities having a market value of $1,765,629 and $262,760,
collateralized by securities in the amount of $1,800,942 and $268,015,
respectively.
OPTIONS The Funds (except for V.A. Money Market Fund) may enter into
option contracts. Listed options will be valued at the last quoted sales
price on the exchange on which they are primarily traded. Over-the-counter
options are valued at the mean between the last bid and asked prices. Upon
the writing of a call or put option, an amount equal to the premium
received by a Fund will be included in the Statement of Assets and
Liabilities as an asset and corresponding liability. The amount of the
liability will be subsequently marked to market to reflect the current
market value of the written option.
The Funds may use option contracts to manage their exposure to the price
volatility of financial instruments. Writing puts and buying calls will
tend to increase the Funds' exposure to the underlying instruments and
buying puts and writing calls will tend to decrease the Funds' exposure to
the underlying instruments, or hedge other Funds' investments.
The maximum exposure to loss for any purchased options will be limited to
the premium initially paid for the option. In all other cases, the face
(or "notional") amount of each contract at value will reflect the maximum
exposure of a Fund in these contracts, but the actual exposure will be
limited to the change in value of the contract over the period the
contract remains open.
Risks may also arise if counterparties do not perform under the contracts'
terms ("credit risk") or if a Fund is unable to offset a contract with a
counterparty on a timely basis ("liquidity risk"). Exchange-traded options
have minimal credit risk as the exchanges act as counterparties to each
transaction, and only present liquidity risk in highly unusual market
conditions. To minimize credit and liquidity risks in over-the-counter
option contracts, the Funds will continuously monitor the creditworthiness
of all their counterparties.
At any particular time, except for purchased options, market or credit
risk may involve amounts in excess of those reflected in the Funds'
year-end Statements of Assets and Liabilities. The Funds had no written
option transactions during the period ended June 30, 2001.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds (except for V.A.
Core Equity, V.A. Sovereign Investors and V.A. Money Market Funds) may
enter into forward foreign currency exchange contracts as a hedge against
the effect of fluctuations in currency exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date at a set price. The aggregate principal
amounts of the contracts are marked to market daily at the applicable
foreign currency exchange rates. Any resulting unrealized gains and losses
are included in the determination of the Funds' daily net assets. The
Funds record realized gains and losses at the time the forward foreign
currency exchange contract is closed out or offset by a matching contract.
Risks may arise upon entering these contracts from the potential inability
of counterparties to meet the terms of the contract and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Funds' Statements of Assets and Liabilities.
The Funds may also purchase and sell forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under
which they intend to take delivery of the foreign currency. Such contracts
normally involve no market risk if they are offset by the currency amount
of the underlying transaction.
The Funds had the following open forward foreign currency exchange
contracts at June 30, 2001:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION/
CURRENCY COVERED BY CONTRACT MONTH (DEPRECIATION)
- -------- ------------------- ---------- ------------
V.A. STRATEGIC INCOME FUND
Buys
Pound Sterling 255,500 Jul 01 ($7,045)
=======
Sells
Pound Sterling 523,700 Jul 01 $21,244
Pound Sterling 218,500 Aug 01 5,485
Pound Sterling 196,900 Sep 01 ($3,669)
-------
$23,060
=======
FEDERAL INCOME TAXES The Funds qualify as "regulated investment companies"
by complying with the applicable provisions of the Internal Revenue Code
and will not be subject to federal income tax on taxable income which is
distributed to shareholders. Therefore, no federal income tax provision is
required.
For federal income tax purposes, the following Funds had capital loss
carryforwards available to the extent provided by regulators to offset
future net realized capital gains:
CAPITAL LOSS
CARRYFORWARD EXPIRING
-------------------------------------
FUND 12/31/2006 12/31/2007 12/31/2008
- ---- ---------- ---------- ----------
V.A. Sovereign Investors Fund $157,877 $101,159 $1,206,695
V.A. Financial Industries Fund -- 2,140,648 1,313,228
V.A. Technology Fund -- -- 14,000
V.A. Bond Fund -- 67,593 215,568
V.A. Strategic Income Fund 4,130 136,493 455,777
Expired capital loss carryforwards are reclassified to capital paid-in, in
the year of expiration.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds identify the
dividends. Interest income on investment securities is recorded on the
accrual basis. The Funds may place debt obligations on non-accrual status
and reduce related interest income by ceasing current accruals and writing
off interest receivables when the collection of interest has become
doubtful. Foreign income may be subject to foreign withholding taxes,
which are accrued as applicable.
The Funds record distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ
from accounting principles generally accepted in the United States of
America.
USE OF ESTIMATES The preparation of these financial statements, in
accordance with accounting principles generally accepted in the United
States of America, incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Funds. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Funds have an investment management contract with the Adviser. Under
the investment management contract, the Funds pay monthly management fees
to the Adviser equivalent, on an annual basis, to the following:
RATE AS A PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
- ---- ------------------------
V.A. Core Equity Fund 0.70%
V.A. Relative Value Fund 0.60
V.A. Sovereign Investors Fund 0.60
V.A. Financial Industries Fund 0.80
V.A. Technology Fund 0.80
V.A. Bond Fund 0.50
V.A. Money Market Fund 0.50
V.A. Strategic Income Fund 0.60
V.A. Core Equity Fund and the Adviser have a subadvisory contract with
Independence Investment LLC ("Independence"), formerly Independence
Investment Associates, Inc. Independence is a wholly owned indirect
subsidiary of John Hancock Life Insurance Company ("JHLICo"). The V.A.
Technology Fund and the Adviser have a subadvisory contract with American
Fund Advisors, Inc. The Funds are not responsible for payment of
subadvisers' fees.
The Adviser has agreed to limit each Fund's expenses (excluding the
management fee), to 0.25% of each Fund's average daily net assets at least
until April 30, 2002. Accordingly, the Adviser reduced the V.A. Technology
Fund's expenses by $7,551 for the period ended June 30, 2001. The Adviser
reserves the right to terminate this limitation in the future.
The Funds have an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the
period was at an annual rate 0.02% of the average net assets of the Funds.
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or officers
of the Adviser and/or its affiliates, as well as Trustees of the Funds.
The compensation of unaffiliated Trustees is borne by the Funds. The
unaffiliated Trustees may elect to defer for tax purposes their receipt of
this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Funds make investments into other John Hancock
Funds, as applicable, to cover their liability for the deferred
compensation. Investments to cover the Funds' deferred compensation
liability are recorded on the Funds' books as an other asset. The deferred
compensation liability and the related other asset are always equal and
are marked to market on a periodic basis to reflect any income earned by
the investment as well as any unrealized gains or losses. The Deferred
Compensation Plan investments had no impact on the operations of the
Funds.
The Adviser and other subsidiaries of John Hancock Life Insurance Company
owned the following shares of beneficial interest of the Funds as of June
30, 2001:
FUND SHARES OF BENEFICIAL INTEREST
- ---- -----------------------------
V.A. Technology Fund 50,095
V.A. Bond Fund 135,931
V.A. Money Market Fund 123,982
V.A. Strategic Income Fund 557,187
NOTE C --
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities for the Funds, other than
short-term securities and obligations of the U.S. government, during the
period ended June 30, 2001, were as follows:
FUND PURCHASES SALES
- ---- ----------- -----------
V.A. Core Equity Fund 19,622,904 16,593,115
V.A. Relative Value Fund 23,534,078 15,426,044
V.A. Sovereign Investors Fund 27,892,613 12,218,212
V.A. Financial Industries Fund 50,251,626 36,764,543
V.A. Technology Fund 16,391,057 2,346,666
V.A. Bond Fund 107,129,045 66,899,002
V.A. Strategic Income Fund 33,658,235 16,521,059
The cost of investments owned at June 30, 2001 (including short-term
investments) and gross unrealized appreciation and depreciation of
investments for federal income tax purposes, were as follows:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- ----------- ------------ ------------ ------------
V.A. Core Equity Fund $36,789,999 $6,623,422 $1,871,339 $4,752,083
V.A. Relative Value Fund 56,604,513 6,392,678 11,617,088 (5,224,410)
V.A. Sovereign Investors Fund 63,970,454 8,074,640 3,704,883 4,369,757
V.A. Financial Industries Fund 73,777,334 10,566,411 2,695,772 7,870,639
V.A. Technology Fund 29,303,387 1,187,668 8,454,824 (7,267,156)
V.A. Bond Fund 69,426,695 399,880 419,904 (20,024)
V.A. Money Market Fund 143,342,085 -- -- --
V.A. Strategic Income Fund 60,832,493 571,358 3,273,530 (2,702,172)
NOTE D --
CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 2001, the Funds adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies, as revised, and began
amortizing premiums on debt securities. Prior to this date, the Funds did
not amortize premiums on debt securities. The cumulative effect of this
accounting change had no impact on the total net assets of the Funds, but
resulted in the following reduction in the cost of the investments and a
corresponding increase/decrease in unrealized appreciation/depreciation on
investments, based on securities held as of December 31,2000:
REDUCTION IN THE COST
FUND OF THE INVESTMENTS
- ---- ---------------------
V.A. Bond Fund $32,713
V.A. Strategic Income Fund 230,438
The effect of this change in the period ended June 30, 2001 was as
follows:
INCREASE/
DECREASE IN DECREASE
REDUCTION IN NET REALIZED IN NET
THE COST OF GAIN/LOSS INVESTMENT
FUND INVESTMENTS ON INVESTMENTS INCOME
- ---- ----------- -------------- ----------
V.A. Bond Fund $26,706 $28,562 $55,268
V.A. Strategic Income Fund 243,590 47,556 291,146
The effect of this change on the per share operating performance and the
annualized ratio of net investment income to average net assets in the
period ended June 30, 2001 was as follows:
INCREASE/
DECREASE IN NET DECREASE
DECREASE REALIZED AND IN NET
IN NET UNREALIZED INVESTMENT
INVESTMENT LOSS/GAIN INCOME TO
INCOME ON INVESTMENTS AVERAGE
FUND PER SHARE PER SHARE NET ASSETS
- ---- --------- -------------- ----------
V.A. Bond Fund $0.02 $0.02 0.27%
V.A. Strategic Income Fund 0.06 0.06 1.50
The Statements of Changes in Net Assets and the Financial Highlights for
prior periods have not been restated to reflect this change in
presentation.
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
This report is for the information of the shareholders of the John
Hancock Declaration Trust.
A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."
RVASA 6/01
8/01
SEMIANNUAL REPORT
Declaration Trust
Equity V.A. 500 Index Fund
V.A. Large Cap Growth Fund
V.A. Mid Cap Growth Fund
V.A. Small Cap Growth Fund
- ------------------------------------------------------
International V.A. International Fund
- ------------------------------------------------------
Sector V.A. Regional Bank Fund
- ------------------------------------------------------
Income V.A. High Yield Bond Fund
JUNE 30, 2001
[A 2" x 1" John Hancock (Signature)/John Hancock Funds logo in lower,
center middle of page. A tag line below reads "JOHN HANCOCK FUNDS".]
Table of Contents
1) CEO Corner 3
2) Portfolio Manager Commentary
These commentaries reflect the views of the portfolio managers or
portfolio management teams through the end of the period discussed in
this report. Of course, the managers' or team's views are subject to
change as market and other conditions warrant.
Equity
V.A. 500 Index Fund 4
V.A. Large Cap Growth Fund 7
V.A. Mid Cap Growth Fund 10
V.A. Small Cap Growth Fund 13
International
V.A. International Fund 16
Sector
V.A. Regional Bank Fund 19
Income
V.A. High Yield Bond Fund 22
3) Financial Statements 25
4) Notes to Financial Statements 57
TRUSTEES
Dennis S. Aronowitz*
Richard P. Chapman, Jr.
William J. Cosgrove*
John M. DeCiccio
Richard A. Farrell*
Maureen R. Ford
Gail D. Fosler
William F. Glavin
Dr. John A. Moore
Patti McGill Peterson
John W. Pratt*
* Members of the Audit Committee
OFFICERS
Maureen R. Ford
Chairman, President and
Chief Executive Officer
William L. Braman
Executive Vice President and
Chief Investment Officer
Richard A. Brown
Senior Vice President and
Chief Financial Officer
Susan S. Newton
Senior Vice President and Secretary
William H. King
Vice President and Treasurer
Thomas H. Connors
Vice President and Compliance Officer
CUSTODIANS
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
V.A. High Yield Bond Fund
V.A. Large Cap Growth Fund
V.A. Mid Cap Growth Fund
V.A. Regional Bank Fund
V.A. Small Cap Growth Fund
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
V.A. 500 Index Fund
V.A. International Fund
TRANSFER AGENT
John Hancock Annuity Servicing Office
529 Main Street (X-4)
Charlestown, Massachusetts 02129
INVESTMENT ADVISER
John Hancock Advisers, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
SUB-INVESTMENT ADVISER
Nicholas-Applegate Capital Management LP
600 West Broadway
San Diego, California 92101
V.A. International Fund
ISSUER
John Hancock
Life Insurance Company
John Hancock Variable
Life Insurance Company*
200 Clarendon Street
Boston, Massachusetts 02117
*Not Licensed in New York
PRINCIPAL DISTRIBUTOR
John Hancock Funds, Inc.
101 Huntington Avenue
Boston, Massachusetts 02199-7603
LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
CEO CORNER
[A 1" x 1" photo of Maureen R. Ford, Chairman and Chief Executive Officer,
flush right next to first paragraph.]
DEAR SHAREHOLDERS:
The U.S. stock market has had a rough beginning in 2001, as last year's
downward spiral continued due to growing concern over the slowing economy
and a parade of disappointing earnings announcements. The Standard & Poor's
500 Index, a leading benchmark of large-cap stocks, fell by 6.69% in the
first six months of the year. The Federal Reserve aggressively began to
attack the economic slowdown with interest-rate cuts totaling 2.75
percentage points between January and the end of June. By April, investors
began to believe the worst might be over, prompting a sharp stock rally
that month. Bonds wound up outperforming stocks overall.
Even with the spring upturn, the stock market remains indecisive, as
investors try to get a clearer sense of the timetable for economic and
corporate recovery. More than ever, this is a time to keep a long-term
investment perspective and check in with your investment professional to
ensure that your portfolio is adequately diversified.
In the midst of this year's market disappointments, one significant event
occurred that has positive short- and long-term implications for
investors. On June 7, President George W. Bush signed into law the most
sweeping tax-cut bill in two decades. The bill's first benefit comes this
summer in the form of a tax refund, ranging from $300 to $600, to almost
everyone who filed a 2000 tax return. Gradual cuts in taxes will follow
the rebate checks. For investors, the bill also provides a number of extra
incentives for retirement and college savings through changes to IRA and
401(k) plan contributions and enhancements to Education IRAs, among other
things.
The new tax law has a variety of provisions, many of which are phased in
over a number of years. We encourage you to consult with your investment
professional to determine how to take the best, and most timely, advantage
of the benefits it contains.
Sincerely,
/S/ MAUREEN R. FORD
MAUREEN R. FORD, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY JAMES D. SCHANTZ, CFA, PORTFOLIO MANAGER
John Hancock
V.A. 500 Index Fund
S&P 500 Index loses ground as economy slows
For the stocks that make up the Standard & Poor's 500 Index, the first six
months of 2001 can be neatly divided between their poor showing during the
first calendar quarter and their rebound in the second quarter. In the
first three months of the year, a weakening economy and surprisingly poor
corporate earnings reports caused the Index to drop by nearly 12%. But
from April through the end of June, stocks rebounded as sentiment shifted,
lifting the S&P 500 Index by nearly 6%, thereby cutting the Index's loss
back to -6.69% for the first half of the year.
"Interestingly,
the technology
sector provided
the Index with
some of its best
performers, as
well as its
biggest losers."
Despite the continual drumbeat of bad economic news, job cuts and earnings
warnings, consumer and investor confidence rose, thanks to hopes that the
Federal Reserve Board's aggressive rate-cutting campaign could prevent the
economy from free falling into a recession. The Fed lowered rates six
times during as many months, with three of the cuts coming in April, May
and June. The rate cuts lowered corporate borrowing costs, pumped money
into the U.S. economy and fanned hopes that corporate earnings and stocks
prices would improve. Even the depressed manufacturing sector exhibited
signs that the worst could be behind it.
[Table at bottom left hand column entitled "Top Five Stock Holdings." The
first listing is General Electric 4.3%, the second is Microsoft 3.5%, the
third ExxonMobil 2.7%, the fourth Citigroup 2.3% and the fifth Pfizer 2.2%.
A note below the table reads "As a percentage of net assets on June 30,
2001."]
Fund performance and strategy explained
John Hancock V.A. 500 Index Fund had a total return of -6.88% at net asset
value for the six-month period ended June 30, 2001. By comparison, the
average variable annuity S&P 500 Index objective fund had a total return
of -6.86%, according to Lipper, Inc. Historical performance information
can be found on page six.
In managing the Fund, our goal is to have our holdings closely track those
of the S&P 500 Index, while minimizing the costs associated with buying
and selling shares of stocks. Although there are frequent changes in the
composition of the Index, we re-balance the Fund's holdings less
frequently to minimize transaction costs. When we get additional money
into the Fund that cannot immediately be deployed into Index components,
we buy S&P 500 futures, which allow us to participate in the Index's
performance without incurring the higher transaction costs of buying
stocks.
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A. 500
Index Fund. Caption below reads "Jim Schantz."]
Technology: leaders and laggards
Interestingly, the technology sector provided the Index with some of its
best performers, as well as its biggest losers. Microsoft, for example,
surged more than 68% during the first six months of 2001. In contrast to
some other technology suppliers, the company rode the wave of strong
demand for corporate software and easily topped reduced expectations for
profits and revenues. The company's shares also got a boost in late June
when a U.S. appeals court tossed out a lower court's order to split the
company. Other computer giants, such as industry titans IBM and Dell
Computers, also flourished, posting gains of roughly 33% and 49%,
respectively. Investors enthused about the combination of Internet and
media companies AOL and Time Warner pushed its combined stock up about
52%.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 2% with -8% at the bottom and
0% at the top. The first bar represents the -6.88% total return for John
Hancock V.A. 500 Index Fund. The second bar represents the -6.86% total
return for Average variable annuity S&P 500 Index objective fund. A note
below the chart reads "The total return for John Hancock V.A. 500 Index
Fund is at net asset value with all distributions reinvested. The average
variable annuity S&P 500 Index objective fund is tracked by Lipper, Inc.
See the following page for historical performance information."]
In contrast, some well-known technology stocks -- including some of last
year's best performers -- proved to be the biggest detractors from the
Index's performance. Cisco Systems, the leading provider of data
networking products to businesses, slumped more than 52% and was the
biggest detractor from the Index's performance on a
capitalization-weighted basis. Data storage companies EMC and Nortel
Networks also were hit hard, suffering losses of about 55% and 71%
respectively.
Topping the list of the Index's best performers was Bank of America, which
exceeded earnings expectations thanks to improvement in its core custody
business (the management of stock certificates and other securities held
by clients), growth in asset management fees and rising trading revenues.
AT&T gained 27% during the period, driven by its ability to meet
scaled-back earnings expectations. Philip Morris returned roughly 17%
thanks to improving results in many of its businesses, including tobacco
and food. The nation's second-largest home-improvement retailer Lowe's was
up more than 63% as the company continued to benefit from the strong
housing market and falling interest rates.
Health care, telecom hit hard
As bad as some of the technology sector's losses were, the health-care
sector's declines were worse. An absence of exciting new products either
in the research pipeline or recently brought to market, coupled with
investors' speedy rotation out of defensive names into higher growth
stocks in the spring, took its toll on pharmaceutical companies
Bristol-Myers Squibb and Pfizer. Communications equipment companies such
as JDS Uniphase and Corning suffered losses of roughly 70% each as telecom
providers drastically reduced their plans to build out their systems.
"The stock market
enters the second
half of 2001 under
a cloud of
uncertainty."
Outlook
The stock market enters the second half of 2001 under a cloud of
uncertainty. For the most part, corporate earnings remain weak and CEOs
continue to complain about a lack of "visibility," meaning they have no
clear idea of when earnings will improve. Although job cuts continue,
consumer confidence has remained strong and has provided a cushion against
the declining technology and manufacturing sectors. Whether or not this
continues to be the case in the second half is anyone's guess. On the
other hand, the six interest-rate cuts delivered in the first half,
coupled with tax cuts, may put enough money into the economy to pull it
out of its doldrums. But regardless of how the stock market performs, our
goal will be to closely track the performance of the S&P 500 Index. The
Fund's returns, as always, will be dictated by the performance of that
Index.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (8/29/96)
------- ------- -------
Cumulative Total Returns (6.88%) (15.08%) 89.26%
Average Annual Total Returns -- (15.08%) 14.10%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. 500 Index Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Index -- an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. 500 Index Fund, representing
the growth of a hypothetical $10,000 investment over the life of the fund.
Within the chart are two lines. The first line represents the Standard &
Poor's 500 Index and is equal to $20,142 as of June 30, 2001. The second
line represents the value of the hypothetical $10,000 investment made in
the John Hancock V.A. 500 Index Fund on August 29, 1996 and is equal to
$18,926 as of June 30, 2001.
BY WILLIAM L. BRAMAN, ROBERT UEK AND PAUL J. BERLINGUET
FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
V.A. Large Cap Growth Fund
Corporate profits and economy weaken, stock prices remain erratic
Throughout the six months ended June 30, 2001, the stock market continued
to provide investors with a steady diet of unease. The year began in the
midst of a well-rounded bear market that had depressed stock prices,
especially in the technology sector, and greatly diminished investor
confidence. The Federal Reserve Board aggressively entered the scene,
injecting liquidity into the financial markets with six successive cuts in
short-term interest rates amounting to a total of 2.75 percentage points.
By June's end, the federal funds rate stood at 3.75%, down from 6.50% in
December 2000.
[Table at bottom left hand column entitled "Top Five Stock Holdings." The
first listing is General Electric 5.9%, the second is Tyco International
5.7%, the third Cisco Systems 4.5%, the fourth AOL Time Warner 4.3% and the
fifth Wal-Mart Stores 4.2%. A note below the table reads "As a percentage
of net assets on June 30, 2001."]
In response to the Fed's initial actions, stock prices rebounded in April
and May, lending credence to the widely held view that the worst of the
rout may be over. Near period's end, the market's second quarter
pre-announcement season was under way. A number of high-profile companies
- -- particularly in, but not limited to, the technology sector -- predicted
weaker-than-expected profits and some even admitted to dire financial
straits. Stock prices came under pressure once again and the broad market,
as measured by the Standard & Poor's 500 Index, lost ground in the period,
returning -6.69% for the first six months of the year.
"As the period
progressed,
our objective
increasingly
became
broader
diversification..."
Fund performance
For the six months ended June 30, 2001, John Hancock V.A. Large Cap Growth
Fund produced a total return of -25.12% at net asset value. This compares
with the -14.71% return posted by the average variable annuity large-cap
growth fund, according to Lipper, Inc. Historical performance information
can be found on page 9.
Many technology positions reduced or eliminated
The Fund's weighting in technology, which is greater than that of its
peers, along with individual stock selection within the telecommunications
equipment group during the first calendar quarter, were the primary causes
of its relative underperformance. As the second quarter began, however, we
shifted the Fund's technology exposure away from a number of
telecommunications equipment, networking and fiber-optics-related stocks
- -- the technology subsectors that were hit particularly hard by the
deterioration in capital equipment spending. We sold such names as Nortel
Networks, Ericsson, PMC Sierra, Broadcom, JDS Uniphase and Corning. We
also pared or eliminated positions in hardware names such as Sun
Microsystems, EMC, Compaq and IBM. By period's end, the Fund's technology
weighting was trimmed to roughly 30% of net assets.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 6% with -30% at the bottom and
0% at the top. The first bar represents the -25.12% total return for John
Hancock V.A. Large Cap Growth Fund. The second bar represents the -14.71%
total return for Average variable annuity large-cap growth fund. A note
below the chart reads "The total return for John Hancock V.A. Large Cap
Growth Fund is at net asset value with all distributions reinvested. The
average variable annuity large-cap growth fund is tracked by Lipper, Inc.
See the following page for historical performance information."]
Redefined tech focus helps in Q2
We redeployed our tech assets into software-related companies as well as
semiconductor capital equipment stocks, either adding to existing
portfolio holdings or initiating new positions in such names as Microsoft,
Amdocs Ltd., Electronic Data Systems, Intel, Applied Materials and
Novellus Systems. Many of the software companies we pursued exhibit
greater predictability in their future earnings potential than many other
technology names right now, while the semiconductor stocks appealed to us
because we believe the ones we've chosen are poised to benefit when new
order momentum resumes. The portfolio's reconfiguration within the
technology arena proved timely, as the stock prices of many networking
companies hit new lows after they were eliminated from the portfolio. In
fact, the Fund's revised technology exposure helped the portfolio regain
some previously lost ground and outperform its Lipper peer group in the
second quarter.
"...stock
prices may
continue to
take two steps
forward and
one step back
through
calendar
year end...
Broader diversification the best strategy
Throughout the period, the market has taken its cues from corporate profit
announcements and leading economic indicators and we, in turn, have taken
our cues from the market. It now appears the long-awaited turnaround in
corporate profitability is not within easy reach as investors had hoped
earlier this year. As the period progressed, our objective increasingly
became broader diversification in tandem with a focus on companies that
demonstrate a clear visibility in their earnings stream. We applied this
approach not only to the technology sector but also to health-care,
consumer-oriented companies, financial names and those issues with a
cyclical bias.
Over the period, we bolstered the Fund's stake in health-care stocks. We
did so in favor of niche players, those health-care companies with higher
growth potential than the traditional pharmaceutical companies, which are
currently contending with leaner product pipelines. We also sold
health-care equipment companies such as Waters, which is suffering from a
manufacturing slump in health-care's research and development area. Newly
purchased, or bolstered, positions include Allergan, a specialty eye-care
pharmaceutical company; Amgen, an established biotech company; and
Stryker, a medical device company benefiting from changing demographics
and a new product cycle.
We made a small foray into consumer-staple companies such as
Anheuser-Busch and Philip Morris and initiated a position in Viacom, a
media conglomerate with a broad spectrum of advertising delivery mediums.
We purchased American Express and Goldman Sachs, two financial service
companies with diversified business models, as well as home-improvement
retailer Lowe's.
Outlook
Going forward, we anticipate a turn for the better in business conditions,
based on the Fed's commitment to ease monetary policy to spur economic
growth. The critical factor remains timing. Historically, business and
investment conditions tend to improve six to 12 months after a concerted
effort by the Fed to improve financial liquidity. We are still in the
midst of a lengthy campaign, with the possibility of even further rate
cuts ahead. Therefore, stock prices may continue to take two steps forward
and one step back through calendar year end, as investors struggle to
regain confidence in the viability of corporate America's long-term growth
potential.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (8/29/96)
------- ------- -------
Cumulative Total Returns (25.12%) (46.31%) (16.98%)
Average Annual Total Returns -- (46.31%) (3.78%)
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Large Cap Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Russell Top 200 Growth Index -- an unmanaged
index which measures the performance of the Russell Top 200 companies with
higher price-to-book ratios and higher forecasted growth values. It is not
possible to invest in an index.
Line chart with the heading John Hancock V.A. Large Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
Russell Top 200 Growth Index and is equal to $18,766 as of June 30, 2001.
The second line represents the value of the hypothetical $10,000 investment
made in the John Hancock V.A. Large Cap Growth Fund on August 29, 1996 and
is equal to $8,302 as of June 30, 2001.
BY PAUL J. BERLINGUET AND TIMOTHY N. MANNING
FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
V.A. Mid Cap Growth Fund
Mid-cap growth stocks tumble as market continues to head south
The stock market's progress in the first half of 2001 was a tale best told
in two parts. During the first quarter, the market went through a brutal
meltdown that rocked nearly all sectors. Leading the decline were
technology and telecommunications stocks, which looked overly expensive
relative to deteriorating business fundamentals. Safer-haven sectors like
finance and energy moved into favor. Early in the second quarter, the
market reversed course, thanks to lower interest rates and anecdotal
reports that business was stabilizing at some companies. Amid the relief
rally that marked the second quarter, however, volatility continued as
many companies announced missed earnings. The Standard & Poor's 500 Index
closed the six months ended June 30, 2001 with a -6.69% return. By
comparison, the Russell Midcap Growth Index returned -12.96% due to its
heavier concentrations in technology, telecom and biotechnology names.
"We trimmed
more volatile
names in the
telecom,
biotech and
software
sectors..."
Disappointing performance
John Hancock V.A. Mid Cap Growth Fund had a sizable, but average, stake in
technology -- about one-third of assets -- but was dogged by weak stock
performance. Higher-than-average investments in telecom and biotech also
eroded performance, leaving the Fund with a -23.39% return at net asset
value for the first six months of the year. By comparison, the average
variable annuity multi-cap growth fund returned -16.18%, according to
Lipper, Inc. Historical performance information appears on page 12.
[Table at bottom left hand column entitled "Top Five Stock Holdings." The
first listing is Shire Pharmaceuticals 2.2%, the second is VeriSign 2.1%,
the third USA Education 2.1%, the fourth Mercury Interactive 2.0% and the
fifth Dobson Communications 2.0%. A note below the table reads "As a
percentage of net assets on June 30, 2001."]
Disappointments in telecom and biotech
Among the biggest drags on performance were our stakes in competitive
local exchange carriers like McLeodUSA and XO Communications, both of
which fell sharply amid the downturn in telecom spending. As the outlook
for the sector remained uncertain, we decided to cut our losses and sell.
Several stocks in the volatile biotech area also cost the Fund dearly,
including Waters and Applera Corp. - Applied Biosystems Group, both of
which supply analytical equipment to biotech companies, which cut back on
spending in 2001. Millennium Pharmaceuticals, a company that provides
genetic information to pharmaceutical companies, and Immunex, a
biopharmaceutical company that develops drugs to treat autoimmune
disorders, also posted steep declines. In the technology area, our
investments in Brocade Communications Systems, which make switches for
storage systems, and Aeroflex, which makes optical test equipment used in
the build-out of fiber-optic networks, tumbled as spending slowed.
Gains in retail and finance
Tempering these losses were our retail investments, including Abercrombie
& Fitch, Bed Bath & Beyond, Coach and Staples, which we had built up early
in the year. All rallied nicely as consumers kept spending and investors
anticipated an economic recovery, and we took profits. Our finance
investments also did quite well. Transaction processors like Concord EFS
and Fiserv benefited from their predictable revenue streams, while USA
Education (formerly Sallie Mae), a student loan company, attracted
interest following a recent acquisition. Other top gainers included
Scientific-Atlanta, a leading producer of digital set top boxes for cable
television, KLA-Tencor, which provides inspection systems for
semiconductor capital equipment, and King Pharmaceuticals, a specialty
pharmaceutical company with a new cardiovascular drug that has quickly
gained market share.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 5% with -25% at the bottom and
0% at the top. The first bar represents the -23.39% total return for John
Hancock V.A. Mid Cap Growth Fund. The second bar represents the -16.18%
total return for Average variable annuity multi-cap fund. A note below the
chart reads "The total return for John Hancock V.A. Mid Cap Growth Fund is
at net asset value with all distributions reinvested. The average variable
annuity multi-cap fund is tracked by Lipper, Inc. See the following page
for historical performance information."]
Focus on predictability
In the spring, we stepped up the Fund's emphasis on companies with
predictable earnings growth and the potential for dominant market share.
These businesses have proven they can do well even in a sluggish economy.
We trimmed more volatile names in the telecom, biotech and software
sectors, buying instead stocks like Amdocs, which provides telecom
carriers with outsourcing solutions for customer service and billing. This
is a company with no competition and more than 75% of its revenues for
next year guaranteed by long-term contracts. We also increased our stake
in VeriSign, a software company that is a leader in Internet domain
registration, and Dobson Communications, a wireless company that has
longer-term contracts with major carriers and little direct competition in
the rural markets it serves.
Buying opportunities
Much of our buying was in the medical area (about 22% of net assets),
where we focused on companies with predictable earnings, including
health-care service companies like WellPoint Health Networks and specialty
pharmaceuticals like Shire Pharmaceuticals. We also increased our
investment in media stocks, which we expect to benefit as the economy
recovers and ad spending increases. Among our additions were USA Networks,
a company with great management and media assets, and Charter
Communications, a cable company that is adding subscribers at the same
time that its build-out expenditures are coming to an end. In the
technology sector, we increased our investment in Mercury Interactive, a
software testing company that has strong growth prospects.
"By the fourth
quarter, the
market should
benefit from
easier
year-over-year
earnings
comparisons as
well as
improved
corporate
revenues."
A look ahead
The Federal Reserve cut interest rates six times between January and June.
Typically, interest-rate moves take six to 12 months before they work
their way through the economy. This means we could be looking at a
recovery by late in the year. Fortunately, inflation and unemployment have
both remained pretty low and tax refunds should give a boost to consumer
confidence and spending. Given an improved economic outlook, we expect
stock prices to climb in the second half of the year. The third quarter,
however, could be rocky as investors digest recent earnings
disappointments. By the fourth quarter, the market should benefit from
easier year-over-year earnings comparisons as well as improved corporate
revenues. We are especially optimistic about the outlook for mid-cap
stocks, which have historically beaten larger-cap stocks on the way out of
a downturn, and remain at reasonable valuations.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (1/7/98)
------- ------- -------
Cumulative Total Returns (23.39%) (36.99%) 16.54%
Average Annual Total Returns -- (36.99%) 4.50%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Mid Cap Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in both the Standard & Poor's 500 Index and the Russell
Midcap Growth Index. The Standard & Poor's 500 Index is an unmanaged index
that includes 500 widely traded common stocks and is a commonly used
measure of stock market performance. The Russell Midcap Growth Index is an
unmanaged index that contains those securities from the Russell Midcap
Index with a greater-than-average growth orientation. It is not possible
to invest in an index.
Line chart with the heading John Hancock V.A. Mid Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are three lines. The first line represents
the Russell Midcap Growth Index and is equal to $13,697 as of June 30,
2001. The second line represents the Standard & Poor's 500 Index and is
equal to $13,201 as of June 30, 2001. The third line represents the value
of the hypothetical $10,000 investment made in the John Hancock V.A. Mid
Cap Growth Fund on January 7, 1998 and is equal to $11,654 as of June 30,
2001.
BY BERNICE S. BEHAR, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
ANURAG PANDIT, CFA, PORTFOLIO MANAGER
John Hancock
V.A. Small Cap Growth Fund
Slowing economy, deteriorating corporate profits hold stocks back
The stock market remained in turmoil during the first six months of 2001,
as the economy continued to slow and investors reacted to a steady stream
of bad corporate earnings news. Fast-growing, high-priced growth stocks --
which started struggling a year ago -- kept sagging, particularly in the
technology and telecommunications sectors. With the exception of a
three-week surge in January sparked by a surprise interest-rate cut by the
Federal Reserve, the first quarter of 2001 was especially difficult for
stocks, despite the Fed's aggressive action to prevent a recession. But by
April, the Fed had cut rates enough that investors began to hope the worst
was over for the economy, and stocks rallied, including technology. The
sector remained volatile and under pressure through the end of June,
however, as business conditions showed no signs of improving. Small-cap
stocks outperformed large caps, but growth stocks continued to trail value
stocks by a substantial margin, producing a large variance in performance
between the two major indexes that track small-cap stock performance. In
the first six months of 2001, the Russell 2000 Value Index gained 12.84%,
while the Russell 2000 Growth Index was essentially flat, returning 0.14%.
[Table at bottom left hand column entitled "Top Five Stock
Holdings." The first listing is Microsemi 1.4%, the second is Corporate
Executive Board 1.4%, the third Columbia Sportswear 1.3%, the fourth
Accredo Health 1.3% and the fifth Education Management 1.3%. A note below
the table reads "As a percentage of net assets on June 30, 2001."]
Fund performance
For the six months ended June 30, 2001, John Hancock V.A. Small Cap Growth
Fund posted a total return of -8.06% at net asset value. That compared
with the -4.06% return of the average variable annuity small-cap growth
fund, according to Lipper, Inc. Historical performance information can be
found on page 15.
"Companies
having any
connection
to the
telecommunications
industry
suffered in
particular..."
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A.
Small Cap Growth Fund. Caption below reads "Bernice Behar."]
Our relative underperformance stemmed from our emphasis on defensive
sectors of the market -- including pharmaceutical stocks and health-care
services companies like LifePoint Hospitals. This held us back in the
first three weeks of the year, when the Fed's surprise rate cut boosted
more aggressive, low-quality tech stocks that we chose not to own. Our
defensive stance also caused us to miss much of the gains in the
biotechnology sector during the period. We took profits and cut our
biotech stake significantly in January, given the sector's strong move in
2000 based on what we believe to be unrealistic expectations. We also had
concerns about bottlenecks in the FDA approval process. However, even
though the group was volatile during the period, the stocks produced good
results and our underweighting worked against us. One of our best
performers, however, was Covance, a contract research company that
provides product development services to both the biotech and
pharmaceutical industries. On the other hand we were disappointed by CV
Therapeutics, which served us very well last year, but saw its stock drop
precipitously this year after it announced disappointing results from a
clinical trial for one of its drugs.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 2% with -10% at the bottom and
0% at the top. The first bar represents the -8.06% total return for John
Hancock V.A. Small Cap Growth Fund. The second bar represents the -4.06%
total return for Average variable annuity small-cap growth fund. A note
below the chart reads "The total return for John Hancock V.A. Small Cap
Growth Fund is at net asset value with all distributions reinvested. The
average variable annuity small-cap growth fund is tracked by Lipper, Inc.
See the following page for historical performance information."]
"The real
question mark
is when
corporate
earnings will
make a
comeback."
Telecom and IT consultants hit hard
Companies having any connection to the telecommunications industry
suffered in particular during this period, as demand for all types of
products and services ground to a halt and companies ran into trouble
getting additional financing to finish building out their networks. This
impacted anyone along the supply chain, including Fund holding M-Systems
Flash Disk Pioneers, a telecom-focused semiconductor company. Our stake in
information technology (IT) consulting companies also hurt us as demand
for IT services slowed dramatically, even for companies with strong
franchises and niche markets like Forrester Research and Management
Network Group. While the technology and telecommunications sectors
produced negative results as a whole, our stock selection helped us fare
better than the tech portion of the Russell 2000 Growth Index, and we did
have some outstanding performers. Our biggest contributor to performance
was also our top holding, Microsemi, a semiconductor company offering a
broad range of products to a wide customer base, which has protected it in
this difficult economic environment.
Individual standouts
We had some standout performances from a range of small companies that fit
our investment criteria of producing accelerating and sustainable earnings
growth, and having dominant market positions and strong managements. These
included Tweeter Home Entertainment, a company we've owned for a while
whose strong franchise in consumer electronics is beginning to be
recognized, and Columbia Sportswear, a niche apparel company with great
brand recognition and tremendous relationships with some of the
fast-growing retailers. Our radio stocks also rebounded off their lows.
Earnings stability counts
In a tough environment for growth stocks, we continued to position
ourselves in areas where we believe there is a relative amount of earnings
stability. This caused us to maintain a lighter stake in tech and telecom
and an increased exposure to health care and energy, a sector that has
produced the highest earnings results so far this year. Unfortunately, the
market has not rewarded energy stocks on balance in this period, assuming
that the level of earnings growth was unsustainable in the midst of the
economic slowdown and building inventories. While we believe the long-term
outlook is positive, the more near-term economic and inventory issues have
caused us to begin paring our energy stake.
Outlook
After six rate cuts totalling 2.75%, it appears the Fed is getting close
to the end of its rate-cutting cycle, and the economy should soon begin to
feel its effects. The real question mark is when corporate earnings will
make a comeback. While we believe in the strong long-term potential of
tech and telecom, we believe it's going to take more time for these
sectors to turn around, as excess capacity needs to be absorbed. As a
result, we believe more reliable earnings growth lies, for now, in other
sectors.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (8/29/96)
------- ------- -------
Cumulative Total Returns (8.06%) (30.62%) 44.70%
Average Annual Total Returns -- (30.62%) 7.94%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Small Cap Growth Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Russell 2000 Index and the Russell 2000 Growth
Index. The Russell 2000 Index is an unmanaged small-cap index that is
comprised of 2,000 U.S. stocks. The Russell 2000 Growth Index is an
unmanaged index that contains Russell 2000 Index stocks with a
greater-than-average growth orientation. It is not possible to invest in
an index.
Line chart with the heading John Hancock V.A. Small Cap Growth Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are three lines. The first line represents
the Russell 2000 Index and is equal to $16,393 as of June 30, 2001. The
second line represents the value of the hypothetical $10,000 investment
made in the John Hancock V.A. Small Cap Growth Fund on August 29, 1996 and
is equal to $14,470 as of June 30, 2001. The third line represents the
Russell 2000 Growth Index and is equal to $13,401 as of June 30, 2001.
BY LORETTA MORRIS AND RANDY KAHN FOR THE PORTFOLIO MANAGEMENT TEAM
John Hancock
V.A. International Fund
Overseas markets struggle in first half of 2001
Despite a transition to an easing bias by central banks worldwide, the
difficulties experienced by international equities in 2000 persisted in
the first half of 2001. As represented by the MSCI All-World Country Free
ex-U.S. Index, non-U.S. stocks shed 13.56% of their value during the
six-month period ended June 30.
"Currently, we
are
identifying
compelling
opportunities
in the energy,
health care,
and consumer
services
sectors."
The contagion that began to spread early last year during the sell-off of
technology, media and telecommunications (TMT) stocks continued to linger
into 2001. Contributing to this weakness was a tightening bias by central
banks worldwide in 2000. All told, there were nearly 130 interest-rate
hikes in 2000 and the cumulative effect of tighter monetary policy
ultimately precipitated a sharp slowdown in global growth. This
deceleration in growth prompted a shift toward an easing bias, and through
June 30 there had been more than 70 interest-rate reductions by central
bankers globally. However, the European Central Bank reduced rates only
once as it continued to adhere to its stated mission of battling inflation
rather than stimulating growth. As a result, the euro fell to near-record
lows against the dollar at the year's halfway mark.
[Pie chart at bottom left hand column with heading "Portfolio
Diversification." The chart is divided into seven sections (from top to
left): Short-term Investments & Other 7%, Latin America 1%, Pacific Rim
ex-Japan 7%, Japan 18%, U.K. & Ireland 22%, Continental Europe 39% and
Canada 6%. A note below the chart reads "As a percentage of net assets on
June 30, 2001."]
In eurozone countries, which observers thought would be relatively immune
to the stagnation that took hold of the United States in late 2000,
economic indicators deteriorated rapidly in the second quarter of this
year. In particular, Germany -- the region's largest economy -- suffered
higher-than-expected rates of unemployment and inflation, and an erosion
of consumer confidence as a result.
Japan has also fared poorly in 2001. Early in the year, political
uncertainty over the fate of former Prime Minister Yoshiro Mori, the
lingering overhang of bad debts, and a reluctance of the country's
consumers to spend in a deflationary environment combined to pressure the
Japanese stock market. Although the country's main stock index, the
Nikkei, rallied briefly in April after the election of popular new Prime
Minister Junichiro Koizumi, the market slumped again in May and June as
the magnitude of Japan's problems weighed on investor sentiment.
Fund performance
For the six months ended June 30, 2001, John Hancock V.A. International
Fund posted a total return of -19.26% at net asset value. In comparison,
the average variable annuity international fund returned -14.34% during
the same period. See page 18 for historical performance information.
The Fund's relative underperformance stemmed in large part from holdings
in the volatile TMT arena, electric utilities and money-center banks.
Specifically, Alcatel of France, Colt Telecom of Britain, and British
Telecom were among the portfolio's weakest performers in the first half of
2001, as corporate expenditures on telecommunications equipment and
services plummeted. On a country basis, stock selection in Japan and the
United Kingdom negatively influenced returns during the period. On the
positive side, stock selection in Irish and Danish equities helped limit
Fund declines, as did holdings in biotechnology, apparel and automotive
equipment companies.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 4% with -20% at the bottom and
0% at the top. The first bar represents the -19.26% total return for John
Hancock V.A. International Fund. The second bar represents the -14.34%
total return for Average variable annuity international fund. A note below
the chart reads "The total return for John Hancock V.A. International Fund
is at net asset value with all distributions reinvested. The average
international fund is tracked by Lipper, Inc. See the following page for
historical performance information."]
Stakes boosted in Japan, U.K. and France
During the period, we shifted assets out of Japan early in the year,
reducing exposure from 21% of the Fund's holdings at the end of 2000 to
10% as of January 31, 2001. As the situation there seemed to improve with
the election of Prime Minister Koizumi, we increased holdings to reach 18%
as of June 30. As a result of our bottom-up stock selection process
centered on positive, sustainable change, we also identified opportunities
in the United Kingdom and France. The percentage of U.K. equities rose
from 10% to 19% during the period, while French stocks increased from 6%
to 10%.
On a sector-by-sector basis, we increased the Fund's energy holdings, as
tight supplies and growing demand pushed fuel prices higher. Meanwhile, we
significantly reduced exposure to the beleaguered technology sector. As of
June 30, 2001, the Fund was overweighted in energy and consumer durable
stocks relative to its benchmark MSCI index and underweighted in the
financial services and technology sectors. The Fund's country weightings
were largely in line with the benchmark.
Looking ahead
Despite a difficult environment for equity investors spanning more than a
year now, we believe that international markets continue to offer
compelling investment opportunities. Falling interest rates should begin
to fuel a recovery in worldwide equity markets. The case for international
investing also remains compelling amid the positive themes of structural
changes such as tax and pension reform and deregulation, especially in
Europe. The trend toward a rising equity culture in Europe and Japan also
bodes well for international equity markets. Finally, non-U.S. equities'
share of world market capitalization has increased over the last three
decades, rising from 30% in the 1970s to more than 50% today. We believe
international markets remain home to many companies with sound
fundamentals.
"Falling
interest rates
should begin
to fuel a
recovery in
worldwide
equity
markets."
No matter how difficult the market environment may become, we will never
waver from the proven philosophy and process that has served our clients
so well over time. We remain committed to our discipline of finding the
companies exhibiting the fastest growth in earnings, and we continue to
find stocks with sustainable positive change at attractive valuations.
Currently, we are identifying compelling opportunities in the energy,
health-care and consumer services sectors. The TMT group's fundamentals
continue to deteriorate and we expect them to worsen in the short term.
However, our dynamic process is designed to turn change into capital
appreciation, so we will continue to search for candidates in this
fast-moving sector.
- -----------------------------------------------------------------------------
International investing involves special risks such as political,
economic and currency risks and differences in accounting standards and
financial reporting.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (8/29/96)
------- ------- -------
Cumulative Total Returns (19.26%) (31.56%) 4.08%
Average Annual Total Returns -- (31.56%) 0.83%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. International Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Morgan Stanley Capital International (MSCI) All
Country World Free Ex-U.S. Index, which measures the performance of a
broad range of developed and emerging stock markets. The index represents
securities that are freely traded on a variety of equity exchanges around
the world. It is not possible to invest in an index.
Line chart with the heading John Hancock V.A. International Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
MSCI All Country World Free Ex-U.S. Index and is equal to $11,688 as of
June 30, 2001. The second line represents the value of the hypothetical
$10,000 investment made in the John Hancock V.A. International Fund on
August 29, 1996 and is equal to $10,408 as of June 30, 2001.
BY JAMES K. SCHMIDT, CFA, PORTFOLIO MANAGEMENT TEAM LEADER, AND
THOMAS M. FINUCANE AND THOMAS C. GOGGINS, PORTFOLIO MANAGERS
John Hancock
V.A. Regional Bank Fund
Smaller banks outperform other financial stocks
in a difficult six months for the stock market
The first six months of 2001 were marked by a dramatically slowing
economy, a relentless stream of disappointing corporate profit
announcements and a distressed stock market that produced negative
results. In response to the sagging economy, the Federal Reserve Board cut
short-term interest rates six times for a total of 2.75 percentage points
in a bid to avoid a recession. Banks and thrifts with the most sensitivity
to falling rates were lifted by the Fed's easing stance, as were the
smaller banks that struggled last year. While financial stocks as a group
held up better than the broad stock market, those connected to the
increasingly dicey stock market, like asset managers and brokerage houses,
were hit hard, as were financial companies whose valuations ran up the
most by the end of last year. For the six months ended June 30, 2001, the
Standard & Poor's Major Regional Bank Index returned -2.59%, while the
broad market, as measured by the Standard & Poor's 500 Index, returned
- -6.69%.
[Table at bottom left hand column entitled "Top Five Stock
Holdings." The first listing is Valley National Bancorp 4.0%, the second is
Mid-State Bancshares 3.9%, the third Fifth Third Bancorp 3.6%, the fourth
Umpqua Holdings 3.6% and the fifth Pacific Capital Bancorp 3.5%. A note
below the table reads "As a percentage of net assets on June 30, 2001."]
"...financial
stocks as a
group held up
better than the
broad stock
market..."
Fund performance
John Hancock V. A. Regional Bank Fund produced a very solid result during
the period due to our focus on the outperforming mid-sized regional and
smaller banks. For the six months ended June 30, 2001, the Fund posted a
total return of 8.10% at net asset value. That compared with the 0.54%
return of the average open-end financial services fund and the -14.72%
return of the average variable annuity specialty/miscellaneous fund,
according to Lipper, Inc. See page 21 for historical performance
information.
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A.
Regional Bank Fund. Caption below reads "Jim Schmidt."]
Small and interest-sensitive banks dominate
Not surprisingly, the Fund's holdings in banks and thrifts with the
greatest sensitivity to falling rates were some of our best performers,
including Community First Bankshares, Charter One Financial, SouthTrust
and First Financial Holdings. Conversely, the banks with the highest
price-to-earnings ratios, which had risen the most last year, like Mellon
Financial and Wells Fargo, lost ground. Small capitalization banks whose
stock prices had grown very cheap after last year's lag also boosted our
performance, including Financial Institutions, Umpqua Holdings, Cascade
Bancorp and Independent Bank Corp. Their stocks were also lifted by
several other factors, including their potential inclusion in the Russell
2000 Index, the banks' relative underexposure to areas of heightened loan
concern (i.e., telecommunications loans) and their improved margin
outlooks in the falling-rate environment.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 5% with -15% at the bottom and
10% at the top. The first bar represents the 8.10% total return for John
Hancock V.A. Regional Bank Fund. The second bar represents the 0.54% total
return for Average open-end financial services fund. The third bar
represents the -14.72% total return for Average variable annuity
specialty/miscellaneous fund. A note below the chart reads "The total
return for John Hancock V.A. Regional Bank Fund is at net asset value with
all distributions reinvested. The average open-end financial services fund
and variable annuity specialty/miscellaneous fund are tracked by Lipper,
Inc. See the following page for historical performance information."]
"Falling
rates and an
economy that is
growing
moderately are
usually two
good
ingredients for
bank-stock
performance."
Banks poised for above-market growth
With the economy in a slower mode and interest rates continuing to
decline, bank loan growth should be at a slower 5% pace. At the same time,
bank margins have stabilized, expenses are under control and banks
continue to buy back stock. Even though the level of non-performing assets
rose in the period, it is still very low -- at less than one percent of
total assets -- and we do not believe it will rise much above one percent.
With this backdrop, banks should be able to generate single-digit
earnings-per-share growth, which, while modest compared to prior years,
still tops the negative profit outlook for the broad market.
Slow pace for bank mergers
Although merger activity was generally slow during the period, we did have
three of our banks involved in takeover offers. The headline transaction
was First Union's bid to acquire Wachovia, later complicated by the
arrival of Sun Trust as a hostile suitor. We believe many years of
consolidation are still ahead in the banking industry, as the
extraordinary number of institutions gets whittled down to a more
efficient level. Although many valuable bank franchises are trading at
very reasonable prices, the pool of banks able to undertake a sizable
acquisition has shrunk due to low valuation and uncertain benefits from
past deals. Only a handful of the nation's top banks have unblemished
records that leave them in a good position to pursue further transactions.
It will take time and a greater number of merger success stories before
other powerful banks resume acquisition programs.
Outlook
Although the Fed's aggressive move to stabilize the economy appears to be
winding down, its efforts should begin to have a positive effect later
this year, and we expect the U.S. economy to avoid a recession and produce
modest growth for the rest of 2001. Falling rates and an economy that is
growing moderately are usually two good ingredients for bank-stock
performance. In this environment, we will keep adding to our stake in
higher-quality banks and reducing positions in banks in which we are less
certain about their loan portfolios.
- -----------------------------------------------------------------------------
Sector investing is subject to greater risks than the market as a whole.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (5/1/98)
------- ------- -------
Cumulative Total Returns 8.10% 40.65% 13.46%
Average Annual Total Returns -- 40.65% 4.07%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. Regional Bank Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Standard & Poor's 500 Index -- an unmanaged
index that includes 500 widely traded common stocks and is often used as a
measure of stock market performance. It is not possible to invest in an
index.
Line chart with the heading John Hancock V.A. Regional Bank Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
Standard & Poor's 500 Index and is equal to $11,469 as of June 30, 2001.
The second line represents the value of the hypothetical $10,000 investment
made in the John Hancock V.A. Regional Bank Fund on May 1, 1998 and is
equal to $11,282 as of June 30, 2001.
BY ARTHUR N. CALAVRITINOS, CFA, PORTFOLIO MANAGEMENT TEAM LEADER; AND
JANET L. CLAY, CFA, AND FREDERICK L. CAVANAUGH, JR., PORTFOLIO MANAGERS
John Hancock
V.A. High Yield Bond Fund
High-yield bonds outperform stocks in a difficult environment
During the first six months of 2001, high-yield bonds rebounded off last
year's lows and outperformed stocks, as market conditions remained choppy.
A dramatically slowing economy prompted a slew of earnings disappointments
and sent the stock market into a tailspin. Investors fled the once-favored
technology and telecommunications sectors and sought safety in more
defensive areas like energy, health care and high-quality bonds. These
bonds were also boosted by six interest-rate cuts by the Federal Reserve
since January that brought short-term rates down from 6.50% at the end of
2000 to 3.75% by the end of June.
"Our increased
weighting in
energy
companies
served us well
as the price
of oil and gas
spiked..."
[Pie chart at bottom left hand column with heading "Portfolio
Diversification." The chart is divided into six sections (from top to
left): Short-Term Investments & Other 5%, Foreign Government Bonds 1%,
Preferred Stock & Warrants 9%, Common Stock 8%, Foreign Corporate Bonds 20%
and U.S. Corporate Bonds 57%. A note below the chart reads "As a percentage
of net assets on June 30, 2001."]
With the rate cuts, investors began seeking higher levels of income in the
high-yield, or junk, bond market as the year progressed. But this sector
of the bond market still had a rougher road than government and
high-quality corporate bonds. Not only do high-yield bonds carry a greater
degree of risk because of their below-investment-grade credit ratings, but
they also tend to move more in line with the stock market because their
fortunes are so closely tied to their underlying credits. With the
deteriorating economic conditions, the number of companies defaulting on
their debt payments grew and investors turned to higher-quality issues.
Except for a brief period in January after the Fed's first rate cut, many
start-up telecommunications companies -- which make up the largest
component of the high-yield market -- were particularly hard hit, as they
increasingly were unable to get funding for the next phases of their
business plans. On a technical level, a lack of liquidity, or ease of
trading, also continued to stymie the high-yield universe. Despite these
challenges, high-yield bonds still outperformed the stock market,
returning 3.93% for the six months ended June 30, 2001, as measured by the
Lehman Brothers High Yield Index, while the Standard & Poor's 500 Index
lost 6.69%. But there was great disparity between better-quality
high-yield bonds, rated Ba, which returned 8.27%, and lower-quality junk
bonds with higher yields, such as bonds rated B, which returned 1.30%, as
measured by Lehman Brothers.
[A 1 1/2" x 2" photo at bottom right side of page of John Hancock V.A. High
Yield Bond Fund. Caption below reads "Arthur Calavritinos."]
Fund performance
For the six months ended June 30, 2001, John Hancock V.A. High Yield Bond
Fund posted a total return of 2.46% at net asset value, compared with the
1.10% return of the average variable annuity high current yield fund,
according to Lipper, Inc. Historical performance information can be found
on page 24.
[Bar chart at the top of left hand column with heading "Fund Performance."
Under the heading is a note that reads "For the six months ended June 30,
2001." The chart is scaled in increments of 1% with 0% at the bottom and 3%
at the top. The first bar represents the 2.46% total return for John
Hancock V.A. High Yield Bond Fund. The second bar represents the 1.10%
total return for Average variable annuity high current yield fund. A note
below the chart reads "The total return for John Hancock V.A. High Yield
Bond Fund is at net asset value with all distributions reinvested. The
average variable annuity high current yield fund is tracked by Lipper, Inc.
See the following page for historical performance information."]
While we outperformed our peers, our absolute performance was held back by
our significant stake in Asia Pulp & Paper (APP), which recently filed for
bankruptcy protection and is in the process of restructuring its debt.
APP's main mistake was focusing too much on expanding capacity and not
enough on paying down debt. But it remains a very low-cost paper producer
with world-class assets, and we intend to hold on until a plan is worked
out. In contrast, our top holding, Timberwest, a Canadian timber company
with good assets and an attractive yield, served us well.
Telecommunications cut
Our stake in telecommunications company Nextel Communications -- one of
our top holdings -- also detracted from performance in the period when,
after holding in longer than most, it finally was taken down by the market
after lowering its cash-flow estimates. But we still like the company,
which, unlike many telecom start-ups, actually has a business that makes
money, with a franchise and national brand name recognition for its
cell-phone/paging technology. We are more wary about other telecom names,
and throughout the year we continued to cut our stake to a significantly
underweighted position, down from 14% in December. We continue to believe
that the sector still faces challenges until demand catches up to the
current oversupply of telecom goods and services.
Energy, media emerging markets boosted
Our increased weighting in energy companies served us well as the price of
oil and gas spiked and exploration and development expanded. We had
several companies get taken over, including Gothic Production, a natural
gas exploration and production company bought out by Chesapeake.
Well-servicing company Key Energy, natural gas producer Grey Wolf, and CHC
Helicopter, which provides transportation to offshore oil rigs, were all
solid performers. A number of energy companies have been so successful
that they have called back their higher-yielding bonds that we owned and
reissued lower-yielding bonds. To the extent that our energy bonds get
called, we are reducing our stake in the sector in search of
higher-yielding bonds.
"We will keep
underweighted
in telecom..."
We upped our media exposure by buying the stock and bonds of direct
satellite TV company Pegasus Communications, which we believe is
undervalued compared with its competitors. We also increased our stake in
emerging-market bonds, particularly in Latin America, as this region has
bounced back better than others.
Outlook
We expect pressures to remain on the telecommunications sector, with the
potential for more failures ahead. As long as the economy remains weak, we
anticipate further action by the Fed, which should help spark an economic
rebound, but not until some time next year. We will keep underweighted in
telecom, selectively focused on companies we believe have the best chances
of survival, and apply our value style toward maintaining a portfolio that
provides shareholders with a high level of current income and the
potential for price gains.
See the prospectus for the risks of investing in high-yield bonds.
International investing involves special risks such as political, economic
and currency risks and differences in accounting standards and financial
reporting.
A LOOK AT PERFORMANCE
For the period ended June 30, 2001
SINCE
SIX ONE INCEPTION
MONTHS YEAR (1/6/98)
------- ------- -------
Cumulative Total Returns 2.46% (3.35%) (1.81%)
Average Annual Total Returns -- (3.35%) (0.52%)
YIELD
For the period ended June 30, 2001
SEC 30-DAY
YIELD
-------
John Hancock V.A. High Yield
Bond Fund 12.43%
Total return measures the change in value of an investment from the
beginning to the end of a period, assuming all distributions were
reinvested. Performance figures reflect the effect of investment-related
charges on the underlying funds, but do not include insurance and other
charges levied at the separate account level.
All figures represent past performance and are no guarantee of future
results. Keep in mind that the total return and share price of the Fund's
investments will fluctuate. As a result, your Fund's shares may be worth
more or less than their original cost, depending on when you sell them.
Note to Performance
The Fund's performance results reflect any applicable expense reductions,
without which the expenses would increase and results would have been less
favorable. These reductions can be terminated in the future.
WHAT HAPPENED TO
A $10,000 INVESTMENT . . .
The chart below shows how much a $10,000 investment in the John Hancock
V.A. High Yield Bond Fund would be worth, assuming all distributions were
reinvested for the period indicated. For comparison, we've shown the same
$10,000 investment in the Lehman Brothers High Yield Bond Index -- an
unmanaged index of fixed-income securities that are similar, but not
identical, to the bonds in the Fund's portfolio. It is not possible to
invest in an index.
Line chart with the heading John Hancock V.A. High Yield Bond Fund,
representing the growth of a hypothetical $10,000 investment over the life
of the fund. Within the chart are two lines. The first line represents the
Lehman Brothers High Yield Bond Index and is equal to $10,205 as of June
30, 2001. The second line represents the value of the hypothetical $10,000
investment made in the John Hancock V.A. High Yield Bond Fund on January 6,
1998 and is equal to $9,819 as of June 30, 2001.
FINANCIAL STATEMENTS
John Hancock Funds - Declaration Trust
Statements of Assets and Liabilities
June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A. V.A. V.A. V.A.
500 INDEX LARGE CAP MID CAP SMALL CAP INTERNATIONAL REGIONAL BANK HIGH YIELD
FUND GROWTH FUND GROWTH FUND GROWTH FUND FUND FUND BOND FUND
----------- ----------- ----------- ----------- ------------- ------------- -----------
Assets:
Investments at value (cost -
$12,948,504, $6,081,968,
$6,065,678, $11,380,649,
$6,273,184, $8,818,705 and
$8,523,041, respectively) $17,836,392 $6,328,151 $5,930,239 $13,193,181 $5,944,661 $11,104,314 $5,947,408
Joint repurchase agreements
(cost - $911,000, none, $503,000,
$111,000, $262,000, $743,000 and
$85,000, respectively) 911,000 -- 503,000 111,000 262,000 743,000 85,000
----------- ----------- ----------- ----------- ------------- ------------- -----------
18,747,392 6,328,151 6,433,239 13,304,181 6,206,661 11,847,314 6,032,408
Cash 714 -- 436 476 -- 947 934
Foreign currency at value
(cost - none, none, none, none,
$1,750, none and none, respectively) -- -- -- -- 1,747 -- --
Cash segregated for futures
contracts 34,500 -- -- -- -- -- --
Receivable for investments sold 24,953 29,445 51,675 156,578 24,356 34,311 30,528
Receivable for shares sold -- -- 1,045 28,103 -- -- --
Dividends and interest receivable 13,314 2,251 1,333 625 12,090 26,509 221,690
Receivable for futures variation
margin 2,350 -- -- -- -- -- --
Receivable for forward foreign
currency exchange contracts sold -- -- -- -- 3,314 -- 15,994
Deferred organization expense 360 360 -- 360 360 -- --
Receivable from affiliates 29,130 -- -- -- -- -- --
Other assets 700 279 49 1,039 186 296 129
----------- ----------- ----------- ----------- ------------- ------------- -----------
Total assets 18,853,413 6,360,486 6,487,777 13,491,362 6,248,714 11,909,377 6,301,683
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Due to custodian -- 68,079 -- -- 207 -- --
Payable for investments purchased 389,390 -- 158,629 140,681 167,849 -- --
Payable for shares repurchased -- 185 94 7,664 -- 374 147
Dividends payable -- -- -- -- -- -- 3,869
Payable for securities on loan -- -- -- -- 1,040,206 -- --
Payable for forward foreign
currency exchange contracts
purchased -- -- -- -- 33 -- 589
Payable to affiliates -- 1,571 2,089 8,369 3,889 7,862 2,592
Accounts payable and accrued
expenses 44,530 10,815 11,791 21,633 37,954 12,898 10,126
----------- ----------- ----------- ----------- ------------- ------------- -----------
Total liabilities 433,920 80,650 172,603 178,347 1,250,138 21,134 17,323
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Capital paid-in 12,497,928 11,191,616 8,932,394 15,584,510 6,711,524 11,970,766 9,547,853
Accumulated net realized gain
(loss) on investments
and foreign currency transactions 1,051,931 (5,135,699) (2,451,411) (4,033,684) (1,334,074) (2,368,502) (649,560)
Net unrealized appreciation
(depreciation) of investments,
futures and translation of assets
and liabilities in foreign
currencies 4,869,674 246,183 (135,439) 1,812,532 (326,048) 2,285,609 (2,561,856)
Undistributed (distributions in
excess of) net investment income
(accumulated net investment loss) (40) (22,264) (30,370) (50,343) (52,826) 370 (52,077)
----------- ----------- ----------- ----------- ------------- ------------- -----------
Net assets $18,419,493 $6,279,836 $6,315,174 $13,313,015 $4,998,576 $11,888,243 $6,284,360
=================================================================================================================================
Net Asset Value Per Share:
(Based on 1,227,183, 816,304,
546,313, 1,005,607, 562,479,
1,120,720, and 974,905 shares,
respectively, of beneficial
interest outstanding - unlimited
number of shares authorized with
no par value) $15.01 $7.69 $11.56 $13.24 $8.89 $10.61 $6.45
=================================================================================================================================
The Statement of Assets and Liabilities is each Fund's balance sheet and shows the value of what the Fund owns,
is due and owes on June 30, 2001. You'll also find the net asset value per share as of that date.
See notes to financial statements.
Statements of Operations
Six months ended June 30, 2001 (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A. V.A. V.A. V.A. V.A.
500 INDEX LARGE CAP MID CAP SMALL CAP INTERNATIONAL REGIONAL BANK HIGH YIELD
FUND GROWTH FUND GROWTH FUND GROWTH FUND FUND FUND BOND FUND
----------- ----------- ----------- ----------- ------------- ------------- -----------
Investment Income:
Dividends (net of foreign
withholding tax of $592, $288,
$11, none, $6,579, none and
$1,130, respectively) $119,367 $18,031 $7,239 $7,782 $45,360 $132,955 $32,206
Interest 16,871 1,563 3,426 2,967 8,316 14,565 363,443
Securities lending -- -- -- 14,066 3,924 1,581 --
----------- ----------- ----------- ----------- ------------- ------------- -----------
Total investment income 136,238 19,594 10,665 24,815 57,600 149,101 395,649
- --------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment management fee 25,568 31,324 30,771 56,311 26,093 48,380 19,741
Custodian fee 80,141 7,713 9,276 22,531 61,690 5,049 6,102
Auditing fee 7,438 5,951 5,951 7,438 5,951 5,917 5,951
Miscellaneous 5,237 388 90 159 73 320 162
Printing 2,187 3,303 1,224 578 2,170 830 778
Accounting and legal services fee 2,001 817 803 1,469 568 1,183 644
Organization expense 1,053 1,053 -- 1,053 1,053 -- --
Trustees' fees 683 352 300 503 190 422 194
Legal fees 110 80 45 88 673 71 675
Registration and filing fees 8 352 8 8 40 9 21
Interest expense -- 1,324 252 673 -- 52 --
----------- ----------- ----------- ----------- ------------- ------------- -----------
Total expenses 124,426 52,657 48,720 90,811 98,501 62,233 34,268
Less expense reductions (88,630) (10,890) (7,693) (15,729) (65,160) -- (6,302)
- --------------------------------------------------------------------------------------------------------------------------------
Net expenses 35,796 41,767 41,027 75,082 33,341 62,233 27,966
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 100,442 (22,173) (30,362) (50,267) 24,259 86,868 367,683
- --------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 751,294 (3,369,813) (1,746,838) (1,792,517) (497,721) 577,019 (419,180)
Futures (66,957) -- -- -- -- -- --
Foreign currency transactions -- -- -- -- (316,985) -- (9,107)
Change in unrealized appreciation
(depreciation) on:
Investments (2,396,941) 638,393 (725,291) 27,433 (533,372) 170,852 180,171
Futures (36,061) -- -- -- -- -- --
Translation of assets and
liabilities in foreign currencies -- -- -- -- 4,430 -- 46,517
----------- ----------- ----------- ----------- ------------- ------------- -----------
Net realized and unrealized
gain (loss) (1,748,665) (2,731,420) (2,472,129) (1,765,084) (1,343,648) 747,871 (201,599)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations ($1,648,223) ($2,753,593) ($2,502,491) ($1,815,351) ($1,319,389) $834,739 $166,084
================================================================================================================================
The Statement of Operations summarizes for each of the Funds the investment income earned and expenses incurred in operating
the Fund. It also shows net gains (losses) for the period stated.
See notes to financial statements.
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A.
500 INDEX FUND LARGE CAP GROWTH FUND MID CAP GROWTH FUND
------------------------ ------------------------ ------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
DECEMBER 31, 2001 DECEMBER 31, 2001 DECEMBER 31, 2001
2000 (UNAUDITED) 2000 (UNAUDITED) 2000 (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) $284,283 $100,442 ($116,390) ($22,173) ($55,546) ($30,362)
Net realized gain (loss) 510,070 684,337 (1,715,484) (3,369,813) (691,193) (1,746,838)
Change in net unrealized
appreciation (depreciation) (3,816,126) (2,433,002) (4,414,002) 638,393 (1,246,996) (725,291)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease in net assets
resulting from operations (3,021,773) (1,648,223) (6,245,876) (2,753,593) (1,993,735) (2,502,491)
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
From net investment income (279,659) (105,489) -- -- -- --
From net realized gain (92,786) -- (643,661) -- (78,273) --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions to shareholders (372,445) (105,489) (643,661) -- (78,273) --
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions:
Shares sold 2,172,521 473,627 5,563,562 237,611 12,664,811 306,649
Shares issued to shareholders in
reinvestment of distributions 372,407 105,489 643,661 -- 78,273 --
Less shares repurchased (12,009,903) (5,499,934) (8,885,412) (3,508,388) (5,552,026) (2,970,834)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (9,464,975) (4,920,818) (2,678,189) (3,270,777) 7,191,058 (2,664,185)
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 37,953,216 25,094,023 21,871,932 12,304,206 6,362,800 11,481,850
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (loss) (distributions in
excess of net investment income)
of $5,007, ($40), ($91),
($22,264), ($8) and ($30,370),
respectively) $25,094,023 $18,419,493 $12,304,206 $6,279,836 $11,481,850 $6,315,174
=========== =========== =========== =========== =========== ===========
Distributions to Shareholders:
Per share dividends from net
investment income $0.1530 $0.0825 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain $0.0585 -- $0.5666 -- $0.1010 --
----------- ----------- ----------- ----------- ----------- -----------
* Analysis of Fund Share Transactions:
Shares sold 123,028 30,367 376,363 27,503 699,219 23,775
Shares issued to shareholders in
reinvestment of distributions 21,738 7,183 62,310 -- 5,222 --
Less shares repurchased (694,943) (358,048) (628,273) (408,950) (313,149) (238,537)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) (550,177) (320,498) (189,600) (381,447) 391,292 (214,762)
=========== =========== =========== =========== =========== ===========
The Statement of Changes in Net Assets shows how the value of each Fund's
net assets has changed since the end of the previous period. The
difference reflects earnings less expenses, any investment and foreign
currency gains and losses, distributions paid to shareholders, if any, and
any increase or decrease in money shareholders invested in each Fund. The
footnotes illustrate the number of Fund shares sold, reinvested and
repurchased during the last two periods, along with the per share amount
of distributions made to shareholders of each Fund for the periods
indicated.
See notes to financial statements.
Statements of Changes in Net Assets (continued)
- -----------------------------------------------------------------------------------------------------------------------------
V.A. V.A. V.A.
SMALL CAP GROWTH FUND INTERNATIONAL FUND REGIONAL BANK FUND
------------------------ ------------------------ ------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
DECEMBER 31, 2001 DECEMBER 31, 2001 DECEMBER 31, 2001
2000 (UNAUDITED) 2000 (UNAUDITED) 2000 (UNAUDITED)
----------- ----------- ----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss) ($194,883) ($50,267) $17,595 $24,259 $271,788 $86,868
Net realized gain (loss) (2,221,923) (1,792,517) (451,324) (814,706) (2,865,401) 577,019
Change in net unrealized
appreciation (depreciation) (5,140,485) 27,433 (2,179,238) (528,942) 4,087,137 170,852
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from operations (7,557,291) (1,815,351) (2,612,967) (1,319,389) 1,493,524 834,739
----------- ----------- ----------- ----------- ----------- -----------
Distributions to Shareholders: *
From net investment income -- -- (107,471) -- (275,181) (86,394)
From net realized gain (1,193,201) -- (238,923) -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions to shareholders (1,193,201) -- (346,394) -- (275,181) (86,394)
----------- ----------- ----------- ----------- ----------- -----------
From Fund Share Transactions:
Shares sold 18,612,044 445,018 1,932,741 85,169 1,198,441 652,155
Shares issued to shareholders in
reinvestment of distributions 1,193,201 -- 346,394 -- 275,181 86,394
Less shares repurchased (12,149,701) (5,088,314) (1,364,748) (1,096,843) (9,253,630) (3,332,081)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 7,655,544 (4,643,296) 914,387 (1,011,674) (7,780,008) (2,593,532)
----------- ----------- ----------- ----------- ----------- -----------
Net Assets:
Beginning of period 20,866,610 19,771,662 9,374,613 7,329,639 20,295,095 13,733,430
----------- ----------- ----------- ----------- ----------- -----------
End of period (including
undistributed net investment
income (loss) (distributions in
excess of net investment income)
of ($76), ($50,343), ($77,085),
($52,826), ($104) and $370,
respectively) $19,771,662 $13,313,015 $7,329,639 $4,998,576 $13,733,430 $11,888,243
=========== =========== =========== =========== =========== ===========
Distributions to Shareholders:
Per share dividends from net
investment income -- -- $0.1684 -- $0.1686 $0.0732
----------- ----------- ----------- ----------- ----------- -----------
Per share distributions from net
realized gain $0.9031 -- $0.3744 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
* Analysis of Fund Share Transactions:
Shares sold 888,422 33,471 131,349 8,932 150,452 65,385
Shares issued to shareholders in
reinvestment of distributions 86,905 -- 31,955 -- 33,504 8,780
Less shares repurchased (658,355) (400,835) (104,357) (112,301) (1,166,423) (342,613)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) 316,972 (367,364) 58,947 (103,369) (982,467) (268,448)
=========== =========== =========== =========== =========== ===========
See notes to financial statements.
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------
V.A.
HIGH YIELD BOND FUND
------------------------
SIX MONTHS
YEAR ENDED
ENDED JUNE 30,
DECEMBER 31, 2001
2000 (UNAUDITED)
----------- -----------
Increase (Decrease) in Net Assets:
From Operations:
Net investment income $1,037,461 $367,683
Net realized gain (loss) 141,324 (428,287)
Change in net unrealized
appreciation (depreciation) (1,666,407) 226,688
----------- -----------
Net increase (decrease) in net
assets resulting from operations (487,622) 166,084
----------- -----------
Distributions to Shareholders: *
From net investment income (1,039,972) (391,044)
From net realized gain (241,224) --
----------- -----------
Total distributions to shareholders (1,281,196) (391,044)
----------- -----------
From Fund Share Transactions:
Shares sold 858,489 697,429
Shares issued to shareholders in
reinvestment of distributions 1,281,195 387,175
Less shares repurchased (2,438,764) (1,793,918)
----------- -----------
Net decrease (299,080) (709,314)
----------- -----------
Net Assets:
Beginning of period 9,286,532 7,218,634
----------- -----------
End of period (including
distributions in excess of net
investment income of ($4,802) and
($52,077), respectively) $7,218,634 $6,284,360
=========== ===========
Distributions to Shareholders:
Per share dividends from net
investment income $0.9394 $0.3885
----------- -----------
Per share distributions from net
realized gain $0.2290 --
----------- -----------
* Analysis of Fund Share Transactions:
Shares sold 110,078 105,067
Shares issued to shareholders in
reinvestment of distributions 172,859 58,318
Less shares repurchased (320,600) (268,727)
----------- -----------
Net decrease (37,663) (105,342)
=========== ===========
See notes to financial statements.
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------
V.A. 500 INDEX FUND
--------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $10.44 $12.62 $15.23 $18.09 $16.21
-------- -------- -------- -------- -------- --------
Net Investment Income(2) 0.17 0.30 0.20 0.17 0.14 0.07
Net Realized and Unrealized Gain (Loss) on
Investments 0.98 2.72 3.37 2.98 (1.81) (1.19)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 1.15 3.02 3.57 3.15 (1.67) (1.12)
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.16) (0.30) (0.20) (0.17) (0.15) (0.08)
From Net Realized Gain (0.55) (0.54) (0.76) (0.11) (0.06) --
In Excess of Net Realized Gain -- -- -- (0.01) -- --
-------- -------- -------- -------- -------- --------
Total Distributions (0.71) (0.84) (0.96) (0.29) (0.21) (0.08)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $10.44 $12.62 $15.23 $18.09 $16.21 $15.01
======== ======== ======== ======== ======== ========
Total Investment Return(3,4) 11.49%(5) 29.51% 28.44% 20.81% (9.28%) (6.88%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $4,049 $20,008 $26,457 $37,953 $25,094 $18,419
Ratio of Expenses to Average Net Assets 0.60%(6) 0.36% 0.35% 0.35% 0.35% 0.35%(6)
Ratio of Adjusted Expenses to Average Net
Assets(7) 1.31%(6) 0.83% 0.92% 0.75% 0.93% 1.22%(6)
Ratio of Net Investment Income to Average
Net Assets 4.57%(6) 2.45% 1.44% 1.06% 0.86% 0.98%(6)
Portfolio Turnover Rate 0% 9% 47% 5% 7% 3%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------
V.A. LARGE CAP GROWTH FUND
--------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.39 $10.73 $13.37 $15.77 $10.27
-------- -------- -------- -------- -------- --------
Net Investment Loss(2) (0.01) (0.04) --(3) (0.04) (0.08) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments (0.60) 1.38 2.64 2.80 (4.85) (2.56)
-------- -------- -------- -------- -------- --------
Total from Investment Operations (0.61) 1.34 2.64 2.76 (4.93) (2.58)
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Realized Gain -- -- -- (0.36) (0.57) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $9.39 $10.73 $13.37 $15.77 $10.27 $7.69
======== ======== ======== ======== ======== ========
Total Investment Return(4) (6.10%)(5,6) 14.27%(6) 24.60%(6) 20.71%(6) (31.30%) (25.12%)(5,6)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $994 $3,733 $10,372 $21,872 $12,304 $6,280
Ratio of Expenses to Average Net Assets 1.00%(7) 1.00% 1.00% 1.00% 0.96% 1.00%(7)
Ratio of Adjusted Expenses to Average Net
Assets(8) 4.76%(7) 2.37% 1.33% 1.02% -- 1.26%(7)
Ratio of Net Investment Loss to Average Net
Assets (0.23%)(7) (0.39%) (0.00%) (0.25%) (0.59%) (0.53%)(7)
Portfolio Turnover Rate 68% 136% 176% 172% 170% 38%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------
V.A. MID CAP GROWTH FUND
--------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------ 2001
1998(1) 1999 2000 (UNAUDITED)
-------- -------- -------- --------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $11.03 $17.21 $15.09
-------- -------- -------- --------
Net Investment Income (Loss)(2) 0.01 (0.03) (0.08) (0.05)
Net Realized and Unrealized Gain (Loss) on
Investments 1.03 6.23 (1.94) (3.48)
-------- -------- -------- --------
Total from Investment Operations 1.04 6.20 (2.02) (3.53)
-------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.01) -- -- --
From Net Realized Gain -- (0.02) (0.10) --
Tax Return of Capital --(3) -- -- --
-------- -------- -------- --------
Total Distributions (0.01) (0.02) (0.10) --
-------- -------- -------- --------
Net Asset Value, End of Period $11.03 $17.21 $15.09 $11.56
======== ======== ======== ========
Total Investment Return(4,5) 10.35%(6) 56.18% (11.73%) (23.39%)(6)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $1,779 $6,363 $11,482 $6,315
Ratio of Expenses to Average Net Assets 1.00%(7) 1.00% 1.00% 1.00%(7)
Ratio of Adjusted Expenses to Average Net
Assets(8) 4.23%(7) 2.36% 1.10% 1.19%(7)
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.06%(7) (0.23%) (0.42%) (0.74%)(7)
Portfolio Turnover Rate 103% 136% 155% 71%
(1) Commenced operations on January 7, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------
V.A. SMALL CAP GROWTH FUND
--------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.32 $10.35 $12.00 $19.76 $14.40
-------- -------- -------- -------- -------- --------
Net Investment Income (Loss)(2) 0.02 (0.02) (0.06) (0.10) (0.13) (0.04)
Net Realized and Unrealized Gain (Loss) on
Investments (0.68) 1.05 1.71 8.29 (4.33) (1.12)
-------- -------- -------- -------- -------- --------
Total from Investment Operations (0.66) 1.03 1.65 8.19 (4.46) (1.16)
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.02) --(3) -- -- -- --
From Net Realized Gain -- -- -- (0.43) (0.90) --
-------- -------- -------- -------- -------- --------
Total Distributions to Shareholders (0.02) -- -- (0.43) (0.90) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $9.32 $10.35 $12.00 $19.76 $14.40 $13.24
======== ======== ======== ======== ======== ========
Total Investment Return(4,5) (6.62%)(6) 11.06% 15.94% 68.52% (22.33%) (8.06%)(6)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $975 $3,841 $8,232 $20,867 $19,772 $13,313
Ratio of Expenses to Average Net Assets 1.00%(7) 1.00% 1.00% 1.00% 1.00% 1.00%(7)
Ratio of Adjusted Expenses to Average Net
Assets(8) 5.19%(7) 2.72% 1.63% 1.38% 1.10% 1.21%(7)
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.62%(7) (0.16%) (0.59%) (0.76%) (0.68%) (0.67%)(7)
Portfolio Turnover Rate 31% 79% 93% 120% 104% 40%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(6) Not annualized.
(7) Annualized.
(8) Does not take into consideration expense reductions during the periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ------------------------------------------------------------------------------------------------------------------------------
V.A. INTERNATIONAL FUND
--------------------------------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, -------------------------------------------------- 2001
1996(1) 1997 1998 1999 2000 (UNAUDITED)
-------- -------- -------- -------- -------- ---------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $11.23 $10.50 $12.18 $15.45 $11.01
-------- -------- -------- -------- -------- --------
Net Investment Income(2) 0.07 0.05 0.07 0.07 0.03 0.04
Net Realized and Unrealized Gain (Loss) on
Investments 1.20 (0.13) 1.69 3.75 (3.93) (2.16)
-------- -------- -------- -------- -------- --------
Total from Investment Operations 1.27 (0.08) 1.76 3.82 (3.90) (2.12)
-------- -------- -------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.04) (0.01) (0.07) (0.08) (0.17) --
In Excess of Net Investment Income -- -- (0.01) (0.02) -- --
From Net Realized Gain -- (0.64) -- (0.45) (0.37) --
-------- -------- -------- -------- -------- --------
Total Distributions (0.04) (0.65) (0.08) (0.55) (0.54) --
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $11.23 $10.50 $12.18 $15.45 $11.01 $8.89
======== ======== ======== ======== ======== ========
Total Investment Return(3,4) 12.75%(5) (0.54%) 16.75% 31.55% (25.17%) (19.26%)(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $2,267 $3,792 $7,201 $9,375 $7,330 $4,999
Ratio of Expenses to Average Net Assets 1.15%(6) 1.15% 1.15% 1.15% 1.15% 1.15%(6)
Ratio of Adjusted Expenses to Average Net
Assets(7) 3.13%(6) 2.04% 3.13% 2.51% 3.24% 3.40%(6)
Ratio of Net Investment Income to Average
Net Assets 2.03%(6) 0.43% 0.59% 0.52% 0.19% 0.84%(6)
Portfolio Turnover Rate 14% 273% 89% 116% 177% 176%
(1) Commenced operations on August 29, 1996.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods shown.
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------
V.A. REGIONAL BANK FUND
--------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------ 2001
1998(1) 1999 2000 (UNAUDITED)
-------- -------- -------- --------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $9.28 $8.56 $9.89
-------- -------- -------- --------
Net Investment Income(2) 0.09 0.12 0.16 0.07
Net Realized and Unrealized Gain (Loss) on
Investments (0.74) (0.57) 1.34 0.72
-------- -------- -------- --------
Total from Investment Operations (0.65) (0.45) 1.50 0.79
-------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.07) (0.12) (0.17) (0.07)
From Net Realized Gain --(3) (0.15) -- --
-------- -------- -------- --------
Total Distributions (0.07) (0.27) (0.17) (0.07)
-------- -------- -------- --------
Net Asset Value, End of Period $9.28 $8.56 $9.89 $10.61
======== ======== ======== ========
Total Investment Return(4) (6.43%)(5,6) (4.86%) 17.91% 8.10%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $20,256 $20,295 $13,733 $11,888
Ratio of Expenses to Average Net Assets 1.05%(7) 1.00% 1.01% 1.03%(7)
Ratio of Adjusted Expenses to Average Net
Assets(8) 1.14%(7) -- -- --
Ratio of Net Investment Income to Average
Net Assets 1.39%(7) 1.30% 1.92% 1.44%(7)
Portfolio Turnover Rate 28% 49% 32% 9%
(1) Commenced operations on May 1, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Less than $0.01 per share.
(4) Assumes dividend reinvestment.
(5) Not annualized.
(6) The total return would have been lower had certain expenses not been
reduced during the period shown
(7) Annualized.
(8) Does not take into consideration expense reductions during the period shown
See notes to financial statements.
Financial Highlights (continued)
Selected data for a share of beneficial interest outstanding throughout
each period indicated, investment returns, key ratios and supplemental
data are listed as follows:
- ----------------------------------------------------------------------------------------------------------------
V.A. HIGH YIELD BOND FUND
--------------------------------------------------------
SIX MONTHS
PERIOD ENDED
ENDED YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------ 2001
1998(1) 1999 2000 (UNAUDITED)
-------- -------- -------- --------
Per Share Operating Performance
Net Asset Value, Beginning of Period $10.00 $8.22 $8.31 $6.68
-------- -------- -------- --------
Net Investment Income(2) 0.90 0.88 0.94 0.36
Net Realized and Unrealized Gain (Loss) on
Investments (1.82) 0.16 (1.40) (0.20)
-------- -------- -------- --------
Total from Investment Operations (0.92) 1.04 (0.46) 0.16
-------- -------- -------- --------
Less Distributions:
From Net Investment Income (0.84) (0.88) (0.94) (0.39)
From Net Realized Gain -- (0.07) (0.23) --
Tax Return of Capital (0.02) -- -- --
-------- -------- -------- --------
Total Distributions (0.86) (0.95) (1.17) (0.39)
-------- -------- -------- --------
Net Asset Value, End of Period $8.22 $8.31 $6.68 $6.45
======== ======== ======== ========
Total Investment Return(3,4) (9.80%)(5) 13.12% (6.08%) 2.46%(5)
Ratios and Supplemental Data
Net Assets, End of Period (000s omitted) $8,120 $9,287 $7,219 $6,284
Ratio of Expenses to Average Net Assets 0.85%(6) 0.85% 0.85% 0.85%(6)
Ratio of Adjusted Expenses to Average Net
Assets(7) 1.15%(6) 1.03% 1.24% 1.04%(6)
Ratio of Net Investment Income to Average
Net Assets 9.85%(6) 10.56% 12.12% 11.18%(6,8)
Portfolio Turnover Rate 102% 122% 56% 33%
(1) Commenced operations on January 6, 1998.
(2) Based on the average of the shares outstanding at the end of each month.
(3) Assumes dividend reinvestment.
(4) The total returns would have been lower had certain expenses not been
reduced during the periods shown.
(5) Not annualized.
(6) Annualized.
(7) Does not take into consideration expense reductions during the periods shown.
(8) Had the Fund not amortized premiums on debt securities, the annualized
ratio of net investment income to average net assets would have been 11.40%
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. 500 Index Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. 500 Index Fund on June 30, 2001. It is divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Advertising (0.29%)
Interpublic Group of Companies,
Inc. (The) 607 $17,815
Omnicom Group, Inc. 300 25,800
TMP Worldwide, Inc.* 172 10,320
--------------
53,935
--------------
Aerospace (1.18%)
Boeing Co. (The) 1,411 78,452
General Dynamics Corp. 325 25,288
Goodrich (B.F.) Co. (The) 167 6,343
Lockheed Martin Corp. 702 26,009
Northrop Grumman Corp. 138 11,054
Raytheon Co. 575 15,266
United Technologies Corp. 761 55,751
--------------
218,163
--------------
Automobiles/Trucks (0.94%)
Cummins Engine Co., Inc. 67 2,593
Dana Corp. 239 5,578
Delphi Automotive Systems Corp. 906 14,433
Eaton Corp. 111 7,781
Ford Motor Co. 2,959 72,643
General Motors Corp. 887 57,078
PACCAR, Inc. 124 6,376
Ryder System, Inc. 98 1,921
Visteon Corp. 212 3,897
--------------
172,300
--------------
Banks - United States (5.40%)
AmSouth Bancorp. 599 11,076
Bank of America Corp. 2,592 155,598
Bank of New York Co., Inc. 1,190 57,120
Bank One Corp. 1,885 67,483
BB&T Corp. 659 24,185
Comerica, Inc. 289 16,646
Fifth Third Bancorp 931 55,907
First Union Corp. 1,587 55,450
FleetBoston Financial Corp. 1,752 69,116
Huntington Bancshares, Inc. 406 6,638
KeyCorp. 687 17,896
Mellon Financial Corp. 772 35,512
National City Corp. 972 29,918
Northern Trust Corp. 360 22,500
PNC Bank Corp. 467 30,724
Regions Financial Corp. 368 11,776
SouthTrust Corp. 550 14,300
State Street Corp. 526 26,032
SunTrust Banks, Inc. 472 30,576
Synovus Financial Corp. 469 14,717
U.S. Bancorp 3,082 70,239
Union Planters Corp. 222 9,679
Wachovia Corp. 340 24,191
Wells Fargo Co. 2,776 128,890
Zions Bancorp. 149 8,791
--------------
994,960
--------------
Beverages (2.04%)
Anheuser-Busch Cos., Inc. 1,452 59,822
Brown-Forman Corp. 111 7,097
Coca-Cola Co. (The) 4,023 181,035
Coca-Cola Enterprises, Inc. 680 11,118
Coors (Adolph) Co. (Class B) 60 3,011
Pepsi Bottling Group, Inc. 233 9,343
PepsiCo, Inc. 2,368 104,666
--------------
376,092
--------------
Broker Services (1.47%)
Bear Stearns Cos., Inc. 170 10,025
Lehman Brothers Holdings, Inc. 399 31,022
Merrill Lynch & Co., Inc. 1,357 80,402
Morgan Stanley Dean Witter & Co. 1,800 115,614
Schwab (Charles) Corp. 2,242 34,303
--------------
271,366
--------------
Building (0.60%)
Black & Decker Corp. 131 5,169
Centex Corp. 96 3,912
Danaher Corp. 231 12,936
Georgia-Pacific Corp. 365 12,355
Kaufman & Broad Home Corp. 72 2,172
Louisiana-Pacific Corp. 169 1,982
Masco Corp. 744 18,570
Pulte Corp. 68 2,899
Sherwin-Williams Co. 253 5,617
Snap-on, Inc. 93 2,247
Stanley Works (The) 138 5,779
Vulcan Materials Co. 163 8,761
Weyerhauser Co. 348 19,130
Willamette Industries, Inc. 177 8,762
--------------
110,291
--------------
Business Services - Misc. (0.50%)
Block, H&R, Inc. 148 9,553
Cendant Corp.* 1,378 26,871
Convergys Corp.* 276 8,349
Equifax, Inc. 232 8,510
Moody's Corp. 255 8,543
Paychex, Inc. 604 24,160
Robert Half International, Inc. 284 7,069
--------------
93,055
--------------
Chemicals (0.69%)
Air Products & Chemicals, Inc. 369 16,882
Dow Chemical Co. 1,452 48,279
Eastman Chemical Co. 125 5,954
Engelhard Corp. 211 5,442
FMC Corp.* 50 3,428
Great Lakes Chemical Corp. 81 2,499
Hercules, Inc. 175 1,978
PPG Industries, Inc. 272 14,299
Praxair, Inc. 260 12,220
Rohm & Haas Co. 356 11,712
Sigma-Aldrich Corp. 122 4,712
--------------
127,405
--------------
Computers (12.17%)
Adobe Systems, Inc. 387 18,189
Apple Computer, Inc.* 564 13,113
Autodesk, Inc. 87 3,245
Automatic Data Processing, Inc. 1,010 50,197
BMC Software, Inc.* 394 8,881
BroadVision, Inc.* 442 2,210
Cabletron Systems, Inc.* 305 6,969
Cisco Systems, Inc.* 11,837 215,433
Citrix Systems, Inc.* 299 10,435
Compaq Computer Corp. 2,732 42,319
Computer Associates International,
Inc. 932 33,552
Computer Sciences Corp.* 273 9,446
Compuware Corp.* 595 8,324
Dell Computer Corp.* 4,207 110,013
Electronic Data Systems Corp. 757 47,313
EMC Corp.* 3,569 103,679
First Data Corp. 634 40,735
Fiserv, Inc.* 201 12,860
Gateway 2000, Inc.* 522 8,587
Hewlett-Packard Co. 3,142 89,861
IMS Health, Inc. 477 13,595
International Business Machines Corp. 2,810 317,530
Intuit, Inc.* 337 13,477
Lexmark International Group, Inc.
(Class A)* 207 13,921
Mercury Interactive Corp.* 134 8,027
Microsoft Corp.* 8,704 635,392
NCR Corp.* 156 7,332
Network Appliance, Inc.* 526 7,206
Novell, Inc.* 514 2,925
Oracle Corp.* 9,079 172,501
Palm, Inc.* 917 5,566
Parametric Technology Corp.* 427 5,974
PeopleSoft, Inc.* 475 23,384
Sabre Holdings Corp.* 215 10,750
Sapient Corp.* 199 1,940
Siebel Systems, Inc.* 733 34,378
Sun Microsystems, Inc.* 5,267 82,797
Unisys Corp.* 512 7,532
VERITAS Software Corp.* 643 42,779
--------------
2,242,367
--------------
Consumer Products - Misc. (0.01%)
American Greetings Corp. (Class A) 103 1,133
--------------
Containers (0.08%)
Ball Corp. 45 2,140
Bemis Co., Inc. 85 3,414
Pactiv Corp.* 257 3,444
Sealed Air Corp.* 135 5,029
--------------
14,027
--------------
Cosmetics & Personal Care (0.41%)
Alberto Culver Co. (Class B) 92 3,868
Avon Products, Inc. 384 17,772
Gillette Co. 1,705 49,428
International Flavors & Fragrances, Inc. 155 3,895
--------------
74,963
--------------
Diversified Operations (2.57%)
Crane Co. 97 3,007
Du Pont (E.I.) De Nemours & Co. 1,687 81,381
Fortune Brands, Inc. 247 9,475
Honeywell International, Inc. 1,309 45,802
Illinois Tool Works, Inc. 492 31,144
ITT Industries, Inc. 142 6,284
Johnson Controls, Inc. 140 10,146
Loews Corp. 319 20,553
Minnesota Mining & Manufacturing Co. 640 73,024
National Service Industries, Inc. 67 1,512
Textron, Inc. 228 12,549
TRW, Inc. 202 8,282
Tyco International Ltd. 3,132 170,694
--------------
473,853
--------------
Electronics (9.49%)
Advanced Micro Devices, Inc.* 556 16,057
Agilent Technologies, Inc.* 739 24,018
Altera Corp.* 625 18,125
American Power Conversion Corp.* 315 4,961
Analog Devices, Inc.* 582 25,172
Applied Materials, Inc.* 1,315 64,567
Applied Micro Circuits Corp.* 486 8,359
Broadcom Corp. (Class A)* 421 18,002
Conexant Systems, Inc.* 400 3,580
Emerson Electric Co. 693 41,927
General Electric Co. 16,065 783,169
Grainger (W.W.), Inc. 154 6,339
Intel Corp. 10,876 318,123
Jabil Circuit, Inc.* 309 9,536
KLA-Tencor Corp.* 300 17,541
Linear Technology Corp. 514 22,729
LSI Logic Corp.* 584 10,979
Maxim Integrated Products, Inc.* 531 23,476
Micron Technology, Inc. 964 39,620
Molex Inc. 316 11,543
Motorola, Inc. 3,552 58,821
National Semiconductor Corp.* 280 8,154
Novellus Systems, Inc.* 230 13,062
Parker-Hannifin Corp. 189 8,021
PerkinElmer, Inc. 163 4,487
Power-One, Inc.* 127 2,113
QLogic Corp.* 149 9,603
Rockwell International Corp. 296 11,284
Sanmina Corp.* 517 12,103
Solectron Corp.* 1,057 19,343
Tektronix, Inc. 152 4,127
Teradyne, Inc.* 282 9,334
Texas Instruments, Inc. 2,808 88,452
Thomas & Betts Corp. 94 2,075
Vitesse Semiconductor Corp.* 297 6,249
Xilinx, Inc.* 538 22,187
--------------
1,747,234
--------------
Energy (0.20%)
Calpine Corp.* 483 18,257
Mirant Corp.* 549 18,886
--------------
37,143
--------------
Engineering (0.03%)
Fluor Corp. 128 5,779
--------------
Fiber Optics (0.14%)
JDS Uniphase Corp.* 2,129 26,613
--------------
Finance (5.20%)
American Express Co. 2,140 83,032
Capital One Financial Corp. 337 20,220
Charter One Financial, Inc. 334 10,655
Citigroup, Inc. 8,133 429,748
Concord EFS, Inc.* 390 20,284
Franklin Resources, Inc. 428 19,590
Golden West Financial Corp. 257 16,510
Household International, Inc. 750 50,025
J.P. Morgan Chase & Co. 3,211 143,211
MBNA Corp. 1,378 45,405
Price (T. Rowe) Associates, Inc. 199 7,441
Providian Financial Corp. 462 27,350
Stilwell Financial, Inc. 355 11,914
USA Education, Inc. 264 19,272
Washington Mutual, Inc. 1,419 53,283
--------------
957,940
--------------
Food (1.38%)
Archer-Daniels-Midland Co. 1,022 13,286
Campbell Soup Co. 660 16,995
ConAgra, Inc. 869 17,215
General Mills, Inc. 460 20,139
Heinz (H.J.) Co. 564 23,062
Hershey Foods Corp. 221 13,638
Kellogg Co. 656 19,024
Quaker Oats Co. 214 19,528
Ralston Purina Group 501 15,040
Sara Lee Corp. 1,272 24,092
Unilever NV, American Depositary Receipts (ADR)
(Netherlands) 924 55,043
Wrigley (WM) Jr. Co. 365 17,100
--------------
254,162
--------------
Furniture (0.04%)
Leggett & Platt, Inc. 317 6,984
--------------
Household (0.13%)
Maytag Corp. 123 3,599
Newell Rubbermaid, Inc. 431 10,818
Tupperware Corp. 94 2,202
Whirlpool Corp. 108 6,750
--------------
23,369
--------------
Instruments - Scientific (0.11%)
Applera Corp. - Applied Biosystems Group 341 9,122
Millipore Corp. 76 4,710
Thermo Electron Corp.* 293 6,452
--------------
20,284
--------------
Insurance (4.22%)
Aetna, Inc. 230 5,950
AFLAC, Inc. 850 26,767
Allstate Corp. (The) 1,172 51,556
Ambac Financial Group, Inc. 171 9,952
American General Corp. 807 37,485
American International Group, Inc. 3,770 324,220
Aon Corp. 424 14,840
Chubb Corp. (The) 283 21,913
CIGNA Corp. 242 23,188
Cincinnati Financial Corp. 260 10,270
Conseco, Inc. 546 7,453
Hartford Financial Services Group, Inc. (The) 383 26,197
Jefferson Pilot Corp 246 11,887
John Hancock Financial Services, Inc. 498 20,049
Lincoln National Corp. 304 15,732
Marsh & McLennan Cos., Inc. 446 45,046
MBIA, Inc. 240 13,363
MetLife, Inc. 1,213 37,579
MGIC Investment Corp. 173 12,567
Progressive Corp. 119 16,088
SAFECO Corp. 207 6,107
St. Paul Cos., Inc. (The) 347 17,589
Torchmark Corp. 203 8,163
UnumProvident Corp. 390 12,527
--------------
776,488
--------------
Internet Services (2.16%)
America Online, Inc.* 7,166 379,798
Yahoo! Inc.* 917 18,331
--------------
398,129
--------------
Leisure (1.28%)
Brunswick Corp. 142 3,412
Carnival Corp. (Class A) 946 29,042
Disney (Walt) Co., (The) 3,380 97,648
Eastman Kodak Co. 469 21,893
Harley-Davidson, Inc. 489 23,022
Harrah's Entertainment, Inc.* 190 6,707
Hasbro, Inc. 279 4,032
Hilton Hotels Corp. 597 6,925
Marriott International, Inc. (Class A) 394 18,652
Mattel, Inc. 697 13,187
Starwood Hotels & Resorts
Worldwide, Inc. 321 11,967
--------------
236,487
--------------
Linen Supply & Related (0.07%)
Cintas Corp. 273 12,626
--------------
Machinery (0.39%)
Caterpiller Tractor, Inc. 555 27,778
Cooper Industries, Inc. 151 5,978
Deere & Co. 380 14,383
Dover Corp. 329 12,387
Ingersoll-Rand Co. 259 10,671
--------------
71,197
--------------
Media (2.10%)
Clear Channel Communications, Inc.* 950 59,565
Comcast Corp. 1,528 66,315
Dow Jones & Co., Inc. 140 8,359
Gannett Co., Inc. 428 28,205
Knight-Ridder, Inc. 118 6,997
McGraw-Hill Cos., Inc. (The) 316 20,903
Meredith Corp. 80 2,865
New York Times Co. (Class A) 258 10,836
Tribune Co. 483 19,325
Univision Communications, Inc.
(Class A)* 337 14,417
Viacom, Inc. (Class B)* 2,879 148,988
--------------
386,775
--------------
Medical (12.26%)
Abbott Laboratories 2,505 120,265
Allergan, Inc. 213 18,211
American Home Products Corp. 2,126 124,243
Medical (continued)
Amgen, Inc.* 1,687 102,367
Bard (C.R.), Inc. 82 4,670
Bausch & Lomb, Inc. 87 3,153
Baxter International, Inc. 958 46,942
Becton, Dickinson & Co. 417 14,924
Biogen, Inc.* 240 13,046
Biomet, Inc. 289 13,889
Boston Scientific Corp.* 649 11,033
Bristol-Myers Squibb Co. 3,143 164,379
Cardinal Health, Inc. 721 49,749
Chiron Corp.* 307 15,657
Forest Laboratories, Inc.* 285 20,235
Guidant Corp. 497 17,892
HCA - The Healthcare Co. 869 39,270
HEALTHSOUTH Corp.* 630 10,061
Humana, Inc.* 275 2,709
Johnson & Johnson 4,897 244,850
King Pharmaceuticals, Inc.* 277 14,889
Lilly (Eli) & Co. 1,818 134,532
Manor Care, Inc.* 166 5,270
McKesson HBOC, Inc. 461 17,112
MedImmune, Inc.* 344 16,237
Medtronic, Inc. 1,955 89,950
Merck & Co., Inc. 3,708 236,978
Pall Corp. 199 4,682
Pfizer Inc. 10,210 408,910
Pharmacia Corp. 2,104 96,679
Quintiles Transnational Corp.* 189 4,772
Schering-Plough Corp. 2,366 85,744
St. Jude Medical, Inc.* 139 8,340
Stryker Corp. 317 17,387
Tenet Healthcare Corp.* 524 27,033
UnitedHealth Group, Inc. 513 31,678
Watson Pharmaceutical, Inc.* 171 10,540
Wellpoint Health Networks, Inc.* 102 9,612
--------------
2,257,890
--------------
Metal (0.64%)
Alcan Aluminium Ltd. (Canada) 516 21,682
Alcoa Inc. 1,396 55,002
Barrick Gold Corp. (Canada) 640 9,696
Freeport-McMoran Copper & Gold, Inc. (Class B)* 233 2,575
Homestake Mining Co. 426 3,302
Inco, Ltd. (Canada) 294 5,074
Newmont Mining Corp. 316 5,881
Phelps Dodge Corp. 127 5,271
Placer Dome, Inc. (Canada) 530 5,194
Timken Co. (The) 97 1,643
Worthington Industries, Inc. 138 1,877
--------------
117,197
--------------
Mortgage Banking (1.22%)
Countrywide Credit Industries, Inc. 192 8,809
Fannie Mae 1,618 137,773
Freddie Mac 1,120 78,400
--------------
224,982
--------------
Office (0.22%)
Avery Dennison Corp. 178 9,087
Deluxe Corp. 114 3,295
Pitney Bowes, Inc. 399 16,806
Xerox Corp. 1,123 10,747
--------------
39,935
--------------
Oil & Gas (6.96%)
Amerada Hess Corp. 144 11,635
Anadarko Petroleum Corp. 405 21,882
Apache Corp. 203 10,302
Ashland, Inc. 113 4,531
Baker Hughes, Inc. 543 18,190
Burlington Resources, Inc. 342 13,663
Chevron Corp. 1,037 93,848
Conoco, Inc. (Class B) 1,010 29,189
Devon Energy Corp. 209 10,972
El Paso Energy Corp. 823 43,240
Enron Corp. 1,207 59,143
EOG Resources, Inc. 188 6,683
Exxon Mobil Corp. 5,579 487,326
Halliburton Co. 694 24,706
Kerr-McGee Corp. 153 10,139
McDermott International, Inc. 99 1,153
Nabors Industries, Inc.* 238 8,854
Noble Drilling Corp.* 217 7,107
Occidental Petroleum Corp. 599 15,927
Phillips Petroleum Co. 414 23,598
Rowan Cos., Inc.* 153 3,381
Royal Dutch Petroleum Co. (ADR)
(Netherlands) 3,468 202,080
Schlumberger Ltd. 927 48,807
Sunoco, Inc. 136 4,982
Texaco, Inc. 891 59,341
Tosco Corp. 250 11,012
Transocean Sedco Forex, Inc. 514 21,202
Unocal Corp. 394 13,455
USX - Marathon Group 499 14,725
--------------
1,281,073
--------------
Paper & Paper Products (0.51%)
Boise Cascade Corp. 93 3,271
International Paper Co. 781 27,882
Kimberly-Clark Corp. 861 48,130
Mead Corp. (The) 160 4,342
Potlatch Corp. 46 1,583
Temple-Inland, Inc. 80 4,263
Westvaco Corp. 163 3,959
--------------
93,430
--------------
Pollution Control (0.20%)
Allied Waste Industries, Inc.* 319 5,959
Waste Management, Inc. 1,012 31,190
--------------
37,149
--------------
Printing - Commercial (0.03%)
Donnelley (R.R.) & Sons 190 5,643
--------------
Retail (6.80%)
Albertson's, Inc. 655 19,643
AutoZone, Inc.* 181 6,788
Bed Bath & Beyond, Inc.* 467 14,570
Best Buy Co., Inc.* 339 21,533
Big Lots, Inc.* 183 2,503
Circuit City Stores - Circuit City
Group 336 6,048
Costco Wholesale Corp. 728 29,906
CVS Corp. 636 24,550
Darden Restaurants, Inc. 191 5,329
Dillards, Inc. 138 2,107
Dollar General Corp. 535 10,433
Federated Department Stores, Inc.* 320 13,600
Gap, Inc. (The) 1,390 40,310
Genuine Parts Co. 278 8,757
Home Depot, Inc. (The) 3,774 175,680
Kmart Corp.* 792 9,084
Kohl's Corp.* 539 33,811
Kroger Co.* 1,311 32,775
Limited, Inc. (The) 690 11,399
Longs Drug Stores Corp. 61 1,315
Lowe's Cos., Inc. 622 45,126
May Department Stores 483 16,548
McDonald's Corp. 2,092 56,610
Nordstrom, Inc. 216 4,007
Office Depot, Inc.* 481 4,993
Penney (J. C.) Co., Inc. 425 11,203
RadioShack Corp. 300 9,150
Reebok International Ltd.* 95 3,035
Safeway, Inc.* 817 39,216
Sears, Roebuck & Co. 531 22,467
Staples, Inc.* 738 11,801
Starbucks Corp.* 615 14,145
SUPERVALU, Inc. 214 3,756
SYSCO Corp. 1,088 29,539
Target Corp. 1,454 50,308
Tiffany & Co. 236 8,548
TJX Cos., Inc. 453 14,437
Toys R Us, Inc.* 320 7,920
Tricon Global Restaurants, Inc.* 238 10,448
Walgreen Co. 1,646 56,211
Wal-Mart Stores, Inc. 7,231 352,873
Wendy's International, Inc. 184 4,699
Winn-Dixie Stores, Inc. 227 5,932
--------------
1,253,113
--------------
Rubber - Tires & Misc. (0.05%)
Cooper Tire & Rubber Co. 117 1,661
Goodyear Tire & Rubber Co. (The) 257 7,196
--------------
8,857
--------------
Shoes & Related Apparel (0.10%)
Nike, Inc. (Class B) 439 18,434
--------------
Soap & Cleaning Preparations (1.13%)
Clorox Co. 383 12,965
Colgate-Palmolive Co. 907 53,504
Ecolab, Inc. 206 8,440
Procter & Gamble Co. (The) 2,095 133,661
--------------
208,570
--------------
Steel (0.06%)
Allegheny Technologies, Inc. 130 2,352
Nucor Corp. 125 6,111
USX-U.S. Steel Group, Inc. 144 2,902
--------------
11,365
--------------
Telecommunications (4.69%)
ADC Telecommunications, Inc.* 1,264 8,342
Andrew Corp.* 132 2,435
AT&T Corp. 5,580 122,760
Avaya, Inc.* 459 6,288
CenturyTel, Inc. 228 6,908
Citizens Communications Co. 461 5,546
Comverse Technology, Inc.* 277 15,817
Corning, Inc.* 1,504 25,132
Global Crossing Ltd.* (Bermuda) 1,434 12,390
Lucent Technologies, Inc. 5,508 34,150
Nextel Communications, Inc. (Class A)* 1,237 21,648
Nortel Networks Corp. (Canada) 5,153 46,841
QUALCOMM, Inc.* 1,225 71,638
Qwest Communications International, Inc.* 2,687 85,635
Scientific-Atlanta, Inc. 263 10,678
Sprint Corp. 1,515 36,587
Sprint PCS* 1,433 30,609
Symbol Technologies, Inc. 366 8,125
Tellabs, Inc.* 662 12,830
Verizon Communications, Inc. 4,374 234,009
WorldCom, Inc.* 4,671 66,328
--------------
864,696
--------------
Textile (0.06%)
Liz Claiborne, Inc. 85 4,288
VF Corp. 181 6,585
--------------
10,873
--------------
Tobacco (1.02%)
Philip Morris Cos., Inc. 3,558 180,569
UST, Inc. 264 7,619
--------------
188,188
--------------
Transport (0.72%)
AMR Corp.* 249 8,996
Burlington Northern Santa Fe Corp. 634 19,128
CSX Corp. 345 12,503
Delta Air Lines, Inc. 199 8,772
FedEx Corp.* 497 19,979
Navistar International Corp.* 96 2,700
Norfolk Southern Corp. 622 12,875
Southwest Airlines Co. 1,232 22,780
Union Pacific Corp. 401 22,019
US Airways Group, Inc.* 109 2,649
--------------
132,401
--------------
Utilities (4.87%)
AES Corp. (The)* 861 37,066
Allegheny Energy, Inc. 202 9,747
ALLTEL Corp. 506 30,998
Ameren Corp. 222 9,479
American Electric Power Co., Inc. 521 24,055
BellSouth Corp. 3,031 122,058
Cinergy Corp. 257 8,982
CMS Energy Corp. 213 5,932
Consolidated Edison, Inc. 343 13,651
Constellation Energy Group, Inc. 265 11,289
Dominion Resources, Inc. 400 24,052
DTE Energy Co. 267 12,399
Duke Energy Corp. 1,248 48,684
Dynegy, Inc. (Class A) 527 24,506
Edison International 527 5,876
Entergy Corp. 357 13,705
Exelon Corp. 519 33,278
FirstEnergy Corp.* 362 11,642
FPL Group, Inc. 284 17,100
GPU, Inc. 193 6,784
KeySpan Corp. 222 8,099
Kinder Morgan, Inc. 185 9,296
Niagara Mohawk Holdings, Inc.* 259 4,582
NICOR, Inc. 73 2,846
NiSource, Inc. 334 9,128
ONEOK, Inc. 96 1,891
Peoples Energy Corp. 57 2,291
PG&E Corp. 626 7,011
Pinnacle West Capital Corp. 137 6,494
PPL Corp. 236 12,980
Progress Energy, Inc. 333 14,958
Public Service Enterprise Group, Inc. 336 16,430
Reliant Energy, Inc. 481 15,493
SBC Communications, Inc. 5,447 218,207
Sempra Energy 333 9,104
Southern Co. 1,108 25,761
TXU Corp. 415 19,999
Williams Cos., Inc. (The) 784 25,833
Xcel Energy, Inc. 555 15,790
--------------
897,476
--------------
TOTAL COMMON STOCKS
(Cost $12,948,504) (96.83%) 17,836,392
-------------- --------------
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000s OMITTED)
- ------------------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (4.95%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 6-29-01, due 7-02-01
(Secured by U.S. Treasury Bonds 6.875%
and 6.625% due 8-15-25 and 11-30-02) 3.97% $911 911,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (4.95%) 911,000
-------------- --------------
TOTAL INVESTMENTS (101.78%) 18,747,392
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (1.78%) (327,899)
-------------- --------------
TOTAL NET ASSETS (100.00%) $18,419,493
============== ==============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. Large Cap Growth Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Large Cap Growth Fund on June 30, 2001. Common stocks are broken
down by industry group.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Banks - United States (1.15%)
State Street Corp. 1,464 $72,453
--------------
Beverages (1.12%)
Anheuser-Busch Cos., Inc. 1,700 70,040
--------------
Computers (17.97%)
BEA Systems, Inc.* 1,000 30,710
Cisco Systems, Inc.* 15,650 284,830
Electronic Data Systems Corp. 2,000 125,000
EMC Corp.* 4,707 136,738
Microsoft Corp.* 3,450 251,850
Sun Microsystems, Inc.* 6,750 106,110
VeriSign, Inc.* 950 57,010
VERITAS Software Corp.* 2,050 136,387
--------------
1,128,635
--------------
Diversified Operations (11.61%)
General Electric Co. 7,627 371,816
Tyco International Ltd. 6,550 356,975
--------------
728,791
--------------
Electronics (6.94%)
Analog Devices, Inc.* 1,315 56,874
Applied Materials, Inc.* 1,500 73,650
Celestica, Inc. (Canada)* 600 30,900
Intel Corp. 5,000 146,250
Micron Technology, Inc.* 1,400 57,540
Novellus Systems, Inc.* 700 39,753
Xilinx, Inc.* 750 30,930
--------------
435,897
--------------
Fiber Optics (0.97%)
CIENA Corp.* 1,600 60,800
--------------
Finance (8.02%)
Citigroup, Inc. 4,378 231,334
Goldman Sachs Group, Inc. (The) 750 64,350
MBNA Corp. 3,780 124,551
Morgan Stanley Dean Witter & Co. 1,300 83,499
--------------
503,734
--------------
Insurance (2.99%)
American International Group, Inc. 2,182 187,652
--------------
Media (8.65%)
AOL Time Warner, Inc.* 5,110 270,830
Charter Communications, Inc. (Class A)* 3,050 71,217
Clear Channel Communications, Inc.* 2,052 128,660
Viacom, Inc. (Class B)* 1,400 72,450
--------------
543,157
--------------
Medical (20.74%)
Allergan, Inc. 973 83,191
Amgen, Inc.* 2,350 142,598
Cardinal Health, Inc. 3,513 242,397
Express Scripts, Inc.* 800 44,024
Genentech, Inc.* 1,056 58,186
Johnson & Johnson 2,100 105,000
Medtronic, Inc. 2,281 104,949
Pfizer, Inc. 5,928 237,416
Pharmacia Corp. 2,346 107,799
Stryker Corp. 1,400 76,790
UnitedHealth Group, Inc. 550 33,962
Wellpoint Health Networks, Inc.* 700 65,968
--------------
1,302,280
--------------
Oil & Gas (0.46%)
Transocean Sedco Forex, Inc. 700 28,875
--------------
Retail (12.58%)
Bed Bath & Beyond, Inc.* 3,350 100,500
Gap, Inc. (The) 2,600 75,400
Home Depot, Inc. (The) 5,512 256,584
Lowe's Cos., Inc. 1,300 94,315
Wal-Mart Stores, Inc. 5,398 263,422
--------------
790,221
--------------
Telecommunications (5.01%)
Amdocs Ltd.* 700 37,695
American Tower Corp. (Class A) 3,159 65,297
Comverse Technology, Inc.* 1,200 68,520
Nokia Corp., American Depositary
Receipts (Finland) 3,164 69,735
Scientific-Atlanta, Inc. 1,807 73,364
--------------
314,611
--------------
Tobacco (1.45%)
Philip Morris Cos., Inc. 1,800 91,350
--------------
Utilities (1.11%)
AES Corp. (The)* 1,618 69,655
--------------
TOTAL COMMON STOCKS
(Cost $6,081,968) (100.77%) 6,328,151
-------------- --------------
TOTAL INVESTMENTS (100.77%) 6,328,151
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.77%) (48,315)
-------------- --------------
TOTAL NET ASSETS (100.00%) $6,279,836
============== ==============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Mid Cap Growth Fund on June 30, 2001. It's divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Advertising (1.40%)
Lamar Advertising Co.* 850 $37,400
TMP Worldwide, Inc.* 850 51,000
--------------
88,400
--------------
Banks - United States (1.48%)
Northern Trust Corp. 1,500 93,750
--------------
Beverages (0.59%)
Coors (Adolph) Co. (Class B) 742 37,234
--------------
Broker Services (2.32%)
Legg Mason, Inc. 1,206 60,011
Lehman Brothers Holdings, Inc. 1,113 86,536
--------------
146,547
--------------
Computers (13.04%)
Brocade Communications Systems, Inc.* 2,580 113,494
DST Systems, Inc.* 1,192 62,818
Electronic Arts, Inc.* 600 34,740
Emulex Corp.* 1,350 54,540
Fiserv, Inc.* 1,015 64,940
Mercury Interactive Corp.* 2,070 123,993
Micromuse, Inc.* 2,200 61,578
Parametric Technology Corp.* 8,350 116,817
SunGard Data Systems, Inc.* 1,856 55,699
VeriSign, Inc.* 2,250 135,023
--------------
823,642
--------------
Electronics (12.22%)
Aeroflex, Inc.* 6,694 70,287
ASML Holdings NV* (Netherlands) 1,750 38,937
Atmel Corp.* 5,450 73,520
Capstone Turbine Corp.* 2,950 65,165
Celestica, Inc.* (Canada) 993 51,139
International Rectifier Corp.* 994 33,895
KLA-Tencor Corp.* 500 29,235
Lam Research Corp.* 950 28,168
Micrel, Inc.* 1,200 39,600
National Semiconductor Corp.* 2,364 68,840
Novellus Systems, Inc.* 1,150 65,308
ONI Systems Corp.* 1,950 54,405
PMC-Sierra, Inc.* (Canada) 1,300 40,391
QLogic Corp.* 460 29,647
Tektronix, Inc.* 3,057 82,998
--------------
771,535
--------------
Energy (0.96%)
Calpine Corp.* 1,606 60,707
--------------
Fiber Optics (0.64%)
Finisar Corp.* 2,150 40,162
--------------
Finance (6.23%)
Affiliated Managers Group, Inc.* 1,346 82,779
Concord EFS, Inc.* 1,840 95,698
Providian Financial Corp. 1,443 85,426
USA Education, Inc. 1,776 129,648
--------------
393,551
--------------
Instruments - Scientific (0.52%)
Millipore Corp. 533 33,035
--------------
Insurance (3.59%)
Ace, Ltd. 2,095 81,894
Ambac Financial Group, Inc. 1,148 66,814
Everest Re Group Ltd. (Bermuda) 1,042 77,942
--------------
226,650
--------------
Media (6.52%)
Charter Communications, Inc. (Class A)* 4,650 108,577
Clear Channel Communications, Inc.* 882 55,301
Emmis Communications Corp. (Class A)* 2,150 66,112
Hispanic Broadcasting Corp.* 1,771 50,810
Univision Communications, Inc.
(Class A)* 1,516 64,854
USA Networks, Inc.* 2,350 65,800
--------------
411,454
--------------
Medical (21.68%)
Alkermes, Inc.* 1,730 60,723
Allergan, Inc. 870 74,385
AmeriSource Health Corp. (Class A)* 1,387 76,701
Apogent Technologies, Inc.* 1,686 41,476
Express Scripts, Inc.* 1,200 66,036
Forest Laboratories, Inc.* 1,036 73,556
Genzyme Corp.* 900 54,900
Human Genome Sciences, Inc.* 1,070 64,468
ICOS Corp.* 850 54,400
IDEC Pharmaceuticals Corp.* 1,250 84,612
Inhale Therapeutic Systems, Inc.* 3,150 72,450
Invitrogen Corp.* 800 44,512
MedImmune, Inc.* 1,490 70,328
Oxford Health Plans, Inc.* 2,328 66,581
Shire Pharmaceuticals Group Plc,
American Depositary Receipts (ADR)*
(United Kingdom) 2,502 138,861
Teva Pharmaceutical Industries Ltd.
(ADR) (Israel) 1,301 81,052
Trigon Healthcare, Inc.* 603 39,105
Universal Health Services, Inc.
(Class B)* 1,417 64,474
Varian Medical Systems, Inc.* 979 69,999
Wellpoint Health Networks, Inc.* 751 70,774
--------------
1,369,393
--------------
Oil & Gas (4.91%)
Baker Hughes, Inc. 1,377 46,129
Cooper Cameron Corp.* 1,164 64,951
Santa Fe International Corp. 2,487 72,123
Transocean Sedco Forex, Inc. 1,391 57,379
Weatherford International, Inc.* 1,452 69,696
--------------
310,278
--------------
Retail (4.65%)
Bed Bath & Beyond, Inc.* 2,200 66,000
BJ's Wholesale Club, Inc.* 1,693 90,169
Talbots, Inc. 1,814 79,363
TJX Cos., Inc. 1,820 58,003
--------------
293,535
--------------
Telecommunications (10.80%)
Amdocs Ltd.* 2,026 109,100
American Tower Corp. (Class A)* 3,243 67,033
Comverse Technology, Inc.* 1,570 89,647
Crown Castle International Corp.* 2,975 48,790
Dobson Communications Corp. (Class A)* 7,230 123,271
Global Crossing Ltd.* (Bermuda) 5,493 47,460
Nextel Communications, Inc. (Class A)* 1,250 21,875
Scientific-Atlanta, Inc. 1,959 79,534
Sonus Networks, Inc.* 1,150 26,864
Western Wireless Corp. (Class A)* 1,590 68,370
--------------
681,944
--------------
Textile (1.00%)
Jones Apparel Group, Inc.* 1,462 63,158
--------------
Utilities (1.35%)
Orion Power Holdings, Inc.* 3,581 85,264
--------------
TOTAL COMMON STOCKS
(Cost $6,065,678) (93.90%) 5,930,239
-------------- --------------
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000s OMITTED)
- ------------------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (7.97%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds,
10.625% due 08-15-15 and 6.250% due
08-15-23, and U.S. Treasury Note 5.625%
due 11-30-02) 3.97% $503 503,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (7.97%) 503,000
-------------- --------------
TOTAL INVESTMENTS (101.87%) 6,433,239
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (1.87%) (118,065)
-------------- --------------
TOTAL NET ASSETS (100.00%) $6,315,174
============== ==============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
Portfolio Concentration
June 30, 2001 (Unaudited)
- ---------------------------------------------------------------------------
The V.A. Mid Cap Growth Fund invests primarily in common stocks of U.S.
and foreign issuers. The performance of the Fund is closely tied to the
economic and financial conditions within the countries in which it
invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the Schedule of
Investments.
In addition, concentration of investments can be aggregated by various
countries. The table below shows the percentages of the Fund's investments
at June 30, 2001 assigned to country categories.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- -------------------
Bermuda 1.98%
Canada 1.45
Netherlands 0.62
Israel 1.28
United Kingdom 2.20
United States 94.34
------
TOTAL INVESTMENTS 101.87%
======
John Hancock Funds - Declaration Trust - V.A. Small Cap Growth Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Small Cap Growth Fund on June 30, 2001. It's divided into two
main categories: common stocks and short-term investments. Common stocks
are further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Advertising (1.27%)
Getty Images, Inc.* 3,800 $99,788
Ventiv Health, Inc.* 3,350 69,144
--------------
168,932
--------------
Banks - United States (2.17%)
Greater Bay Bancorp. 3,450 86,181
Southwest Bancorp. of Texas, Inc.* 3,000 90,630
Sterling Bancshares, Inc. 5,850 112,203
--------------
289,014
--------------
Building (0.61%)
Ryland Group, Inc. (The) 1,600 80,960
--------------
Business Services - Misc. (3.27%)
Corporate Executive Board Co. (The)* 4,450 186,900
Forrester Research, Inc.* 2,800 63,252
On Assignment, Inc.* 5,000 90,000
Profit Recovery Group
International, Inc. (The)* 2,800 32,088
Quanta Services, Inc.* 2,879 63,453
--------------
435,693
--------------
Computers (8.00%)
Advent Software, Inc.* 1,850 117,475
Avocent Corp.* 2,500 56,875
Cerner Corp.* 2,800 117,600
Data Return Corp.* 5,900 10,325
Embarcadero Technologies, Inc.* 3,100 69,161
IntraNet Solutions, Inc.* 2,400 91,320
Macromedia, Inc.* 3,750 67,500
M-Systems Flash Disk Pioneers Ltd.
(Israel)* 8,700 61,770
National Instruments Corp.* 2,250 73,013
NetRatings, Inc.* 6,500 93,600
ScanSource, Inc.* 1,950 92,469
Secure Computing Corp.* 6,900 108,399
Silicon Storage Technology, Inc.* 7,150 72,430
TeleCommunication Systems, Inc.
(Class A)* 10,800 32,400
--------------
1,064,337
--------------
Electronics (14.81%)
Aeroflex, Inc.* 7,000 73,500
Alpha Industries, Inc.* 2,900 85,695
ATMI, Inc.* 3,550 106,500
Brooks Automation, Inc.* 2,050 94,505
CoorsTek, Inc.* 2,300 86,250
Credence Systems Corp.* 3,750 90,900
Cree, Inc.* 2,600 67,977
DDi Corp.* 5,000 100,000
DuPont Photomasks, Inc.* 2,000 96,500
Elantec Semiconductor, Inc.* 2,650 89,543
Electro Scientific Industries, Inc.* 2,650 100,965
LTX Corp.* 4,300 109,908
Microsemi Corp.* 2,650 188,150
Nanometrics, Inc.* 2,650 72,841
Pixelworks, Inc.* 2,600 92,924
Plexus Corp.* 2,000 66,000
PLX Technology, Inc.* 8,500 72,165
PRI Automation, Inc.* 5,400 100,035
Rudolph Technologies, Inc.* 3,050 143,350
Semtech Corp.* 4,450 133,500
--------------
1,971,208
--------------
Energy (0.56%)
Evergreen Solar, Inc.* 3,500 33,600
FuelCell Energy, Inc.* 1,800 41,562
--------------
75,162
--------------
Finance (2.54%)
Actrade Financial Technologies,
Ltd.* 1,366 32,292
Affiliated Managers Group, Inc.* 2,500 153,750
eFUNDS Corp.* 3,150 58,590
Metris Cos., Inc. 2,775 93,545
--------------
338,177
--------------
Food (1.35%)
American Italian Pasta Co. (Class A)* 2,450 113,680
Dean Foods Co. 1,650 66,330
--------------
180,010
--------------
Instruments - Scientific (0.11%)
FEI Co.* 350 14,350
--------------
Insurance (3.56%)
Fidelity National Financial, Inc. 4,350 106,879
HCC Insurance Holdings, Inc. 4,250 104,125
Philadelphia Consolidated Holding Corp.* 1,750 60,865
RenaissanceRe Holdings Ltd.
(Bermuda) 1,550 114,855
StanCorp Financial Group, Inc. 1,850 87,672
--------------
474,396
--------------
Leisure (0.74%)
Expedia, Inc. (Class A)* 1,000 46,600
Extended Stay America, Inc.* 3,450 51,750
--------------
98,350
--------------
Machinery (1.48%)
Global Power Equipment Group, Inc.* 1,350 39,555
Hydril Co.* 4,900 111,573
SureBeam Corp. (Class A)* 2,700 46,224
--------------
197,352
--------------
Media (6.17%)
Entercom Communications Corp.* 2,450 131,344
Insight Communications Co., Inc.* 2,700 67,500
Pegasus Communications Corp.* 3,200 72,000
Radio One, Inc. (Class A)* 3,150 72,450
Radio One, Inc. (Class D)* 5,150 113,558
Regent Communications, Inc.* 14,000 167,860
Scholastic Corp.* 2,700 121,500
Westwood One, Inc.* 2,050 75,543
--------------
821,755
--------------
Medical (18.77%)
Accredo Health, Inc.* 4,550 169,214
Alkermes, Inc.* 3,350 117,585
AmeriSource Health Corp. (Class A)* 2,000 110,600
Apria Healthcare Group, Inc.* 2,150 62,027
Charles River Laboratories
International, Inc.* 1,650 57,337
CIMA Labs, Inc.* 1,000 78,500
COR Therapeutics, Inc.* 2,300 70,150
Covance, Inc.* 5,350 121,177
Cytyc Corp.* 5,150 118,707
DaVita, Inc.* 6,400 130,112
Exelixis, Inc.* 2,300 43,631
Gene Logic, Inc.* 1,200 26,160
Inhale Therapeutic Systems, Inc.* 4,300 98,900
Inspire Pharmaceuticals, Inc.* 1,400 19,600
LifePoint Hospitals, Inc.* 3,400 150,552
Lincare Holdings, Inc.* 4,700 141,047
Mid Atlantic Medical Services, Inc.* 4,300 77,099
Noven Pharmaceuticals, Inc.* 2,050 80,360
NPS Pharmaceuticals, Inc.* 3,750 150,750
Pharmaceutical Product Development, Inc.* 800 24,408
Regeneron Pharmaceuticals, Inc.* 1,850 64,103
Renal Care Group, Inc.* 4,850 159,517
Rightchoice Managed Care, Inc.* 1,200 53,280
Salix Pharmaceuticals, Ltd.* 1,300 32,045
Unilab Corp.* 150 3,780
Urologix, Inc.* 4,350 79,649
Visible Genetics, Inc.* (Canada) 4,150 103,128
Wilson Greatbatch Technologies, Inc.* 5,350 155,150
--------------
2,498,568
--------------
Oil & Gas (8.78%)
Dril-Quip, Inc.* 2,750 59,207
Evergreen Resources, Inc.* 1,500 57,000
FMC Technologies, Inc.* 100 2,065
Hanover Compressor Co.* 3,559 117,767
Horizon Offshore, Inc.* 4,450 60,075
Lone Star Technologies, Inc.* 2,700 97,740
Marine Drilling Cos., Inc.* 4,000 76,440
NATCO Group, Inc. (Class A)* 1,800 15,840
Newfield Exploration Co.* 2,750 88,165
Oceaneering International, Inc.* 3,700 76,775
Patterson-UTI Energy, Inc.* 4,000 71,480
Pride International, Inc.* 4,500 85,500
Spinnaker Exploration Co.* 2,700 107,622
Stone Energy Corp.* 2,350 104,105
Torch Offshore, Inc.* 850 8,458
Universal Compression Holdings, Inc.* 3,700 105,080
Veritas DGC, Inc.* 1,300 36,075
--------------
1,169,394
--------------
Retail (13.63%)
99 Cents Only Stores* 4,435 132,828
Applebee's International, Inc. 750 24,000
bebe stores, inc.* 1,050 30,618
Buca, Inc.* 4,000 87,000
California Pizza Kitchen, Inc.* 3,400 79,050
Columbia Sportswear Co.* 3,375 172,091
Cost Plus, Inc.* 3,250 97,500
Duane Reade, Inc.* 1,100 35,750
Ethan Allen Interiors, Inc. 1,950 63,375
Galyan's Trading Co.* 550 11,220
GoTo.com, Inc.* 4,550 88,497
Hot Topic, Inc.* 3,100 96,410
Krispy Kreme Doughnuts, Inc.* 2,400 96,000
O'Reilly Automotive, Inc.* 1,800 51,660
P.F. Chang's China Bistro, Inc.* 2,800 106,120
Performance Food Group Co.* 4,700 142,081
RARE Hospitality International, Inc.* 3,175 71,755
Skechers U.S.A. (Class A)* 2,350 68,691
Too, Inc.* 3,000 82,200
Tweeter Home Entertainment Group, Inc.* 4,100 144,730
Whole Foods Market, Inc.* 4,900 132,790
--------------
1,814,366
--------------
Schools/Education (4.26%)
Corinthian Colleges, Inc.* 2,750 129,442
Education Management Corp.* 4,200 168,210
SkillSoft Corp.* 1,950 66,788
Strayer Education, Inc. 1,500 73,125
University of Phoenix Online* 3,050 129,625
--------------
567,190
--------------
Telecommunications (3.46%)
AirGate PCS, Inc.* 2,700 140,400
Alamosa Holdings, Inc.* 4,800 78,240
CTC Communications Group, Inc.* 6,650 20,349
Dobson Communications Corp. (Class A)* 2,300 39,215
Metro One Telecommunications, Inc.* 2,050 132,984
SBA Communications Corp.* 1,950 48,263
Tellium, Inc.* 100 1,820
--------------
461,271
--------------
Textile (0.64%)
Nautica Enterprises, Inc.* 700 14,301
Tommy Hilfiger Corp.* 5,050 70,700
--------------
85,001
--------------
Transport (1.52%)
Expeditors International of
Washington, Inc. 1,950 116,998
Forward Air Corp.* 2,850 85,357
--------------
202,355
--------------
Utilities (0.45%)
Beacon Power Corp.* 8,600 59,340
--------------
Waste Disposal Service & Equip. (0.95%)
Waste Connections, Inc.* 3,500 126,000
--------------
TOTAL COMMON STOCKS
(Cost $11,380,649) (99.10%) 13,193,181
-------------- --------------
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000s OMITTED)
- ------------------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (0.83%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds,
10.625% due 08-15-15 and 6.250% due
08-15-23, and U.S. Treasury Note 5.625%
due 11-30-02) 3.97% $111 111,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (0.83%) 111,000
-------------- --------------
TOTAL INVESTMENTS (99.93%) 13,304,181
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.07%) 8,834
-------------- --------------
TOTAL NET ASSETS (100.00%) $13,313,015
============== ==============
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. International Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. International Fund on June 30, 2001. It's divided into two main
categories: common stocks and rights, and short-term investments. Common
stocks are further broken down by country. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Brazil (0.37%)
Tele Norte Leste Participacoes SA American Depositary
Receipts (ADR) (Telecommunications) 1,200 $18,312
--------------
Canada (5.89%)
Anderson Exploration Ltd.* (Oil & Gas) 2,500 50,491
Magna International, Inc. (Class A)
(Automobiles/Trucks) 500 30,716
Manulife Financial Corp.
(Insurance) 2,000 55,820
Nortel Networks Corp.
(Telecommunications) 2 18
Precision Drilling Corp.* (Oil & Gas) 1,700 53,108
Suncor Energy, Inc. (Oil & Gas) 1,700 43,239
Talisman Energy, Inc. (Oil & Gas) 1,600 60,944
--------------
294,336
--------------
Denmark (0.89%)
Novo Nordisk A/S (Class B)
(Medical) 1,000 44,275
--------------
France (10.24%)
Alstom (Machinery) 1,800 50,125
Assurances Generales de France
(Insurance) 1,000 55,677
Aventis SA (Medical) 600 47,949
Lafarge SA (Building) 400 34,237
PSA Peugeot Citroen SA
(Automobiles/Trucks) 100 27,178
Sanofi-Synthelabo SA (Medical) 800 52,542
Schneider Electric SA (Machinery) 1,060 58,659
Societe Television Francaise 1
(Media) 1,000 29,203
Total Fina Elf SA (Oil & Gas) 330 46,256
Vivendi Environnement SA
(Utilities) 1,500 63,190
Vivendi Universal SA (Media) 800 46,678
--------------
511,694
--------------
Germany (7.62%)
BASF AG (Chemicals) 1,300 51,338
Bayer AG (Chemicals) 1,400 54,991
Bayerische Motoren Werke AG
(Automobiles/Trucks) 1,200 39,762
Deutsche Bank AG (Banks - Foreign) 500 35,864
Deutsche Telekom AG
(Telecommunications) 1,500 34,220
E.On AG (Utilities) 1,300 68,238
Muenchener Rueckversicherungs-Gesellschaft AG
(Insurance) 147 41,010
SAP AG (Computers) 400 55,562
--------------
380,985
--------------
Hong Kong (4.24%)
Cheung Kong Holdings Ltd. (Real
Estate Operations) 5,000 54,489
China Mobile Ltd.*
(Telecommunications) 7,000 36,886
Citic Pacific Ltd.
(Commercial/Industrial Services) 13,000 40,251
Hutchison Whampoa Ltd.
(Commercial/Industrial Services) 5,000 50,482
Johnson Electric Holdings Ltd.
(Electronics) 22,000 30,039
--------------
212,147
--------------
Ireland (2.88%)
Allied Irish Banks Plc (Banks - Foreign) 3,100 35,729
Bank of Ireland (Banks - Foreign) 2,600 25,779
Bank of Ireland (Banks - Foreign) 1,600 15,864
CRH Plc (Building) 1,800 30,203
Elan Corp. Plc* (ADR) (Medical) 600 36,600
--------------
144,175
--------------
Israel (1.50%)
Check Point Software Technologies, Ltd.*
(Computers) 500 25,285
Teva Pharmaceutical Industries, Ltd. (ADR)
(Medical) 800 49,840
--------------
75,125
--------------
Italy (4.97%)
Autostrade SpA (Transport) 5,500 35,750
Banca Fideuram SpA (Finance) 3,100 29,476
Banca Nazionale del Lavoro* (Banks
- - Foreign) 16,000 50,169
Edison SpA (Utilities) 3,800 34,876
Riunione Adriatica di Sicurta SpA
(Insurance) 5,282 64,995
Telecom Italia SpA
(Telecommunications) 3,700 33,237
--------------
248,503
--------------
Japan (18.28%)
Bridgestone Corp. (Rubber - Tires &
Misc.) 2,000 20,929
Daikin Industries Ltd. (Building) 3,000 55,569
Fast Retailing Co., Ltd. (Retail) 200 34,801
Fuji Photo Film Co., Ltd. (Leisure) 1,000 43,140
Kyocera Corp. (Electronics) 500 44,102
Marui Co., Ltd. (Retail) 1,000 14,433
Matsushita Electric Industrial Co.,
Ltd. (Electronics) 2,000 31,305
Mitsui Fudosan Co., Ltd. (Real
Estate Operations) 4,000 43,108
Mizuho Holdings, Inc. (Banks - Foreign) 8 37,206
Murata Manufacturing Co., Ltd.
(Electronics) 300 19,942
Nintendo Co., Ltd. (Leisure) 100 18,202
Nippon Mitsubishi Oil Corp. (Oil & Gas) 3,000 16,935
Nippon Telegraph & Telephone Corp.
(Telecommunications) 4 20,848
Nissan Motor Co., Ltd.
(Automobiles/Trucks) 12,000 82,848
Nomura Securities Co., Ltd. (Broker
Services) 1,000 19,164
NTT Data Corp. (Telecommunications) 4 21,811
NTT DoCoMo, Inc.
(Telecommunications) 3 52,201
Oriental Land Co., Ltd. (Leisure) 400 29,701
Pioneer Corp. (Electronics) 1,000 30,391
Seven-Eleven Japan Co., Ltd.
(Retail) 1,000 39,051
Sony Corp. (Electronics) 900 59,177
Takeda Chemical Industries Ltd.
(Medical) 1,000 46,508
Tokyo Electron Ltd. (Machinery) 500 30,270
Toray Industries, Inc. (Textile) 8,000 31,946
Yamanouchi Pharmaceutical Co., Ltd.
(Medical) 1,000 28,065
Yamato Transport Co., Ltd.
(Transport) 2,000 41,937
--------------
913,590
--------------
Mexico (0.42%)
America Movil SA de CV Ser L (ADR)
(Telecommunications) 1,000 20,860
--------------
Netherlands (5.65%)
Akzo Nobel NV (Chemicals) 1,130 47,881
Heineken NV (Beverages) 1,375 55,501
ING Groep NV (Banks - Foreign) 850 55,610
Koninklijke Ahold NV (Retail) 1,545 48,444
Qiagen NV* (Medical) 1,400 30,847
Unilever Plc (Food) 5,200 43,866
--------------
282,149
--------------
Portugal (0.91%)
Portugal Telecom, SGPS, SA
(Telecommunications) 6,500 45,389
--------------
Singapore (1.06%)
Singapore Telecommunications Ltd.
(Telecommunications) 51,000 53,183
--------------
South Korea (0.66%)
Korea Telecom Corp. (ADR)
(Telecommunications) 1,500 32,970
--------------
Spain (2.77%)
Iberdrola SA (Utilities) 2,500 32,097
Inditex SA* (Retail) 3,200 51,118
Repsol YPF, SA (Oil & Gas) 2,200 36,356
Telefonica SA (Telecommunications) 1,546 19,076
--------------
138,647
--------------
Sweden (2.08%)
Electrolux AB, Ser B (Machinery) 3,800 52,598
Svenska Handelsbanken AB (Banks - Foreign) 3,600 51,485
--------------
104,083
--------------
Switzerland (3.66%)
Nestle SA (Food) 300 63,791
Novartis AG (Medical) 1,009 36,535
Serona SA* (ADR) (Medical) 1,300 32,435
Swiss Re Co. (Insurance) 25 49,986
--------------
182,747
--------------
Taiwan (1.26%)
Taiwan Semiconductor Manufacturing Co., Ltd.*
(ADR) (Electronics) 2,100 31,899
United Microelectronics Corp.*
(ADR) (Electronics) 3,500 31,150
--------------
63,049
--------------
United Kingdom (18.71%)
Abbey National Plc (Banks - Foreign) 1,500 26,300
AstraZeneca Plc (Medical) 800 37,326
Barclays Plc (Banks - Foreign) 1,600 49,122
BG Group Plc (Oil & Gas) 13,000 51,308
BP Plc (Oil & Gas) 4,600 37,865
British Airways PLC (Transport) 6,700 32,458
British American Tobacco Plc
(Tobacco) 5,200 39,545
British Sky Broadcasting Group Plc*
(Media) 5,200 50,090
Centrica Plc (Utilities) 15,640 50,054
Compass Group Plc (Consumer
Services) 5,500 44,073
Diageo Plc (Beverages) 6,800 74,696
Energis Plc* (Telecommunications) 8,450 22,462
GlaxoSmithKline Plc (Medical) 1,600 45,066
National Grid Group Plc (Utilities) 6,600 48,705
Reckitt Benckiser Plc (Grocery
Products) 4,100 59,184
Royal Bank of Scotland Group Plc
(Banks - Foreign) 2,300 50,757
Scottish Power Plc (Utilities) 5,800 42,719
Shell Transport & Trading Co. Plc
(Oil & Gas) 6,800 56,597
Shire Pharmaceuticals Group Plc*
(Medical) 2,400 43,736
Standard Chartered Plc (Banks - Foreign) 2,600 33,357
Vodafone Group Plc
(Telecommunications) 17,980 39,881
--------------
935,301
--------------
United States (4.06%)
Amdocs Ltd.* (Telecommunications) 400 21,540
Santa Fe International Corp. (Oil & Gas)
1,500 43,500
Schlumberger Ltd. (Oil & Gas) 900 47,385
Transocean Sedco Forex, Inc. (Oil & Gas)
1,000 41,250
XL Capital Ltd. (Class A)
(Insurance) 600 49,260
--------------
202,935
--------------
TOTAL COMMON STOCKS
(Cost $5,232,978) (98.12%) 4,904,455
-------------- --------------
RIGHTS
Portugal (0.00%)
Portugal Telecom, SGPS, SA*
(Telecommunications) 6,500 0
--------------
TOTAL RIGHTS
(Cost $0) (0.00%) 0
-------------- --------------
TOTAL COMMON STOCKS AND RIGHTS
(Cost $5,232,978) (98.12%) 4,904,455
-------------- --------------
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000s OMITTED)
- ------------------- -------------- --------------
Joint Repurchase Agreement (5.24%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bond, 6.875%
due 08-15-25 and U.S. Treasury Note,
5.625% due 11-30-02) 3.97% $262 262,000
-------------- --------------
NUMBER
OF SHARES
--------------
Cash Equivalents (20.81%)
Navigator Securities Lending Prime Portfolio** 1,040,206 1,040,206
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (26.05%) 1,302,206
-------------- --------------
TOTAL INVESTMENTS (124.17%) 6,206,661
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (24.17%) (1,208,085)
-------------- --------------
TOTAL NET ASSETS (100.00%) $4,998,576
============== ==============
* Non-income producing security.
** Represents investment of security lending collateral.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
Industry Diversification (Unaudited)
- ---------------------------------------------------------------------------
The Fund primarily invests in securities issued by companies of other
countries. The performance of the Fund is closely tied to the economic
conditions within the countries in which it invests. The concentration of
investments by country for individual securities held by the Fund is shown
in the schedule of investments. In addition, the concentration of
investments can be aggregated by various industry groups. The table below
shows the percentages of the Fund's investments at June 30, 2001 assigned
to the various investment categories.
MARKET VALUE AS A %
INVESTMENT CATEGORIES OF FUND NET ASSETS
- ---------------------- -------------------
Automobiles/Trucks 3.61%
Banks - Foreign 9.35
Beverages 2.60
Broker Services 0.38
Building 2.40
Chemicals 3.09
Commercial/Industrial Services 1.82
Computers 1.62
Consumer Services 0.88
Diversified Operations 2.30
Electronics 4.20
Finance 0.59
Food 2.15
Grocery Products 1.18
Insurance 6.34
Leisure 1.82
Machinery 3.83
Media 1.59
Medical 10.64
Oil & Gas 11.71
Real Estate Operations 1.95
Retail 3.76
Rubber - Tires & Misc. 0.42
Telecommunications 9.46
Textile 0.64
Tobacco 0.79
Transport 2.20
Utilities 6.80
Short-Term Investments 26.05
-------
TOTAL INVESTMENTS 124.17%
=======
John Hancock Funds - Declaration Trust - V.A. Regional Bank Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. Regional Bank Fund on June 30, 2001. It's divided into two main
categories: common stocks and short-term investments. Common stocks are
further broken down by industry group. Short-term investments, which
represent the Fund's "cash" position, are listed last.
NUMBER OF MARKET
ISSUER, DESCRIPTION SHARES VALUE
- ------------------- -------------- --------------
COMMON STOCKS
Superregional Banks (7.50%)
Bank One Corp. (OH) 3,000 $107,400
Mellon Financial Corp. (PA) 8,500 391,000
U.S. Bancorp (MN) 5,000 113,950
Wells Fargo & Co. (CA) 6,000 278,580
--------------
890,930
--------------
Banks - Money Center (4.80%)
Citigroup, Inc. (NY) 7,000 369,880
J.P. Morgan Chase & Co. (NY) 4,500 200,700
--------------
570,580
--------------
Banks - United States (71.48%)
BancFirst Corp. (OK) 2,500 100,625
BancWest Corp. (HI) 3,000 103,200
BB&T Corp. (NC) 3,000 110,100
Cascade Bancorp (OR) 21,612 302,568
Chittenden Corp. (VT) 5,000 168,250
City National Corp. (CA) 5,000 221,450
Comerica, Inc. (MI) 3,500 201,600
Commerce Bancshares, Inc. (MO) 10,047 370,734
Community First Bankshares, Inc. (ND) 7,500 172,500
Cullen/Frost Bankers., Inc. (TX) 6,500 220,025
Fifth Third Bancorp (OH) 7,092 425,875
Financial Institutions, Inc. (NY) 9,000 201,600
First Midwest Bancorp., Inc. (IL) 5,000 154,250
FirstMerit Corp. (OH) 5,000 132,000
Independent Bank Corp. (MI) 8,000 196,400
M & T Bank Corp. (NY) 4,000 302,000
Mercantile Bankshares Corp. (MD) 9,500 371,735
Mid-State Bancshares (CA) 25,000 456,000
National Commerce Financial Corp.
(TN) 9,000 219,330
Northern Trust Corp. (IL) 1,500 93,750
Northrim Bank (AK) 16,695 232,227
Pacific Capital Bancorp. (CA) 13,500 411,075
PNC Financial Services Group (PA) 4,000 263,160
Prosperity Bancshares, Inc. (TX) 14,000 335,020
SJNB Financial Corp. (CA) 8,000 345,920
SouthTrust Corp. (AL) 3,000 78,000
Southwest Bancorp. of Texas, Inc.*
(TX) 5,000 151,050
State Street Corp. (MA) 2,000 98,980
Sterling Bancshares, Inc. (TX) 10,000 191,800
Summit Bancshares, Inc. (TX) 12,000 225,840
Texas Regional Bancshares, Inc.
(Class A) (TX) 1,750 70,508
Umpqua Holdings Corp. (OR) 33,000 422,730
Valley National Bancorp. (NJ) 16,485 467,350
Whitney Holding Corp. (LA) 5,000 234,500
Yardville National Bancorp. (NJ) 15,000 210,000
Zions Bancorp. (UT) 4,000 236,000
--------------
8,498,152
--------------
Computers (1.00%)
SEI Investments Co. (PA) 2,500 118,500
--------------
Finance (2.41%)
American Express Co. (NY) 3,000 116,400
Fannie Mae (DC) 2,000 170,300
--------------
286,700
--------------
Insurance (2.06%)
American General Corp. (TX) 1,000 46,450
Hartford Financial Services Group, Inc. (The) (CT) 2,000 136,800
MetLife, Inc. (NY) 2,000 61,960
--------------
245,210
--------------
Thrifts (4.16%)
Charter One Financial, Inc. (OH) 6,017 191,942
First Financial Holdings, Inc. (SC) 5,300 121,900
Warren Bancorp., Inc. (MA) 20,000 180,400
--------------
494,242
--------------
TOTAL COMMON STOCK
(Cost $8,818,705) (93.41%) 11,104,314
-------------- --------------
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000s OMITTED)
- ------------------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (6.25%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds,
10.625% due 08-15-15, and 6.250% due
08-15-23, U.S. Treasury Note 5.625%
due 11-30-02) 3.97% $743 743,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (Cost $743,000) (6.25%) 743,000
-------------- --------------
TOTAL INVESTMENTS (99.66%) 11,847,314
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (0.34%) 40,929
-------------- --------------
TOTAL NET ASSETS (100.00%) $11,888,243
============== ==============
* Non-income producing security.
The percentage shown for each investment category is the total value of
that category as a percentage of the net assets of the Fund.
See notes to financial statements.
John Hancock Funds - Declaration Trust - V.A. High Yield Bond Fund
Schedule of Investments
June 30, 2001 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all securities owned by
the V.A. High Yield Bond Fund on June 30, 2001. It is divided into four
main categories: bonds, common stocks, preferred stocks and warrants, and
short-term investments. Bonds are further broken down by industry group.
Short-term investments, which represent the Fund's "cash" position, are
listed last.
INTEREST CREDIT PAR VALUE MARKET
ISSUER, DESCRIPTION RATE RATING** (000s OMITTED) VALUE
- ------------------- -------- ------ ------------ -------------
BONDS
Aerospace (0.06%)
Compass Aerospace Corp.,
Gtd Sr Sub Note Ser D
04-15-05 (B) 10.125% C $25 $4,000
--------------
Agricultural Operations (0.05%)
Iowa Select Farms L.P./ISF Finance, Inc.,
Jr Sec Note 12-01-06 (R) 10.750 Ca 6 3,000
--------------
Automobiles/Trucks (1.10%)
AM General Corp.,
Sr Note Ser B 05-01-02 12.875 B 50 48,500
J.B. Poindexter & Co., Inc.,
Sr Note 05-15-04 12.500 B 25 20,750
--------------
69,250
--------------
Banks - United States (0.82%)
Colonial Bank,
Sub Note 06-01-11 9.375 BB- 50 51,640
--------------
Building (1.15%)
Amatek Industries Property Ltd.,
Sr Sub Note (Australia)
02-15-08 (Y) 12.000 B 25 19,500
WCI Communities, Inc.,
Sr Sub Note 02-15-11 (R) 10.625 B 50 52,500
--------------
72,000
--------------
Business Services - Misc. (0.22%)
AP Holdings, Inc.,
Sr Disc Note, Step Coupon
(11.25%, 03-15-03)
03-15-08 (A) Zero CCC+ 200 14,000
--------------
Chemicals (4.91%)
American Pacific Corp.,
Sr Note 03-01-05 9.250 BB- 30 30,150
Applied Extrusion Technologies, Inc.,
Sr Note 07-01-11 (R) 10.750 B 50 50,625
Sr Note Ser B 04-01-02 11.500 B 25 25,031
Huntsman ICI Chemicals LLC,
Sr Sub Note 07-01-09 10.125 B 100 98,000
Huntsman ICI Holdings LLC,
Sr Disc Note 12-31-09 Zero B+ 75 23,250
Trikem S.A.,
Bond (Brazil) 07-24-07 (R) (Y) 10.625 B+ 125 81,250
--------------
308,306
--------------
Consumer Products Misc. (0.37%)
Diamond Brands Operating Corp.,
Sr Sub Note 04-15-08 (B) 10.125 D 100 14,000
Indesco International, Inc.,
Sr Sub Note 04-15-08 (B) 9.750 D 100 9,000
--------------
23,000
--------------
Containers (3.97%)
Gaylord Container Corp.,
Sr Note Ser B 06-15-07 9.375 B- 15 9,600
Sr Sub Note Ser B 02-15-08 9.875 CCC+ 100 29,000
Kappa Beheer B.V.,
Sr Sub Bond (Netherlands)
07-15-09 (Y) 10.625 B 75 78,750
Sr Sub Bond, Step Coupon
(12.50%, 07-15-04) (Netherlands)
07-15-09 (A) (E) Zero B 100 64,796
Riverwood International Corp.,
Gtd Sr Sub Note 04-01-08 10.875 CCC+ 70 67,550
--------------
249,696
--------------
Cosmetics & Personal Care (0.12%)
Global Health Sciences, Inc.,
Gtd Sr Note 05-01-08 (B) 11.000 D 75 7,500
--------------
Diversified Operations (0.84%)
Diamond Holdings Plc,
Bond (United Kingdom)
02-01-08 # 10.000 B- 50 52,826
--------------
Energy (3.00%)
AEI Resources, Inc./AEI Resources
Holdings, Inc.,
Gtd Note 12-15-05 (B) (R) 10.500 Ca 75 52,500
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 B 81 84,848
Port Arthur Finance Corp.,
Gtd Sr Sec Note 01-15-09 12.500 BB 50 51,000
--------------
188,348
--------------
Finance (1.57%)
Finova Capital Corp.,
Floating Rate Sr Note 06-18-03 4.128*** D 50 47,000
Takefuji Corp.,
Sr Note (Japan) 04-15-11 (R) (Y) 9.200 A- 50 51,591
--------------
98,591
--------------
Food (4.05%)
Agrilink Foods, Inc.,
Sr Sub Note 11-01-08 11.875 B- 125 113,750
Mastellone Hermanos S.A.,
Sr Note (Argentina) 04-01-08 (Y) 11.750 B+ 125 68,750
RAB Holdings, Inc.,
Sr Note 05-01-08 (R) 13.000 Caa2 120 72,000
--------------
254,500
--------------
Government - Foreign (0.80%)
Panama, Republic of,
Bond (Panama) 02-08-11 (Y) 9.625 BB+ 50 50,500
--------------
Insurance (0.81%)
Willis Corroon Corp.,
Gtd Sr Sub Note 02-01-09 9.000 B+ 50 50,875
--------------
Leisure (3.05%)
Ameristar Casinos, Inc.,
Sr Sub Note 02-15-09 (R) 10.750 B- 50 52,125
Claridge Hotel & Casino Corp.,
1st Mtg Note 02-01-02 (B) 11.750 Ca 50 1,500
Fitzgeralds Gaming Corp.,
Gtd Sr Sec Note Ser B
12-15-04 (B) 12.250 Caa1 50 30,000
Penn National Gaming, Inc.,
Sr Sub Note 03-01-08 (R) 11.125 B- 25 25,875
SC International Services, Inc.,
Sr Sub Note Ser B 09-01-07 9.250 B 30 32,100
Trump Atlantic City Associates,
1st Mtg Note 05-01-06 11.250 B- 75 50,250
--------------
191,850
--------------
Machinery (0.25%)
Glasstech, Inc.,
Sr Note Ser B 07-01-04 12.750 B3 25 15,500
--------------
Manufacturing (0.32%)
ICON Health & Fitness, Inc.,
Gtd Note 09-27-05 12.000 B 22 19,980
--------------
Media (6.93%)
Antenna TV S.A.,
Sr Note (Germany) 07-01-08 (E) 9.750 BB 50 41,927
Callahan Nordheim-Westfalen GmbH,
Sr Note (Germany) 7-15-11 (E) 14.125 B- 50 35,362
DIVA Systems Corp.,
Sr Disc Note Ser B, Step Coupon
(12.625%, 03-01-03)
03-01-08 (A) Zero B- 50 7,000
Fox Family Worldwide, Inc.,
Sr Disc Note, Step Coupon
(10.25%, 11-01-02)
11-01-07 (A) Zero B 80 71,200
ONO Finance Plc,
Sr Sub Note (United Kingdom)
07-15-10 (E) 14.000 CCC+ 50 33,033
Pegasus Communications Corp.,
Sr Note Ser B 08-01-07 12.500 CCC+ 35 34,650
Pegasus Satellite Communications, Inc.,
Sr Disc Note, Step Coupon
(13.50%, 03-01-04)
03-01-07 (A) Zero CCC+ 60 36,600
Regional Independent Media Group Plc,
Sr Disc Note, Step Coupon
(12.875%, 07-01-03)
(United Kingdom)
07-01-08 (A) # Zero B- 20 22,539
Sr Note (United Kingdom)
07-01-08 (Y) 10.500 B- 5 5,050
Sirius Satellite Radio, Inc.,
Sr Disc Note, Step Coupon
(15.00%, 12-01-02)
12-01-07 (A) Zero CCC+ 110 36,300
United International Holdings, Inc.,
Sr Disc Note, Step Coupon
(10.75%, 02-15-03)
02-15-08 (A) Zero B- 75 23,250
XM Satellite Radio, Inc.,
Sr Sec Note 03-15-10 14.000 CCC+ 150 88,500
--------------
435,411
--------------
Medical (1.89%)
Magellan Health Services, Inc.,
Sr Sub Note 02-15-08 9.000 B- 100 94,250
Select Medical Corp.,
Sr Sub Note 06-15-09 (R) 9.500 B 25 24,625
--------------
118,875
--------------
Metal (3.47%)
Doe Run Resources Corp.,
Gtd Sr Note Ser B 03-15-03 11.181*** CCC+ 25 8,500
Gtd Sr Note Ser B 03-15-05 11.250 CCC+ 10 3,400
Freeport-McMoRan Copper & Gold, Inc.,
Sr Note 11-15-06 7.500 CCC 75 50,250
Golden Northwest Aluminum, Inc.,
1st Mtg Note 12-15-06 12.000 B+ 25 13,000
Great Lakes Acquisition Corp.,
Sr Disc Deb, Step Coupon
(13.125%, 05-15-03)
05-15-09 (A) Zero B- 200 80,000
TVX Gold, Inc.,
Conv Sub Note (Canada)
03-28-02 (Y) 5.000 B- 100 63,000
--------------
218,150
--------------
Miscellaneous (0.65%)
Sotheby's Holdings, Inc.,
Note 02-01-09 6.875 BBB 50 41,000
--------------
Oil & Gas (11.09%)
Comstock Resources, Inc.,
Gtd Sr Note 05-01-07 11.250 B 75 79,500
Frontier Oil Corp.,
Sr Sub Note 11-15-09 11.750 B 50 53,500
Giant Industries, Inc.,
Gtd Sr Sub Note 09-01-07 9.000 B+ 50 48,500
Sr Sub Note 11-15-03 9.750 B+ 25 24,563
Great Lakes Carbon Corp.,
Gtd Sr Sub Note Ser B 05-15-08 10.250 B- 50 29,500
Key Energy Services, Inc.,
Conv Sub Note 09-15-04 (R) 5.000 B2 80 74,000
Conv Sub Note 09-15-04 5.000 B2 143 132,275
Sr Sub Note Ser B 01-15-09 14.000 B 93 106,950
Mariner Energy, Inc.,
Sr Sub Note Ser B 08-01-06 10.500 B- 10 9,875
Ocean Rig Norway A.S.,
Gtd Sr Sec Note (Norway)
06-01-08 (Y) 10.250 B- 55 48,400
Universal Compression, Inc.,
Sr Disc Note, Step Coupon
(9.875%, 02-15-03)
02-15-08 (A) Zero B+ 100 90,000
--------------
697,063
--------------
Paper & Paper Products (4.84%)
APP China Group Ltd.,
Unit (Sr Disc Note & Warrant)
(Indonesia) 03-15-10 (B) (R) (Y) 14.000 D 250 37,500
APP Finance (VII) Mauritius Ltd.,
Gtd Note (Indonesia)
04-30-03 (B) (R) (Y) 3.500 D 10 400
Corporacion Durango S.A. de C.V.,
Sr Note (Mexico) 08-01-06 (Y) 13.125 BB- 125 125,000
Grupo Industrial Durango S.A.,
Note (Mexico) 08-01-03 (Y) 12.625 BB- 125 131,250
Sappi BVI Finance Ltd.,
Gtd Conv Bond (South Africa)
08-01-02 (R) (Y) 7.500 BB- 10 9,950
--------------
304,100
--------------
Real Estate Operations (0.02%)
Signature Resorts, Inc.,
Conv Sub Note 01-15-07 (B) 5.750 Caa1 35 1,050
--------------
Retail (0.92%)
Imperial Home Decor Group, Inc,
Gtd Sr Sub Note 03-15-08 (B) 11.000 C 125 625
SpinCycle, Inc.,
Sr Disc Note, Step Coupon
(12.75%, 05-01-01)
05-01-05 (A) Zero CCC+ 25 7,250
St. John Knits International, Inc.,
Sr Sub Note 07-01-09 12.500 B- 50 50,000
--------------
57,875
--------------
Steel (1.54%)
Gulf States Steel, Inc. of Alabama,
1st Mtg Bond 04-15-03 (B) 13.500 Caa3 100 250
LTV Corp. (The),
Gtd Sr Sub Note 11-15-09 (B) 11.750 Ca 50 3,500
Metallurg Holdings, Inc.,
Sr Disc Note, Step Coupon
(12.75%, 07-15-03)
07-15-08 (A) Zero CCC+ 50 23,000
Metallurg, Inc.,
Gtd Sr Note Ser B 12-01-07 11.000 B- 30 27,000
NSM Steel, Inc./NSM Steel Ltd.,
Gtd Sr Sub Mtg Note Ser B
02-01-08 (B) (R) 12.250 D 75 750
Oregon Steel CF&I,
Note 03-31-03 (r) 9.500 B 46 42,321
--------------
96,821
--------------
Telecommunications (6.14%)
CTI Holdings S.A.,
Sr Note, Step Coupon (11.25%,
04-15-03) (Argentina)
04-15-08 (A) (Y) Zero B2 75 29,250
Esprit Telecom Group Plc,
Sr Note (Germany) 06-15-08 (B) # 11.000 D 40 346
Grupo Iusacell S.A. de C.V.,
Sr Note (Mexico) 12-01-06 (Y) 14.250 B+ 100 106,000
GT Group Telecom, Inc.,
Unit (Sr Disc Note & Warrant), Step
Coupon (13.125%, 02-01-05)
02-01-10 (A) 1.000 B- 100 28,000
Jazztel Plc,
Sr Note (United Kingdom)
12-15-09 (E) 13.250 CCC+ 50 15,669
Nextel Partners, Inc.,
Sr Disc Note, Step Coupon
(14.00%, 02-01-04)
02-01-09 (A) Zero CCC+ 15 8,400
NTL Communications Corp.,
Sr Note Ser B 10-01-08 11.500 B 50 33,500
Sr Note Ser B, Step Coupon
(12.375%, 10-01-03)
10-01-08 (A) Zero B 100 42,000
PTC International Finance II S.A.,
Gtd Sr Sub Note (Luxembourg)
12-01-09 (E) 11.250 B+ 25 22,022
Telewest Communications Plc,
Sr Disc Note, Step Coupon
(9.875%, 04-15-04)
(United Kingdom)
04-15-09 (A) # Zero B+ 25 16,904
United Pan-Europe Communications N.V.,
Sr Note (Netherlands)
11-01-07 (E) 10.875 B 50 24,139
Sr Note (Netherlands)
11-01-09 (E) 11.250 Caa1 25 12,070
Versatel Telecom International N.V.,
Sr Note (Netherlands)
05-15-08 (Y) 13.250 B- 125 47,500
--------------
385,800
--------------
Textile (1.51%)
Coyne International Enterprises Corp.,
Sr Sub Note 06-01-08 11.250 CCC 75 31,500
Steel Heddle Group, Inc.,
Sr Disc Deb, Step Coupon (13.75%,
06-01-03) 06-01-09 (A) Zero Caa2 200 10,000
Steel Heddle Manufacturing Co.,
Gtd Sr Sub Note Ser B
06-01-08 (B) 10.625 Caa1 50 7,500
Tropical Sportswear International Corp.,
Sr Sub Note Ser A 06-15-08 11.000 B- 50 46,000
--------------
95,000
--------------
Transport (7.68%)
Amtran, Inc.,
Sr Note 08-01-04 10.500 B+ 50 44,000
Cenargo International Plc,
1st Mtg Note (United Kingdom)
06-15-08 (Y) 9.750 B+ 20 15,200
CHC Helicopter Corp.,
Sr Sub Note (Canada)
07-15-07 (E) 11.750 B2 100 94,864
Fine Air Services, Inc.,
Sr Note 06-01-08 (B) 9.875 Caa1 105 6,296
North American Van Lines, Inc.,
Sr Sub Note 12-01-09 (R) 13.375 B- 100 92,000
Northwest Airlines Corp.,
Gtd Note 03-15-07 8.700 BB 100 96,939
Pacer International, Inc.,
Sr Sub Note 06-01-07 11.750 B- 50 49,000
Pacific & Atlantic Holdings, Inc.,
Sr Sec Note 12-31-07 (R) 10.500 CC 21 10,716
US Airways, Inc.,
Pass Thru Ctf Ser 1993-A3
03-01-13 10.375 B- 75 73,500
--------------
482,515
--------------
Utilities (1.54%)
CMS Energy Corp.,
Sr Note 10-15-07 9.875 BB 25 26,375
Monterrey Power S.A. de C.V.,
Sr Sec Bond (Mexico)
11-15-09 (R) (Y) 9.625 BB+ 68 70,381
--------------
96,756
--------------
Waste Disposal Service & Equip. (2.09%)
Allied Waste North America, Inc.,
Sr Sub Note Ser B 08-01-09 10.000 B+ 125 128,438
Waste Systems International, Inc.,
Gtd Sr Note 01-15-06 (B) 11.500 C 15 3,000
--------------
131,438
--------------
TOTAL BONDS
(Cost $7,053,690) (77.77%) 4,887,216
-------------- --------------
NUMBER OF SHARES
OR WARRANTS
--------------
COMMON STOCKS
American Pacific Corp.** 5,000 $32,200
AMR Corp.** 2,000 72,260
Chesapeake Energy Corp.** 1,872 12,318
Gaylord Container Corp. (Class A)** 6,500 6,825
Grey Wolf, Inc.** 28,850 115,400
International Wireless
Communications Holdings, Inc. 2,417 1,329
KLM Royal Dutch Airlines N.V.
(Netherlands) (Y) 78 1,377
Kraft Foods, Inc. (Class A)** 255 7,905
Nortek, Inc.** 563 17,577
Northwest Airlines Corp.** 6,500 164,125
Pathmark Stores, Inc.** 1,046 25,731
Star Gas Partners, L.P. 3,300 68,805
Waste Systems International, Inc. (B)** 8,715 0
-------------- --------------
TOTAL COMMON STOCKS
(Cost $732,116) (8.37%) 525,852
-------------- --------------
PREFERRED STOCKS AND WARRANTS
Asia Pulp & Paper Co. Ltd., Warrant (R)** 250 3
DIVA Systems Corp., Warrant (R)** 150 188
Gothic Energy Corp., Warrant** 79 31
HF Holdings, Inc., Warrant** 212 106
Hills Stores Co., Warrant** 35,000 0
Nakornthai Strip Mill Plc, Warrant
(Thailand) (R) (Y)** 63,309 63
Nextel Communications, Inc., 11.125%,
Payment-In-Kind, Ser E, Preferred
Stock 208 131,040
ONO Finance Plc, Warrant (United
Kingdom) (R) (Y)** 50 1,500
Pacific & Atlantic Holdings, Inc., 7.50%,
Preferred Stock 1,172 5,860
Pathmark Stores, Inc., Warrant** 740 6,497
Smurfit-Stone Container Corp., 7.00%, Ser A,
Preferred Stock 4,100 79,950
SpinCycle, Inc., Warrant (R)** 25 0
TimberWest Forest Corp., Unit
(Common & Preferred Shares)
(Canada) # 38,000 305,490
Waste Systems International, Inc., 8.00%, Ser E,
Preferred Stock (B)** 160 160
Waste Systems International, Inc.,
Warrant (B) (R)** 225 2
XM Satellite Radio Holdings, Inc.,
Warrant (R)** 150 3,450
--------------
TOTAL PREFERRED STOCKS AND WARRANTS
(Cost $737,235) (8.50%) 534,340
-------------- --------------
INTEREST PAR VALUE
ISSUER, DESCRIPTION RATE (000s OMITTED)
- ------------------- -------------- --------------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.35%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds,
10.625% due 08-15-15 and 6.250% due
08-15-23, U.S. Treasury Note 5.625%
due 11-30-02) 3.970% $85 85,000
-------------- --------------
TOTAL SHORT-TERM INVESTMENTS (1.35%) 85,000
-------------- --------------
TOTAL INVESTMENTS (95.99%) 6,032,408
-------------- --------------
OTHER ASSETS AND LIABILITIES, NET (4.01%) 251,952
-------------- --------------
TOTAL NET ASSETS (100.00%) $6,284,360
============== ==============
* Credit ratings are unaudited and rated by Moody's Investors Service or
John Hancock Advisers, Inc. where Standard and Poor's ratings are not
available.
** Non-income producing security.
*** Represents rate in effect on June 30, 2001.
# Par value of foreign bonds and common stocks is expressed in local
currency, as shown parenthetically in security description.
(A) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(B) Non-income producing issuer filed for protection under Federal
Bankruptcy Code or is in default of interest payment.
(E) Parenthetical disclosure of a country in the security description
represents country of issuer; however, security is euro denominated.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $766,994, or 12.20% of net assets as of
June 30, 2001.
(Y) Parenthetical disclosure of a foreign country in the security
description represents country of a foreign issuer; however, security is
U.S. dollar denominated.
(r) Direct placement securities are restricted as to resale. They have been
valued in accordance with procedures approved by the Trustees after
consideration of restrictions as to resale, financial condition and
prospects of the issuer, general market conditions and pertinent
information, in accordance with the Fund's By- Laws and the Investment
Company Act of 1940, as amended. The Fund has limited rights to
registration under the Securities Act of 1933 with respect to these
restricted securities.
Additional information on these securities is as follows:
MARKET MARKET
VALUE AS A VALUE AT
ACQUISITION ACQUISITION % OF FUND JUNE 30,
ISSUER, DESCRIPTION DATE COST NET ASSETS 2000
- ------------------- ---- ---- ---------- ----
Oregon Steel CF&I 05-14-98 $44,207 0.67% $42,321
The percentage shown for each investment category is the total value of
that category expressed as a percentage of the net assets of the Fund.
See notes to financial statements.
Portfolio Concentration
June 30, 2001 (Unaudited)
- ---------------------------------------------------------------------------
The V.A. High Yield Bond Fund invests primarily in securities issued
in the United States of America. The performance of this Fund is closely
tied to the economic and financial conditions of the countries within which
it invests. The concentration of investments by industry category for
individual securities held by the Fund is shown in the Schedule of
Investments. In addition, concentration of investments can be aggregated by
various countries. The table below shows the percentages of the Fund's
investments at June 30, 2001 assigned to country categories.
MARKET VALUE AS A %
COUNTRY DIVERSIFICATION OF FUND NET ASSETS
- ----------------------- -------------------
Argentina 1.56%
Australia 0.31
Brazil 1.29
Canada 7.37
Germany 1.24
Indonesia 0.60
Japan 0.82
Luxembourg 0.35
Mexico 6.88
Netherlands 3.64
Norway 0.77
Panama 0.80
South Africa 0.16
United Kingdom 2.59
United States 67.61
------
TOTAL INVESTMENTS 95.99%
======
Additionally, the concentration of investments can be aggregated by the
quality rating for each debt security.
QUALITY DISTRIBUTION
- --------------------
A 0.82%
BBB 1.48
BB 11.25
B 51.14
CCC 9.97
CC 1.13
C 0.12
D 1.86
------
TOTAL BONDS 77.77%
======
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
John Hancock Funds - Declaration Trust
(UNAUDITED)
NOTE A --
ACCOUNTING POLICIES
John Hancock V.A. 500 Index Fund ("V.A. 500 Index Fund"), John Hancock
V.A. Large Cap Growth Fund ("V.A. Large Cap Growth Fund"), John Hancock
V.A. Mid Cap Growth Fund ("V.A. Mid Cap Growth Fund"), John Hancock V.A.
Small Cap Growth Fund ("V.A. Small Cap Growth Fund"), John Hancock V.A.
International Fund ("V.A. International Fund"), John Hancock V.A. Regional
Bank Fund ("V.A. Regional Bank Fund") and John Hancock V.A. High Yield
Bond Fund ("V.A. High Yield Bond Fund") (each a "Fund," collectively, the
"Funds") are separate series of John Hancock Declaration Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940. The Trust, organized as a Massachusetts
business trust in 1995, consists of fifteen different series as of June
30, 2001. The other series of the Trust are reported in a separate
shareholders' report. Each Fund currently has one class of shares with
equal rights as to voting, redemption, dividends and liquidation within
its respective Funds. The Trustees may authorize the creation of
additional series from time to time to satisfy various investment
objectives. An insurance company issuing a Variable Contract that
participates in the Trust will vote shares of the Funds held by the
insurance company's separate accounts as required by law. In accordance
with current law and interpretations thereof, participating insurance
companies are required to request voting instructions from policy owners
and must vote shares of the Funds in proportion to the voting instructions
received.
The investment objective of the V.A. 500 Index Fund is to provide
investment results that correspond with the total return performance of
the Standard & Poor's 500 Stock Price Index (the "S&P 500 Index"). The
investment objective of the V.A. Large Cap Growth Fund is to seek
long-term capital appreciation. The investment objective of the V.A. Mid
Cap Growth Fund is to seek long-term capital appreciation. The investment
objective of the V.A. Small Cap Growth Fund is to seek long-term capital
appreciation. The investment objective of the V.A. International Fund is
to seek long-term growth of capital. The investment objective of the V.A.
Regional Bank Fund is to seek long-term capital appreciation. The
investment objective of the V.A. High Yield Bond Fund is to seek maximum
current income without assuming undue risk.
Significant accounting policies of the Funds are as follows:
VALUATION OF INVESTMENTS Securities in the Funds' portfolios are valued on
the basis of market quotations, valuations provided by independent pricing
services or, if quotations are not readily available, or the value has
been materially affected by events occurring after the closing of a
foreign market, at fair value as determined in good faith in accordance
with procedures approved by the Trustees. Short-term debt investments
maturing within 60 days are valued at amortized cost, which approximates
market value. All portfolio transactions initially expressed in terms of
foreign currencies have been translated into U.S. dollars as described in
"Foreign Currency Translation" below.
JOINT REPURCHASE AGREEMENT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Funds, along with other registered
investment companies having a management contract with John Hancock
Advisers, Inc. (the "Adviser"), a wholly owned subsidiary of The Berkeley
Financial Group, Inc., may participate in a joint repurchase agreement
transaction. Aggregate cash balances are invested in one or more large
repurchase agreements, whose underlying securities are obligations of the
U.S. government and/or its agencies. The Funds' respective custodian banks
receive delivery of the underlying securities for the joint account on the
Funds' behalf. The Adviser is responsible for ensuring that the agreement
is fully collateralized at all times.
FOREIGN CURRENCY TRANSLATION All assets or liabilities initially expressed
in terms of foreign currencies are translated into U.S. dollars based on
London currency exchange quotations as of 5:00 p.m., London time, on the
date of any determination of the net asset value of the Funds.
Transactions affecting statement of operations accounts and net realized
gain (loss) on investments are translated at the rates prevailing at the
dates of the transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on
the Funds' books and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities, other than
investments in securities, resulting from changes in the exchange rate.
INVESTMENT TRANSACTIONS Investment transactions are recorded as of the
date of purchase, sale or maturity. Net realized gains and losses on sales
of investments are determined on the identified cost basis. Capital gains
realized on some foreign securities are subject to foreign taxes, which
are accrued, as applicable.
DISCOUNT AND PREMIUM ON SECURITIES The Funds accrete discount and amortize
premium from par value on securities from either the date of issue or the
date of purchase over the life of the security.
EXPENSES The majority of the expenses are directly identifiable to an
individual fund. Expenses that are not readily identifiable to a specific
fund will be allocated in such a manner as deemed equitable, taking into
consideration, among other things, the nature and type of expense and the
relative sizes of the funds.
ORGANIZATION EXPENSES Expenses incurred in connection with the
organization of the Funds have been capitalized and are being charged to
the Funds' operations ratably over a five-year period that began with the
commencement of the investment operations of the Funds.
BANK BORROWINGS The Funds are permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of
securities. The Funds have entered into a syndicated line of credit
agreement with various banks. This agreement enables the Funds to
participate with other funds managed by the Adviser in an unsecured line
of credit with banks, which permit borrowings up to $500 million,
collectively. Interest is charged to each fund, based on its borrowing. In
addition, a commitment fee is charged to each fund based on the average
daily unused portion of the line of credit and is allocated among the
participating Funds. The Funds had no borrowing activities under the line
of credit during the period ended June 30, 2001.
SECURITIES LENDING The Funds may lend securities to certain qualified
brokers who pay the Funds negotiated lender fees. These fees are included
in interest income. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. As with other extensions of credit, the Funds may bear
the risk of delay of the loaned securities in recovery or even loss of
rights in the collateral, should the borrower of the securities fail
financially. At June 30, 2001, the V.A. International Fund loaned
securities having a market value of $1,034,602, collateralized by cash in
the amount of $1,040,206 and securities with market value of $35,900. The
cash collateral was invested in a short-term instrument.
FINANCIAL FUTURES CONTRACTS The Funds may buy and sell financial futures
contracts. Buying futures tends to increase the Funds' exposure to the
underlying instruments. Selling futures tends to decrease the Funds'
exposure to the underlying instruments or hedge other Funds' instruments.
At the time the Funds enter into financial futures contracts, they are
required to deposit with their custodians specified amounts of cash or
U.S. government securities, known as "initial margin," equal to a certain
percentage of the value of the financial futures contracts being traded.
Each day, the futures contracts are valued at the official settlement
price of the board of trade or U.S. commodities exchange on which they
trade. Subsequent payments to and from the broker, known as "variation
margin," are made on a daily basis as the market price of the financial
futures contract fluctuates. Daily variation margin adjustments, arising
from this "mark to market," are recorded by the Funds as unrealized gains
or losses.
When the contracts are closed, the Funds recognize a gain or loss. Risks
of entering into futures contracts include the possibility that there may
be an illiquid market and/or that a change in the value of the contracts
may not correlate with changes in the value of the underlying securities.
In addition, the Funds could be prevented from opening or realizing the
benefits of closing out futures positions because of position limits or
limits on daily price fluctuation imposed by an exchange.
For federal income tax purposes, the amount, character and timing of the
Funds' gains and/or losses can be affected as a result of futures
contracts.
The Funds had the following open financial futures contracts at June 30,
2001:
OPEN UNREALIZED
EXPIRATION CONTRACTS POSITION DEPRECIATION
- -------- --------- -------- ------------
V.A. 500 INDEX FUND
SEPT 01 2 S&P 500 Long ($18,214)
=======
At June 30, 2001, the V.A. 500 Index Fund had deposited $34,500 in a
segregated account to cover margin requirements on open futures contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS The Funds (except for V.A. 500
Index Fund) may enter into forward foreign currency exchange contracts as
a hedge against the effect of fluctuations in currency exchange rates. A
forward foreign currency exchange contract involves an obligation to
purchase or sell a specific currency at a future date at a set price. The
aggregate principal amounts of the contracts are marked to market daily at
the applicable foreign currency exchange rates. Any resulting unrealized
gains and losses are included in the determination of the Funds' daily net
assets. The Funds record realized gains and losses at the time the forward
foreign currency exchange contract is closed out or offset by a matching
contract. Risks may arise upon entering these contracts from the potential
inability of counterparties to meet the terms of the contract and from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
These contracts involve market or credit risk in excess of the unrealized
gain or loss reflected in the Funds' Statements of Assets and Liabilities.
The Funds may also purchase and sell forward contracts to facilitate the
settlement of foreign currency denominated portfolio transactions, under
which they intend to take delivery of the foreign currency. Such contracts
normally involve no market risk if they are offset by the currency amount
of the underlying transaction.
The Funds had the following open forward foreign currency exchange
contracts at June 30, 2001:
UNREALIZED
PRINCIPAL AMOUNT EXPIRATION APPRECIATION/
CURRENCY COVERED BY CONTRACT MONTH (DEPRECIATION)
- -------- ------------------- ---------- ------------
V.A. INTERNATIONAL FUND
Buys
Euro 4,716 Jul 01 ($33)
=======
Sells
Japanese Yen 32,214,883 Sep 01 $3,314
=======
V.A. HIGH YIELD BOND FUND
Buys
Euro 13,000 Jul 01 ($589)
=======
Sells
Euro 246,000 Jul 01 $11,283
Euro 59,000 Aug 01 2,491
Euro 54,400 Sep 01 413
Euro 103,200 Oct 01 38
Pound Sterling 13,750 Jul 01 398
Pound Sterling 54,600 Aug 01 1,371
-------
$15,994
=======
FEDERAL INCOME TAXES The Funds qualify as "regulated investment companies"
by complying with the applicable provisions of the Internal Revenue Code
and will not be subject to federal income tax on taxable income which is
distributed to shareholders. Therefore, no federal income tax provision is
required.
For federal income tax purposes, the following Funds had capital loss
carryforwards available to the extent provided by regulators to offset
future net realized capital gains:
CAPITAL LOSS
CARRYFORWARD
EXPIRING
FUND 12/31/2008
- ---- ----------
V.A. Large Cap Growth Fund 1,306,804
V.A. Mid Cap Growth Fund 633,415
V.A. Small Cap Growth Fund 2,089,105
V.A. International Fund 265,560
V.A. Regional Bank Fund 2,212,041
Expired capital loss carryforwards are reclassified to capital paid-in, in
the year of expiration.
DIVIDENDS, INTEREST AND DISTRIBUTIONS Dividend income on investment
securities is recorded on the ex-dividend date or, in the case of some
foreign securities, on the date thereafter when the Funds identify the
dividend. Interest income on investment securities is recorded on the
accrual basis. The Funds may place debt obligations on non-accrual status
and reduce related interest income by ceasing current accruals and writing
off interest receivables when the collection of interest has become
doubtful. Foreign income may be subject to foreign withholding taxes,
which are accrued as applicable.
The Funds record distributions to shareholders from net investment income
and realized gains on the ex-dividend date. Such distributions are
determined in conformity with income tax regulations, which may differ
from accounting principles generally accepted in the United States of
America.
USE OF ESTIMATES The preparation of these financial statements, in
accordance with accounting principles generally accepted in the United
States of America, incorporates estimates made by management in
determining the reported amount of assets, liabilities, revenues and
expenses of the Funds. Actual results could differ from these estimates.
NOTE B --
MANAGEMENT FEE AND TRANSACTIONS
WITH AFFILIATES AND OTHERS
The Funds have an investment management contract with the Adviser. Under
the investment management contract, the Funds pay monthly management fees
to the Adviser equivalent, on an annual basis, to the following:
RATE AS A PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS
- ---- ------------------------
V.A. 500 Index Fund 0.35%
V.A. Large Cap Growth Fund 0.75
V.A. Mid Cap Growth Fund 0.75
V.A. Small Cap Growth Fund 0.75
V.A. International Fund 0.90
V.A. Regional Bank Fund 0.80
V.A. High Yield Bond Fund 0.60
V.A. International Fund and the Adviser have a subadvisory contract with
Nicholas-Applegate Capital Management LP. The Fund is not responsible for
payment of subadviser's fees.
The Adviser has agreed to limit the management fee on the V.A. 500 Index
Fund to 0.10% of the Fund's average daily net assets, at least until April
30, 2002. Accordingly, the management fee reduction amounted to $15,341
during the period ended June 30, 2001. The Adviser reserves the right to
terminate this limitation in the future.
The Adviser has agreed to limit each Fund's expenses (excluding the
management fee), to 0.25% of each Fund's average daily net assets at least
until April 30, 2002. Accordingly, the reductions in the Funds' expenses
for the period ended June 30, 2001 amounted to as follows:
FUND FEE REDUCTION
- ---- -------------
V.A. 500 Index Fund $73,289
V.A. Large Cap Growth Fund 10,890
V.A. Mid Cap Growth Fund 7,693
V.A. Small Cap Growth Fund 15,729
V.A. International Fund 65,160
V.A. High Yield Bond Fund 6,302
The Adviser reserves the right to terminate this limitation in the future.
The Funds have an agreement with the Adviser to perform necessary tax,
accounting and legal services for the Funds. The compensation for the
period was at an annual rate 0.02% of the average net assets of the Funds.
The V.A. 500 Index Fund has an agreement with Standard & Poor's ("S&P") to
license certain trademarks and trade names of S&P and of the S&P 500
Index, which is determined, composed and calculated by S&P without regard
to the Adviser or the V.A. 500 Index Fund. (Requisite disclosure regarding
the use of the Standard & Poor's name is included in the Fund's
prospectus.)
Ms. Maureen R. Ford and Mr. John M. DeCiccio are directors and/or officers
of the Adviser and/or its affiliates, as well as Trustees of the Funds.
The compensation of unaffiliated Trustees is borne by the Funds. The
unaffiliated Trustees may elect to defer for tax purposes their receipt of
this compensation under the John Hancock Group of Funds Deferred
Compensation Plan. The Funds make investments into other John Hancock
Funds, as applicable, to cover their liability for the deferred
compensation. Investments to cover the Funds' deferred compensation
liability are recorded on the Funds' books as an other asset. The deferred
compensation liability and the related other asset are always equal and
are marked to market on a periodic basis to reflect any income earned by
the investment as well as any unrealized gains or losses. The Deferred
Compensation Plan investments had no impact on the operations of the
Funds.
The Adviser and other subsidiaries of John Hancock Life Insurance Company
owned the following shares of beneficial interest of the Funds as of June
30, 2001:
FUND SHARES OF BENEFICIAL INTEREST
- ---- -----------------------------
V.A. International Fund 234,153
V.A. Regional Bank Fund 53,285
V.A. High Yield Bond Fund 303,397
NOTE C -
INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities for the Funds, other than
short-term securities and obligations of the U.S. government, during the
period ended June 30, 2001, were as follows:
FUND PURCHASES SALES
- ---- ----------- -----------
V.A. 500 Index Fund $601,875 $5,080,671
V.A. Large Cap Growth Fund 3,198,286 6,750,088
V.A. Mid Cap Growth Fund 5,746,356 8,760,588
V.A. Small Cap Growth Fund 6,054,793 10,810,755
V.A. International Fund 10,407,135 9,595,174
V.A. Regional Bank Fund 1,100,972 3,794,866
V.A. High Yield Bond Fund 2,295,915 2,023,988
The cost of investments owned at June 30, 2001 (including short-term
investments) and gross unrealized appreciation and depreciation of
investments for federal income tax purposes, were as follows:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- ----------- ------------ ------------ ------------
V.A. 500 Index Fund $13,903,431 $6,188,493 $1,344,532 $4,843,961
V.A. Large Cap Growth Fund 6,085,183 1,056,859 813,891 242,968
V.A. Mid Cap Growth Fund 6,572,548 629,200 768,509 (139,309)
V.A. Small Cap Growth Fund 11,552,758 3,156,020 1,404,597 1,751,423
V.A. International Fund 6,537,946 171,218 502,503 (331,285)
V.A. Regional Bank Fund $9,630,558 $2,357,634 $140,878 $2,216,756
V.A. High Yield Bond Fund 8,639,726 299,155 2,906,473 (2,607,318)
NOTE D -
CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 2001, the Funds adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies, as revised, and began
amortizing premiums on debt securities. Prior to this date, the Funds did
not amortize premiums on debt securities. The cumulative effect of this
accounting change had no impact on the total net assets of the Funds, but
for the V.A. High Yield Bond Fund resulted in a $23,914 reduction in the
cost of the investments and a corresponding decrease in unrealized
depreciation on investments, based on securities held as of December 31,
2000.
For the V.A. High Yield Bond Fund, the effect of this change in the period
ended June 30, 2001 was to decrease net investment income by $7,389,
decrease unrealized depreciation on investments by $3,483 and decrease net
realized loss on investments by $3,906. The effect of this change on the
per share operating performance and the annualized ratio of net investment
income to average net assets for the period ended June 30, 2001 was as
follows: decrease in net investment income by $0.01 per share, decrease in
net realized and unrealized loss on investments by $0.01 per share and
decrease in the ratio of net investment income to average net assets by
0.22%.
The Statements of Changes in Net Assets and Financial Highlights for prior
periods have not been restated to reflect this change in presentation.
NOTE E -
SHAREHOLDER MEETING
On April 25, 2001 shareholders of V.A. International Fund approved a new
subadvisory management contract among the V.A. International Fund, Adviser
and Nicholas-Applegate Capital Management LP (562,916 FOR; 17,927 AGAINST;
and 41,896 ABSTAINING).
[A 1 1/2" x 1/2" John Hancock (Signature) logo in upper left hand corner.]
John Hancock Funds, Inc.
MEMBER NASD
101 Huntington Avenue
Boston, MA 02199-7603
1-800-225-5291
1-800-554-6713 TDD
1-800-338-8080 EASI-Line
www.jhfunds.com
This report is for the information of the shareholders of the John
Hancock Declaration Trust.
A recycled logo in lower left hand corner with caption "Printed on
Recycled Paper."
DVASA 6/01
8/01
Exhibit C
JOHN HANCOCK V.S.T. GROWTH & INCOME
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. Growth & Income Fund and the John Hancock V.A. Core Equity Fund
with information about the impact of the proposed merger by indicating how the
merger might have affected information had the merger been consummated as of
June 30, 2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. Growth & Income and John Hancock V.A. Core Equity Fund after
giving effect to pro forma adjustments described in the notes below.
(a) Acquisition by John Hancock V.S.T. Growth & Income Fund of all assets of
John Hancock V.A. Core Equity Fund and issuance of John Hancock V.S.T.
Growth & Income Fund shares in exchange for all of the outstanding shares
of John Hancock V.A. Core Equity Fund.
(b) The deferred organization expense of John Hancock V.A. Core Equity Fund
was written off as the Fund would no longer be in existence.
(c) The investment advisory fee was adjusted to reflect the application of the
fee structure which will be in effect for John Hancock V.S.T. Growth &
Income Fund:
0.71% for the first $150,000,000 of the Fund's net assets;
0.69% for the net assets between $150,000,000 and $300,000,000;
0.67% for the net assets in excess of $300,000,000.
(d) The actual expenses incurred by the John Hancock V.S.T. Growth & Income
Fund and the John Hancock V.A. Core Equity Fund for various expenses
included on a pro forma basis were reduced to reflect the estimated
savings arising from the merger.
(e) Represents the Adviser's voluntary agreement to limit the funds' other
expenses to an annual rate of 0.10% of the funds' average daily net
assets.
John Hancock V.S.T. Growth & Income Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000 omitted)
John Hancock John Hancock
V.S.T. Growth & V.A. Core Pro-Forma
Income Fund Equity Fund Adjustments Combined
--------------- ------------ ------------ -----------
Assets
Long term investments at cost $ 2,539,202 $ 36,204 $ -- $ 2,575,406
Net unrealized appreciation (depreciation) of investments 221,717 4,780 -- 226,497
Short-term investments at value 55,129 558 -- 55,687
----------- ----------- ------------ -----------
Total investments 2,816,048 41,542 -- 2,857,590
Receivable for:
Investments sold 13,303 22 -- 13,325
Interest and dividends 2,031 42 -- 2,073
Other assets -- 1 -- 1
----------- ----------- ------------ -----------
Total Assets 2,831,382 41,607 -- 2,872,989
----------- ----------- ------------ -----------
Liabilities
Payables for:
Investments purchased 19,727 305 -- 20,032
Fund shares purchased -- 120 -- 120
Securities on loan 9,945 -- -- 9,945
Payable to affiliates -- 25 -- 25
Other liabilities 1,720 21 -- 1,741
----------- ----------- ------------ -----------
Total Liabilities 31,392 471 -- 31,863
----------- ----------- ------------ -----------
Net assets:
Capital paid-in 2,963,174 40,154 -- 3,003,328
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions (385,265) (3,801) -- (389,066)
Undistributed (distribution in excess of)
net investment income (loss) 364 3 -- 367
Net unrealized appreciation (depreciation) of investments,
futures and foreign currencies translations 221,717 4,780 -- 226,497
----------- ----------- ------------ -----------
Net assets 2,799,990 41,136 -- 2,841,126
=========== =========== ============ ===========
NET ASSETS
V.S.T. Growth & Income Fund 2,799,990 -- 41,136 (a) 2,841,126
V.A. Core Equity Fund -- 41,136 (41,136)(a) --
----------- ----------- ------------ -----------
2,799,990 41,136 -- 2,841,126
=========== =========== ============ ===========
Shares outstanding:
V.S.T. Growth & Income Fund 217,626 -- 3,100 (a) 220,726
V.A. Core Equity Fund -- 2,469 (2,469)(a) --
----------- ----------- ------------ -----------
217,626 2,469 631 220,726
=========== =========== ============ ===========
Net asset value per share:
V.S.T. Growth & Income Fund $ 12.87 -- -- $ 12.87
V.A. Core Equity Fund -- $ 16.66 $ (16.66)(a) --
=========== =========== ============ ===========
See Notes to Pro-forma Combined Financial Statements
John Hancock V.S.T. Growth & Income Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000 omitted)
John Hancock John Hancock
V.S.T. Growth & V.A. Core Pro-Forma
Income Fund Equity Fund Adjustments Combined
--------------- ------------ ------------ -----------
Investement Income
Interest and dividends $ 38,881 $ 532 $ -- $ 39,413
Securities Lending 172 24 -- 196
--------- --------- --------- ---------
Total Investment Income 39,053 556 -- 39,609
--------- --------- --------- ---------
Expenses
Investment management fee 22,818 295 (12)(c) 23,101
Auditing fees 367 24 (24)(d) 367
Custodian fees 1,146 27 (13)(d) 1,160
Fidelity Bond fees 4 -- -- 4
Accounting and legal services fee -- 8 -- 8
Legal fees 230 -- -- (d) 230
Printing & mailing fees 1,991 5 (5)(d) 1,991
Organization expense -- 2 (2)(b) --
Trustees' fee 140 3 -- 143
Registration and filing fees -- -- -- --
Miscellaneous -- 4 -- 4
Other fees 87 -- -- 87
Interest expense -- -- -- --
--------- --------- --------- ---------
Total Expenses 26,783 368 (56) 27,095
Less Expense Reductions (149) -- (538)(e) (687)
--------- --------- --------- ---------
Net Expenses 26,634 368 (594) 26,408
--------- --------- --------- ---------
Net Investment Income 12,419 188 594 13,201
--------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investments (273,187) (3,524) -- (276,711)
Change in net unrealized appreciation (depreciation) of:
Investments (531,648) (2,110) -- (533,758)
--------- --------- --------- ---------
Net realized and unrealized gain (loss) (804,835) (5,634) -- (810,469)
--------- --------- --------- ---------
Net increase (decrease) in net assets resulting from operations $(792,416) $ (5,446) $ 594 $(797,268)
========= ========= ========= =========
See Notes to Pro-forma Combined Financial Statements
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
COMMON STOCK
Aerospace & Defense (1.76%)
Boeing Co. 146,300 $ 8,134
General Dynamics Corp. 266,000 20,697 3,800 $ 296
United Technologies Corp. 277,800 20,352 5,600 410
--------------- ---------------
49,183 706
--------------- ---------------
Auto & Truck Parts (0.31%)
Lear Corp. * 244,000 8,516 4,400 154
--------------- ---------------
Automobile (0.89%)
Ford Motor Co. 600,000 14,730 13,000 319
General Motors Corp. - Cl. H 506,658 10,260
--------------- ---------------
24,990 319
--------------- ---------------
Bank (5.01%)
Bank of America Corp. 340,000 20,410 4,600 276
Bank of New York Co., Inc. 121,100 5,813
Comerica, Inc. 232,800 13,409 3,100 178
Fifth Third Bancorp 107,900 6,479
FleetBoston Financial Corp. 226,600 8,939 4,100 162
JP Morgan Chase & Co. 400,000 17,840 5,600 250
Mellon Financial Corp. 341,400 15,705 3,300 152
State Street Corp. 53,600 2,653
US Bancorp 1,236,000 28,169 28,400 647
Washington Mutual, Inc. 565,200 21,223
--------------- ---------------
140,640 1,665
--------------- ---------------
Brokerage & Investment Management (0.43%)
Charles Schwab Corp. 3,900 60
Goldman Sachs Group, Inc. 45,900 3,938
Morgan Stanley, Dean Witter, Discover & Co. 128,300 8,241
---------------
12,239
---------------
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
COMMON STOCK
Aerospace & Defense (1.76%)
Boeing Co. 146,300 $ 8,134
General Dynamics Corp. 269,800 20,993
United Technologies Corp. 283,400 20,762
--------------
49,889
--------------
Auto & Truck Parts (0.31%)
Lear Corp. * 248,400 8,670
--------------
Automobile (0.89%)
Ford Motor Co. 613,000 15,049
General Motors Corp. - Cl. H 506,658 10,260
--------------
25,309
--------------
Bank (5.01%)
Bank of America Corp. 344,600 20,686
Bank of New York Co., Inc. 121,100 5,813
Comerica, Inc. 235,900 13,587
Fifth Third Bancorp 107,900 6,479
FleetBoston Financial Corp. 230,700 9,101
JP Morgan Chase & Co. 405,600 18,090
Mellon Financial Corp. 344,700 15,857
State Street Corp. 53,600 2,653
US Bancorp 1,264,400 28,816
Washington Mutual, Inc. 565,200 21,223
--------------
142,305
--------------
Brokerage & Investment Management (0.43%)
Charles Schwab Corp. 3,900 60
Goldman Sachs Group, Inc. 45,900 3,938
Morgan Stanley, Dean Witter, Discover & Co. 128,300 8,241
--------------
12,239
--------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Building (0.01%)
Black & Decker Corp. (The) 6,300 $ 249
---------------
Chemical (1.80%)
Air Products & Chemicals, Inc. 298,700 $ 13,666 5,200 238
Dow Chemical Co. 428,500 14,248 16,200 539
E.I. du Pont de Nemours & Co. 125,230 6,041
Praxair, Inc. 346,200 16,271 5,800 272
--------------- ---------------
50,226 1,049
--------------- ---------------
Commercial Sevices (0.87%)
Avery Dennison Corp. 219,400 11,200
Concord EFS, Inc. 150,600 7,833
Omnicom Group, Inc. 22,400 1,926
TMP Worldwide, Inc. 60,800 3,648
---------------
24,607
---------------
Computer Equipment (6.00%)
Brocade Communications Systems, Inc. 55,800 2,455
Cisco Systems, Inc.* 8,600 156
Dell Computer Corp. * 921,600 24,100 14,000 366
EMC Corp. * 115,100 3,344
Gateway, Inc. 144,100 2,370
Intel Corp. 2,077,100 60,755 31,600 924
International Business Machines Corp. 418,600 47,302 6,300 712
Lexmark International Group, Inc. - Cl. A 265,400 17,848 7,800 525
McData Corp. 154,100 2,704
Veritas Software Corp. * 105,500 7,019
--------------- ---------------
167,897 2,683
--------------- ---------------
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Building (0.01%)
Black & Decker Corp. (The) 6,300 $ 249
--------------
Chemical (1.80%)
Air Products & Chemicals, Inc. 303,900 13,904
Dow Chemical Co. 444,700 14,787
E.I. du Pont de Nemours & Co. 125,230 6,041
Praxair, Inc. 352,000 16,543
--------------
51,275
--------------
Commercial Sevices (0.87%)
Avery Dennison Corp. 219,400 11,200
Concord EFS, Inc. 150,600 7,833
Omnicom Group, Inc. 22,400 1,926
TMP Worldwide, Inc. 60,800 3,648
--------------
24,607
--------------
Computer Equipment (6.00%)
Brocade Communications Systems, Inc. 55,800 2,455
Cisco Systems, Inc.* 8,600 156
Dell Computer Corp. * 935,600 24,466
EMC Corp. * 115,100 3,344
Gateway, Inc. 144,100 2,370
Intel Corp. 2,108,700 61,679
International Business Machines Corp. 424,900 48,014
Lexmark International Group, Inc. - Cl. A 273,200 18,373
McData Corp. 154,100 2,704
Veritas Software Corp. * 105,500 7,019
--------------
170,580
--------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Computer Software & Services (8.24%)
Adobe Systems, Inc. * 183,100 $ 8,606 2,300 $ 108
Cadence Design Systems, Inc. * 386,200 7,195 6,000 112
Check Point Software Technologies, Ltd. * 105,200 5,320
Electronic Data Systems Corp. * 283,400 17,712 6,100 381
First Data Corp. 192,900 12,394 4,000 257
Fiserv, Inc. * 156,100 9,987 3,500 224
Micromuse, Inc. * 119,200 3,336
Microsoft Corp. 1,808,900 132,050 25,500 1,861
Oracle Corp. * 886,000 16,834 17,100 325
Parametric Technology Corp. 42,400 593
Peoplesoft, Inc. 109,900 5,410 3,000 148
Siebel Systems, Inc. * 112,000 5,253
SunGard Data Systems, Inc. 181,700 5,453 14,100 423
--------------- ---------------
230,143 3,839
--------------- ---------------
Consumer Miscellaneous (0.67%)
Black & Decker Corp. 305,700 12,063
Harley-Davidson, Inc. 147,100 6,925
---------------
18,988
---------------
Cosmetic & Personal Care (1.61%)
Avon Products, Inc. 244,100 11,297 6,000 278
Colgate-Palmolive Co. 164,900 9,727
Procter & Gamble Co. 176,000 11,229
Unilever NV - NY Shares 217,700 12,968 2,300 137
--------------- ---------------
45,221 415
--------------- ---------------
Diversified Operations (8.12%)
Amgen, Inc. 150,700 9,144
Danaher Corp. 193,500 10,836
General Electric Co. 3,401,330 165,815 39,300 1,916
Tyco International, Ltd. 774,800 42,227 12,800 697
--------------- ---------------
228,022 2,613
--------------- ---------------
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Computer Software & Services (8.24%)
Adobe Systems, Inc. * 185,400 $ 8,714
Cadence Design Systems, Inc. * 392,200 7,307
Check Point Software Technologies, Ltd. * 105,200 5,320
Electronic Data Systems Corp. * 289,500 18,093
First Data Corp. 196,900 12,651
Fiserv, Inc. * 159,600 10,211
Micromuse, Inc. * 119,200 3,336
Microsoft Corp. 1,834,400 133,911
Oracle Corp. * 903,100 17,159
Parametric Technology Corp. 42,400 593
Peoplesoft, Inc. 112,900 5,558
Siebel Systems, Inc. * 112,000 5,253
SunGard Data Systems, Inc. 195,800 5,876
--------------
233,982
--------------
Consumer Miscellaneous (0.67%)
Black & Decker Corp. 305,700 12,063
Harley-Davidson, Inc. 147,100 6,925
--------------
18,988
--------------
Cosmetic & Personal Care (1.61%)
Avon Products, Inc. 250,100 11,575
Colgate-Palmolive Co. 164,900 9,727
Procter & Gamble Co. 176,000 11,229
Unilever NV - NY Shares 220,000 13,105
--------------
45,636
--------------
Diversified Operations (8.12%)
Amgen, Inc. 150,700 9,144
Danaher Corp. 193,500 10,836
General Electric Co. 3,440,630 167,731
Tyco International, Ltd. 787,600 42,924
--------------
230,635
--------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Electric Power (1.96%)
Allegheny Energy, Inc. 241,800 $ 11,667
Duke Energy Co. 400,000 15,604
Exelon Corp. 335,500 21,512
Mirant Corp. 194,400 6,687 5,600 $ 193
--------------- ---------------
55,470 193
--------------- ---------------
Electrical Equipment (0.24%)
Best Buy Co., Inc. 106,800 6,784
---------------
Electronic Components (0.06%)
Electronic Arts, Inc. 28,400 1,644
---------------
Electronic Products & Services (4.88%)
Analog Devices, Inc. 232,400 10,051 4,200 182
Applera Corporation - Applied Biosystems Group 86,700 2,319
Applied Materials, Inc. * 357,300 17,544 4,100 201
Applied Micro Circuits Corp. * 133,900 2,303
Celestica, Inc. 49,300 2,539
Cisco Systems, Inc. 1,483,100 26,992
Emulex Corp. 78,800 3,184
Integrated Device Technology, Inc. 55,800 1,768
KLA-Tencor Corp. * 237,363 13,879 3,300 193
LSI Logic Corp. 350,000 6,580 7,000 132
Marvell Technology Group, Ltd. * 140,600 3,782
Maxim Integrated Products, Inc. * 262,432 11,602 3,600 159
Parker- Hannifin Corp. 3,700 157
Sanmina Corp. * 114,200 2,673
Tektronix, Inc. 288,900 7,844
Texas Instruments, Inc. 476,500 15,010 7,800 245
Xilinx, Inc. * 219,300 9,044 3,100 128
--------------- ---------------
137,114 1,397
--------------- ---------------
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Electric Power (1.96%)
Allegheny Energy, Inc. 241,800 $ 11,667
Duke Energy Co. 400,000 15,604
Exelon Corp. 335,500 21,512
Mirant Corp. 200,000 6,880
--------------
55,663
--------------
Electrical Equipment (0.24%)
Best Buy Co., Inc. 106,800 6,784
--------------
Electronic Components (0.06%)
Electronic Arts, Inc. 28,400 1,644
--------------
Electronic Products & Services (4.88%)
Analog Devices, Inc. 236,600 10,233
Applera Corporation - Applied Biosystems Group 86,700 2,319
Applied Materials, Inc. * 361,400 17,745
Applied Micro Circuits Corp. * 133,900 2,303
Celestica, Inc. 49,300 2,539
Cisco Systems, Inc. 1,483,100 26,992
Emulex Corp. 78,800 3,184
Integrated Device Technology, Inc. 55,800 1,768
KLA-Tencor Corp. * 240,663 14,072
LSI Logic Corp. 357,000 6,712
Marvell Technology Group, Ltd. * 140,600 3,782
Maxim Integrated Products, Inc. * 266,032 11,761
Parker- Hannifin Corp. 3,700 157
Sanmina Corp. * 114,200 2,673
Tektronix, Inc. 288,900 7,844
Texas Instruments, Inc. 484,300 15,255
Xilinx, Inc. * 222,400 9,172
--------------
138,511
--------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Energy - Alternative Source (0.29%)
El Paso Corp. 155,900 $ 8,191
---------------
Financial Services (0.76%)
Providian Financial Corp. * 120,000 7,104
Stillwell Financial, Inc. 362,500 12,165
Citigroup, Inc. 32,600 $ 1,723
Concord EFS, Inc.* 4,100 213
Washington Mutual, Inc. 12,450 467
--------------- ---------------
19,269 2,403
--------------- ---------------
Food, Beverage & Tobacco (3.42%)
Anheuser-Busch Cos., Inc. 247,200 10,185 4,600 190
Coca-Cola Co. 300,000 13,500
Kraft Foods, Inc. CL A* 163,800 5,078 3,000 93
Pepsi Bottling Group, Inc. 6,900 277
PepsiCo, Inc. 549,800 24,301 5,800 256
Philip Morris Cos., Inc. 837,900 42,523 15,600 792
--------------- ---------------
95,864 1,331
--------------- ---------------
Health Care Products (12.37%)
Abbott Laboratories 308,000 14,787
Allergan, Inc. 132,500 11,329
American Home Products Corp. 608,200 35,543
Andrx Corp. * 32,300 2,487
Bristol-Myers Squibb Co. 436,000 22,803
Eli Lilly & Co. 112,400 8,318
Forest Laboratories, Inc. * 31,000 2,201
Genetech, Inc. * 104,000 5,731
Ivax Corp. 61,650 2,404
Johnson & Johnson 1,057,704 52,885
King Pharmaceuticals, Inc. * 64,500 3,467
MedImmune, Inc. * 108,900 5,140
Medtronic, Inc. 173,600 7,987
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Energy - Alternative Source (0.29%)
El Paso Corp. 155,900 $ 8,191
--------------
Financial Services (0.76%)
Providian Financial Corp. * 120,000 7,104
Stillwell Financial, Inc. 362,500 12,165
Citigroup, Inc. 32,600 1,723
Concord EFS, Inc.* 4,100 213
Washington Mutual, Inc. 12,450 467
--------------
21,672
--------------
Food, Beverage & Tobacco (3.42%)
Anheuser-Busch Cos., Inc. 251,800 10,375
Coca-Cola Co. 300,000 13,500
Kraft Foods, Inc. CL A* 166,800 5,171
Pepsi Bottling Group, Inc. 6,900 277
PepsiCo, Inc. 555,600 24,557
Philip Morris Cos., Inc. 853,500 43,315
--------------
97,195
--------------
Health Care Products (12.37%)
Abbott Laboratories 308,000 14,787
Allergan, Inc. 132,500 11,329
American Home Products Corp. 608,200 35,543
Andrx Corp. * 32,300 2,487
Bristol-Myers Squibb Co. 436,000 22,803
Eli Lilly & Co. 112,400 8,318
Forest Laboratories, Inc. * 31,000 2,201
Genetech, Inc. * 104,000 5,731
Ivax Corp. 61,650 2,404
Johnson & Johnson 1,057,704 52,885
King Pharmaceuticals, Inc. * 64,500 3,467
MedImmune, Inc. * 108,900 5,140
Medtronic, Inc. 173,600 7,987
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Merck & Co., Inc. 493,100 $ 31,514
Pfizer, Inc. 2,726,300 109,188
Pharmacia Corp. 181,700 8,349
Schering-Plough Corp. 570,100 20,661
UnitedHealth Group, Inc. 105,700 6,527
---------------
351,321
---------------
Health Care Services (0.72%)
Lincare Holdings, Inc. 137,400 4,123 5,400 $ 162
Tenet Healthcare Corp. 130,000 6,707
Trigon Healthcare, Inc. 144,700 9,384 2,700 175
--------------- ---------------
20,214 337
--------------- ---------------
Insurance (4.09%)
American International Group, Inc. 407,500 35,045 5,600 482
Hartford Financial Services Group, Inc. 349,600 23,913 4,900 335
Lincoln National Corp. 412,200 21,331 5,600 290
St. Paul Cos., Inc. 381,100 19,318 6,500 329
Torchmark, Inc. 210,100 8,448 4,300 173
XL Capital, Ltd. - Cl. A 78,900 6,478 2,200 181
--------------- ---------------
114,533 1,790
--------------- ---------------
Leisure & Recreation (0.18%)
Sabre Group Holdings, Inc. 100,000 5,000 3,800 190
--------------- ---------------
Manufacturing (0.00%)
Danaher Corp. 2,300 129
---------------
Media - TV / Radio (5.16%)
AOL Time Warner, Inc. * 1,636,250 86,722 20,600 1,092
BEA Systems, Inc. 148,100 4,548
Clear Channel Communications, Inc. * 229,700 14,402
The Walt Disney Co. 487,300 14,078 7,500 217
Viacom, Inc. - Cl. B* 489,299 25,321 7,200 372
--------------- ---------------
145,071 1,681
--------------- ---------------
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Merck & Co., Inc. 493,100 $ 31,514
Pfizer, Inc. 2,726,300 109,188
Pharmacia Corp. 181,700 8,349
Schering-Plough Corp. 570,100 20,661
UnitedHealth Group, Inc. 105,700 6,527
--------------
351,321
--------------
Health Care Services (0.72%)
Lincare Holdings, Inc. 142,800 4,285
Tenet Healthcare Corp. 130,000 6,707
Trigon Healthcare, Inc. 147,400 9,559
--------------
20,551
--------------
Insurance (4.09%)
American International Group, Inc. 413,100 35,527
Hartford Financial Services Group, Inc. 354,500 24,248
Lincoln National Corp. 417,800 21,621
St. Paul Cos., Inc. 387,600 19,647
Torchmark, Inc. 214,400 8,621
XL Capital, Ltd. - Cl. A 81,100 6,659
--------------
116,323
--------------
Leisure & Recreation (0.18%)
Sabre Group Holdings, Inc. 103,800 5,190
--------------
Manufacturing (0.00%)
Danaher Corp. 2,300 129
--------------
Media - TV / Radio (5.16%)
AOL Time Warner, Inc. * 1,656,850 87,814
BEA Systems, Inc. 148,100 4,548
Clear Channel Communications, Inc. * 229,700 14,402
The Walt Disney Co. 494,800 14,295
Viacom, Inc. - Cl. B* 496,499 25,693
--------------
146,752
--------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Medical (0.16%)
Abbott Laboratories 5,400 $ 259
Allergan, Inc. * 2,000 171
American Home Products Corp. 7,400 432
Bristol-Myers Squibb Co. 7,800 408
Invitrogen Corp.* 2,000 111
Johnson & Johnson 14,618 731
Laboratory Corp. of America Holdings* 2,200 169
Merck & Co., Inc. 9,400 601
Pfizer, Inc. 34,000 1,362
Pharmacia Corp. 3,600 165
Schering-Plough Corp. 4,100 149
---------------
4,558
---------------
Metals & Mining (0.80%)
Minnesota Mining & Manufacturing Co. 197,100 $ 22,489 3,300 377
--------------- ---------------
Mortgage Banking (0.03%)
Fannie Mae 9,100 775
---------------
Natural Gas Distribution (0.88%)
Enron Corp. 509,900 24,985
---------------
Office (0.01%)
Avery Dennison Corp. 3,600 184
---------------
Oil (1.46%)
Baker Hughes, Inc. 300,000 10,050
Royal Dutch Petroleum Co. - NY Shares 540,100 31,472
---------------
41,522
---------------
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Medical (0.16%)
Abbott Laboratories 5,400 $ 259
Allergan, Inc. * 2,000 171
American Home Products Corp. 7,400 432
Bristol-Myers Squibb Co. 7,800 408
Invitrogen Corp.* 2,000 111
Johnson & Johnson 14,618 731
Laboratory Corp. of America Holdings* 2,200 169
Merck & Co., Inc. 9,400 601
Pfizer, Inc. 34,000 1,362
Pharmacia Corp. 3,600 165
Schering-Plough Corp. 4,100 149
--------------
4,558
--------------
Metals & Mining (0.80%)
Minnesota Mining & Manufacturing Co. 200,400 22,866
--------------
Mortgage Banking (0.03%)
Fannie Mae 9,100 775
--------------
Natural Gas Distribution (0.88%)
Enron Corp. 509,900 24,985
--------------
Office (0.01%)
Avery Dennison Corp. 3,600 184
--------------
Oil (1.46%)
Baker Hughes, Inc. 300,000 10,050
Royal Dutch Petroleum Co. - NY Shares 540,100 31,472
--------------
41,522
--------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Oil & Natural Gas Exploration & Production (4.31%)
Apache Corp. 2,500 $ 127
Chevron Corp. 174,000 $ 15,747 3,000 271
El Paso Corp. 2,300 121
Enron Corp. 7,000 343
Exxon Mobil Corp. 842,870 73,625 14,112 1,233
Kerr-McGee Corp. 168,200 11,147 2,400 159
Royal Dutch Petroleum Co. (ADR) (Netherlands) 9,600 559
Transocean Sedco Forex, Inc. 50,450 2,081
USX-Marathon Group 572,500 16,894 5,800 171
--------------- ---------------
119,494 2,984
--------------- ---------------
Paper & Forest Products (0.41%)
Kimberly-Clark Corp. 203,000 11,348 4,100 229
--------------- ---------------
Personal & Commercial Lending (2.88%)
Citigroup, Inc. 1,549,000 81,849
---------------
Real Estate Operations (0.05%)
HomeStore.com, Inc. 39,800 1,391
---------------
Retail - Department Stores (7.75%)
Abercrombie & Fitch Co. (Class A) * 197,700 8,798 4,100 183
Bed Bath & Beyond, Inc. * 300,500 9,376 5,600 168
CVS Corp. 263,900 10,187 4,600 177
Home Depot, Inc. 559,600 26,049 6,600 307
Kohl's Corp. * 393,500 24,684 7,900 496
Lowe's Cos., Inc. 402,766 29,221 9,200 667
May Department Stores Co. 271,100 9,288 7,400 254
Talbots, Inc. 128,000 5,600
Target Corp. 338,300 11,705 5,600 194
TJX Cos., Inc. 499,100 15,906 9,700 309
Wal-Mart Stores, Inc. 1,348,900 65,826 14,800 722
--------------- ---------------
216,640 3,477
--------------- ---------------
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Oil & Natural Gas Exploration & Production (4.31%)
Apache Corp. 2,500 $ 127
Chevron Corp. 177,000 16,018
El Paso Corp. 2,300 121
Enron Corp. 7,000 343
Exxon Mobil Corp. 856,982 74,858
Kerr-McGee Corp. 170,600 11,306
Royal Dutch Petroleum Co. (ADR) (Netherlands) 9,600 559
Transocean Sedco Forex, Inc. 50,450 2,081
USX-Marathon Group 578,300 17,065
--------------
122,478
--------------
Paper & Forest Products (0.41%)
Kimberly-Clark Corp. 207,100 11,577
--------------
Personal & Commercial Lending (2.88%)
Citigroup, Inc. 1,549,000 81,849
--------------
Real Estate Operations (0.05%)
HomeStore.com, Inc. 39,800 1,391
--------------
Retail - Department Stores (7.75%)
Abercrombie & Fitch Co. (Class A) * 201,800 8,981
Bed Bath & Beyond, Inc. * 306,100 9,544
CVS Corp. 268,500 10,364
Home Depot, Inc. 566,200 26,356
Kohl's Corp. * 401,400 25,180
Lowe's Cos., Inc. 411,966 29,888
May Department Stores Co. 278,500 9,542
Talbots, Inc. 128,000 5,600
Target Corp. 343,900 11,899
TJX Cos., Inc. 508,800 16,215
Wal-Mart Stores, Inc. 1,363,700 66,548
--------------
220,117
--------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Retail - Drug Stores (0.26%)
Rite Aid Corp. 15,000 $ 135
Walgreen Co. 210,300 7,182 3,900 $ 133
--------------- ---------------
7,317 133
--------------- ---------------
Retail - Food (0.17%)
Starbucks Corp. * 210,700 4,846
---------------
Soap & Cleaning Preparations (0.01%)
Colgate-Palmolive Co. 4,100 242
Procter & Gamble Co. (The) 3,100 198
---------------
440
---------------
Telecommunication Equipment (2.61%)
Ciena Corp. * 96,900 3,682
Comverse Technology, Inc. 219,400 12,528 1,800 103
Linear Technology Corp. 339,700 15,022 4,900 217
Micron Technology, Inc. 181,100 7,443
Nokia Oyj - ADR 200,000 4,408
Qualcomm, Inc. * 382,000 22,339 4,500 263
RF Micro Devices, Inc. 105,000 2,832
Scientific-Atlanta, Inc. * 76,200 3,094
Sonus Networks, Inc. * 99,200 2,317
--------------- ---------------
73,665 583
--------------- ---------------
Telecommunication Services (3.18%)
Broadwing, Inc. 452,100 11,054 6,700 164
EchoStar Communications Corp. - Cl. A* 195,400 6,335
Sprint PCS (PCS Group) * 809,500 19,549 11,700 282
Verizon Communications 971,600 51,981 18,300 979
--------------- ---------------
88,919 1,425
--------------- ---------------
Telephone (2.33%)
AT&T Corp. - Liberty Media Group - Cl. A 704,262 12,318 16,400 287
Qwest Communications International, Inc. 1,080,300 34,429 17,000 542
SBC Communications, Inc. 196,800 7,884
Telephone and Data Systems, Inc. 96,500 10,494 1,800 195
--------------- ---------------
65,125 1,024
--------------- ---------------
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Retail - Drug Stores (0.26%)
Rite Aid Corp. 15,000 $ 135
Walgreen Co. 214,200 7,315
--------------
7,450
--------------
Retail - Food (0.17%)
Starbucks Corp. * 210,700 4,846
--------------
Soap & Cleaning Preparations (0.01%)
Colgate-Palmolive Co. 4,100 242
Procter & Gamble Co. (The) 3,100 198
--------------
440
--------------
Telecommunication Equipment (2.61%)
Ciena Corp. * 96,900 3,682
Comverse Technology, Inc. 221,200 12,631
Linear Technology Corp. 344,600 15,239
Micron Technology, Inc. 181,100 7,443
Nokia Oyj - ADR 200,000 4,408
Qualcomm, Inc. * 386,500 22,602
RF Micro Devices, Inc. 105,000 2,832
Scientific-Atlanta, Inc. * 76,200 3,094
Sonus Networks, Inc. * 99,200 2,317
--------------
74,248
--------------
Telecommunication Services (3.18%)
Broadwing, Inc. 458,800 11,218
EchoStar Communications Corp. - Cl. A* 195,400 6,335
Sprint PCS (PCS Group) * 821,200 19,831
Verizon Communications 989,900 52,960
--------------
90,344
--------------
Telephone (2.33%)
AT&T Corp. - Liberty Media Group - Cl. A 720,662 12,605
Qwest Communications International, Inc. 1,097,300 34,971
SBC Communications, Inc. 196,800 7,884
Telephone and Data Systems, Inc. 98,300 10,689
--------------
66,149
--------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Core Equity Fund, combined on June
30, 2001.
----------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
----------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------------
ISSUER DESCRIPTION
Utilities (0.06%)
Allegheny Energy, Inc. 4,400 $ 212
Duke Energy Corp. 16,500 644
Exelon Corp. 8,100 519
SBC Communications, Inc. 6,900 277
---------------
1,652
---------------
U.S. Government Agencies (1.41%)
Federal National Mortgage Assoc. 471,900 $ 40,182
---------------
--------------- ---------------
TOTAL COMMON STOCK (98.62%) 2,760,919 40,984
--------------- ---------------
PAR VALUE PAR VALUE
(000's (000's
OMITTED) OMITTED)
------------ ------------
SHORT-TERM INVESTMENTS (1.59%)
Investments in joint trading account
3.97% due 07/02/01 3.970% $ 45,184 45,184
Joint Repurchase Agreement (0.02%)
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. - Dated 06-29-01,
due 07-02-01 (Secured by U.S. Treasury Bonds,
10.625% due 08-15-15 and 6.250% due 08-15-23,
U.S. Treasury Note 5.625% due 11-30-02) - Note B 3.97% $ 558 558
CASH EQUIVALENTS (0.35%)
Navigator Securities Lending Prime Portfolio** 9,944,668 9,945
--------------- ---------------
TOTAL SHORT TERM INVESTMENTS (1.96%) 55,129 558
--------------- ---------------
TOTAL INVESTMENTS (100.58%) 2,816,048 41,542
--------------- ---------------
OTHER ASSETS AND LIABILITIES, NET (0.58%) (16,058) (406)
--------------- ---------------
NET ASSETS (100.00%) $ 2,799,990 $ 41,136
=============== ===============
-----------------------------
Combined
-----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
-----------------------------
ISSUER DESCRIPTION
Utilities (0.06%)
Allegheny Energy, Inc. 4,400 $ 212
Duke Energy Corp. 16,500 644
Exelon Corp. 8,100 519
SBC Communications, Inc. 6,900 277
--------------
1,652
--------------
U.S. Government Agencies (1.41%)
Federal National Mortgage Assoc. 471,900 40,182
--------------
--------------
TOTAL COMMON STOCK (98.62%) 2,801,903
--------------
PAR VALUE
(000's
OMITTED)
------------
SHORT-TERM INVESTMENTS (1.59%)
Investments in joint trading account
3.97% due 07/02/01 $ 45,184 45,184
Joint Repurchase Agreement (0.02%)
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. - Dated 06-29-01,
due 07-02-01 (Secured by U.S. Treasury Bonds,
10.625% due 08-15-15 and 6.250% due 08-15-23,
U.S. Treasury Note 5.625% due 11-30-02) - Note B 558 558
CASH EQUIVALENTS (0.35%)
Navigator Securities Lending Prime Portfolio** 9,944,668 9,945
--------------
TOTAL SHORT TERM INVESTMENTS (1.96%) 55,687
--------------
TOTAL INVESTMENTS (100.58%) 2,857,590
--------------
OTHER ASSETS AND LIABILITIES, NET (0.58%) (16,464)
--------------
NET ASSETS (100.00%) $ 2,841,126
==============
Notes to the Schedule of Investments
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage show for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
Exhibit C
JOHN HANCOCK V.S.T. GROWTH & INCOME FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. Growth & Income Fund and the John Hancock V.A. Large Cap Growth
Fund with information about the impact of the proposed merger by indicating how
the merger might have affected information had the merger been consummated as of
June 30, 2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. Growth & Income Fund and John Hancock V.A. Large Cap Growth Fund
after giving effect to pro forma adjustments described in the notes below.
(a) Acquisition by John Hancock V.S.T. Growth & Income Fund of all assets of
John Hancock V.A. Large Cap Growth Fund and issuance of John Hancock
V.S.T. Growth & Income Fund shares in exchange for all of the outstanding
shares of John Hancock V.A. Large Cap Growth Fund.
(b) The deferred organization expense of John Hancock V.A. Large Cap Growth
Fund was written off as the Fund would no longer be in existence.
(c) The investment advisory fee was adjusted to reflect the application of the
fee structure which will be in effect for John Hancock V.S.T. Growth &
Income Fund:
0.71% for the first $150,000,000 of the Fund's net assets;
0.69% for the net assets between $150,000,000 and $300,000,000;
0.67% for the net assets in excess of $300,000,000.
(d) The actual expenses incurred by the John Hancock V.S.T. Growth & Income
Fund and the John Hancock V.A. Large Cap Growth Fund for various expenses
included on a pro forma basis were reduced to reflect the estimated
savings arising from the merger.
(e) Represents the Adviser's voluntary agreement to limit the funds' other
expenses to an annual rate of 0.10% of the funds' average daily net
assets.
John Hancock V.S.T. Growth & Income Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000 omitted)
John Hancock John Hancock
V.S.T. Growth & V.A. Large Cap Pro-Forma
Income Fund Growth Fund Adjustments Combined
--------------- -------------- ----------- ----------
Assets
Long term investments at cost $2,539,202 $ 6,082 $ -- $2,545,284
Net unrealized appreciation (depreciation) of investments 221,717 246 -- 221,963
Short-term investments at value 55,129 -- -- 55,129
---------- ---------- ---------- ----------
Total investments 2,816,048 6,328 -- 2,822,376
Receivable for:
Investments sold 13,303 29 -- 13,332
Interest and dividends 2,031 2 -- 2,033
Other assets -- 1 -- 1
---------- ---------- ---------- ----------
Total Assets
2,831,382 6,360 -- 2,837,742
---------- ---------- ---------- ----------
Liabilities
Payables for:
Due to custodian -- 68 -- 68
Investments purchased 19,727 -- -- 19,727
Securities on loan 9,945 -- -- 9,945
Payable to affiliates -- 1 -- 1
Other liabilities 1,720 11 -- 1,731
---------- ---------- ---------- ----------
Total Liabilities 31,392 80 -- 31,472
---------- ---------- ---------- ----------
Net assets:
Capital paid-in 2,963,174 11,192 -- 2,974,366
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions (385,265) (5,136) -- (390,401)
Undistributed (distribution in excess of)
net investment income (loss) 364 (22) -- 342
Net unrealized appreciation (depreciation) of investments,
futures and foreign currencies translations 221,717 246 -- 221,963
---------- ---------- ---------- ----------
Net assets 2,799,990 6,280 -- 2,806,270
========== ========== ========== ==========
NET ASSETS
V.S.T. Growth & Income Fund 2,799,990 -- 6,280(a) 2,806,270
V.A. Large Cap Growth Fund -- 6,280 (6,280)(a) --
---------- ---------- ---------- ----------
2,799,990 6,280 -- 2,806,270
========== ========== ========== ==========
Shares outstanding:
V.S.T. Growth & Income Fund 217,626 -- 500(a) 218,126
V.A. Large Cap Growth Fund -- 816 (816)(a) --
---------- ---------- ---------- ----------
217,626 816 (316) 218,126
========== ========== ========== ==========
Net asset value per share:
V.S.T. Growth & Income Fund $ 12.87 -- -- $ 12.87
V.A. Large Cap Growth Fund -- $ 7.69 $ (7.69)(a) --
========== ========== ========== ==========
John Hancock V.S.T. Growth & Income Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000 omitted)
John Hancock John Hancock
V.S.T. Growth & V.A. Large Cap Pro-Forma
Income Fund Growth Fund Adjustments Combined
--------------- -------------- ----------- ----------
Investement Income
Interest and dividends $ 38,881 $ 50 $ -- $ 38,931
Securities Lending 172 -- -- 172
--------- ---------
--------- --------- --------- ---------
Total Investment Income 39,053 50 -- 39,103
--------- --------- --------- ---------
Expenses
Investment management fee 22,818 99 (11)(c) 22,906
Auditing fees 367 12 (12)(d) 367
Custodian fees 1,146 17 (10)(d) 1,153
Fidelity Bond fees 4 -- -- 4
Accounting and legal services fee -- 3 -- 3
Legal fees 230 -- -- (d) 230
Printing & mailing fees 1,991 2 (2)(d) 1,991
Organization expense -- 2 (2)(b) --
Trustees' fee 140 1 -- 141
Miscellaneous -- 1 -- 1
Other fees 87 -- -- 87
Interest expense -- 3 -- 3
--------- --------- --------- ---------
Total Expenses 26,783 140 (37) 26,886
Less Expense Reductions (149) (11) (521)(e) (681)
--------- --------- --------- ---------
Net Expenses 26,634 129 (558) 26,205
--------- --------- --------- ---------
Net Investment Income (loss) 12,419 (79) 558 12,898
--------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investments (273,187) (4,168) -- (277,355)
Change in net unrealized appreciation
(depreciation) of:
Investments (531,648) (3,797) -- (535,445)
--------- --------- --------- ---------
Net realized and unrealized gain (loss) (804,835) (7,965) -- (812,800)
--------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations $(792,416) $ (8,044) $ 558 $(799,902)
========= ========= ========= =========
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Common Stock
Aerospace & Defense (1.75%)
Boeing Co. 146,300 $ 8,134
General Dynamics Corp. 266,000 20,697
United Technologies Corp. 277,800 20,352
----------
49,183
----------
Auto & Truck Parts (0.30%)
Lear Corp. * 244,000 8,516
----------
Automobile (0.89%)
Ford Motor Co. 600,000 14,730
General Motors Corp. - Cl. H 506,658 10,260
----------
24,990
----------
Bank (5.01%)
Bank of America Corp. 340,000 20,410
Bank of New York Co., Inc. 121,100 5,813
Comerica, Inc. 232,800 13,409
Fifth Third Bancorp 107,900 6,479
FleetBoston Financial Corp. 226,600 8,939
JP Morgan Chase & Co. 400,000 17,840
Mellon Financial Corp. 341,400 15,705
State Street Corp. 53,600 2,653 1,464 $ 72
US Bancorp 1,236,000 28,169
Washington Mutual, Inc. 565,200 21,223
---------- ----------
140,640 72
---------- ----------
Brokerage & Investment Management (0.44%)
Charles Schwab Corp. 3,900 60
Goldman Sachs Group, Inc. 45,900 3,938 750 64
Morgan Stanley, Dean Witter, Discover & Co. 128,300 8,241 1,300 84
---------- ----------
12,239 148
---------- ----------
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Common Stock
Aerospace & Defense (1.75%)
Boeing Co. 146,300 $ 8,134
General Dynamics Corp. 266,000 20,697
United Technologies Corp. 277,800 20,352
----------
49,183
----------
Auto & Truck Parts (0.30%)
Lear Corp. * 244,000 8,516
----------
Automobile (0.89%)
Ford Motor Co. 600,000 14,730
General Motors Corp. - Cl. H 506,658 10,260
----------
24,990
----------
Bank (5.01%)
Bank of America Corp. 340,000 20,410
Bank of New York Co., Inc. 121,100 5,813
Comerica, Inc. 232,800 13,409
Fifth Third Bancorp 107,900 6,479
FleetBoston Financial Corp. 226,600 8,939
JP Morgan Chase & Co. 400,000 17,840
Mellon Financial Corp. 341,400 15,705
State Street Corp. 55,064 2,725
US Bancorp 1,236,000 28,169
Washington Mutual, Inc. 565,200 21,223
----------
140,712
----------
Brokerage & Investment Management (0.44%)
Charles Schwab Corp. 3,900 60
Goldman Sachs Group, Inc. 46,650 4,002
Morgan Stanley, Dean Witter, Discover & Co. 129,600 8,325
----------
12,387
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Chemical (1.79%)
Air Products & Chemicals, Inc. 298,700 $ 13,666
Dow Chemical Co. 428,500 14,248
E.I. du Pont de Nemours & Co. 125,230 6,041
Praxair, Inc. 346,200 16,271
----------
50,226
----------
Commercial Sevices (0.88%)
Avery Dennison Corp. 219,400 11,200
Concord EFS, Inc. 150,600 7,833
Omnicom Group, Inc. 22,400 1,926
TMP Worldwide, Inc. 60,800 3,648
----------
24,607
----------
Computer Equipment (6.00%)
BEA Systems, Inc.* 1,000 $ 31
Brocade Communications Systems, Inc. 55,800 2,455
Cisco Systems, Inc.* 15,650 285
Dell Computer Corp. * 921,600 24,100
EMC Corp. 115,100 3,344
Gateway, Inc. 144,100 2,370
Intel Corp. 2,077,100 60,755 5,000 146
International Business Machines Corp. 418,600 47,302
Lexmark International Group, Inc. - Cl. A 265,400 17,848
McData Corp. 154,100 2,704
Veritas Software Corp. * 105,500 7,019 2,050 136
---------- ----------
167,897 598
---------- ----------
Computer Software & Services (8.23%)
Adobe Systems, Inc. * 183,100 8,606
Cadence Design Systems, Inc. * 386,200 7,195
Check Point Software Technologies, Ltd. * 105,200 5,320
Electronic Data Systems Corp. 283,400 17,712 2,000 125
EMC Corp.* 4,707 137
First Data Corp. 192,900 12,394
Fiserv, Inc. * 156,100 9,987
Micromuse, Inc. * 119,200 3,336
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Chemical (1.79%)
Air Products & Chemicals, Inc. 298,700 $ 13,666
Dow Chemical Co. 428,500 14,248
E.I. du Pont de Nemours & Co. 125,230 6,041
Praxair, Inc. 346,200 16,271
----------
50,226
----------
Commercial Sevices (0.88%)
Avery Dennison Corp. 219,400 11,200
Concord EFS, Inc. 150,600 7,833
Omnicom Group, Inc. 22,400 1,926
TMP Worldwide, Inc. 60,800 3,648
----------
24,607
----------
Computer Equipment (6.00%)
BEA Systems, Inc.* 1,000 31
Brocade Communications Systems, Inc. 55,800 2,455
Cisco Systems, Inc.* 15,650 285
Dell Computer Corp. * 921,600 24,100
EMC Corp. 115,100 3,344
Gateway, Inc. 144,100 2,370
Intel Corp. 2,082,100 60,901
International Business Machines Corp. 418,600 47,302
Lexmark International Group, Inc. - Cl. A 265,400 17,848
McData Corp. 154,100 2,704
Veritas Software Corp. * 107,550 7,155
----------
168,495
----------
Computer Software & Services (8.23%)
Adobe Systems, Inc. * 183,100 8,606
Cadence Design Systems, Inc. * 386,200 7,195
Check Point Software Technologies, Ltd. * 105,200 5,320
Electronic Data Systems Corp. 285,400 17,837
EMC Corp.* 4,707 137
First Data Corp. 192,900 12,394
Fiserv, Inc. * 156,100 9,987
Micromuse, Inc. * 119,200 3,336
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Microsoft Corp. 1,808,900 $ 132,050 3,450 $ 252
Oracle Corp. * 886,000 16,834
Parametric Technology Corp. 42,400 593
Peoplesoft, Inc. 109,900 5,410
Siebel Systems, Inc. * 112,000 5,253
SunGard Data Systems, Inc. 181,700 5,453
Sun Microsystems, Inc.* 6,750 106
VeriSign, Inc.* 950 57
---------- ----------
230,143 677
---------- ----------
Consumer Miscellaneous (0.68%)
Black & Decker Corp. 305,700 12,063
Harley-Davidson, Inc. 147,100 6,925
----------
18,988
----------
Cosmetic & Personal Care (1.61%)
Avon Products, Inc. 244,100 11,297
Colgate-Palmolive Co. 164,900 9,727
Procter & Gamble Co. 176,000 11,229
Unilever NV - NY Shares 217,700 12,968
----------
45,221
----------
Diversified Operations (8.15%)
Amgen, Inc. 150,700 9,144
Danaher Corp. 193,500 10,836
General Electric Co. 3,401,330 165,815 7,627 372
Tyco International, Ltd. 774,800 42,227 6,550 357
---------- ----------
228,022 729
---------- ----------
Electric Power (1.98%)
Allegheny Energy, Inc. 241,800 11,667
Duke Energy Co. 400,000 15,604
Exelon Corp. 335,500 21,512
Mirant Corp. 194,400 6,687
----------
55,470
----------
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Microsoft Corp. 1,812,350 $ 132,302
Oracle Corp. * 886,000 16,834
Parametric Technology Corp. 42,400 593
Peoplesoft, Inc. 109,900 5,410
Siebel Systems, Inc. * 112,000 5,253
SunGard Data Systems, Inc. 181,700 5,453
Sun Microsystems, Inc.* 6,750 106
VeriSign, Inc.* 950 57
----------
230,820
----------
Consumer Miscellaneous (0.68%)
Black & Decker Corp. 305,700 12,063
Harley-Davidson, Inc. 147,100 6,925
----------
18,988
----------
Cosmetic & Personal Care (1.61%)
Avon Products, Inc. 244,100 11,297
Colgate-Palmolive Co. 164,900 9,727
Procter & Gamble Co. 176,000 11,229
Unilever NV - NY Shares 217,700 12,968
----------
45,221
----------
Diversified Operations (8.15%)
Amgen, Inc. 150,700 9,144
Danaher Corp. 193,500 10,836
General Electric Co. 3,408,957 166,187
Tyco International, Ltd. 781,350 42,584
----------
228,751
----------
Electric Power (1.98%)
Allegheny Energy, Inc. 241,800 11,667
Duke Energy Co. 400,000 15,604
Exelon Corp. 335,500 21,512
Mirant Corp. 194,400 6,687
----------
55,470
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Electrical Equipment (0.24%)
Best Buy Co., Inc. 106,800 $ 6,784
----------
Electronic Components (0.06%)
Electronic Arts, Inc. 28,400 1,644
----------
Electronic Products & Services (4.89%)
Analog Devices, Inc. 232,400 10,051 1,315 $ 57
Applera Corporation - Applied Biosystems Group 86,700 2,319
Applied Materials, Inc. * 357,300 17,544 1,500 73
Applied Micro Circuits Corp. * 133,900 2,303
Celestica, Inc. 49,300 2,539 600 31
Cisco Systems, Inc. 1,483,100 26,992
Emulex Corp. 78,800 3,184
Integrated Device Technology, Inc. 55,800 1,768
KLA-Tencor Corp. * 237,363 13,879
LSI Logic Corp. 350,000 6,580
Marvell Technology Group, Ltd. * 140,600 3,782
Maxim Integrated Products, Inc. * 262,432 11,602
Novellus Systems, Inc.* 700 40
Sanmina Corp. * 114,200 2,673
Tektronix, Inc. 288,900 7,844
Texas Instruments, Inc. 476,500 15,010
Xilinx, Inc. * 219,300 9,044 750 31
---------- ----------
137,114 232
---------- ----------
Energy - Alternative Source (0.29%)
El Paso Corp. 155,900 8,191
----------
Fiber Optics (0.00%)
CIENA Corp.* 1,600 61
----------
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Electrical Equipment (0.24%)
Best Buy Co., Inc. 106,800 $ 6,784
----------
Electronic Components (0.06%)
Electronic Arts, Inc. 28,400 1,644
----------
Electronic Products & Services (4.89%)
Analog Devices, Inc. 233,715 10,108
Applera Corporation - Applied Biosystems Gro 86,700 2,319
Applied Materials, Inc. * 358,800 17,617
Applied Micro Circuits Corp. * 133,900 2,303
Celestica, Inc. 49,900 2,570
Cisco Systems, Inc. 1,483,100 26,992
Emulex Corp. 78,800 3,184
Integrated Device Technology, Inc. 55,800 1,768
KLA-Tencor Corp. * 237,363 13,879
LSI Logic Corp. 350,000 6,580
Marvell Technology Group, Ltd. * 140,600 3,782
Maxim Integrated Products, Inc. * 262,432 11,602
Novellus Systems, Inc.* 700 40
Sanmina Corp. * 114,200 2,673
Tektronix, Inc. 288,900 7,844
Texas Instruments, Inc. 476,500 15,010
Xilinx, Inc. * 220,050 9,075
----------
137,346
----------
Energy - Alternative Source (0.29%)
El Paso Corp. 155,900 8,191
----------
Fiber Optics (0.00%)
CIENA Corp.* 1,600 61
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Financial Services (0.70%)
Citigroup, Inc. 4,378 $ 231
MBNA Corp. 3,780 125
Providian Financial Corp. * 120,000 $ 7,104
Stillwell Financial, Inc. 362,500 12,165
---------- ----------
19,269 356
---------- ----------
Food, Beverage & Tobacco (3.42%)
Anheuser-Busch Cos., Inc. 247,200 10,185 1,700 70
Coca-Cola Co. 300,000 13,500
Kraft Foods, Inc. CL A* 163,800 5,078
Pepsi Bottling Group, Inc. 6,900 277
PepsiCo, Inc. 549,800 24,301
Philip Morris Cos., Inc. 837,900 42,523 1,800 91
---------- ----------
95,864 161
---------- ----------
Health Care Products (12.52%)
Abbott Laboratories 308,000 14,787
Allergan, Inc. 132,500 11,329
American Home Products Corp. 608,200 35,543
Andrx Corp. * 32,300 2,487
Bristol-Myers Squibb Co. 436,000 22,803
Eli Lilly & Co. 112,400 8,318
Forest Laboratories, Inc. * 31,000 2,201
Genetech, Inc. * 104,000 5,731
Ivax Corp. 61,650 2,404
Johnson & Johnson 1,057,704 52,885
King Pharmaceuticals, Inc. * 64,500 3,467
MedImmune, Inc. * 108,900 5,140
Medtronic, Inc. 173,600 7,987
Merck & Co., Inc. 493,100 31,514
Pfizer, Inc. 2,726,300 109,188
Pharmacia Corp. 181,700 8,349
Schering-Plough Corp. 570,100 20,661
UnitedHealth Group, Inc. 105,700 6,527
----------
351,321
----------
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Financial Services (0.70%)
Citigroup, Inc. 4,378 $ 231
MBNA Corp. 3,780 125
Providian Financial Corp. * 120,000 7,104
Stillwell Financial, Inc. 362,500 12,165
----------
19,625
----------
Food, Beverage & Tobacco (3.42%)
Anheuser-Busch Cos., Inc. 248,900 10,255
Coca-Cola Co. 300,000 13,500
Kraft Foods, Inc. CL A* 163,800 5,078
Pepsi Bottling Group, Inc. 6,900 277
PepsiCo, Inc. 549,800 24,301
Philip Morris Cos., Inc. 839,700 42,614
----------
96,025
----------
Health Care Products (12.52%)
Abbott Laboratories 308,000 14,787
Allergan, Inc. 132,500 11,329
American Home Products Corp. 608,200 35,543
Andrx Corp. * 32,300 2,487
Bristol-Myers Squibb Co. 436,000 22,803
Eli Lilly & Co. 112,400 8,318
Forest Laboratories, Inc. * 31,000 2,201
Genetech, Inc. * 104,000 5,731
Ivax Corp. 61,650 2,404
Johnson & Johnson 1,057,704 52,885
King Pharmaceuticals, Inc. * 64,500 3,467
MedImmune, Inc. * 108,900 5,140
Medtronic, Inc. 173,600 7,987
Merck & Co., Inc. 493,100 31,514
Pfizer, Inc. 2,726,300 109,188
Pharmacia Corp. 181,700 8,349
Schering-Plough Corp. 570,100 20,661
UnitedHealth Group, Inc. 105,700 6,527
----------
351,321
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Health Care Services (0.72%)
Lincare Holdings, Inc. * 137,400 $ 4,123
Tenet Healthcare Corp. 130,000 6,707
Trigon Healthcare, Inc. 144,700 9,384
----------
20,214
----------
Insurance (4.09%)
American International Group, Inc. 407,500 35,045 2,182 $ 188
Hartford Financial Services Group, Inc. 349,600 23,913
Lincoln National Corp. 412,200 21,331
St. Paul Cos., Inc. 381,100 19,318
Torchmark, Inc. 210,100 8,448
XL Capital, Ltd. - Cl. A 78,900 6,478
---------- ----------
114,533 188
---------- ----------
Leisure & Recreation (0.18%)
Sabre Group Holdings, Inc. 100,000 5,000
----------
Media - TV / Radio (5.19%)
AOL Time Warner, Inc. * 1,636,250 86,722 5,110 271
BEA Systems, Inc. 148,100 4,548
Charter Communications, Inc. (Class A)* 3,050 71
Clear Channel Communications, Inc. 229,700 14,402 2,052 129
The Walt Disney Co. 487,300 14,078
Viacom, Inc. - Cl. B* 489,299 25,321 1,400 72
---------- ----------
145,071 543
---------- ----------
Medical (0.05%)
Abbott Laboratories 973 83
Amgen, Inc.* 2,350 143
Cardinal Health, Inc. 3,513 242
Express Scripts, Inc.* 800 44
Genentech, Inc.* 1,056 58
Johnson & Johnson 2,100 105
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Health Care Services (0.72%)
Lincare Holdings, Inc. * 137,400 $ 4,123
Tenet Healthcare Corp. 130,000 6,707
Trigon Healthcare, Inc. 144,700 9,384
----------
20,214
----------
Insurance (4.09%)
American International Group, Inc. 409,682 35,233
Hartford Financial Services Group, Inc. 349,600 23,913
Lincoln National Corp. 412,200 21,331
St. Paul Cos., Inc. 381,100 19,318
Torchmark, Inc. 210,100 8,448
XL Capital, Ltd. - Cl. A 78,900 6,478
----------
114,721
----------
Leisure & Recreation (0.18%)
Sabre Group Holdings, Inc. 100,000 5,000
----------
Media - TV / Radio (5.19%)
AOL Time Warner, Inc. * 1,641,360 86,993
BEA Systems, Inc. 148,100 4,548
Charter Communications, Inc. (Class A)* 3,050 71
Clear Channel Communications, Inc. 231,752 14,531
The Walt Disney Co. 487,300 14,078
Viacom, Inc. - Cl. B* 490,699 25,393
----------
145,614
----------
Medical (0.05%)
Abbott Laboratories 973 83
Amgen, Inc.* 2,350 143
Cardinal Health, Inc. 3,513 242
Express Scripts, Inc.* 800 44
Genentech, Inc.* 1,056 58
Johnson & Johnson 2,100 105
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Medtronic, Inc. 2,281 $ 105
Pfizer, Inc. 5,928 237
Pharmacia Corp. 2,346 108
Stryker Corp. 1,400 77
UnitedHealth Group, Inc. 550 34
Wellpoint Health Networks, Inc.* 700 66
----------
1,302
----------
Metals & Mining (0.80%)
Minnesota Mining & Manufacturing Co. 197,100 $ 22,489
----------
Natural Gas Distribution (0.89%)
Enron Corp. 509,900 24,985
----------
Oil (1.48%)
Baker Hughes, Inc. 300,000 10,050
Royal Dutch Petroleum Co. - NY Shares 540,100 31,472
----------
41,522
----------
Oil & Natural Gas Exploration & Production (4.26%)
Chevron Corp. 174,000 15,747
Exxon Mobil Corp. 842,870 73,625
Kerr-McGee Corp. 168,200 11,147
Transocean Sedco Forex, Inc. 50,450 2,081 700 29
USX-Marathon Group 572,500 16,894
---------- ----------
119,494 29
---------- ----------
Paper & Forest Products (0.41%)
Kimberly-Clark Corp. 203,000 11,348
----------
Personal & Commercial Lending (2.92%)
Citigroup, Inc. 1,549,000 81,849
----------
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Medtronic, Inc. 2,281 $ 105
Pfizer, Inc. 5,928 237
Pharmacia Corp. 2,346 108
Stryker Corp. 1,400 77
UnitedHealth Group, Inc. 550 34
Wellpoint Health Networks, Inc.* 700 66
----------
1,302
----------
Metals & Mining (0.80%)
Minnesota Mining & Manufacturing Co. 197,100 22,489
----------
Natural Gas Distribution (0.89%)
Enron Corp. 509,900 24,985
----------
Oil (1.48%)
Baker Hughes, Inc. 300,000 10,050
Royal Dutch Petroleum Co. - NY Shares 540,100 31,472
----------
41,522
----------
Oil & Natural Gas Exploration & Production (
Chevron Corp. 174,000 15,747
Exxon Mobil Corp. 842,870 73,625
Kerr-McGee Corp. 168,200 11,147
Transocean Sedco Forex, Inc. 51,150 2,110
USX-Marathon Group 572,500 16,894
----------
119,523
----------
Paper & Forest Products (0.41%)
Kimberly-Clark Corp. 203,000 11,348
----------
Personal & Commercial Lending (2.92%)
Citigroup, Inc. 1,549,000 81,849
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Real Estate Operations (0.05%)
HomeStore.com, Inc. 39,800 $ 1,391
----------
Retail - Department Stores (7.75%)
Abercrombie & Fitch Co. (Class A) * 197,700 8,798
Bed Bath & Beyond, Inc. * 300,500 9,376 3,350 $ 101
CVS Corp. 263,900 10,187
Gap, Inc. (The) 2,600 75
Home Depot, Inc. 559,600 26,049 5,512 257
Kohl's Corp. * 393,500 24,684
Lowe's Cos., Inc. 402,766 29,221 1,300 94
May Department Stores Co. 271,100 9,288
Talbots, Inc. 128,000 5,600
Target Corp. 338,300 11,705
TJX Cos., Inc. 499,100 15,906
Wal-Mart Stores, Inc. 1,348,900 65,826 5,398 263
---------- ----------
216,640 790
---------- ----------
Retail - Drug Stores (0.26%)
Rite Aid Corp. 15,000 135
Walgreen Co. 210,300 7,182
----------
7,317
----------
Retail - Food (0.17%)
Starbucks Corp. * 210,700 4,846
----------
Telecommunication Equipment (2.64%)
Amdocs Ltd.* 700 38
American Tower Corp. (Class A) 3,159 65
Ciena Corp. * 96,900 3,682
Comverse Technology, Inc. 219,400 12,528 1,200 68
Linear Technology Corp. 339,700 15,022
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Real Estate Operations (0.05%)
HomeStore.com, Inc. 39,800 $ 1,391
----------
Retail - Department Stores (7.75%)
Abercrombie & Fitch Co. (Class A) * 197,700 8,798
Bed Bath & Beyond, Inc. * 303,850 9,477
CVS Corp. 263,900 10,187
Gap, Inc. (The) 2,600 75
Home Depot, Inc. 565,112 26,306
Kohl's Corp. * 393,500 24,684
Lowe's Cos., Inc. 404,066 29,315
May Department Stores Co. 271,100 9,288
Talbots, Inc. 128,000 5,600
Target Corp. 338,300 11,705
TJX Cos., Inc. 499,100 15,906
Wal-Mart Stores, Inc. 1,354,298 66,089
----------
217,430
----------
Retail - Drug Stores (0.26%)
Rite Aid Corp. 15,000 135
Walgreen Co. 210,300 7,182
----------
7,317
----------
Retail - Food (0.17%)
Starbucks Corp. * 210,700 4,846
----------
Telecommunication Equipment (2.64%)
Amdocs Ltd.* 700 38
American Tower Corp. (Class A) 3,159 65
Ciena Corp. * 96,900 3,682
Comverse Technology, Inc. 220,600 12,596
Linear Technology Corp. 339,700 15,022
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
Micron Technology, Inc. 181,100 $ 7,443 1,400 $ 58
Nokia Oyj - ADR 200,000 4,408 3,164 70
Qualcomm, Inc. * 382,000 22,339
RF Micro Devices, Inc. 105,000 2,832
Scientific-Atlanta, Inc. * 76,200 3,094 1,807 73
Sonus Networks, Inc. * 99,200 2,317
---------- ----------
73,665 372
---------- ----------
Telecommunication Services (3.17%)
Broadwing, Inc. 452,100 11,054
EchoStar Communications Corp. - Cl. A* 195,400 6,335
Sprint PCS (PCS Group) * 809,500 19,549
Verizon Communications 971,600 51,981
----------
88,919
----------
Telephone (2.32%)
AT&T Corp. - Liberty Media Group - Cl. A 704,262 12,318
Qwest Communications International, Inc. 1,080,300 34,429
SBC Communications, Inc. 196,800 7,884
Telephone and Data Systems, Inc. 96,500 10,494
----------
65,125
----------
Utilities (0.00%)
AES Corp. (The)* 1,618 70
----------
U.S. Government Agencies (1.43%)
Federal National Mortgage Assoc. 471,900 40,182
----------
---------- ----------
TOTAL COMMON STOCK (98.61%) 2,760,919 6,328
---------- ----------
----------------------------
Combined
----------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
----------------------------
ISSUER DESCRIPTION
Micron Technology, Inc. 182,500 $ 7,501
Nokia Oyj - ADR 203,164 4,478
Qualcomm, Inc. * 382,000 22,339
RF Micro Devices, Inc. 105,000 2,832
Scientific-Atlanta, Inc. * 78,007 3,167
Sonus Networks, Inc. * 99,200 2,317
----------
74,037
----------
Telecommunication Services (3.17%)
Broadwing, Inc. 452,100 11,054
EchoStar Communications Corp. - Cl. A* 195,400 6,335
Sprint PCS (PCS Group) * 809,500 19,549
Verizon Communications 971,600 51,981
----------
88,919
----------
Telephone (2.32%)
AT&T Corp. - Liberty Media Group - Cl. A 704,262 12,318
Qwest Communications International, Inc. 1,080,300 34,429
SBC Communications, Inc. 196,800 7,884
Telephone and Data Systems, Inc. 96,500 10,494
----------
65,125
----------
Utilities (0.00%)
AES Corp. (The)* 1,618 70
----------
U.S. Government Agencies (1.43%)
Federal National Mortgage Assoc. 471,900 40,182
----------
----------
TOTAL COMMON STOCK (98.61%) 2,767,247
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund and the V.A. Large Cap Growth Fund, combined on
June 30, 2001.
----------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Large Cap Growth
----------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
----------------------------------------------------------------------------
ISSUER DESCRIPTION
PAR VALUE PAR VALUE
(000's (000's
OMITTED) OMITTED)
---------- ----------
SHORT-TERM INVESTMENTS (1.60%)
Investments in joint trading account
3.97% due 07/02/01 3.970% $ 45,184 $ 45,184
----------
CASH EQUIVALENTS (0.36%)
Navigator Securities Lending Prime Portfolio** 9,944,668 9,945
---------- ----------
TOTAL SHORT TERM INVESTMENTS (1.96%) 55,129 0
---------- ----------
TOTAL INVESTMENTS (100.57%) 2,816,048 $6,328
---------- ----------
OTHER ASSETS AND LIABILITIES, NET (0.57%) (16,058) (48)
---------- ----------
NET ASSETS (100.00%) $2,799,990 $6,280
========== ==========
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER DESCRIPTION
PAR VALUE
(000's
OMITTED)
-------------
SHORT-TERM INVESTMENTS (1.60%)
Investments in joint trading account
3.97% due 07/02/01 $ 45,184 $ 45,184
----------
CASH EQUIVALENTS (0.36%)
Navigator Securities Lending Prime Portfolio** 9,944,668 9,945
----------
TOTAL SHORT TERM INVESTMENTS (1.96%) 55,129
----------
TOTAL INVESTMENTS (100.57%) 2,822,376
----------
OTHER ASSETS AND LIABILITIES, NET (0.57%) (16,106)
----------
NET ASSETS (100.00%) $2,806,270
==========
Notes to the Schedule of Investments
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage show for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
Exhibit C
JOHN HANCOCK V.S.T. GROWTH & INCOME
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. Growth & Income Fund, the John Hancock V.A. Core Equity Fund, and
the John Hancock V.A. Large Cap Growth Fund with information about the impact of
the proposed merger by indicating how the merger might have affected information
had the merger been consummated as of June 30, 2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. Growth & Income, John Hancock V.A. Core Equity Fund, and John
Hancock V.A. Large Cap Growth Fund after giving effect to pro forma adjustments
described in the notes below.
(a) Acquisition by John Hancock V.S.T. Growth & Income Fund of all assets of
John Hancock V.A. Core Equity Fund and John Hancock V.A. Large Cap Growth
Fund and issuance of John Hancock V.S.T. Growth & Income Fund shares in
exchange for all of the outstanding shares of John Hancock V.A. Core
Equity Fund and John Hancock V.A. Large Cap Growth Fund.
(b) The deferred organization expenses of John Hancock V.A. Core Equity Fund
and John Hancock V.A. Large Cap Growth were written off as the Funds would
no longer be in existence.
(c) The investment advisory fee was adjusted to reflect the application of the
fee structure which will be in effect for John Hancock V.S.T. Growth
&Income Fund:
0.71% for the first $150,000,000 of the Fund's net assets;
0.69% for the net assets between $150,000,000 and $300,000,000;
0.67% for the net assets in excess of $300,000,000.
(d) The actual expenses incurred by the John Hancock V.S.T. Growth & Income
Fund, the John Hancock V.A. Core Equity Fund, and the John Hancock V.A.
Large Cap Growth Fund for various expenses included on a pro forma basis
were reduced to reflect the estimated savings arising from the merger.
(e) Represents the Adviser's voluntary agreement to limit the funds' other
expenses to an annual rate of 0.10% of the funds' average daily net
assets.
John Hancock V.S.T. Growth & Income Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000's omitted)
John Hancock John Hancock John Hancock
V.S.T. Growth & V.A. Core V.A. Large Cap
Income Fund Equity Fund Growth Fund
--------------- ------------ --------------
Assets
Long term investments at cost $2,539,202 $ 36,204 $ 6,082
Net unrealized appreciation (depreciation) of investments 221,717 4,780 246
Short-term investments at value 55,129 558 --
---------- ---------- ----------
Total investments 2,816,048 41,542 6,328
Receivable for:
Investments sold 13,303 22 29
Interest and dividends 2,031 42 2
Other assets -- 1 1
---------- ---------- ----------
Total Assets 2,831,382 41,607 6,360
---------- ---------- ----------
Liabilities
Payables for:
Due to custodian -- -- 68
Investments purchased 19,727 305 --
Fund shares purchased -- 120 --
Securities on loan 9,945 -- --
Payable to affiliates -- 25 1
Other liabilities 1,720 21 11
---------- ---------- ----------
Total Liabilities 31,392 471 80
---------- ---------- ----------
Net assets:
Capital paid-in 2,963,174 40,154 11,192
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions (385,265) (3,801) (5,136)
Undistributed (distribution in excess of)
net investment income (loss) 364 3 (22)
Net unrealized appreciation (depreciation) of
investments, futures and foreign currencies
translations 221,717 4,780 246
---------- ---------- ----------
Net assets 2,799,990 41,136 6,280
========== ========== ==========
NET ASSETS
V.S.T. Growth & Income Fund 2,799,990 -- --
V.A. Core Equity Fund -- 41,136 --
V.A. Large Cap Growth Fund -- -- 6,280
---------- ---------- ----------
2,799,990 41,136 6,280
========== ========== ==========
Shares outstanding:
V.S.T. Growth & Income Fund 217,626 -- --
V.A. Core Equity Fund -- 2,469 --
V.A. Large Cap Growth Fund -- -- 816
---------- ---------- ----------
217,626 2,469 816
========== ========== ==========
Net asset value per share:
V.S.T. Growth & Income Fund $ 12.87 -- --
V.A. Core Equity Fund -- $ 16.66 --
V.A. Large Cap Growth Fund -- -- $ 7.69
========== ========== ==========
Pro-Forma
Adjustments Combined
----------- ----------
Assets
Long term investments at cost $ -- $2,581,488
Net unrealized appreciation (depreciation) of investments -- 226,743
Short-term investments at value -- 55,687
---------- ----------
Total investments -- 2,863,918
Receivable for:
Investments sold -- 13,354
Interest and dividends -- 2,075
Other assets -- 2
---------- ----------
Total Assets -- 2,879,349
---------- ----------
Liabilities
Payables for:
Due to custodian -- 68
Investments purchased -- 20,032
Fund shares purchased -- 120
Securities on loan -- 9,945
Payable to affiliates 26
Other liabilities -- 1,752
---------- ----------
Total Liabilities -- 31,943
---------- ----------
Net assets:
Capital paid-in -- 3,014,520
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions -- (394,202)
Undistributed (distribution in excess of)
net investment income (loss) -- 345
Net unrealized appreciation (depreciation) of
investments, futures and foreign currencies
translations -- 226,743
---------- ----------
Net assets -- 2,847,406
========== ==========
NET ASSETS
V.S.T. Growth & Income Fund 47,416(a) 2,847,406
V.A. Core Equity Fund (41,136)(a) --
V.A. Large Cap Growth Fund (6,280)(a) --
---------- ----------
-- 2,847,406
========== ==========
Shares outstanding:
V.S.T. Growth & Income Fund 3,618(a) 221,244
V.A. Core Equity Fund (2,469)(a) --
V.A. Large Cap Growth Fund (816)(a) --
---------- ----------
333 221,244
========== ==========
Net asset value per share:
V.S.T. Growth & Income Fund -- $ 12.87
V.A. Core Equity Fund $ (16.66)(a) --
V.A. Large Cap Growth Fund $ (7.69)(a) --
========== ==========
John Hancock V.S.T. Growth & Income Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000 omitted)
John Hancock John Hancock John Hancock
V.S.T. Growth & V.A. Core V.A. Large Cap
Income Fund Equity Fund Growth Fund
--------------- ------------ --------------
Investement Income
Interest and dividends $ 38,881 $ 532 $ 50
Securities Lending 172 24 --
--------- --------- ---------
Total Investment Income 39,053 556 50
--------- --------- ---------
Expenses
Investment management fee 22,818 295 99
Auditing fees 367 24 12
Custodian fees 1,146 27 17
Fidelity Bond fees 4 -- --
Accounting and legal services fee -- 8 3
Legal fees 230 -- --
Printing & mailing fees 1,991 5 2
Organization expense -- 2 2
Trustees' fee 140 3 1
Miscellaneous -- 4 1
Other fees 87 -- --
Interest expense -- -- 3
--------- --------- ---------
Total Expenses 26,783 368 140
--------- --------- ---------
Less Expense Reductions (149) -- (11)
--------- --------- ---------
Net Expenses 26,634 368 129
--------- --------- ---------
Net Investment Income (loss) 12,419 188 (79)
--------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investments (273,187) (3,524) (4,168)
Change in net unrealized appreciation (depreciation) of:
Investments (531,648) (2,110) (3,797)
--------- --------- ---------
Net realized and Unrealized Gain (Loss) (804,835) (5,634) (7,965)
--------- --------- ---------
Net increase (decrease) in net assets resulting from operations $(792,416) $ (5,446) $ (8,044)
========= ========= =========
Pro-Forma
Adjustments Combined
----------- ---------
Investement Income
Interest and dividends $ -- $ 39,463
Securities Lending -- 196
--------- ---------
Total Investment Income -- 39,659
--------- ---------
Expenses
Investment management fee (23)(c) 23,189
Auditing fees (36)(d) 367
Custodian fees (24)(d) 1,166
Fidelity Bond fees -- 4
Accounting and legal services fee -- 11
Legal fees -- (d) 230
Printing & mailing fees (7)(d) 1,991
Organization expense (4)(b) --
Trustees' fee -- 144
Miscellaneous -- 5
Other fees -- 87
Interest expense -- 3
--------- ---------
Total Expenses (94) 27,197
--------- ---------
Less Expense Reductions (530)(e) (690)
--------- ---------
Net Expenses (624) 26,507
--------- ---------
Net Investment Income (loss) 624 13,152
--------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investments -- (280,879)
Change in net unrealized appreciation (depreciation) of:
Investments -- (537,555)
--------- ---------
Net realized and Unrealized Gain (Loss) -- (818,434)
--------- ---------
Net increase (decrease) in net assets resulting from operations $ 624 $(805,282)
========= =========
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund, the V.A. Core Equity Fund and the V.A. Large
Cap Growth Fund, combined on June 30, 2001.
-------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
-------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------------
ISSUER DESCRIPTION
Common Stock
Aerospace & Defense (1.75%)
Boeing Co. 146,300 $ 8,134
General Dynamics Corp. 266,000 20,697 3,800 $ 296
United Technologies Corp. 277,800 20,352 5,600 410
---------- ----------
49,183 706
---------- ----------
Auto & Truck Parts (0.30%)
Lear Corp. * 244,000 8,516 4,400 154
---------- ----------
Automobile (0.89%)
Ford Motor Co. 600,000 14,730 13,000 319
General Motors Corp. - Cl. H 506,658 10,260
---------- ----------
24,990 319
---------- ----------
Bank (5.00%)
Bank of America Corp. 340,000 20,410 4,600 276
Bank of New York Co., Inc. 121,100 5,813
Comerica, Inc. 232,800 13,409 3,100 178
Fifth Third Bancorp 107,900 6,479
FleetBoston Financial Corp. 226,600 8,939 4,100 162
JP Morgan Chase & Co. 400,000 17,840 5,600 250
Mellon Financial Corp. 341,400 15,705 3,300 152
State Street Corp. 53,600 2,653
US Bancorp 1,236,000 28,169 28,400 647
Washington Mutual, Inc. 565,200 21,223
---------- ----------
140,640 1,665
---------- ----------
Brokerage & Investment Management (0.43%)
Charles Schwab Corp. 3,900 60
Goldman Sachs Group, Inc. 45,900 3,938
Morgan Stanley, Dean Witter, Discover & Co. 128,300 8,241
----------
12,239
----------
Building (0.01%)
Black & Decker Corp. (The) 6,300 249
----------
Chemical (1.80%)
Air Products & Chemicals, Inc. 298,700 13,666 5,200 238
Dow Chemical Co. 428,500 14,248 16,200 539
E.I. du Pont de Nemours & Co. 125,230 6,041
Praxair, Inc. 346,200 16,271 5,800 272
---------- ----------
50,226 1,049
---------- ----------
----------------------------------------------------------------
V.A. Large Cap Growth Combined
----------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) WARRANTS OMITTED)
----------------------------------------------------------------
ISSUER DESCRIPTION
Common Stock
Aerospace & Defense (1.75%)
Boeing Co. 146,300 $ 8,134
General Dynamics Corp. 269,800 20,993
United Technologies Corp. 283,400 20,762
----------
49,889
----------
Auto & Truck Parts (0.30%)
Lear Corp. * 248,400 8,670
----------
Automobile (0.89%)
Ford Motor Co. 613,000 15,049
General Motors Corp. - Cl. H 506,658 10,260
----------
25,309
----------
Bank (5.00%)
Bank of America Corp. 344,600 20,686
Bank of New York Co., Inc. 121,100 5,813
Comerica, Inc. 235,900 13,587
Fifth Third Bancorp 107,900 6,479
FleetBoston Financial Corp. 230,700 9,101
JP Morgan Chase & Co. 405,600 18,090
Mellon Financial Corp. 344,700 15,857
State Street Corp. 1,464 $ 72 55,064 2,725
US Bancorp 1,264,400 28,816
Washington Mutual, Inc. 565,200 21,223
---------- ----------
72 142,377
---------- ----------
Brokerage & Investment Management (0.43%)
Charles Schwab Corp. 3,900 60
Goldman Sachs Group, Inc. 45,900 3,938
Morgan Stanley, Dean Witter, Discover & Co. 128,300 8,241
----------
12,239
----------
Building (0.01%)
Black & Decker Corp. (The) 6,300 249
----------
Chemical (1.80%)
Air Products & Chemicals, Inc. 303,900 13,904
Dow Chemical Co. 444,700 14,787
E.I. du Pont de Nemours & Co. 125,230 6,041
Praxair, Inc. 352,000 16,543
----------
51,275
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund, the V.A. Core Equity Fund and the V.A. Large
Cap Growth Fund, combined on June 30, 2001.
-------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
-------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------------
ISSUER DESCRIPTION
Commercial Services (0.86%)
Avery Dennison Corp. 219,400 $ 11,200
Concord EFS, Inc. 150,600 7,833
Omnicom Group, Inc. 22,400 1,926
TMP Worldwide, Inc. 60,800 3,648
----------
24,607
----------
Computer Equipment (6.01%)
BEA Systems, Inc.*
Brocade Communications Systems, Inc. 55,800 2,455
Cisco Systems, Inc.* 8,600 $ 157
Dell Computer Corp. * 921,600 24,100 14,000 366
EMC Corp. 115,100 3,344
Gateway, Inc. 144,100 2,370
Intel Corp. 2,077,100 60,755 31,600 924
International Business Machines Corp. 418,600 47,302 6,300 712
Lexmark International Group, Inc. - Cl. A 265,400 17,848 7,800 524
McData Corp. 154,100 2,704
Veritas Software Corp. * 105,500 7,019
---------- ----------
167,897 2,683
---------- ----------
Computer Software & Services (8.24%)
Adobe Systems, Inc. * 183,100 8,606 2,300 108
Cadence Design Systems, Inc. * 386,200 7,195 6,000 112
Check Point Software Technologies, Ltd. * 105,200 5,320
Electronic Data Systems Corp. * 283,400 17,712 6,100 381
EMC Corp.*
First Data Corp. 192,900 12,394 4,000 257
Fiserv, Inc. 156,100 9,987 3,500 224
Micromuse, Inc. * 119,200 3,336
Microsoft Corp. 1,808,900 132,050 25,500 1,861
Oracle Corp. * 886,000 16,834 17,100 325
Parametric Technology Corp. 42,400 593
Peoplesoft, Inc. 109,900 5,410 3,000 148
Siebel Systems, Inc. * 112,000 5,253
SunGard Data Systems, Inc. 181,700 5,453 14,100 423
Sun Microsystems, Inc.*
VeriSign, Inc.*
---------- ----------
230,143 3,839
---------- ----------
Consumer Miscellaneous (0.67%)
Black & Decker Corp. 305,700 12,063
Harley-Davidson, Inc. 147,100 6,925
----------
18,988
----------
Cosmetic & Personal Care (1.60%)
Avon Products, Inc. 244,100 11,297 6,000 278
Colgate-Palmolive Co. 164,900 9,727
Procter & Gamble Co. 176,000 11,229
Unilever NV - NY Shares 217,700 12,968 2,300 137
---------- ----------
45,221 415
---------- ----------
----------------------------------------------------------------
V.A. Large Cap Growth Combined
----------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) WARRANTS OMITTED)
----------------------------------------------------------------
ISSUER DESCRIPTION
Commercial Services (0.86%)
Avery Dennison Corp. 219,400 $ 11,200
Concord EFS, Inc. 150,600 7,833
Omnicom Group, Inc. 22,400 1,926
TMP Worldwide, Inc. 60,800 3,648
----------
24,607
----------
Computer Equipment (6.01%)
BEA Systems, Inc.* 1,000 $ 31 1,000 31
Brocade Communications Systems, Inc. 55,800 2,455
Cisco Systems, Inc.* 15,650 285 24,250 442
Dell Computer Corp. * 935,600 24,466
EMC Corp. 115,100 3,344
Gateway, Inc. 144,100 2,370
Intel Corp. 5,000 146 2,113,700 61,825
International Business Machines Corp. 424,900 48,014
Lexmark International Group, Inc. - Cl. A 273,200 18,372
McData Corp. 154,100 2,704
Veritas Software Corp. * 2,050 136 107,550 7,155
---------- ----------
598 171,178
---------- ----------
Computer Software & Services (8.24%)
Adobe Systems, Inc. * 185,400 8,714
Cadence Design Systems, Inc. * 392,200 7,307
Check Point Software Technologies, Ltd. * 105,200 5,320
Electronic Data Systems Corp. * 2,000 125 291,500 18,218
EMC Corp.* 4,707 137 4,707 137
First Data Corp. 196,900 12,651
Fiserv, Inc. 159,600 10,211
Micromuse, Inc. * 119,200 3,336
Microsoft Corp. 3,450 252 1,837,850 134,163
Oracle Corp. * 903,100 17,159
Parametric Technology Corp. 42,400 593
Peoplesoft, Inc. 112,900 5,558
Siebel Systems, Inc. * 112,000 5,253
SunGard Data Systems, Inc. 195,800 5,876
Sun Microsystems, Inc.* 6,750 106 6,750 106
VeriSign, Inc.* 950 57 950 57
---------- ----------
677 234,659
---------- ----------
Consumer Miscellaneous (0.67%)
Black & Decker Corp. 305,700 12,063
Harley-Davidson, Inc. 147,100 6,925
----------
18,988
----------
Cosmetic & Personal Care (1.60%)
Avon Products, Inc. 250,100 11,575
Colgate-Palmolive Co. 164,900 9,727
Procter & Gamble Co. 176,000 11,229
Unilever NV - NY Shares 220,000 13,105
----------
45,636
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund, the V.A. Core Equity Fund and the V.A. Large
Cap Growth Fund, combined on June 30, 2001.
-------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
-------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------------
ISSUER DESCRIPTION
Diversified Operations (8.13%)
Amgen, Inc. 150,700 $ 9,144
Danaher Corp. 193,500 10,836
General Electric Co. 3,401,330 165,815 39,300 $ 1,916
Tyco International, Ltd. 774,800 42,227 12,800 697
---------- ----------
228,022 2,613
---------- ----------
Electric Power (1.95%)
Allegheny Energy, Inc. 241,800 11,667
Duke Energy Co. 400,000 15,604
Exelon Corp. 335,500 21,512
Mirant Corp. 194,400 6,687 5,600 193
---------- ----------
55,470 193
---------- ----------
Electrical Equipment (0.24%)
Best Buy Co., Inc. 106,800 6,784
----------
Electronic Components (0.06%)
Electronic Arts, Inc. 28,400 1,644
----------
Electronic Products & Services (4.87%)
Analog Devices, Inc. 232,400 10,051 4,200 182
Applera Corporation - Applied Biosystems Group 86,700 2,319
Applied Materials, Inc. * 357,300 17,544 4,100 201
Applied Micro Circuits Corp. * 133,900 2,303
Celestica, Inc. 49,300 2,539
Cisco Systems, Inc. 1,483,100 26,992
Emulex Corp. 78,800 3,184
Integrated Device Technology, Inc. 55,800 1,768
KLA-Tencor Corp. * 237,363 13,879 3,300 193
LSI Logic Corp. 350,000 6,580 7,000 131
Marvell Technology Group, Ltd. * 140,600 3,782
Maxim Integrated Products, Inc. * 262,432 11,602 3,600 159
Novellus Systems, Inc.*
Parker- Hannifin Corp. 3,700 157
Sanmina Corp. * 114,200 2,673
Tektronix, Inc. 288,900 7,844
Texas Instruments, Inc. 476,500 15,010 7,800 246
Xilinx, Inc. * 219,300 9,044 3,100 128
---------- ----------
137,114 1,397
---------- ----------
Energy - Alternative Source (0.29%)
El Paso Corp. 155,900 8,191
----------
Fiber Optics (0.00%)
CIENA Corp.*
----------------------------------------------------------------
V.A. Large Cap Growth Combined
----------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) WARRANTS OMITTED)
----------------------------------------------------------------
ISSUER DESCRIPTION
Diversified Operations (8.13%)
Amgen, Inc. 150,700 $ 9,144
Danaher Corp. 193,500 10,836
General Electric Co. 7,627 $ 372 3,448,257 168,103
Tyco International, Ltd. 6,550 357 794,150 43,281
---------- ----------
729 231,364
---------- ----------
Electric Power (1.95%)
Allegheny Energy, Inc. 241,800 11,667
Duke Energy Co. 400,000 15,604
Exelon Corp. 335,500 21,512
Mirant Corp. 200,000 6,880
----------
55,663
----------
Electrical Equipment (0.24%)
Best Buy Co., Inc. 106,800 6,784
----------
Electronic Components (0.06%)
Electronic Arts, Inc. 28,400 1,644
----------
Electronic Products & Services (4.87%)
Analog Devices, Inc. 1,315 57 237,915 10,290
Applera Corporation - Applied Biosystems Group 86,700 2,319
Applied Materials, Inc. * 1,500 73 362,900 17,818
Applied Micro Circuits Corp. * 133,900 2,303
Celestica, Inc. 600 31 49,900 2,570
Cisco Systems, Inc. 1,483,100 26,992
Emulex Corp. 78,800 3,184
Integrated Device Technology, Inc. 55,800 1,768
KLA-Tencor Corp. * 240,663 14,072
LSI Logic Corp. 357,000 6,711
Marvell Technology Group, Ltd. * 140,600 3,782
Maxim Integrated Products, Inc. * 266,032 11,761
Novellus Systems, Inc.* 700 40 700 40
Parker- Hannifin Corp. 3,700 157
Sanmina Corp. * 114,200 2,673
Tektronix, Inc. 288,900 7,844
Texas Instruments, Inc. 484,300 15,256
Xilinx, Inc. * 750 31 223,150 9,203
---------- ----------
232 138,743
---------- ----------
Energy - Alternative Source (0.29%)
El Paso Corp. 155,900 8,191
----------
Fiber Optics (0.00%)
CIENA Corp.* 1,600 61 1,600 61
---------- ----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund, the V.A. Core Equity Fund and the V.A. Large
Cap Growth Fund, combined on June 30, 2001.
-------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
-------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------------
ISSUER DESCRIPTION
Financial Services (0.78%)
Providian Financial Corp. * 120,000 $ 7,104
Stillwell Financial, Inc. 362,500 12,165
Citigroup, Inc. 32,600 $ 1,723
Concord EFS, Inc.* 4,100 213
Washington Mutual, Inc. 12,450 467
Goldman Sachs Group, Inc. (The)
MBNA Corp.
Morgan Stanley Dean Witter & Co.
---------- ----------
19,269 2,403
---------- ----------
Food, Beverage & Tobacco (3.42%)
Anheuser-Busch Cos., Inc. 247,200 10,185 4,600 190
Coca-Cola Co. 300,000 13,500
Kraft Foods, Inc. CL A* 163,800 5,078 3,000 93
Pepsi Bottling Group, Inc. 6,900 277 15,600 792
PepsiCo, Inc. 549,800 24,301 5,800 256
Philip Morris Cos., Inc. 837,900 42,523
---------- ----------
95,864 1,331
---------- ----------
Health Care Products (12.34%)
Abbott Laboratories 308,000 14,787
Allergan, Inc. 132,500 11,329
American Home Products Corp. 608,200 35,543
Andrx Corp. * 32,300 2,487
Bristol-Myers Squibb Co. 436,000 22,803
Eli Lilly & Co. 112,400 8,318
Forest Laboratories, Inc. * 31,000 2,201
Genetech, Inc. * 104,000 5,731
Ivax Corp. 61,650 2,404
Johnson & Johnson 1,057,704 52,885
King Pharmaceuticals, Inc. * 64,500 3,467
MedImmune, Inc. * 108,900 5,140
Medtronic, Inc. 173,600 7,987
Merck & Co., Inc. 493,100 31,514
Pfizer, Inc. 2,726,300 109,188
Pharmacia Corp. 181,700 8,349
Schering-Plough Corp. 570,100 20,661
UnitedHealth Group, Inc. 105,700 6,527
----------
351,321
----------
Health Care Services (0.72%)
Lincare Holdings, Inc. 137,400 4,123 5,400 162
Tenet Healthcare Corp. 130,000 6,707
Trigon Healthcare, Inc. 144,700 9,384 2,700 175
---------- ----------
20,214 337
---------- ----------
----------------------------------------------------------------
V.A. Large Cap Growth Combined
----------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) WARRANTS OMITTED)
----------------------------------------------------------------
ISSUER DESCRIPTION
Financial Services (0.78%)
Providian Financial Corp. * 120,000 $ 7,104
Stillwell Financial, Inc. 362,500 12,165
Citigroup, Inc. 4,378 $ 231 36,978 1,954
Concord EFS, Inc.* 4,100 213
Washington Mutual, Inc. 12,450 467
Goldman Sachs Group, Inc. (The) 750 64 750 64
MBNA Corp. 3,780 125 3,780 125
Morgan Stanley Dean Witter & Co. 1,300 84 1,300 84
---------- ----------
504 22,176
---------- ----------
Food, Beverage & Tobacco (3.42%)
Anheuser-Busch Cos., Inc. 1,700 70 253,500 10,445
Coca-Cola Co. 300,000 13,500
Kraft Foods, Inc. CL A* 166,800 5,171
Pepsi Bottling Group, Inc. 1,800 91 24,300 1,160
PepsiCo, Inc. 555,600 24,557
Philip Morris Cos., Inc. 837,900 42,523
---------- ----------
161 97,356
---------- ----------
Health Care Products (12.34%)
Abbott Laboratories 308,000 14,787
Allergan, Inc. 132,500 11,329
American Home Products Corp. 608,200 35,543
Andrx Corp. * 32,300 2,487
Bristol-Myers Squibb Co. 436,000 22,803
Eli Lilly & Co. 112,400 8,318
Forest Laboratories, Inc. * 31,000 2,201
Genetech, Inc. * 104,000 5,731
Ivax Corp. 61,650 2,404
Johnson & Johnson 1,057,704 52,885
King Pharmaceuticals, Inc. * 64,500 3,467
MedImmune, Inc. * 108,900 5,140
Medtronic, Inc. 173,600 7,987
Merck & Co., Inc. 493,100 31,514
Pfizer, Inc. 2,726,300 109,188
Pharmacia Corp. 181,700 8,349
Schering-Plough Corp. 570,100 20,661
UnitedHealth Group, Inc. 105,700 6,527
----------
351,321
----------
Health Care Services (0.72%)
Lincare Holdings, Inc. 142,800 4,285
Tenet Healthcare Corp. 130,000 6,707
Trigon Healthcare, Inc. 147,400 9,559
----------
20,551
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund, the V.A. Core Equity Fund and the V.A. Large
Cap Growth Fund, combined on June 30, 2001.
-------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
-------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------------
ISSUER DESCRIPTION
Insurance (4.09%)
American International Group, Inc. 407,500 $ 35,045 5,600 $ 482
Hartford Financial Services Group, Inc. 349,600 23,913 4,900 335
Lincoln National Corp. 412,200 21,331 5,600 290
St. Paul Cos., Inc. 381,100 19,318 6,500 329
Torchmark, Inc. 210,100 8,448 4,300 173
XL Capital, Ltd. - Cl. A 78,900 6,478 2,200 181
---------- ----------
114,533 1,790
---------- ----------
Leisure & Recreation (0.18%)
Sabre Group Holdings, Inc. 100,000 5,000 3,800 190
---------- ----------
Manufacturing (0.00%)
Danaher Corp. 2,300 129
----------
Media - TV / Radio (5.17%)
AOL Time Warner, Inc. * 1,636,250 86,722 20,600 1,092
BEA Systems, Inc. 148,100 4,548
Charter Communications, Inc. (Class A)*
Clear Channel Communications, Inc. 229,700 14,402
The Walt Disney Co. 487,300 14,078 7,500 217
Viacom, Inc. - Cl. B* 489,299 25,321 7,200 372
---------- ----------
145,071 1,681
---------- ----------
Medical (0.21%)
Abbott Laboratories 5,400 259
Allergan, Inc. 2,000 171
American Home Products Corp. 7,400 432
Amgen, Inc.*
Bristol-Myers Squibb Co. 7,800 408
Cardinal Health, Inc.
Express Scripts, Inc.*
Genentech, Inc.*
Invitrogen Corp.* 2,000 111
Johnson & Johnson 14,618 731
Laboratory Corp. of America Holdings* 2,200 169
Medtronic, Inc.
Merck & Co., Inc. 9,400 601
Pfizer, Inc. 34,000 1,362
Pharmacia Corp. 3,600 165
Schering-Plough Corp. 4,100 149
Stryker Corp.
UnitedHealth Group, Inc.
Wellpoint Health Networks, Inc.*
----------
4,558
----------
Metals & Mining (0.80%)
Minnesota Mining & Manufacturing Co. 197,100 22,489 3,300 377
---------- ----------
----------------------------------------------------------------
V.A. Large Cap Growth Combined
----------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) WARRANTS OMITTED)
----------------------------------------------------------------
ISSUER DESCRIPTION
Insurance (4.09%)
American International Group, Inc. 2,182 $ 188 415,282 $ 35,715
Hartford Financial Services Group, Inc. 354,500 24,248
Lincoln National Corp. 417,800 21,621
St. Paul Cos., Inc. 387,600 19,647
Torchmark, Inc. 214,400 8,621
XL Capital, Ltd. - Cl. A 81,100 6,659
---------- ----------
188 116,511
---------- ----------
Leisure & Recreation (0.18%)
Sabre Group Holdings, Inc. 103,800 5,190
----------
Manufacturing (0.00%)
Danaher Corp. 2,300 129
----------
Media - TV / Radio (5.17%)
AOL Time Warner, Inc. * 5,110 271 1,661,960 88,085
BEA Systems, Inc. 148,100 4,548
Charter Communications, Inc. (Class A)* 3,050 71 3,050 71
Clear Channel Communications, Inc. 2,052 129 231,752 14,531
The Walt Disney Co. 494,800 14,295
Viacom, Inc. - Cl. B* 1,400 72 497,899 25,765
---------- ----------
543 147,295
---------- ----------
Medical (0.21%)
Abbott Laboratories 973 83 6,373 342
Allergan, Inc. 2,000 171
American Home Products Corp. 7,400 432
Amgen, Inc.* 2,350 143 2,350 143
Bristol-Myers Squibb Co. 7,800 408
Cardinal Health, Inc. 3,513 242 3,513 242
Express Scripts, Inc.* 800 44 800 44
Genentech, Inc.* 1,056 58 1,056 58
Invitrogen Corp.* 2,000 111
Johnson & Johnson 2,100 105 16,718 836
Laboratory Corp. of America Holdings* 2,200 169
Medtronic, Inc. 2,281 105 2,281 105
Merck & Co., Inc. 9,400 601
Pfizer, Inc. 5,928 237 39,928 1,599
Pharmacia Corp. 2,346 108 5,946 273
Schering-Plough Corp. 4,100 149
Stryker Corp. 1,400 77 1,400 77
UnitedHealth Group, Inc. 550 34 550 34
Wellpoint Health Networks, Inc.* 700 66 700 66
---------- ----------
1,302 5,860
---------- ----------
Metals & Mining (0.80%)
Minnesota Mining & Manufacturing Co. 200,400 22,866
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund, the V.A. Core Equity Fund and the V.A. Large
Cap Growth Fund, combined on June 30, 2001.
-------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
-------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------------
ISSUER DESCRIPTION
Mortgage Banking (0.03%)
Fannie Mae 9,100 $ 775
----------
Natural Gas Distribution (0.88%)
Enron Corp. 509,900 $ 24,985
----------
Office (0.01%)
Avery Dennison Corp. 3,600 184
----------
Oil (1.46)%
Baker Hughes, Inc. 300,000 10,050
Royal Dutch Petroleum Co. - NY Shares 540,100 31,472
----------
41,522
----------
Oil & Natural Gas Exploration & Production (4.30%)
Apache Corp. 2,500 127
Chevron Corp. 174,000 15,747 3,000 271
El Paso Corp. 2,300 121
Enron Corp. 7,000 343
Exxon Mobil Corp. 842,870 73,625 14,112 1,233
Kerr-McGee Corp. 168,200 11,147 2,400 159
Royal Dutch Petroleum Co. (ADR) (Netherlands) 9,600 559
Transocean Sedco Forex, Inc. 50,450 2,081
USX-Marathon Group 572,500 16,894 5,800 171
---------- ----------
119,494 2,984
---------- ----------
Paper & Forest Products (0.41%)
Kimberly-Clark Corp. 203,000 11,348 4,100 229
---------- ----------
Personal & Commercial Lending (2.88%)
Citigroup, Inc. 1,549,000 81,849
----------
Real Estate Operations (0.05%)
HomeStore.com, Inc. 39,800 1,391
----------
Retail - Department Stores (7.76%)
Abercrombie & Fitch Co. (Class A) * 197,700 8,798 4,100 182
Bed Bath & Beyond, Inc. * 300,500 9,376 5,600 168
CVS Corp. 263,900 10,187 4,600 178
Gap, Inc. (The)
Home Depot, Inc. 559,600 26,049 6,600 307
Kohl's Corp. * 393,500 24,684 7,900 496
----------------------------------------------------------------
V.A. Large Cap Growth Combined
----------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) WARRANTS OMITTED)
----------------------------------------------------------------
ISSUER DESCRIPTION
Mortgage Banking (0.03%)
Fannie Mae 9,100 $ 775
----------
Natural Gas Distribution (0.88%)
Enron Corp. 509,900 24,985
----------
Office (0.01%)
Avery Dennison Corp. 3,600 184
----------
Oil (1.46)%
Baker Hughes, Inc. 300,000 10,050
Royal Dutch Petroleum Co. - NY Shares 540,100 31,472
----------
41,522
----------
Oil & Natural Gas Exploration & Production (4.30%)
Apache Corp. 2,500 127
Chevron Corp. 177,000 16,018
El Paso Corp. 2,300 121
Enron Corp. 7,000 343
Exxon Mobil Corp. 856,982 74,858
Kerr-McGee Corp. 170,600 11,306
Royal Dutch Petroleum Co. (ADR) (Netherlands) 9,600 559
Transocean Sedco Forex, Inc. 700 $ 29 51,150 2,110
USX-Marathon Group 578,300 17,065
---------- ----------
29 122,507
---------- ----------
Paper & Forest Products (0.41%)
Kimberly-Clark Corp. 207,100 11,577
----------
Personal & Commercial Lending (2.88%)
Citigroup, Inc. 1,549,000 81,849
----------
Real Estate Operations (0.05%)
HomeStore.com, Inc. 39,800 1,391
----------
Retail - Department Stores (7.76%)
Abercrombie & Fitch Co. (Class A) * 201,800 8,980
Bed Bath & Beyond, Inc. * 3,350 101 309,450 9,645
CVS Corp. 268,500 10,365
Gap, Inc. (The) 2,600 75 2,600 75
Home Depot, Inc. 5,512 257 571,712 26,613
Kohl's Corp. * 401,400 25,180
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund, the V.A. Core Equity Fund and the V.A. Large
Cap Growth Fund, combined on June 30, 2001.
-------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
-------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------------
ISSUER DESCRIPTION
Lowe's Cos., Inc. 402,766 $ 29,221 9,200 $ 667
May Department Stores Co. 271,100 9,288 7,400 254
Talbots, Inc. 128,000 5,600
Target Corp. 338,300 11,705 5,600 194
TJX Cos., Inc. 499,100 15,906 9,700 309
Wal-Mart Stores, Inc. 1,348,900 65,826 14,800 722
---------- ----------
216,640 3,477
---------- ----------
Retail - Drug Stores (0.26%)
Rite Aid Corp. 15,000 135
Walgreen Co. 210,300 7,182 3,900 133
---------- ----------
7,317 133
---------- ----------
Retail - Food (0.17%)
Starbucks Corp. * 210,700 4,846
----------
Soap & Cleaning Preparations (0.02%)
Colgate-Palmolive Co. 4,100 242
Procter & Gamble Co. (The) 3,100 198
----------
440
----------
Telecommunication Equipment (2.62%)
Amdocs Ltd.*
American Tower Corp. (Class A)
Ciena Corp. * 96,900 3,682
Comverse Technology, Inc. 219,400 12,528 1,800 103
Linear Technology Corp. 339,700 15,022 4,900 217
Micron Technology, Inc. 181,100 7,443
Nokia Oyj - ADR 200,000 4,408
Qualcomm, Inc. * 382,000 22,339 4,500 263
RF Micro Devices, Inc. 105,000 2,832
Scientific-Atlanta, Inc. * 76,200 3,094
Sonus Networks, Inc. * 99,200 2,317
---------- ----------
73,665 583
---------- ----------
Telecommunication Services (3.17%)
Broadwing, Inc. 452,100 11,054 6,700 164
EchoStar Communications Corp. - Cl. A* 195,400 6,335
Sprint PCS (PCS Group) * 809,500 19,549 11,700 282
Verizon Communications 971,600 51,981 18,300 979
---------- ----------
88,919 1,425
---------- ----------
Telephone (2.32%)
AT&T Corp. - Liberty Media Group - Cl. A 704,262 12,318 16,400 287
Qwest Communications International, Inc. 1,080,300 34,429 17,000 542
SBC Communications, Inc. 196,800 7,884
Telephone and Data Systems, Inc. 96,500 10,494 1,800 195
---------- ----------
65,125 1,024
---------- ----------
----------------------------------------------------------------
V.A. Large Cap Growth Combined
----------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) WARRANTS OMITTED)
----------------------------------------------------------------
ISSUER DESCRIPTION
Lowe's Cos., Inc. 1,300 $ 94 413,266 $ 29,982
May Department Stores Co. 278,500 9,542
Talbots, Inc. 128,000 5,600
Target Corp. 343,900 11,899
TJX Cos., Inc. 508,800 16,215
Wal-Mart Stores, Inc. 5,398 263 1,369,098 66,811
---------- ----------
790 220,907
---------- ----------
Retail - Drug Stores (0.26%)
Rite Aid Corp. 15,000 135
Walgreen Co. 214,200 7,315
----------
7,450
----------
Retail - Food (0.17%)
Starbucks Corp. * 210,700 4,846
----------
Soap & Cleaning Preparations (0.02%)
Colgate-Palmolive Co. 4,100 242
Procter & Gamble Co. (The) 3,100 198
----------
440
----------
Telecommunication Equipment (2.62%)
Amdocs Ltd.* 700 38 700 38
American Tower Corp. (Class A) 3,159 65 3,159 65
Ciena Corp. * 96,900 3,682
Comverse Technology, Inc. 1,200 68 222,400 12,699
Linear Technology Corp. 344,600 15,239
Micron Technology, Inc. 1,400 58 182,500 7,501
Nokia Oyj - ADR 3,164 70 203,164 4,478
Qualcomm, Inc. * 386,500 22,602
RF Micro Devices, Inc. 105,000 2,832
Scientific-Atlanta, Inc. * 1,807 73 78,007 3,167
Sonus Networks, Inc. * 99,200 2,317
---------- ----------
372 74,620
---------- ----------
Telecommunication Services (3.17%)
Broadwing, Inc. 458,800 11,218
EchoStar Communications Corp. - Cl. A* 195,400 6,335
Sprint PCS (PCS Group) * 821,200 19,831
Verizon Communications 989,900 52,960
----------
90,344
----------
Telephone (2.32%)
AT&T Corp. - Liberty Media Group - Cl. A 720,662 12,605
Qwest Communications International, Inc. 1,097,300 34,971
SBC Communications, Inc. 196,800 7,884
Telephone and Data Systems, Inc. 98,300 10,689
----------
66,149
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Growth & Income Fund, the V.A. Core Equity Fund and the V.A. Large
Cap Growth Fund, combined on June 30, 2001.
-------------------------------------------------------------------------------
V.S.T. Growth & Income V.A. Core Equity
-------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------------
ISSUER DESCRIPTION
Utilities (0.06%)
AES Corp. (The)*
Allegheny Energy, Inc. 4,400 $ 212
Duke Energy Corp. 16,500 644
Exelon Corp. 8,100 519
SBC Communications, Inc. 6,900 277
----------
1,652
----------
U.S. Government Agencies (1.41%)
Federal National Mortgage Assoc. 471,900 $ 40,182
----------
---------- ----------
TOTAL COMMON STOCK (98.62%) 2,760,919 40,984
---------- ----------
PAR VALUE PAR VALUE
(000's (000's
OMITTED) OMITTED)
--------- ---------
SHORT-TERM INVESTMENTS (1.59%)
Investments in joint trading account
3.97% due 07/02/01 3.970% $ 45,184 45,184
Joint Repurchase Agreement (0.02%) Investment in
a joint repurchase agreement transaction with
UBS Warburg, Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds, 10.625% due
08-15-15 and 6.250% due 08-15-23, U.S. Treasury
Note 5.625% due 11-30-02) - Note B 3.97% $ 558 558
----------
CASH EQUIVALENTS (0.35%)
Navigator Securities Lending Prime Portfolio** 9,944,668 9,945
---------- ----------
TOTAL SHORT TERM INVESTMENTS (1.96%) 55,129 558
---------- ----------
TOTAL INVESTMENTS (100.58%) 2,816,048 41,542
---------- ----------
OTHER ASSETS AND LIABILITIES, NET (0.58%) (16,058) (406)
---------- ----------
NET ASSETS (100.00%) $2,799,990 $41,136
========== ==========
----------------------------------------------------------------
V.A. Large Cap Growth Combined
----------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) WARRANTS OMITTED)
----------------------------------------------------------------
ISSUER DESCRIPTION
Utilities (0.06%)
AES Corp. (The)* 1,618 $ 70 1,618 $ 70
Allegheny Energy, Inc. 4,400 212
Duke Energy Corp. 16,500 644
Exelon Corp. 8,100 519
SBC Communications, Inc. 6,900 277
----------
----------
70 1,722
---------- ----------
U.S. Government Agencies (1.41%)
Federal National Mortgage Assoc. 471,900 40,182
----------
---------- ----------
TOTAL COMMON STOCK (98.62%) 6,328 2,808,231
---------- ----------
PAR VALUE PAR VALUE
(000's (000's
OMITTED) OMITTED)
--------- ----------
SHORT-TERM INVESTMENTS (1.59%)
Investments in joint trading account
3.97% due 07/02/01 $ 45,184 45,184
Joint Repurchase Agreement (0.02%) Investment in
a joint repurchase agreement transaction with
UBS Warburg, Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds, 10.625% due
08-15-15 and 6.250% due 08-15-23, U.S. Treasury
Note 5.625% due 11-30-02) - Note B 558 558
CASH EQUIVALENTS (0.35%)
Navigator Securities Lending Prime Portfolio** 9,944,668 9,945
---------- ----------
TOTAL SHORT TERM INVESTMENTS (1.96%) 0 55,687
---------- ----------
TOTAL INVESTMENTS (100.58%) 6,328 2,863,918
---------- ----------
OTHER ASSETS AND LIABILITIES, NET (0.58%) (48) (16,512)
---------- ----------
NET ASSETS (100.00%) $6,280 $2,847,406
========== ==========
Notes to the Schedule of Investments
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer.
The percentage show for each investment category is the total value of that
category as a percentage of the net assets of the Fund.
Exhibit C
JOHN HANCOCK V.S.T. EQUITY INDEX FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. Equity Index Fund and the John Hancock V.A. 500 Index Fund with
information about the impact of the proposed merger by indicating how the merger
might have affected information had the merger been consummated as of June 30,
2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. Equity Index Fund and John Hancock V.A. 500 Index Fund after
giving effect to pro forma adjustments described in the notes below.
(a) Acquisition by John Hancock V.S.T. Equity Index Fund of all assets of John
Hancock V.A. 500 Index Fund and issuance of John Hancock V.S.T. Small
Equity Index Fund shares in exchange for all of the outstanding shares of
John Hancock V.A. 500 Index Fund.
(b) The deferred organization expense of John Hancock V.A. 500 Index Fund was
written off as the Fund would no longer be in existence.
(c) The investment advisory fee was adjusted to reflect the application of the
fee structure which will be in effect for John Hancock V.S.T. Equity Index
Fund:
0.15% for the first $75,000,000 of the Fund's net assets;
0.14% for net assets between $75,000,000 and 125,000,000;
0.13% for net assets in excess of $125,000,000.
(d) The actual expenses incurred by the John Hancock V.S.T. Equity Index Fund
and the John Hancock V.A. 500 Index Fund for various expenses included on
a pro forma basis were reduced to reflect the estimated savings arising
from the merger.
(e) Represents the Adviser's voluntary agreement to limit the funds' other
expenses to an annual rate of .10% of the funds' average daily net assets.
John Hancock V.S.T. Equity Index Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. Equity V.A. 500 Index Pro-Forma
Index Fund Fund Adjustments Combined
------------- -------------- ----------- ---------
ASSETS
Long term investments at cost $ 556,479 $ 12,949 $ -- $ 569,428
Net unrealized appreciation (depreciation) of investments (36,201) 4,888 -- (31,313)
Short-term investments at value 18,987 911 -- 19,898
--------- --------- ----------- ---------
Total Investments 539,265 18,748 -- 558,013
Cash 68 1 -- 69
Cash Segregated for futures contracts -- 35 -- 35
Receivables for:
Investments sold -- 25 -- 25
Dividends and interest receivable 389 13 -- 402
Receivable for futures variation margin 66 2 -- 68
Receivable from John Hancock Advisors, Inc. and affiliates -- 29 -- 29
--------- --------- ----------- ---------
Total Assets 539,788 18,853 -- 558,641
--------- --------- ----------- ---------
LIABILITIES
Payables for:
Investments purchased 547 389 -- 936
Accounts payable, accrued expenses and other liabilities 94 45 -- 139
--------- --------- ----------- ---------
Total Liabilities 641 434 -- 1,075
--------- --------- ----------- ---------
Net Assets 539,147 18,419 -- 557,566
========= ========= =========== =========
Net assets:
Capital paid-in 563,431 12,498 -- 575,929
Accumulated net realized gain (loss) on investments, futures and
foreign currency transactions 12,451 1,052 -- 13,503
Undistributed (distributions in excess of)
net investment income (loss) (19) -- -- (19)
Net unrealized appreciation (depreciation) of investments, futures
and translation of assets and liabilities in foreign currencies (36,716) 4,869 -- (31,847)
--------- --------- ----------- ---------
539,147 18,419 -- 557,566
========= ========= =========== =========
Net assets:
V.S.T. Equity Index Fund 539,147 -- 18,419 (a) 557,566
V.A. 500 Index Fund -- 18,419 (18,419)(a) --
--------- --------- ----------- ---------
539,147 18,419 -- 557,566
========= ========= =========== =========
Shares outstanding:
V.S.T. Equity Index Fund 32,952 -- 1,126 (a) 34,078
V.A. 500 Index Fund -- 1,227 (1,227)(a) --
--------- --------- ----------- ---------
32,952 1,227 (101)(a) 34,078
========= ========= =========== =========
Net asset value per share:
V.S.T. Equity Index Fund $ 16.36 -- -- $ 16.36
V.A. 500 Index Fund -- $ 15.01 $ (15.01)(a) --
========= ========= =========== =========
See Notes to Pro-form Combined Financial Statements
John Hancock V.S.T. Equity Index Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. Equity V.A. 500 Index
Index Fund Fund
12 months 12 months
ended ended Pro-Forma
June 30, 2001 June 30, 2001 Adjustments Combined
------------- -------------- ----------- ---------
INVESTMENT INCOME
Interest $ 729 $ 45 $ -- $ 774
Dividends 6,337 281 -- 6,618
--------- --------- --------- ---------
Total investment income 7,066 326 -- 7,392
--------- --------- --------- ---------
EXPENSES
Investment management fee 708 80 (43)(c) 745
Auditing fees 22 15 (12)(d) 25
Custodian fees 102 161 (155)(d) 108
Accounting and legal services fee -- 5 -- 5
Legal fees 4 1 (1)(d) 4
Printing & mailing fees 74 3 (3)(d) 74
Organization expense -- 2 (2)(b) --
Trustees' fee 5 2 -- 7
Miscellaneous -- 13 -- 13
Other fees 5 -- -- 5
--------- --------- --------- ---------
Total expenses 920 282 (216) 986
Less expenses reimbursed -- (191) 191 (e) --
--------- --------- --------- ---------
Net expenses 920 91 (25) 986
--------- --------- --------- ---------
Net investment income (loss) 6,146 235 25 6,406
--------- --------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 28,495 1,499 -- 29,994
Financial futures contracts (1,404) (155) -- (1,559)
Change in net unrealized appreciation (depreciation) on:
Investments (120,407) (5,952) -- (126,359)
Futures (225) (13) -- (238)
--------- --------- --------- ---------
Net realized and unrealized gain (loss) (93,541) (4,621) -- (98,162)
--------- --------- --------- ---------
Net increase (decrease) in net assets resulting from operations $ (87,395) $ (4,386) $ 25 $ (91,756)
========= ========= ========= =========
See Notes to Pro-form Combined Financial Statements
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Common Stock
Advertising (0.01%)
Interpublic Group of Companies, Inc. (The) 607 $ 18
Omnicom Group, Inc. 300 26
TMP Worldwide, Inc.* 172 10
-------------
54
-------------
Aerospace & Defense - (1.42%)
B.F. Goodrich Co. 4,500 $ 171
Boeing Co. 41,568 2,311 1,411 79
General Dynamics Corp. 9,300 724 325 25
Goodrich (B.F.) Co. (The) 167 6
Honeywell International, Inc. 37,862 1,325
Lockheed Martin Corp. 20,100 745 702 26
Northrop Grumman Corp. 3,900 312 138 11
Raytheon Co. 17,400 462 575 15
United Technologies Corp. 22,400 1,641 761 56
------------- -------------
7,691 218
------------- -------------
Auto & Truck Parts - (0.33%)
AutoZone, Inc. 5,600 210
Cooper Tire & Rubber Co. 3,200 45
Cummins Engine Company, Inc. 1,700 66 67 3
Dana Corp. 6,515 152 239 6
Eaton Corp. 111 8
Genuine Parts Co. 8,650 273
Goodyear Tire & Rubber Co. 7,600 213
Johnson Controls, Inc. 4,100 297
Paccar, Inc. 3,300 170 124 6
Ryder System, Inc. 98 2
TRW, Inc. 6,200 254
Visteon Corp. 6,166 113 212 4
------------- -------------
1,793 29
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Common Stock
Advertising (0.01%)
Interpublic Group of Companies, Inc. (The) 607 $ 18
Omnicom Group, Inc. 300 26
TMP Worldwide, Inc.* 172 10
-------------
54
-------------
Aerospace & Defense - (1.42%)
B.F. Goodrich Co. 4,500 171
Boeing Co. 42,979 2,390
General Dynamics Corp. 9,625 749
Goodrich (B.F.) Co. (The) 167 6
Honeywell International, Inc. 37,862 1,325
Lockheed Martin Corp. 20,802 771
Northrop Grumman Corp. 4,038 323
Raytheon Co. 17,975 477
United Technologies Corp. 23,161 1,697
-------------
7,909
-------------
Auto & Truck Parts - (0.33%)
AutoZone, Inc. 5,600 210
Cooper Tire & Rubber Co. 3,200 45
Cummins Engine Company, Inc. 1,767 69
Dana Corp. 6,754 158
Eaton Corp. 111 8
Genuine Parts Co. 8,650 273
Goodyear Tire & Rubber Co. 7,600 213
Johnson Controls, Inc. 4,100 297
Paccar, Inc. 3,424 176
Ryder System, Inc. 98 2
TRW, Inc. 6,200 254
Visteon Corp. 6,378 117
-------------
1,822
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Automobile - (0.80%)
Delphi Automotive Systems Corp. 27,069 $ 431 906 $ 14
Ford Motor Co. 87,036 2,137 2,959 73
General Motors Corp. 26,100 1,679 887 57
Navistar International Corp., Inc. - Cl. B 2,700 76
------------- -------------
4,323 144
------------- -------------
Bank - (6.55%)
AmSouth Bancorp. 16,900 312 599 11
Bank of America Corp. 75,268 4,518 2,592 156
Bank of New York Co., Inc. 34,300 1,646 1,190 57
Bank One Corp. 54,850 1,964 1,885 67
BB&T Corporation 18,800 690 659 24
Charter One Financial, Inc. 9,450 301
Comerica, Inc. 8,500 490 289 17
Fifth Third Bancorp 27,054 1,625 931 56
First Union Corp. 46,646 1,630 1,587 55
FleetBoston Financial Corp. 51,420 2,029 1,752 69
Golden West Financial Corp. 7,300 469
Huntington Bancshares, Inc. 12,031 197 406 7
JP Morgan Chase & Co. 93,150 4,154
KeyCorp 20,400 531 687 18
Mellon Financial Corp. 22,800 1,049 772 36
National City Corp. 28,500 877 972 30
Northern Trust Corp. 10,300 644 360 22
PNC Bank Corp. 13,900 914 467 31
Regions Financial Corp. 11,200 358 368 12
SouthTrust Corp. 15,600 406 550 14
State Street Corp. 15,200 752 526 26
Suntrust Banks, Inc. 14,100 913 472 31
Synovus Financial Corp. 13,250 416 469 15
Union Planters Corp. 6,600 288 222 10
US Bancorp 90,919 2,072 3,082 70
Wachovia Corp. 10,100 719 340 24
Washington Mutual, Inc. 41,277 1,550
Wells Fargo & Co. 80,900 3,756 2,776 129
Zions Bancorp 4,300 254 149 9
------------- -------------
35,524 996
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Automobile - (0.80%)
Delphi Automotive Systems Corp. 27,975 $ 445
Ford Motor Co. 89,995 2,210
General Motors Corp. 26,987 1,736
Navistar International Corp., Inc. - Cl. B 2,700 76
-------------
4,467
-------------
Bank - (6.55%)
AmSouth Bancorp. 17,499 323
Bank of America Corp. 77,860 4,674
Bank of New York Co., Inc. 35,490 1,703
Bank One Corp. 56,735 2,031
BB&T Corporation 19,459 714
Charter One Financial, Inc. 9,450 301
Comerica, Inc. 8,789 507
Fifth Third Bancorp 27,985 1,681
First Union Corp. 48,233 1,685
FleetBoston Financial Corp. 53,172 2,098
Golden West Financial Corp. 7,300 469
Huntington Bancshares, Inc. 12,437 204
JP Morgan Chase & Co. 93,150 4,154
KeyCorp 21,087 549
Mellon Financial Corp. 23,572 1,085
National City Corp. 29,472 907
Northern Trust Corp. 10,660 666
PNC Bank Corp. 14,367 945
Regions Financial Corp. 11,568 370
SouthTrust Corp. 16,150 420
State Street Corp. 15,726 778
Suntrust Banks, Inc. 14,572 944
Synovus Financial Corp. 13,719 431
Union Planters Corp. 6,822 298
US Bancorp 94,001 2,142
Wachovia Corp. 10,440 743
Washington Mutual, Inc. 41,277 1,550
Wells Fargo & Co. 83,676 3,885
Zions Bancorp 4,449 263
-------------
36,520
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Beverages (.07%)
Anheuser-Busch Cos., Inc. 1,452 $ 60
Brown-Forman Corp. 111 7
Coca-Cola Co. (The) 4,023 181
Coca-Cola Enterprises, Inc. 680 11
Coors (Adolph) Co. (Class B) 60 3
Pepsi Bottling Group, Inc. 233 9
PepsiCo, Inc. 2,368 105
-------------
376
-------------
Brokerage & Investment Management - (0.98%)
Bear Stearns Cos., Inc. 5,032 $ 297
Charles Schwab Corp. 64,675 989
Franklin Resources, Inc. 13,000 595
Morgan Stanley, Dean Witter, Discover & Co. 52,200 3,353
T. Rowe Price Group, Inc. 6,100 228
-------------
5,462
-------------
Broker Services (.05%)
Bear Stearns Cos., Inc. 170 10
Lehman Brothers Holdings, Inc. 399 31
Merrill Lynch & Co., Inc. 1,357 80
Morgan Stanley Dean Witter & Co. 1,800 116
Schwab (Charles) Corp. 2,242 34
-------------
271
-------------
Building (0.02%)
Black & Decker Corp. 131 5
Centex Corp. 96 4
Danaher Corp. 231 13
Georgia-Pacific Corp. 365 12
Kaufman & Broad Home Corp. 72 2
Louisiana-Pacific Corp. 169 2
Masco Corp. 744 19
Pulte Corp. 68 3
Sherwin-Williams Co. 253 6
Snap-on, Inc. 93 2
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Beverages (.07%)
Anheuser-Busch Cos., Inc. 1,452 $ 60
Brown-Forman Corp. 111 7
Coca-Cola Co. (The) 4,023 181
Coca-Cola Enterprises, Inc. 680 11
Coors (Adolph) Co. (Class B) 60 3
Pepsi Bottling Group, Inc. 233 9
PepsiCo, Inc. 2,368 105
-------------
376
-------------
Brokerage & Investment Management - (0.98%)
Bear Stearns Cos., Inc. 5,032 297
Charles Schwab Corp. 64,675 989
Franklin Resources, Inc. 13,000 595
Morgan Stanley, Dean Witter, Discover & Co. 52,200 3,353
T. Rowe Price Group, Inc. 6,100 228
-------------
5,462
-------------
Broker Services (.05%)
Bear Stearns Cos., Inc. 170 10
Lehman Brothers Holdings, Inc. 399 31
Merrill Lynch & Co., Inc. 1,357 80
Morgan Stanley Dean Witter & Co. 1,800 116
Schwab (Charles) Corp. 2,242 34
-------------
271
-------------
Building (0.02%)
Black & Decker Corp. 131 5
Centex Corp. 96 4
Danaher Corp. 231 13
Georgia-Pacific Corp. 365 12
Kaufman & Broad Home Corp. 72 2
Louisiana-Pacific Corp. 169 2
Masco Corp. 744 19
Pulte Corp. 68 3
Sherwin-Williams Co. 253 6
Snap-on, Inc. 93 2
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Stanley Works (The) 138 $ 6
Vulcan Materials Co. 163 9
Weyerhauser Co. 348 19
Willamette Industries, Inc. 177 9
-------------
111
-------------
Business Services - (0.47%)
Automatic Data Processing, Inc. 29,900 $ 1,486
Cendant Corp. * 1,378 27
Convergys Corp.* 276 8
Equifax, Inc. 232 9
H & R Block, Inc. 4,200 271 148 10
Interpublic Group Cos., Inc. 18,100 531
Moody's Corp. 255 9
Paychex, Inc. 604 24
Robert Half International, Inc. 8,800 219 284 7
------------- -------------
2,507 94
------------- -------------
Chemical - (1.04%)
Air Products & Chemicals, Inc. 10,500 480 369 17
Ashland, Inc. 3,000 120
Dow Chemical Co. 42,643 1,418 1,452 48
E.I. du Pont de Nemours & Co. 48,982 2,363
Eastman Chemical Co. 3,400 162 125 6
Engelhard Corp. 6,100 157 211 5
FMC Corp. * 50 3
Great Lakes Chemical Corp. 2,300 71 81 3
Hercules, Inc. 4,600 52 175 2
PPG Industries, Inc. 272 14
Praxair, Inc. 7,300 343 260 12
Rohm & Haas Co. 10,227 337 356 12
Sigma-Aldrich Corp. 3,700 143 122 5
------------- -------------
5,646 127
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Stanley Works (The) 138 $ 6
Vulcan Materials Co. 163 9
Weyerhauser Co. 348 19
Willamette Industries, Inc. 177 9
-------------
111
-------------
Business Services - (0.47%)
Automatic Data Processing, Inc. 29,900 1,486
Cendant Corp. * 1,378 27
Convergys Corp.* 276 8
Equifax, Inc. 232 9
H & R Block, Inc. 4,348 281
Interpublic Group Cos., Inc. 18,100 531
Moody's Corp. 255 9
Paychex, Inc. 604 24
Robert Half International, Inc. 9,084 226
-------------
2,601
-------------
Chemical - (1.04%)
Air Products & Chemicals, Inc. 10,869 497
Ashland, Inc. 3,000 120
Dow Chemical Co. 44,095 1,466
E.I. du Pont de Nemours & Co. 48,982 2,363
Eastman Chemical Co. 3,525 168
Engelhard Corp. 6,311 162
FMC Corp. * 50 3
Great Lakes Chemical Corp. 2,381 74
Hercules, Inc. 4,775 54
PPG Industries, Inc. 272 14
Praxair, Inc. 7,560 355
Rohm & Haas Co. 10,583 349
Sigma-Aldrich Corp. 3,822 148
-------------
5,773
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Commercial Services - (0.83%)
American Greetings Corp. - Cl. A 2,800 $ 31
Avery Dennison Corp. 5,200 265
Cendant Corp. 40,899 798
Cintas Corp. 7,900 365
Concord EFS, Inc. 11,600 603
Convergys Corp. 8,000 242
Deluxe Corp. 3,100 90
Ecolab, Inc. 6,500 266
Equifax, Inc. 7,200 264
Omnicom Group, Inc. 9,000 774
Power One, Inc. 3,300 55
Quintiles Transnational Corp. 6,500 164
R.R. Donnelley & Sons Co. 4,800 143
The Dun & Bradstreet Corp. 7,700 258
TMP Worldwide, Inc. 5,100 306
-------------
4,624
-------------
Computer Equipment - (5.88%)
Advanced Micro Devices, Inc. 15,700 453
Apple Computer, Inc. * 16,000 372 564 $ 13
Compaq Computer Corp. 79,011 1,224 2,732 42
Dell Computer Corp. * 122,500 3,203 4,207 110
EMC Corp. * 104,912 3,048 3,569 104
Gateway, Inc. * 15,100 248 522 9
Hewlett-Packard Co. 92,400 2,643 3,142 90
Intel Corp. 316,400 9,255
International Business Machines Corp. 81,700 9,232 2,810 317
Lexmark International Group, Inc. - Cl. A * 6,100 410 207 14
Network Appliance, Inc. * 15,000 206 526 7
Palm, Inc. * 24,561 149 917 6
Sabre Holdings Corp.* 215 11
Veritas Software Corp. * 19,100 1,271 643 43
Xerox Corp. 32,500 311
------------- -------------
32,025 766
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Commercial Services - (0.83%)
American Greetings Corp. - Cl. A 2,800 $ 31
Avery Dennison Corp. 5,200 265
Cendant Corp. 40,899 798
Cintas Corp. 7,900 365
Concord EFS, Inc. 11,600 603
Convergys Corp. 8,000 242
Deluxe Corp. 3,100 90
Ecolab, Inc. 6,500 266
Equifax, Inc. 7,200 264
Omnicom Group, Inc. 9,000 774
Power One, Inc. 3,300 55
Quintiles Transnational Corp. 6,500 164
R.R. Donnelley & Sons Co. 4,800 143
The Dun & Bradstreet Corp. 7,700 258
TMP Worldwide, Inc. 5,100 306
-------------
4,624
-------------
Computer Equipment - (5.88%)
Advanced Micro Devices, Inc. 15,700 453
Apple Computer, Inc. * 16,564 385
Compaq Computer Corp. 81,743 1,266
Dell Computer Corp. * 126,707 3,313
EMC Corp. * 108,481 3,152
Gateway, Inc. * 15,622 257
Hewlett-Packard Co. 95,542 2,733
Intel Corp. 316,400 9,255
International Business Machines Corp. 84,510 9,549
Lexmark International Group, Inc. - Cl. A * 6,307 424
Network Appliance, Inc. * 15,526 213
Palm, Inc. * 25,478 155
Sabre Holdings Corp.* 215 11
Veritas Software Corp. * 19,743 1,314
Xerox Corp. 32,500 311
-------------
32,791
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Computer Software & Services - (6.78%)
Adobe Systems, Inc. 11,200 $ 526 387 $ 18
Autodesk, Inc. 2,400 90 87 3
Automatic Data Processing, Inc. 1,010 50
BMC Software, Inc. * 11,500 259 394 9
BroadVision, Inc. 11,100 56 442 2
Cabletron Systems, Inc. * 9,400 215 305 7
Cisco Systems, Inc.* 11,837 216
Citrix Systems, Inc. * 8,800 307 299 10
Computer Associates International, Inc. 26,925 969 932 34
Computer Sciences Corp. * 8,100 280 273 9
Compuware Corp. * 17,500 245 595 8
Electronic Data Systems Corp. 22,300 1,394 757 47
First Data Corp. 18,500 1,189 634 41
Fiserv, Inc. * 5,600 358 201 13
IMS Health, Inc. 14,200 405 477 14
Intuit, Inc. * 9,600 384 337 14
Mercury Interactive Corp. * 3,600 216 134 8
Microsoft Corp. * 253,500 18,505 8,704 635
NCR Corp. * 4,800 226 156 7
Novell, Inc. * 14,100 80 514 3
Oracle Corp. * 263,500 5,006 9,079 173
Parametric Technology Corp. * 11,800 165 427 6
Peoplesoft, Inc. * 14,100 694 475 23
Progressive Corp. 3,400 460
Sapient Corp. 5,000 49 199 2
Siebel Systems, Inc. * 21,800 1,022 733 34
Sun Microsystems, Inc. * 154,400 2,427 5,267 83
Unisys Corp. * 16,000 235 512 8
Yahoo!, Inc. 27,400 548
------------- -------------
36,310 1,477
------------- -------------
Construction - (0.07%)
Stanley Works 3,800 159
Vulcan Materials Co. 4,800 258
-------------
417
-------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Computer Software & Services - (6.78%)
Adobe Systems, Inc. 11,587 $ 544
Autodesk, Inc. 2,487 93
Automatic Data Processing, Inc. 1,010 50
BMC Software, Inc. * 11,894 268
BroadVision, Inc. 11,542 58
Cabletron Systems, Inc. * 9,705 222
Cisco Systems, Inc.* 11,837 216
Citrix Systems, Inc. * 9,099 317
Computer Associates International, Inc. 27,857 1,003
Computer Sciences Corp. * 8,373 289
Compuware Corp. * 18,095 253
Electronic Data Systems Corp. 23,057 1,441
First Data Corp. 19,134 1,230
Fiserv, Inc. * 5,801 371
IMS Health, Inc. 14,677 419
Intuit, Inc. * 9,937 398
Mercury Interactive Corp. * 3,734 224
Microsoft Corp. * 262,204 19,140
NCR Corp. * 4,956 233
Novell, Inc. * 14,614 83
Oracle Corp. * 272,579 5,179
Parametric Technology Corp. * 12,227 171
Peoplesoft, Inc. * 14,575 717
Progressive Corp. 3,400 460
Sapient Corp. 5,199 51
Siebel Systems, Inc. * 22,533 1,056
Sun Microsystems, Inc. * 159,667 2,510
Unisys Corp. * 16,512 243
Yahoo!, Inc. 27,400 548
-------------
37,787
-------------
Construction - (0.07%)
Stanley Works 3,800 159
Vulcan Materials Co. 4,800 258
-------------
417
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Consumer Miscellaneous - (0.47%)
American Greetings Corp. (Class A) 103 $ 1
Black & Decker Corp. 3,500 $ 138
Clorox Co. 11,100 376
Dollar General Corp. 15,646 305
Fortune Brands, Inc. 7,300 280
Harley-Davidson, Inc. 14,200 669
Newell Rubbermaid, Inc. 13,116 329
Parker-Hannifin Corp. 5,650 240
Sherwin-Williams Co. 7,000 155
Snap-On, Inc. 2,500 60
Tupperware Corp. 2,500 59
------------- -------------
2,611 1
------------- -------------
Container - (0.06%)
Ball Corp. 45 2
Bemis Co., Inc. 2,400 96 85 3
Pactiv Corp. * 7,400 99 257 4
Sealed Air Corp. * 3,589 134 135 5
------------- -------------
329 14
------------- -------------
Cosmetic & Personal Care - (1.72%)
Alberto-Culver Co. - Cl. B 2,700 114 92 4
Avon Products, Inc. 11,700 541 384 18
Colgate-Palmolive Co. 26,800 1,581
Gillette Co. 50,500 1,464 1,705 49
International Flavors & Fragrances, Inc. 4,400 111 155 4
Leggett & Platt, Inc. 9,900 218
Procter & Gamble Co. 60,700 3,873
Unilever NV - NY Shares 26,782 1,595
------------- -------------
9,497 75
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Consumer Miscellaneous - (0.47%)
American Greetings Corp. (Class A) 103 $ 1
Black & Decker Corp. 3,500 138
Clorox Co. 11,100 376
Dollar General Corp. 15,646 305
Fortune Brands, Inc. 7,300 280
Harley-Davidson, Inc. 14,200 669
Newell Rubbermaid, Inc. 13,116 329
Parker-Hannifin Corp. 5,650 240
Sherwin-Williams Co. 7,000 155
Snap-On, Inc. 2,500 60
Tupperware Corp. 2,500 59
-------------
2,612
-------------
Container - (0.06%)
Ball Corp. 45 2
Bemis Co., Inc. 2,485 99
Pactiv Corp. * 7,657 103
Sealed Air Corp. * 3,724 139
-------------
343
-------------
Cosmetic & Personal Care - (1.72%)
Alberto-Culver Co. - Cl. B 2,792 118
Avon Products, Inc. 12,084 559
Colgate-Palmolive Co. 26,800 1,581
Gillette Co. 52,205 1,513
International Flavors & Fragrances, Inc. 4,555 115
Leggett & Platt, Inc. 9,900 218
Procter & Gamble Co. 60,700 3,873
Unilever NV - NY Shares 26,782 1,595
-------------
9,572
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Diversified Operations - (6.41%)
Amgen, Inc. 49,300 $ 2,992
Corning, Inc. 43,100 720
Costco Wholesale Corp. 21,000 863
Crane Co. 2,950 91 97 $ 3
Danaher Corp. 6,800 381
Du Pont (E.I.) De Nemours & Co. 1,687 81
Eaton Corp. 3,100 217
Fortune Brands, Inc. 247 9
Honeywell International, Inc. 1,309 46
General Electric Co. 468,000 22,815
Illinois Tool Works, Inc. 14,100 893 492 31
ITT Industries, Inc. 4,200 186 142 6
Johnson Controls, Inc. 140 10
Loews Corp. 319 21
Minnesota Mining & Manufacturing Co. 640 73
National Service Industries, Inc. 1,700 38 67 2
Pall Corp. 5,300 125
PPG Industries, Inc. 7,900 415
Textron, Inc. 6,700 369 228 13
TRW, Inc. 202 8
Tyco International, Ltd. 90,930 4,956 3,132 171
W.W. Grainger, Inc. 4,700 193
------------- -------------
35,254 474
------------- -------------
Electric Power - (2.83%)
AES Corp. 24,900 1,072
Allegheny Energy, Inc. 5,800 280
Ameren Corp. 6,500 278
American Electric Power Co. 15,260 705
Calpine Corp. 14,300 541
Cinergy Corp. 7,500 262
CMS Energy Corp. 5,700 159
Consolidated Edison, Inc. 10,100 402
Dominion Resources, Inc. 11,994 721
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Diversified Operations - (6.41%)
Amgen, Inc. 49,300 $ 2,992
Corning, Inc. 43,100 720
Costco Wholesale Corp. 21,000 863
Crane Co. 3,047 94
Danaher Corp. 6,800 381
Du Pont (E.I.) De Nemours & Co. 1,687 81
Eaton Corp. 3,100 217
Fortune Brands, Inc. 247 9
Honeywell International, Inc. 1,309 46
General Electric Co. 468,000 22,815
Illinois Tool Works, Inc. 14,592 924
ITT Industries, Inc. 4,342 192
Johnson Controls, Inc. 140 10
Loews Corp. 319 21
Minnesota Mining & Manufacturing Co. 640 73
National Service Industries, Inc. 1,767 40
Pall Corp. 5,300 125
PPG Industries, Inc. 7,900 415
Textron, Inc. 6,928 382
TRW, Inc. 202 8
Tyco International, Ltd. 94,062 5,127
W.W. Grainger, Inc. 4,700 193
-------------
35,728
-------------
Electric Power - (2.83%)
AES Corp. 24,900 1,072
Allegheny Energy, Inc. 5,800 280
Ameren Corp. 6,500 278
American Electric Power Co. 15,260 705
Calpine Corp. 14,300 541
Cinergy Corp. 7,500 262
CMS Energy Corp. 5,700 159
Consolidated Edison, Inc. 10,100 402
Dominion Resources, Inc. 11,994 721
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
DTE Energy Co. 8,000 $ 372
Duke Energy Co. 36,488 1,423
Edison International 14,300 159
Emerson Electric Co. 20,100 1,216 693 $ 42
Entergy Corp. 10,500 403
Exelon Corp. 15,150 971
Firstenergy Corp. 11,200 360
FPL Group, Inc. 8,300 500
General Electric Co. 16,065 783
GPU, Inc. 6,100 214
Mirant Corp. 15,868 546
Niagara Mohawk Holdings, Inc. 7,800 138
NiSource, Inc. 9,149 250
PG & E Corp. 19,900 223
Pinnacle West Capital Corp. 4,400 209
PPL Corp. 6,900 380
Progress Energy, Inc. 9,556 429
Public Services Enterprise Group, Inc. 10,100 494
Reliant Energy, Inc. 14,224 458
Southern Co. 32,000 744
TXU Corp. 12,312 593
Xcel Energy, Inc. 15,550 442
------------- -------------
14,944 825
------------- -------------
Electrical Equipment - (0.23%)
American Power Conversion * 8,300 131 315 5
Best Buy Co., Inc. 9,700 616
Cooper Industries, Inc. 4,000 158
Molex, Inc. * 9,550 349 316 12
------------- -------------
1,254 17
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
DTE Energy Co. 8,000 $ 372
Duke Energy Co. 36,488 1,423
Edison International 14,300 159
Emerson Electric Co. 20,793 1,258
Entergy Corp. 10,500 403
Exelon Corp. 15,150 971
Firstenergy Corp. 11,200 360
FPL Group, Inc. 8,300 500
General Electric Co. 16,065 783
GPU, Inc. 6,100 214
Mirant Corp. 15,868 546
Niagara Mohawk Holdings, Inc. 7,800 138
NiSource, Inc. 9,149 250
PG & E Corp. 19,900 223
Pinnacle West Capital Corp. 4,400 209
PPL Corp. 6,900 380
Progress Energy, Inc. 9,556 429
Public Services Enterprise Group, Inc. 10,100 494
Reliant Energy, Inc. 14,224 458
Southern Co. 32,000 744
TXU Corp. 12,312 593
Xcel Energy, Inc. 15,550 442
-------------
15,769
-------------
Electrical Equipment - (0.23%)
American Power Conversion * 8,615 136
Best Buy Co., Inc. 9,700 616
Cooper Industries, Inc. 4,000 158
Molex, Inc. * 9,866 361
-------------
1,271
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Electronic Products & Services - (3.92%)
Advanced Micro Devices, Inc.* 556 $ 16
Agilent Technologies, Inc. * 21,374 $ 695 739 24
Altera Corp. * 18,600 539 625 18
Analog Devices, Inc. * 17,200 744 582 25
Applera Corporation - Applied Biosystems Group 10,000 268
Applied Materials, Inc. * 38,400 1,885 1,315 65
Applied Micro Circuits Corp. * 14,100 243 486 8
Ball Corp. 1,400 67
Broadcom Corp. - Cl. A * 12,900 552 421 18
Cisco Systems, Inc. 344,000 6,261
Conexant Systems, Inc. * 10,500 94 400 4
Grainger (W.W.), Inc. 154 6
Intel Corp. 10,876 318
Jabil Circuit, Inc. * 9,000 278 309 10
KLA-Tencor Corp. * 8,700 509 300 18
Linear Technology Corp *. 514 23
LSI Logic Corp. * 17,200 323 584 11
Maxim Integrated Products, Inc. * 15,100 668 531 24
Micron Technology, Inc. * 964 40
Motorola, Inc. * 103,895 1,720 3,552 59
National Semiconductor Corp. * 8,700 253 280 8
Novellus Systems, Inc. * 6,500 369 230 13
Parker-Hannifin Corp. 189 8
PerkinElmer, Inc. 5,000 138 163 5
Power-One, Inc.* 127 2
QLogic Corp. * 4,600 296 149 10
Rockwell International Corp. 8,900 339 296 11
Sanmina Corp. * 14,100 330 517 12
Solectron Corp. * 30,200 553 1,057 19
Tektronix, Inc. 4,000 109 152 4
Teradyne, Inc. * 8,200 271 282 9
Texas Instruments, Inc. 82,100 2,586 2,808 88
Thomas & Betts Corp. 2,500 55 94 2
Vitesse Semiconductor Corp. * 9,100 191 297 6
Xilinx, Inc. * 15,300 631 538 22
------------- -------------
20,967 906
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Electronic Products & Services - (3.92%)
Advanced Micro Devices, Inc.* 556 $ 16
Agilent Technologies, Inc. * 22,113 719
Altera Corp. * 19,225 557
Analog Devices, Inc. * 17,782 769
Applera Corporation - Applied Biosystems Group 10,000 268
Applied Materials, Inc. * 39,715 1,950
Applied Micro Circuits Corp. * 14,586 251
Ball Corp. 1,400 67
Broadcom Corp. - Cl. A * 13,321 570
Cisco Systems, Inc. 344,000 6,261
Conexant Systems, Inc. * 10,900 98
Grainger (W.W.), Inc. 154 6
Intel Corp. 10,876 318
Jabil Circuit, Inc. * 9,309 288
KLA-Tencor Corp. * 9,000 527
Linear Technology Corp *. 514 23
LSI Logic Corp. * 17,784 334
Maxim Integrated Products, Inc. * 15,631 692
Micron Technology, Inc. * 964 40
Motorola, Inc. * 107,447 1,779
National Semiconductor Corp. * 8,980 261
Novellus Systems, Inc. * 6,730 382
Parker-Hannifin Corp. 189 8
PerkinElmer, Inc. 5,163 143
Power-One, Inc.* 127 2
QLogic Corp. * 4,749 306
Rockwell International Corp. 9,196 350
Sanmina Corp. * 14,617 342
Solectron Corp. * 31,257 572
Tektronix, Inc. 4,152 113
Teradyne, Inc. * 8,482 280
Texas Instruments, Inc. 84,908 2,674
Thomas & Betts Corp. 2,594 57
Vitesse Semiconductor Corp. * 9,397 197
Xilinx, Inc. * 15,838 653
-------------
21,873
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Energy - Alternative Source - (0.36%)
Calpine Corp.* 483 $ 18
Dynegy, Inc. - Cl.A 15,100 $ 702
El Paso Corp. 24,362 1,280
Mirant Corp.* 549 19
------------- -------------
1,982 37
------------- -------------
Engineering & Construction - (0.03%)
Fluor Corp. 3,300 149 128 6
------------- -------------
Fiber Optics (0.00%)
JDS Uniphase Corp.* 2,129 27
-------------
Financial Services - (1.89%)
American Express Co. 63,000 2,444 2,140 83
Capital One Financial Corp. 337 20
Charter One Financial, Inc. 334 11
Citigroup, Inc. 8,133 430
Concord EFS, Inc.* 390 20
Franklin Resources, Inc. 428 20
Golden West Financial Corp. 257 17
Household International, Inc. 22,166 1,478 750 50
J.P. Morgan Chase & Co. 3,211 143
Lehman Brothers Holdings, Inc. 11,700 910
MBNA Corp. 1,378 45
Merrill Lynch & Co., Inc. 39,300 2,329
Paychex, Inc. 17,950 718
Pitney Bowes, Inc. 11,800 497
Price (T. Rowe) Associates, Inc. 199 8
Providian Financial Corp. 13,700 811 462 27
Stillwell Financial, Inc. 10,900 366 355 12
USA Education, Inc. 264 19
Washington Mutual, Inc. 1,419 53
------------- -------------
9,553 958
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Energy - Alternative Source - (0.36%)
Calpine Corp.* 483 $ 18
Dynegy, Inc. - Cl.A 15,100 702
El Paso Corp. 24,362 1,280
Mirant Corp.* 549 19
-------------
2,019
-------------
Engineering & Construction - (0.03%)
Fluor Corp. 3,428 155
-------------
Fiber Optics (0.00%)
JDS Uniphase Corp.* 2,129 27
-------------
Financial Services - (1.89%)
American Express Co. 65,140 2,527
Capital One Financial Corp. 337 20
Charter One Financial, Inc. 334 11
Citigroup, Inc. 8,133 430
Concord EFS, Inc.* 390 20
Franklin Resources, Inc. 428 20
Golden West Financial Corp. 257 17
Household International, Inc. 22,916 1,528
J.P. Morgan Chase & Co. 3,211 143
Lehman Brothers Holdings, Inc. 11,700 910
MBNA Corp. 1,378 45
Merrill Lynch & Co., Inc. 39,300 2,329
Paychex, Inc. 17,950 718
Pitney Bowes, Inc. 11,800 497
Price (T. Rowe) Associates, Inc. 199 8
Providian Financial Corp. 14,162 838
Stillwell Financial, Inc. 11,255 378
USA Education, Inc. 264 19
Washington Mutual, Inc. 1,419 53
-------------
10,511
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Food, Beverage & Tobacco - (4.22%)
Adolph Coors Co. - Cl. B 1,600 $ 80
Anheuser-Busch Cos., Inc. 42,800 1,763
Archer Daniels Midland Co. 30,266 394 1,022 $ 13
Brown-Forman Corp. - Cl. B 3,300 211
Campbell Soup Co. 19,700 507 660 17
Coca-Cola Co. 117,600 5,292
Coca-Cola Enterprises, Inc. 20,300 332
ConAgra, Inc. 25,700 509 869 17
General Mills, Inc. 13,500 591 460 20
H.J. Heinz Co. 16,100 658 564 23
Hershey Foods Corp. 6,600 407 221 14
Kellogg Co. 19,600 569 656 19
Pepsi Bottling Group, Inc. 6,400 257
PepsiCo, Inc. 68,600 3,032
Philip Morris Cos., Inc. 103,300 5,243
Quaker Oats Co. 6,400 584 214 20
Ralston-Ralston Purina Group 14,300 429 501 15
Sara Lee Corp. 37,700 714 1,272 24
SuperValu, Inc. 5,600 98
Sysco Corp. 31,800 863
Unilever NV, American Depositary Receipts
(ADR) (Netherlands) 924 55
UST, Inc. 8,300 240
Wm. Wrigley Jr. Co. 10,600 497
Wrigley (WM) Jr. Co. 365 17
------------- -------------
23,270 254
------------- -------------
Funiture (0.00%)
Leggett & Platt, Inc. 317 7
-------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Food, Beverage & Tobacco - (4.22%)
Adolph Coors Co. - Cl. B 1,600 $ 80
Anheuser-Busch Cos., Inc. 42,800 1,763
Archer Daniels Midland Co. 31,288 407
Brown-Forman Corp. - Cl. B 3,300 211
Campbell Soup Co. 20,360 524
Coca-Cola Co. 117,600 5,292
Coca-Cola Enterprises, Inc. 20,300 332
ConAgra, Inc. 26,569 526
General Mills, Inc. 13,960 611
H.J. Heinz Co. 16,664 681
Hershey Foods Corp. 6,821 421
Kellogg Co. 20,256 588
Pepsi Bottling Group, Inc. 6,400 257
PepsiCo, Inc. 68,600 3,032
Philip Morris Cos., Inc. 103,300 5,243
Quaker Oats Co. 6,614 604
Ralston-Ralston Purina Group 14,801 444
Sara Lee Corp. 38,972 738
SuperValu, Inc. 5,600 98
Sysco Corp. 31,800 863
Unilever NV, American Depositary Receipts
(ADR) (Netherlands) 924 55
UST, Inc. 8,300 240
Wm. Wrigley Jr. Co. 10,600 497
Wrigley (WM) Jr. Co. 365 17
-------------
23,524
-------------
Funiture (0.00%)
Leggett & Platt, Inc. 317 7
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Health Care Products - (10.65%)
Abbott Laboratories 73,200 $ 3,514
Allergan, Inc. 6,200 530
American Home Products Corp. 62,000 3,623
Bausch & Lomb, Inc. 2,200 80
Baxter International, Inc. 28,200 1,382
Becton, Dickinson & Co. 11,700 419
Biomet, Inc. 8,550 411
Boston Scientific Corp. 19,100 325
Bristol-Myers Squibb Co. 91,300 4,775
C.R. Bard, Inc. 2,200 125
Cardinal Health, Inc. 21,350 1,473
Chiron Corp. 9,200 469
Eli Lilly & Co. 52,700 3,900
Forest Laboratories, Inc. 8,500 603
Guidant Corp. 14,700 529
Johnson & Johnson 143,378 7,169
King Pharmaceuticals, Inc. 8,300 446
McKesson HBOC, Inc. 13,233 491
MedImmune, Inc. 10,000 472
Medtronic, Inc. 57,500 2,646
Merck & Co., Inc. 107,800 6,889
Millipore Corp. 1,900 118
Pfizer, Inc. 297,175 11,902
Pharmacia Corp. 61,805 2,840
Schering-Plough Corp. 69,300 2,511
Stryker Corp. 9,000 494
UnitedHealth Group, Inc. 15,300 945
Watson Pharmaceuticals, Inc. 4,800 296
-------------
59,377
-------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Health Care Products - (10.65%)
Abbott Laboratories 73,200 $ 3,514
Allergan, Inc. 6,200 530
American Home Products Corp. 62,000 3,623
Bausch & Lomb, Inc. 2,200 80
Baxter International, Inc. 28,200 1,382
Becton, Dickinson & Co. 11,700 419
Biomet, Inc. 8,550 411
Boston Scientific Corp. 19,100 325
Bristol-Myers Squibb Co. 91,300 4,775
C.R. Bard, Inc. 2,200 125
Cardinal Health, Inc. 21,350 1,473
Chiron Corp. 9,200 469
Eli Lilly & Co. 52,700 3,900
Forest Laboratories, Inc. 8,500 603
Guidant Corp. 14,700 529
Johnson & Johnson 143,378 7,169
King Pharmaceuticals, Inc. 8,300 446
McKesson HBOC, Inc. 13,233 491
MedImmune, Inc. 10,000 472
Medtronic, Inc. 57,500 2,646
Merck & Co., Inc. 107,800 6,889
Millipore Corp. 1,900 118
Pfizer, Inc. 297,175 11,902
Pharmacia Corp. 61,805 2,840
Schering-Plough Corp. 69,300 2,511
Stryker Corp. 9,000 494
UnitedHealth Group, Inc. 15,300 945
Watson Pharmaceuticals, Inc. 4,800 296
-------------
59,377
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Health Care Services - (0.61%)
Biogen, Inc. 7,100 $ 386
HCA-The Healthcare Corp. 25,750 1,164
Healthsouth Corp. 19,800 316
Humana, Inc. 7,200 71
Manor Care, Inc. 4,400 140
St. Jude Medical, Inc. 4,200 252
Tenet Healthcare Corp. 15,400 794
Wellpoint Health Networks, Inc. 3,200 301
-------------
3,424
-------------
Household Appliances / Furnishings - (0.06%)
Maytag Corp. 3,500 102 123 $ 3
Newell Rubbermaid, Inc. 431 11
Tupperware Corp. 94 2
Whirlpool Corp. 3,100 194 108 7
------------- -------------
296 23
------------- -------------
Housing - (0.13%)
Centex Corp. 2,800 114
Masco Corp. 21,600 539
Pulte Corp. 2,200 94
-------------
747
-------------
Instruments - Scientific (0.00%)
Applera Corp. - Applied Biosystems Group 341 9
Millipore Corp. 76 5
Thermo Electron Corp.* 293 6
-------------
20
-------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Health Care Services - (0.61%)
Biogen, Inc. 7,100 $ 386
HCA-The Healthcare Corp. 25,750 1,164
Healthsouth Corp. 19,800 316
Humana, Inc. 7,200 71
Manor Care, Inc. 4,400 140
St. Jude Medical, Inc. 4,200 252
Tenet Healthcare Corp. 15,400 794
Wellpoint Health Networks, Inc. 3,200 301
-------------
3,424
-------------
Household Appliances / Furnishings - (0.06%)
Maytag Corp. 3,623 105
Newell Rubbermaid, Inc. 431 11
Tupperware Corp. 94 2
Whirlpool Corp. 3,208 201
-------------
319
-------------
Housing - (0.13%)
Centex Corp. 2,800 114
Masco Corp. 21,600 539
Pulte Corp. 2,200 94
-------------
747
-------------
Instruments - Scientific (0.00%)
Applera Corp. - Applied Biosystems Group 341 9
Millipore Corp. 76 5
Thermo Electron Corp.* 293 6
-------------
20
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Insurance - (4.13%)
Aetna US Healthcare, Inc. 6,700 $ 173 230 $ 6
AFLAC, Inc. 24,900 784 850 27
Allstate Corp. 34,600 1,522 1,172 52
Ambac Financial Group, Inc. 5,000 291 171 10
American General Corp. 23,842 1,108 807 37
American International Group, Inc. 109,729 9,437 3,770 324
Aon Corp. 11,900 417 424 15
Chubb Corp. 8,300 643 283 22
Cigna Corp. 7,200 690 242 23
Cincinnati Financial Corp. 7,900 312 260 10
Conseco, Inc. 15,391 210 546 7
Hartford Financial Services Group, Inc. 11,100 759 383 26
Jefferson-Pilot Corp. 7,575 366 246 12
John Hancock Financial Services, Inc. 14,400 580 498 20
Lincoln National Corp. 9,000 466 304 16
Marsh & McLennan Cos., Inc. 13,100 1,323 446 45
MBIA, Inc. 7,100 395 240 13
Metlife, Inc. 35,700 1,106 1,213 38
MGIC Investment Corp. 4,900 356 173 13
Progressive Corp. 119 16
Safeco Corp. 6,100 180 207 6
St. Paul Cos., Inc. 10,214 518 347 18
Torchmark, Inc. 6,300 253 203 8
UnumProvident Corp. 11,720 376 390 12
------------- -------------
22,265 776
------------- -------------
Internet Services (0.07%)
America Online, Inc.* 7,166 380
Yahoo! Inc.* 917 18
-------------
398
-------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Insurance - (4.13%)
Aetna US Healthcare, Inc. 6,930 $ 179
AFLAC, Inc. 25,750 811
Allstate Corp. 35,772 1,574
Ambac Financial Group, Inc. 5,171 301
American General Corp. 24,649 1,145
American International Group, Inc. 113,499 9,761
Aon Corp. 12,324 432
Chubb Corp. 8,583 665
Cigna Corp. 7,442 713
Cincinnati Financial Corp. 8,160 322
Conseco, Inc. 15,937 217
Hartford Financial Services Group, Inc. 11,483 785
Jefferson-Pilot Corp. 7,821 378
John Hancock Financial Services, Inc. 14,898 600
Lincoln National Corp. 9,304 482
Marsh & McLennan Cos., Inc. 13,546 1,368
MBIA, Inc. 7,340 408
Metlife, Inc. 36,913 1,144
MGIC Investment Corp. 5,073 369
Progressive Corp. 119 16
Safeco Corp. 6,307 186
St. Paul Cos., Inc. 10,561 536
Torchmark, Inc. 6,503 261
UnumProvident Corp. 12,110 388
-------------
23,041
-------------
Internet Services (0.07%)
America Online, Inc.* 7,166 380
Yahoo! Inc.* 917 18
-------------
398
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Leisure & Recreation - (0.70%)
Brunswick Corp. 3,800 $ 91 142 $ 3
Carnival Corp. 27,300 838 946 29
Disney (Walt) Co., (The) 3,380 98
Eastman Kodak Co. 13,300 621 469 22
Harley-Davidson, Inc. 489 23
Harrah's Entertainment, Inc. * 5,200 183 190 7
Hasbro, Inc. 7,125 103 279 4
Hilton Hotels Corp. 17,500 203 597 7
Loews Corp. 9,200 593
Marriott International, Inc. (Class A) 394 18
Mattel, Inc. 20,900 395 697 13
Sabre Group Holdings, Inc. 6,274 314
Starwood Hotels & Resorts Worldwide, Inc. 8,900 332 321 12
------------- -------------
3,673 236
------------- -------------
Linen Supply & Related (0.00%)
Cintas Corp. 273 13
-------------
Machinery - (0.41%)
Caterpillar, Inc. 16,500 826 555 28
Cooper Industries, Inc. 151 6
Deere & Co. 10,700 405 380 14
Dover Corp. 9,500 358 329 12
Ingersoll-Rand Co. 259 11
FMC Corp. 1,400 96
Ingersoll-Rand Co. 7,800 321
McDermott International, Inc. 2,100 25
Thermo Electron Corp. 8,600 189
------------- -------------
2,220 71
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Leisure & Recreation - (0.70%)
Brunswick Corp. 3,942 $ 94
Carnival Corp. 28,246 867
Disney (Walt) Co., (The) 3,380 98
Eastman Kodak Co. 13,769 643
Harley-Davidson, Inc. 489 23
Harrah's Entertainment, Inc. * 5,390 190
Hasbro, Inc. 7,404 107
Hilton Hotels Corp. 18,097 210
Loews Corp. 9,200 593
Marriott International, Inc. (Class A) 394 18
Mattel, Inc. 21,597 408
Sabre Group Holdings, Inc. 6,274 314
Starwood Hotels & Resorts Worldwide, Inc. 9,221 344
-------------
3,909
-------------
Linen Supply & Related (0.00%)
Cintas Corp. 273 13
-------------
Machinery - (0.41%)
Caterpillar, Inc. 17,055 854
Cooper Industries, Inc. 151 6
Deere & Co. 11,080 419
Dover Corp. 9,829 370
Ingersoll-Rand Co. 259 11
FMC Corp. 1,400 96
Ingersoll-Rand Co. 7,800 321
McDermott International, Inc. 2,100 25
Thermo Electron Corp. 8,600 189
-------------
2,291
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Media - Publishing - (0.42%)
Dow Jones & Co., Inc. 4,400 $ 263 140 $ 8
Gannett Co., Inc. 12,300 810 428 28
Knight-Ridder, Inc. 3,300 196 118 7
McGraw-Hill Cos., Inc. (The) 316 21
Meredith Corp. 2,200 79 80 3
New York Times Co. - Cl. A 7,300 306 258 11
Tribune Co. 14,265 571 483 19
------------- -------------
2,225 97
------------- -------------
Media - TV / Radio - (4.16%)
AOL Time Warner, Inc. 208,550 11,053
Clear Channel Communications, Inc. * 27,800 1,743 950 60
Comcast Corp. - Cl. A 44,600 1,936 1,528 66
McGraw-Hill Cos., Inc. 9,200 609
The Walt Disney Co. 98,500 2,846
Univision Communications, Inc. - Cl. A * 9,500 406 337 14
Viacom, Inc. - Cl. B * 83,562 4,324 2,879 149
------------- -------------
22,917 289
------------- -------------
Medical (0.40%)
Abbott Laboratories 2,505 120
Allergan, Inc. 213 18
American Home Products Corp. 2,126 124
Amgen, Inc.* 1,687 102
Bard (C.R.), Inc. 82 5
Bausch & Lomb, Inc. 87 3
Baxter International, Inc. 958 47
Becton, Dickinson & Co. 417 15
Biogen, Inc.* 240 13
Biomet, Inc. 289 14
Boston Scientific Corp.* 649 11
Bristol-Myers Squibb Co. 3,143 164
Cardinal Health, Inc. 721 50
Chiron Corp. * 307 16
Forest Laboratories, Inc.* 285 20
Guidant Corp. 497 18
HCA-The Healthcare Co. 869 39
HEALTHSOUTH Corp.* 630 10
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Media - Publishing - (0.42%)
Dow Jones & Co., Inc. 4,540 $ 271
Gannett Co., Inc. 12,728 838
Knight-Ridder, Inc. 3,418 203
McGraw-Hill Cos., Inc. (The) 316 21
Meredith Corp. 2,280 82
New York Times Co. - Cl. A 7,558 317
Tribune Co. 14,748 590
-------------
2,322
-------------
Media - TV / Radio - (4.16%)
AOL Time Warner, Inc. 208,550 11,053
Clear Channel Communications, Inc. * 28,750 1,803
Comcast Corp. - Cl. A 46,128 2,002
McGraw-Hill Cos., Inc. 9,200 609
The Walt Disney Co. 98,500 2,846
Univision Communications, Inc. - Cl. A * 9,837 420
Viacom, Inc. - Cl. B * 86,441 4,473
-------------
23,206
-------------
Medical (0.40%)
Abbott Laboratories 2,505 120
Allergan, Inc. 213 18
American Home Products Corp. 2,126 124
Amgen, Inc.* 1,687 102
Bard (C.R.), Inc. 82 5
Bausch & Lomb, Inc. 87 3
Baxter International, Inc. 958 47
Becton, Dickinson & Co. 417 15
Biogen, Inc.* 240 13
Biomet, Inc. 289 14
Boston Scientific Corp.* 649 11
Bristol-Myers Squibb Co. 3,143 164
Cardinal Health, Inc. 721 50
Chiron Corp. * 307 16
Forest Laboratories, Inc.* 285 20
Guidant Corp. 497 18
HCA-The Healthcare Co. 869 39
HEALTHSOUTH Corp.* 630 10
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Humana, Inc.* 275 $ 3
Johnson & Johnson 4,897 245
King Pharmaceuticals, Inc.* 277 15
Lilly (Eli) & Co. 1,818 134
Manor Care, Inc.* 166 5
McKesson HBOC, Inc. 461 17
MedImmune, Inc.* 344 16
Medtronic, Inc. 1,955 90
Merck & Co., Inc. 3,708 237
Pall Corp. 199 5
Pfizer Inc. 10,210 409
Pharmacia Corp. 2,104 97
Quintiles Transnational Corp.* 189 5
Schering-Plough Corp. 2,366 86
St. Jude Medical, Inc. * 139 8
Stryker Corp. 317 17
Tenet Healthcare Corp.* 524 27
UnitedHealth Group, Inc. 513 32
Watson Pharmaceutical, Inc.* 171 11
Wellpoint Health Networks, Inc.* 102 10
-------------
2,258
-------------
Metal Production & Fabrication - (0.02%)
Timken Co. 2,900 $ 49 97 2
Worthington Industries, Inc. 3,700 50 138 2
------------- -------------
99 4
------------- -------------
Metals & Mining - (0.89%)
Alcan Aluminum, Ltd. 15,000 630 516 22
Alcoa, Inc. 41,088 1,619 1,396 55
Barrick Gold Corp. (Canada) 640 10
Freeport-McMoran Copper & Gold, Inc. (Class B)* 233 3
Homestake Mining Co. 426 3
Inco, Ltd. 9,400 162 294 5
Minnesota Mining & Manufacturing Co. 18,800 2,145
Newmont Mining Corp. 9,401 175 316 6
Phelps Dodge Corp. 3,396 141 127 5
Placer Dome, Inc. (Canada) 530 5
------------- -------------
4,872 114
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Humana, Inc.* 275 $ 3
Johnson & Johnson 4,897 245
King Pharmaceuticals, Inc.* 277 15
Lilly (Eli) & Co. 1,818 134
Manor Care, Inc.* 166 5
McKesson HBOC, Inc. 461 17
MedImmune, Inc.* 344 16
Medtronic, Inc. 1,955 90
Merck & Co., Inc. 3,708 237
Pall Corp. 199 5
Pfizer Inc. 10,210 409
Pharmacia Corp. 2,104 97
Quintiles Transnational Corp.* 189 5
Schering-Plough Corp. 2,366 86
St. Jude Medical, Inc. * 139 8
Stryker Corp. 317 17
Tenet Healthcare Corp.* 524 27
UnitedHealth Group, Inc. 513 32
Watson Pharmaceutical, Inc.* 171 11
Wellpoint Health Networks, Inc.* 102 10
-------------
2,258
-------------
Metal Production & Fabrication - (0.02%)
Timken Co. 2,997 51
Worthington Industries, Inc. 3,838 52
-------------
103
-------------
Metals & Mining - (0.89%)
Alcan Aluminum, Ltd. 15,516 652
Alcoa, Inc. 42,484 1,674
Barrick Gold Corp. (Canada) 640 10
Freeport-McMoran Copper & Gold, Inc. (Class B)* 233 3
Homestake Mining Co. 426 3
Inco, Ltd. 9,694 167
Minnesota Mining & Manufacturing Co. 18,800 2,145
Newmont Mining Corp. 9,717 181
Phelps Dodge Corp. 3,523 146
Placer Dome, Inc. (Canada) 530 5
-------------
4,986
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Mortgage Banking (0.04%)
Countrywide Credit Industries, Inc. 192 $ 9
Fannie Mae 1,618 138
Freddie Mac 1,120 78
-------------
225
-------------
Natural Gas Distribution - (0.52%)
Enron Corp. 35,500 $ 1,740
KeySpan Corp. 6,400 233
Nicor, Inc. 2,000 78
Peoples Energy Corp. 1,900 76
Williams Cos., Inc. 22,600 745
-------------
2,872
-------------
Office (0.01%)
Avery Dennison Corp. 178 9
Deluxe Corp. 114 3
Pitney Bowes, Inc. 399 17
Xerox Corp. 1,123 11
-------------
40
-------------
Oil - (1.25%)
Baker Hughes, Inc. 15,600 522 543 18
ONEOK, Inc. 2,400 47
Royal Dutch Petroleum Co. (ADR) (Netherlands) 3,468 202
Royal Dutch Petroleum Co. - NY Shares 100,800 5,874
Tosco Corp. 7,100 313 250 11
------------- -------------
6,756 231
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Mortgage Banking (0.04%)
Countrywide Credit Industries, Inc. 192 $ 9
Fannie Mae 1,618 138
Freddie Mac 1,120 78
-------------
225
-------------
Natural Gas Distribution - (0.52%)
Enron Corp. 35,500 1,740
KeySpan Corp. 6,400 233
Nicor, Inc. 2,000 78
Peoples Energy Corp. 1,900 76
Williams Cos., Inc. 22,600 745
-------------
2,872
-------------
Office (0.01%)
Avery Dennison Corp. 178 9
Deluxe Corp. 114 3
Pitney Bowes, Inc. 399 17
Xerox Corp. 1,123 11
-------------
40
-------------
Oil - (1.25%)
Baker Hughes, Inc. 16,143 540
ONEOK, Inc. 2,400 47
Royal Dutch Petroleum Co. (ADR) (Netherlands) 3,468 202
Royal Dutch Petroleum Co. - NY Shares 100,800 5,874
Tosco Corp. 7,350 324
-------------
6,987
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Oil & Natural Gas Exploration & Production - (4.76%)
Amerada Hess Corp. 4,200 $ 340 144 $ 12
Anadarko Petroleum Corp. 11,662 630 405 22
Apache Corp. 5,700 289 203 10
Ashland, Inc. 113 5
Burlington Resources, Inc. 10,510 420 342 14
Chevron Corp. 30,400 2,751 1,037 94
Conoco, Inc. - Cl. B 29,145 842 1,010 29
Devon Energy Corp. 6,000 315 209 11
El Paso Energy Corp. 823 43
Enron Corp. 1,207 59
EOG Resources, Inc. 5,600 199 188 7
Exxon Mobil Corp. 162,455 14,191 5,579 487
Kerr-McGee Corp. 4,470 296 153 10
Kinder Morgan, Inc. 5,400 271
McDermott International, Inc. 99 1
Noble Drilling Corp. * 6,600 216 217 7
Occidental Petroleum Corp. 18,200 484 599 16
Phillips Petroleum Co. 11,900 678 414 24
Rowan Cos., Inc. * 4,000 89 153 3
Sempra Energy 9,704 265
Sunoco, Inc. 3,800 139 136 5
Texaco, Inc. 26,100 1,738 891 59
Transocean Sedco Forex, Inc. 15,236 629 514 21
Unocal Corp. 11,400 389 394 13
USX-Marathon Group 14,500 428 499 15
------------- -------------
25,599 967
------------- -------------
Oil - Equipment & Service - (0.45%)
Halliburton Co. 20,600 734 694 24
Nabors Industries, Inc. * 7,100 264 238 9
Schlumberger, Ltd. 27,200 1,432 927 49
------------- -------------
2,430 82
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Oil & Natural Gas Exploration & Production - (4.76%)
Amerada Hess Corp. 4,344 $ 352
Anadarko Petroleum Corp. 12,067 652
Apache Corp. 5,903 299
Ashland, Inc. 113 5
Burlington Resources, Inc. 10,852 434
Chevron Corp. 31,437 2,845
Conoco, Inc. - Cl. B 30,155 871
Devon Energy Corp. 6,209 326
El Paso Energy Corp. 823 43
Enron Corp. 1,207 59
EOG Resources, Inc. 5,788 206
Exxon Mobil Corp. 168,034 14,678
Kerr-McGee Corp. 4,623 306
Kinder Morgan, Inc. 5,400 271
McDermott International, Inc. 99 1
Noble Drilling Corp. * 6,817 223
Occidental Petroleum Corp. 18,799 500
Phillips Petroleum Co. 12,314 702
Rowan Cos., Inc. * 4,153 92
Sempra Energy 9,704 265
Sunoco, Inc. 3,936 144
Texaco, Inc. 26,991 1,797
Transocean Sedco Forex, Inc. 15,750 650
Unocal Corp. 11,794 402
USX-Marathon Group 14,999 443
-------------
26,566
-------------
Oil - Equipment & Service - (0.45%)
Halliburton Co. 21,294 758
Nabors Industries, Inc. * 7,338 273
Schlumberger, Ltd. 28,127 1,481
-------------
2,512
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Paper & Forest Products - (0.72%)
Boise Cascade Corp. 2,500 $ 88 93 $ 3
Georgia-Pacific Corp. 10,526 356
International Paper Co. 22,467 802 781 28
Kimberly-Clark Corp. 25,000 1,398 861 48
Louisiana-Pacific Corp. 4,600 54
Mead Corp. 4,400 120 160 4
Potlatch Corp. 1,200 41 46 2
Temple-Inland, Inc. 2,200 117 80 4
Westvaco Corp. 4,300 105 163 4
Weyerhaeuser Co. 10,500 577
Willamette Industries, Inc. 5,400 267
------------- -------------
3,925 93
------------- -------------
Personal & Commercial Lending - (2.74%)
Capital One Financial Corp. 10,200 612
Citigroup, Inc. 236,790 12,512
Countrywide Credit Industries, Inc. 5,500 252
MBNA Corp. 40,575 1,337
USA Education, Inc. 7,900 577
-------------
15,290
-------------
Pollution Control - (0.20%)
Allied Waste Industries, Inc. * 8,600 161 319 6
Waste Management, Inc. 29,057 895 1,012 31
------------- -------------
1,056 37
------------- -------------
Precious Metals/Gems/Stones - (0.11%)
Barrick Gold Corp. 19,300 292
Freeport-McMoRan Copper & Gold, Inc. - Cl. B 6,300 70
Homestake Mining Co. 11,100 86
Placer Dome, Inc. 14,100 138
-------------
586
-------------
Printing - Commercial (0.00%)
Donnelley (R.R.) & Sons 190 6
-------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Paper & Forest Products - (0.72%)
Boise Cascade Corp. 2,593 $ 91
Georgia-Pacific Corp. 10,526 356
International Paper Co. 23,248 830
Kimberly-Clark Corp. 25,861 1,446
Louisiana-Pacific Corp. 4,600 54
Mead Corp. 4,560 124
Potlatch Corp. 1,246 43
Temple-Inland, Inc. 2,280 121
Westvaco Corp. 4,463 109
Weyerhaeuser Co. 10,500 577
Willamette Industries, Inc. 5,400 267
-------------
4,018
-------------
Personal & Commercial Lending - (2.74%)
Capital One Financial Corp. 10,200 612
Citigroup, Inc. 236,790 12,512
Countrywide Credit Industries, Inc. 5,500 252
MBNA Corp. 40,575 1,337
USA Education, Inc. 7,900 577
-------------
15,290
-------------
Pollution Control - (0.20%)
Allied Waste Industries, Inc. * 8,919 167
Waste Management, Inc. 30,069 926
-------------
1,093
-------------
Precious Metals/Gems/Stones - (0.11%)
Barrick Gold Corp. 19,300 292
Freeport-McMoRan Copper & Gold, Inc. - Cl. B 6,300 70
Homestake Mining Co. 11,100 86
Placer Dome, Inc. 14,100 138
-------------
586
-------------
Printing - Commercial (0.00%)
Donnelley (R.R.) & Sons 190 6
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Real Estate Development - (0.01%)
KB Home 2,100 $ 63
-------------
Real Estate Investment Trust - (0.10%)
Marriott International, Inc. - Cl. A 11,800 559
-------------
Retail - Department Stores - (4.86%)
AutoZone, Inc.* 181 $ 7
Bed Bath & Beyond, Inc. * 13,100 409 467 15
Best Buy Co., Inc.* 339 21
Circuit City Stores, Inc. 8,700 157 336 6
Costco Wholesale Corp. 728 30
CVS Corp. 18,300 706 636 25
Dillard's, Inc. - Cl. A 3,600 55 138 2
Dollar General Corp. 535 10
Federated Department Stores, Inc. * 9,200 391 320 14
Gap, Inc. 41,075 1,191 1,390 40
Genuine Parts Co. 278 9
Harcourt General, Inc. 3,500 204
Home Depot, Inc. 109,650 5,104 3,774 176
J.C. Penney Co., Inc. 12,400 327
K-mart Corp. * 22,900 263 792 9
Kohl's Corp. * 15,500 972 539 34
Limited, Inc. 20,052 331 690 11
Lowe's Cos., Inc. 18,200 1,320 622 45
May Department Stores Co. 13,950 478 483 17
Nordstrom, Inc. 7,000 130 216 4
Office Depot, Inc. * 12,900 134 481 5
Penney (J. C.) Co., Inc. 425 11
RadioShack Corp. 8,800 268 300 9
Reebok International Ltd. * 95 3
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Real Estate Development - (0.01%)
KB Home 2,100 $ 63
-------------
Real Estate Investment Trust - (0.10%)
Marriott International, Inc. - Cl. A 11,800 559
-------------
Retail - Department Stores - (4.86%)
AutoZone, Inc.* 181 7
Bed Bath & Beyond, Inc. * 13,567 424
Best Buy Co., Inc.* 339 21
Circuit City Stores, Inc. 9,036 163
Costco Wholesale Corp. 728 30
CVS Corp. 18,936 731
Dillard's, Inc. - Cl. A 3,738 57
Dollar General Corp. 535 10
Federated Department Stores, Inc. * 9,520 405
Gap, Inc. 42,465 1,231
Genuine Parts Co. 278 9
Harcourt General, Inc. 3,500 204
Home Depot, Inc. 113,424 5,280
J.C. Penney Co., Inc. 12,400 327
K-mart Corp. * 23,692 272
Kohl's Corp. * 16,039 1,006
Limited, Inc. 20,742 342
Lowe's Cos., Inc. 18,822 1,365
May Department Stores Co. 14,433 495
Nordstrom, Inc. 7,216 134
Office Depot, Inc. * 13,381 139
Penney (J. C.) Co., Inc. 425 11
RadioShack Corp. 9,100 277
Reebok International Ltd. * 95 3
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Sears, Roebuck & Co. 15,500 $ 656 531 $ 22
Staples, Inc. * 20,750 332 738 12
SUPERVALU, Inc. 214 4
SYSCO Corp. 1,088 30
Target Corp. 42,600 1,474 1,454 50
Tiffany & Co. 6,900 250 236 9
TJX Cos., Inc. 13,400 427 453 14
Toys "R" Us, Inc. * 9,300 230 320 8
Tricon Global Restaurants, Inc. * 238 10
Wal-Mart Stores, Inc. 210,400 10,268 7,231 353
------------- -------------
26,077 1,015
------------- -------------
Retail - Drug Stores - (0.31%)
Longs Drug Stores Corp. 1,900 41 61 2
Walgreen Co. 48,200 1,646 1,646 56
------------- -------------
1,687 58
------------- -------------
Retail - Food - (1.03%)
Albertson's, Inc. 19,177 575 655 20
Darden Restaurants, Inc. 5,300 148 191 5
McDonald's Corp. 61,800 1,672 2,092 56
Safeway, Inc. * 24,200 1,162 817 39
Starbucks Corp. * 17,400 400 615 14
The Kroger Co. * 39,200 980 1,311 33
Tricon Global Restaurants, Inc. 7,050 310
Wendy's International, Inc. 4,900 125 184 5
Winn-Dixie Stores, Inc. 6,700 175 227 6
------------- -------------
5,547 178
------------- -------------
Retailers - Broadline - (0.01%)
Big Lots, Inc. COM * 5,300 73 183 3
------------- -------------
Rubber - Tires & Misc (0.00%)
Cooper Tire & Rubber Co. 117 2
Goodyear Tire & Rubber Co. (The) 257 7
-------------
9
-------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Sears, Roebuck & Co. 16,031 $ 678
Staples, Inc. * 21,488 344
SUPERVALU, Inc. 214 4
SYSCO Corp. 1,088 30
Target Corp. 44,054 1,524
Tiffany & Co. 7,136 259
TJX Cos., Inc. 13,853 441
Toys "R" Us, Inc. * 9,620 238
Tricon Global Restaurants, Inc. * 238 10
Wal-Mart Stores, Inc. 217,631 10,621
-------------
27,092
-------------
Retail - Drug Stores - (0.31%)
Longs Drug Stores Corp. 1,961 43
Walgreen Co. 49,846 1,702
-------------
1,745
-------------
Retail - Food - (1.03%)
Albertson's, Inc. 19,832 595
Darden Restaurants, Inc. 5,491 153
McDonald's Corp. 63,892 1,728
Safeway, Inc. * 25,017 1,201
Starbucks Corp. * 18,015 414
The Kroger Co. * 40,511 1,013
Tricon Global Restaurants, Inc. 7,050 310
Wendy's International, Inc. 5,084 130
Winn-Dixie Stores, Inc. 6,927 181
-------------
5,725
-------------
Retailers - Broadline - (0.01%)
Big Lots, Inc. COM * 5,483 76
-------------
Rubber - Tires & Misc (0.00%)
Cooper Tire & Rubber Co. 117 2
Goodyear Tire & Rubber Co. (The) 257 7
-------------
9
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Shoe & Apparel Manufacturing - (0.17%)
Liz Claiborne, Inc. 2,300 $ 116
Nike, Inc. - Cl. B 12,400 520 439 $ 18
Reebok International, Ltd. 2,400 77
V.F. Corp. 5,800 211
------------- -------------
924 18
------------- -------------
Soap & Cleaning Preparations (0.04%)
Clorox Co. 383 13
Colgate-Palmolive Co. 907 54
Ecolab, Inc. 206 8
Proctor & Gamble Co. (The) 2,095 134
-------------
209
-------------
Steel - 0.06%
Allegheny Technologies, Inc. 3,750 68 130 2
Nucor Corp. 3,600 176 125 6
USX-U.S. Steel Group, Inc. 3,800 76 144 3
------------- -------------
320 11
------------- -------------
Telecommunication Equipment - (1.60%)
ADC Telecommunications, Inc. * 36,700 242 1,264 8
Andrew Corp. * 3,450 64 132 2
Comverse Technology, Inc. * 7,700 440 277 16
Corning, Inc.* 1,504 25
JDS Uniphase Corp. 60,900 761
Linear Technology Corp. 14,800 654
Lucent Technologies, Inc. 161,925 1,004 5,508 34
Micron Technology, Inc. 27,700 1,139
Nortel Networks Corp. 151,000 1,373 5,153 47
Qualcomm, Inc. * 36,100 2,111 1,225 72
Scientific-Atlanta, Inc. 7,400 300 263 11
Symbol Technologies, Inc. 10,300 229 366 8
Tellabs, Inc. * 19,200 372 662 13
------------- -------------
8,689 236
------------- -------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Shoe & Apparel Manufacturing - (0.17%)
Liz Claiborne, Inc. 2,300 $ 116
Nike, Inc. - Cl. B 12,839 538
Reebok International, Ltd. 2,400 77
V.F. Corp. 5,800 211
-------------
942
-------------
Soap & Cleaning Preparations (0.04%)
Clorox Co. 383 13
Colgate-Palmolive Co. 907 54
Ecolab, Inc. 206 8
Proctor & Gamble Co. (The) 2,095 134
-------------
209
-------------
Steel - 0.06%
Allegheny Technologies, Inc. 3,880 70
Nucor Corp. 3,725 182
USX-U.S. Steel Group, Inc. 3,944 79
-------------
331
-------------
Telecommunication Equipment - (1.60%)
ADC Telecommunications, Inc. * 37,964 250
Andrew Corp. * 3,582 66
Comverse Technology, Inc. * 7,977 456
Corning, Inc.* 1,504 25
JDS Uniphase Corp. 60,900 761
Linear Technology Corp. 14,800 654
Lucent Technologies, Inc. 167,433 1,038
Micron Technology, Inc. 27,700 1,139
Nortel Networks Corp. 156,153 1,420
Qualcomm, Inc. * 37,325 2,183
Scientific-Atlanta, Inc. 7,663 311
Symbol Technologies, Inc. 10,666 237
Tellabs, Inc. * 19,862 385
-------------
8,925
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Telecommunication Services - (2.08%)
Avaya , Inc. * 14,102 $ 193 459 $ 6
Citizens Communications Co. 14,400 173 461 5
Global Crossing, Ltd. * 41,490 358 1,434 12
Nextel Communications, Inc. - Cl. A * 36,700 642 1,237 22
Sprint Corp. 1,515 37
Sprint PCS (PCS Group) 43,500 1,051 1,433 31
Verizon Communications 127,174 6,804 4,374 234
WorldCom, Inc. * 136,477 1,938 4,671 66
------------- -------------
11,159 413
------------- -------------
Telephone - (3.32%)
Alltel Corp. 14,600 894
AT&T Corp. * 161,707 3,558 5,580 123
BellSouth Corp. 88,600 3,568
CenturyTel, Inc. 7,100 215 228 7
Constellation Energy Group 7,500 319
Qwest Communications International, Inc. * 78,462 2,501 2,687 85
SBC Communications, Inc. 158,297 6,341
Sprint Corp. * 42,400 906
------------- -------------
18,302 215
------------- -------------
Textile (0.00%)
Liz Claiborne, Inc. 85 4
VF Corp. 181 7
-------------
11
-------------
Tobacco (0.03%)
Philip Morris Cos., Inc. 3,558 180
UST, Inc. 264 8
-------------
188
-------------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Telecommunication Services - (2.08%)
Avaya , Inc. * 14,561 $ 199
Citizens Communications Co. 14,861 178
Global Crossing, Ltd. * 42,924 370
Nextel Communications, Inc. - Cl. A * 37,937 664
Sprint Corp. 1,515 37
Sprint PCS (PCS Group) 44,933 1,082
Verizon Communications 131,548 7,038
WorldCom, Inc. * 141,148 2,004
-------------
11,572
-------------
Telephone - (3.32%)
Alltel Corp. 14,600 894
AT&T Corp. * 167,287 3,681
BellSouth Corp. 88,600 3,568
CenturyTel, Inc. 7,328 222
Constellation Energy Group 7,500 319
Qwest Communications International, Inc. * 81,149 2,586
SBC Communications, Inc. 158,297 6,341
Sprint Corp. * 42,400 906
-------------
18,517
-------------
Textile (0.00%)
Liz Claiborne, Inc. 85 4
VF Corp. 181 7
-------------
11
-------------
Tobacco (0.03%)
Philip Morris Cos., Inc. 3,558 180
UST, Inc. 264 8
-------------
188
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
Transportation Services - (0.71%)
AMR Corp. * 7,500 $ 271 249 $ 9
Burlington Northern Santa Fe Corp. 18,900 570 634 19
CSX Corp. 9,900 359 345 12
Delta Air Lines, Inc. 5,800 256 199 9
Fedex Corp. * 14,300 575 497 20
Navistar International Corp. * 96 3
Norfolk Southern Corp. 18,000 372 622 13
Ryder System, Inc. 2,600 51
Southwest Airlines Co. 35,250 652 1,232 23
U.S. Airways Group, Inc. * 2,900 70 109 2
Union Pacific Corp. 11,600 637 401 22
------------- -------------
3,813 132
------------- -------------
Utilities (0.16%)
AES Corp. (The)* 861 37
Allegheny Energy, Inc. 202 10
ALLTEL Corp. 506 31
Ameren Corp. 222 9
American Electric Power Co., Inc. 521 24
BellSouth Corp. 3,031 122
Cinergy Corp. 257 9
CMS Energy Corp. 213 6
Consolidated Edison, Inc. 343 14
Constellation Energy Group, Inc. 265 11
Dominion Resources, Inc. 400 24
DTE Energy Co. 267 12
Duke Energy Corp. 1,248 49
Dynegy, Inc. (Class A) 527 25
Edison International 527 6
Entergy Corp. 357 14
Exelon Corp. 519 33
FirstEnergy Corp. * 362 12
FPL Group, Inc. 284 17
GPU, Inc. 193 7
KeySpan Corp. 222 8
Kinder Morgan, Inc. 185 9
Niagara Mohawk Holdings, Inc.* 259 5
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
Transportation Services - (0.71%)
AMR Corp. * 7,749 $ 280
Burlington Northern Santa Fe Corp. 19,534 589
CSX Corp. 10,245 371
Delta Air Lines, Inc. 5,999 265
Fedex Corp. * 14,797 595
Navistar International Corp. * 96 3
Norfolk Southern Corp. 18,622 385
Ryder System, Inc. 2,600 51
Southwest Airlines Co. 36,482 675
U.S. Airways Group, Inc. * 3,009 72
Union Pacific Corp. 12,001 659
-------------
3,945
-------------
Utilities (0.16%)
AES Corp. (The)* 861 37
Allegheny Energy, Inc. 202 10
ALLTEL Corp. 506 31
Ameren Corp. 222 9
American Electric Power Co., Inc. 521 24
BellSouth Corp. 3,031 122
Cinergy Corp. 257 9
CMS Energy Corp. 213 6
Consolidated Edison, Inc. 343 14
Constellation Energy Group, Inc. 265 11
Dominion Resources, Inc. 400 24
DTE Energy Co. 267 12
Duke Energy Corp. 1,248 49
Dynegy, Inc. (Class A) 527 25
Edison International 527 6
Entergy Corp. 357 14
Exelon Corp. 519 33
FirstEnergy Corp. * 362 12
FPL Group, Inc. 284 17
GPU, Inc. 193 7
KeySpan Corp. 222 8
Kinder Morgan, Inc. 185 9
Niagara Mohawk Holdings, Inc.* 259 5
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
NICOR, Inc. 73 $ 3
NiSource, Inc. 334 9
ONEOK, Inc. 96 2
Peoples Energy Corp. 57 2
PG&E Corp. 626 7
Pinnacle West Capital Corp. 137 6
PPL Corp. 236 13
Progress Energy, Inc. 333 15
Public Service Enterprise Group, Inc. 336 16
Reliant Energy, Inc. 481 15
SBC Communications, Inc. 5,447 218
Sempra Energy 333 9
Southern Co. 1,108 26
TXU Corp. 415 20
Williams Cos., Inc. (The) 784 26
Xcel Energy, Inc. 555 16
-------------
897
-------------
U.S. Government Agencies - (1.13%)
Federal Home Loan Mortgage Corp. 33,000 $ 2,310
Federal National Mortgage Assoc. 46,900 3,994
-------------
6,304
TOTAL COMMON STOCKS (96.51%) 520,278 17,837
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
NICOR, Inc. 73 $ 3
NiSource, Inc. 334 9
ONEOK, Inc. 96 2
Peoples Energy Corp. 57 2
PG&E Corp. 626 7
Pinnacle West Capital Corp. 137 6
PPL Corp. 236 13
Progress Energy, Inc. 333 15
Public Service Enterprise Group, Inc. 336 16
Reliant Energy, Inc. 481 15
SBC Communications, Inc. 5,447 218
Sempra Energy 333 9
Southern Co. 1,108 26
TXU Corp. 415 20
Williams Cos., Inc. (The) 784 26
Xcel Energy, Inc. 555 16
-------------
897
-------------
U.S. Government Agencies - (1.13%)
Federal Home Loan Mortgage Corp. 33,000 2,310
Federal National Mortgage Assoc. 46,900 3,994
-------------
6,304
-------------
TOTAL COMMON STOCKS (96.51%) 538,115
-------------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Equity Index Fund and the V.A. 500 Index Fund, combined on June 30,
2001.
---------------------------------------------------------------------------
V.S.T. Equity Index Fund V.A. 500 Index Fund
---------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
---------------------------------------------------------------------------
ISSUER DESCRIPTION
PAR VALUE PAR VALUE
(000's (000's
OMITTED) OMITTED)
---------- ----------
SHORT-TERM INVESTMENTS - 3.57%
Joint Repurchase Agreement
Investment in a joint repurchase agreement transaction
with UBS Warburg, Inc. - Dated 6-29-01, due 7-02-01
(Secured by U.S. Treasury Bonds 6.875% and 6.625%
due 8-15-25 and 11-30-02) - Note B 3.970% $ 911 $ 911
Investment in joint trading account
3.97% due 07/02/01 3.970% $ 17,751 17,751
U.S. treasury Bills
3.435% due 09/13/01 3.435 1,245 1,236
------------- -------------
SHORT-TERM INVESTMENTS (3.57%) 18,987 911
------------- -------------
TOTAL INVESTMENTS (100.08%) 520,278 18,748
------------- ------------
OTHER ASSETS AND LIABILITIES, NET (0.08%) (118) (328)
------------- -------------
TOTAL NET ASSETS (100.00%) $ 520,160 $ 18,420
============= =============
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
--------------------------
ISSUER DESCRIPTION
PAR VALUE
(000's
OMITTED)
-----------
SHORT-TERM INVESTMENTS - 3.57%
Joint Repurchase Agreement
Investment in a joint repurchase agreement transaction
with UBS Warburg, Inc. - Dated 6-29-01, due 7-02-01
(Secured by U.S. Treasury Bonds 6.875% and 6.625%
due 8-15-25 and 11-30-02) - Note B $ 911 $ 911
Investment in joint trading account
3.97% due 07/02/01
U.S. treasury Bills
3.435% due 09/13/01
-------------
SHORT-TERM INVESTMENTS (3.57%) 19,898
-------------
TOTAL INVESTMENTS (100.08%) 539,026
-------------
OTHER ASSETS AND LIABILITIES, NET (0.08%) (446)
-------------
TOTAL NET ASSETS (100.00%) $ 538,580
=============
Notes to Schedule of Investments
ADR - American Depository Receipts
** Represents investment of security lending collateral.
* Non-income producing security.
Parenthetical disclosure of a foreign country in the security description
represents country of foreign issuer, however, security is U.S. dollar
denominated. The percentage shown for each investment category is the total
value of that category as a percentage of the combined net assets of the Funds.
Exhibit C
JOHN HANCOCK V.S.T. INTERNATIONAL EQUITY FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. International Equity Fund and the John Hancock V.A. International
Fund with information about the impact of the proposed merger by indicating how
the merger might have affected information had the merger been consummated as of
June 30, 2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. International Equity Fund and John Hancock V.A. International
Fund after giving effect to pro forma adjustments described in the notes below.
(a) Acquisition by John Hancock V.S.T. International Equity Fund of all assets
of John Hancock V.A. International Fund and issuance of John Hancock
V.S.T. International Equity Fund shares in exchange for all of the
outstanding shares of John Hancock V.A. International Fund.
(b) The deferred organization expense of John Hancock V.A. International Fund
was written off as the Fund would no longer be in existence.
(c) The investment advisory fee was adjusted to reflect the application of the
fee structure which will be in effect for John Hancock V.S.T.
International Equity Fund:
1.20% for the first $50,000,000 of the Fund's average daily net assets;
1.05% for the next $150,000,000 of the Fund's average daily net assets;
1.00% for any additional amounts
(d) The actual expenses incurred by the John Hancock V.S.T. International
Equity Fund and the John Hancock V.A. International Fund for various
expenses included on a pro forma basis were reduced to reflect the
estimated savings arising from the merger.
(e) Represents the Adviser's voluntary agreement to limit the funds' other
expenses to an annual rate of 0.10% of the funds' average daily net
assets.
John Hancock V.S.T. International Equity Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. V.A.
International International Pro-Forma
Equity Fund Fund Adjustments Combined
------------- ------------- ----------- ---------
ASSETS
Long term investments at cost $22,763 $ 5,233 $ -- $27,996
Net unrealized appreciation (depreciation) of investments (2,759) (328) -- (3,087)
Short-term investments at value 1,200 1,302 -- 2,502
------- ------- ------- -------
Total investments 21,204 6,207 -- 27,411
Cash 55 -- -- 55
Foreign currency at value 60 2 -- 62
Receivable for:
Investments sold 7 24 -- 31
Dividends and interest 40 12 -- 52
Futures contracts variation margin 10 -- -- 10
Receivable for forward foreign currency exchange contracts sold -- 3 -- 3
Deferred organization expense -- 1 -- 1
------- ------- ------- -------
Total Assets 21,376 6,249 -- 27,625
------- ------- ------- -------
LIABILITIES
Payables for:
Investments purchased 286 168 -- 454
Securities on loan -- 1,040 -- 1,040
Payable to affiliates -- 4 -- 4
Accounts payable and accrued expenses -- 38 -- 38
Other liabilities 4 -- -- 4
------- ------- ------- -------
Total Liabilities 290 1,250 -- 1,540
------- ------- ------- -------
Net Assets 21,086 4,999 -- 26,085
======= ======= ======= =======
Net assets:
Capital paid-in 24,515 6,712 -- 31,227
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions (685) (1,334) -- (2,019)
Undistributed (distribution in excess of)
net investment income (loss) 18 (326) -- (308)
Net unrealized appreciation (depreciation) of investments,
futures and translation of assets and liabilities in
foreign currencies (2,762) (53) -- (2,815)
------- ------- ------- -------
21,086 4,999 -- 26,085
======= ======= ======= =======
Net assets:
V.S.T. International Equity Fund 21,086 -- 4,999(a) 26,085
V.A. International Fund -- 4,999 (4,999)(a) --
------- ------- ------- -------
21,086 4,999 -- 26,085
======= ======= ======= =======
Shares outstanding:
V.S.T. International Equity Fund 2,519 -- 597(a) 3,116
V.A. International Fund -- 562 (562)(a) --
------- ------- ------- -------
2,519 562 35 3,116
======= ======= ======= =======
Net assets value per share:
V.S.T. International Equity Fund $ 8.37 -- -- 8.37
V.A. International Fund -- $ 8.89 (8.89)(a) --
======= ======= ======= =======
John Hancock V.S.T. International Equity Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. V.A.
International International
Equity Fund Fund
12 months ended 12 months ended Pro-Forma
June 30, 2001 June 30, 2001 Adjustments Combined
--------------- --------------- ----------- ---------
INVESTMENT INCOME
Interest $ 65 $ 15 $ -- $ 80
Dividends 217 81 -- 298
Securities Lending -- 9 -- 9
------- ------- ------- -------
Total investment income 282 105 -- 387
------- ------- ------- -------
EXPENSES
Investment management fee 187 64 22(c) 273
Auditing fees 2 13 (4)(d) 11
Custodian fees 87 169 (125)(d) 131
Accounting and legal services fee -- 1 (1)(d) --
Legal fees -- 1 -- 1
Printing & mailing fees 34 4 (4)(d) 34
Organization expense -- 2 (2)(b) --
Miscellaneous -- 2 -- 2
Other fees 2 -- -- 2
------- ------- ------- -------
Total expenses 312 256 (114) 464
Less expenses reimbursed (109) (174) 124(e) (159)
------- ------- ------- -------
Net expenses 203 82 10 295
------- ------- ------- -------
Net investment income (loss) 79 23 (10) 92
------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (795) (952) -- (1,747)
Financial futures contracts 9 -- -- 9
Foreign currency transactions 6 (319) -- (313)
Change in net unrealized appreciation (depreciation) on:
Investments (3,740) (1,474) -- (5,214)
Futures 1 -- -- 1
Translation of assets and liabilities in foreign currencies (7) 2 -- (5)
------- ------- ------- -------
Net realized and unrealized gain (loss) (4,526) (2,743) -- (7,269)
------- ------- ------- -------
Net increase (decrease) in net assets resulting from operations $(4,447) $(2,720) $ (10) $(7,177)
======= ======= ======= =======
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
COMMON STOCK
Australia (2.13%)
BHP, Ltd (DIOP) 27,926 $ 152
Brambles Industries, Ltd. (DIOP) 2,110 52
Broken Hill Proprietary Co., Ltd. (DIOP) 26,220 139
Tabcorp Holdings, Ltd. (LEIS) 6,933 33
Woolworth's, Ltd. (RETS) 32,164 180
-------
556
-------
Belgium (0.00%)
Fortis (B)* (Insurance) 3 $ -
-------
Brazil (0.07%)
Tele Norte Leste Participacoes SA American
Depositary Receipts (ADR) (Telecommunications) 1,200 18
-------
Canada (1.13%)
Anderson Exploration Ltd.* (Oil & Gas) 2,500 50
Magna International, Inc. (Class A)
(Automobile / Trucks) 500 31
Manulife Financial Corp. (Insurance) 2,000 56
Nortel Networks Corp. (Telecommunications) 2 -
Precision Drilling Corp.* (Oil & Gas) 1,700 53
Suncor Energy, Inc. (Oil & Gas) 1,700 43
Talisman Energy, Inc. (Oil & Gas) 1,600 61
-------
294
-------
Denmark (0.17%)
Novo Nordisk A/S (Class B) (Medical) 1,000 44
-------
Finland (1.02%)
Nokia Oyj (TELS) 11,772 267
-------
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
COMMON STOCK
Australia (2.13%)
BHP, Ltd (DIOP) 27,926 $ 152
Brambles Industries, Ltd. (DIOP) 2,110 52
Broken Hill Proprietary Co., Ltd. (DIOP) 26,220 139
Tabcorp Holdings, Ltd. (LEIS) 6,933 33
Woolworth's, Ltd. (RETS) 32,164 180
-------
556
-------
Belgium (0.00%)
Fortis (B)* (Insurance) 3 -
-------
Brazil (0.07%)
Tele Norte Leste Participacoes SA American
Depositary Receipts (ADR) (Telecommunications) 1,200 18
-------
Canada (1.13%)
Anderson Exploration Ltd.* (Oil & Gas) 2,500 50
Magna International, Inc. (Class A)
(Automobile / Trucks) 500 31
Manulife Financial Corp. (Insurance) 2,000 56
Nortel Networks Corp. (Telecommunications) 2 -
Precision Drilling Corp.* (Oil & Gas) 1,700 53
Suncor Energy, Inc. (Oil & Gas) 1,700 43
Talisman Energy, Inc. (Oil & Gas) 1,600 61
-------
294
-------
Denmark (0.17%)
Novo Nordisk A/S (Class B) (Medical) 1,000 44
-------
Finland (1.02%)
Nokia Oyj (TELS) 11,772 267
-------
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
France (8.10%)
Air Liquide (CHEM) 1,368 $ 197
Alcatel (TELS) 2,259 47
Alstom (Machinery) 1,800 $ 50
Assurances Generales de France (Insurance) 1,000 56
Aventis SA (Medical) 600 48
AXA SA (INSU) 7,685 219
Castorama Dubois Investisse (RETS) 290 62
France Telecom (TELS) 997 48
Lafarge SA (CONS) 2,366 203 400 34
PSA Peugeot Citroen SA (Automobile / Trucks) 100 27
Rhone-Poulenc SA (BANK) 556 44
Sanofi-Synthelabo SA (Medical) 800 53
Schneider SA (MACH) 3,368 186 1,060 59
Societe Television Francaise 1 (Media) 1,000 29
Total Fina SA - Cl. B (OILX) 1,156 162 330 46
Vivendi Environment (POLL) 3,340 141 1,500 63
Vivendi Universal SA (DIOP) 5,004 292 800 47
------- -------
1,601 512
------- -------
Germany (6.35%)
Allianz AG - Reg. (INSU) 606 177
BASF AG (Chemicals) 1,300 51
Bayer AG (Chemicals) 1,400 55
Bayerische Motoren Werke AG (AUTO) 6,656 221 1,200 40
Deutsche Bank AG (BANK) 3,476 249 500 36
Deutsche Telekom AG (UTIT) 3,539 81 1,500 34
E.On AG (Utilities) 1,300 68
Infineon Technologies AG (ETRN) 2,790 66
Muenchener Rueckversicherungs-Gesellschaft
AG - Reg. (INSU) 474 132 147 41
SAP AG (SOFT) 1,557 216 400 56
Siemens AG (DIOP) 2,188 134
------- -------
1,276 381
------- -------
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
France (8.10%)
Air Liquide (CHEM) 1,368 $ 197
Alcatel (TELS) 2,259 47
Alstom (Machinery) 1,800 50
Assurances Generales de France (Insurance) 1,000 56
Aventis SA (Medical) 600 48
AXA SA (INSU) 7,685 219
Castorama Dubois Investisse (RETS) 290 62
France Telecom (TELS) 997 48
Lafarge SA (CONS) 2,766 237
PSA Peugeot Citroen SA (Automobile / Trucks) 100 27
Rhone-Poulenc SA (BANK) 556 44
Sanofi-Synthelabo SA (Medical) 800 53
Schneider SA (MACH) 4,428 245
Societe Television Francaise 1 (Media) 1,000 29
Total Fina SA - Cl. B (OILX) 1,486 208
Vivendi Environment (POLL) 4,840 204
Vivendi Universal SA (DIOP) 5,804 339
-------
2,113
-------
Germany (6.35%)
Allianz AG - Reg. (INSU) 606 177
BASF AG (Chemicals) 1,300 51
Bayer AG (Chemicals) 1,400 55
Bayerische Motoren Werke AG (AUTO) 7,856 261
Deutsche Bank AG (BANK) 3,976 285
Deutsche Telekom AG (UTIT) 5,039 115
E.On AG (Utilities) 1,300 68
Infineon Technologies AG (ETRN) 2,790 66
Muenchener Rueckversicherungs-Gesellschaft
AG - Reg. (INSU) 621 173
SAP AG (SOFT) 1,957 272
Siemens AG (DIOP) 2,188 134
-------
1,657
-------
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
Hong Kong (1.97%)
Cheung Kong Holdings Ltd. (Real Estate Operations) 5,000 $ 54
China Mobile Ltd.* (Telecommunications) 7,000 37
Citic Pacific Ltd. (Commercial /Industrial Services) 13,000 40
Giordano International Ltd. (APPA) 48,000 $ 25
Hang Seng Bank, Ltd. (BANK) 9,400 96
Hutchison Whampoa, Ltd. (COMM) 4,700 48 5,000 50
Johnson Electric Holdings Ltd. (Electronics) 22,000 30
Li & Fung, Ltd. (COMM) 60,000 99
Sun Hung Kai Properties, Ltd. (REIT) 4,000 36
------- -------
304 211
------- -------
Ireland (0.56%)
Allied Irish Banks Plc (Banks - Foreign) 3,100 36
Bank of Ireland (Banks - Foreign) 2,600 26
Bank of Ireland (Banks - Foreign) 1,600 16
CRH Plc (Building) 1,800 30
Elan Corp. Plc* (ADR) (Medical) 600 37
-------
145
-------
Israel (0.29%)
Check Point Software Technologies, Ltd.* (Computers) 500 25
Teva Pharmaceutical Industries, Ltd. (ADR) (Medical) 800 50
-------
75
-------
Italy (3.71%)
Autostrade SpA (Transport) 5,500 36
Banca Fideuram SpA (Finance) 3,100 29
Banca Nazionale del Lavoro * (Banks - Foreign) 16,000 50
Edison SpA (Utilities) 3,800 35
Riunione Adriatica di Sicurta SpA (Insurance) 5,282 65
San Paolo-IMI SpA (BANK) 12,300 158
Telecom Italia Mobile SpA (TELS) 11,500 59
Telecom Italia SpA (TELS) 26,983 242 3,700 33
UniCredito Italiano SpA (BANK) 60,500 260
------- -------
719 248
------- -------
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
Hong Kong (1.97%)
Cheung Kong Holdings Ltd. (Real Estate Operations) 5,000 $ 54
China Mobile Ltd.* (Telecommunications) 7,000 37
Citic Pacific Ltd. (Commercial /Industrial Services) 13,000 40
Giordano International Ltd. (APPA) 48,000 25
Hang Seng Bank, Ltd. (BANK) 9,400 96
Hutchison Whampoa, Ltd. (COMM) 9,700 98
Johnson Electric Holdings Ltd. (Electronics) 22,000 30
Li & Fung, Ltd. (COMM) 60,000 99
Sun Hung Kai Properties, Ltd. (REIT) 4,000 36
-------
515
-------
Ireland (0.56%)
Allied Irish Banks Plc (Banks - Foreign) 3,100 36
Bank of Ireland (Banks - Foreign) 2,600 26
Bank of Ireland (Banks - Foreign) 1,600 16
CRH Plc (Building) 1,800 30
Elan Corp. Plc* (ADR) (Medical) 600 37
-------
145
-------
Israel (0.29%)
Check Point Software Technologies, Ltd.* (Computers) 500 25
Teva Pharmaceutical Industries, Ltd. (ADR) (Medical) 800 50
-------
75
-------
Italy (3.71%)
Autostrade SpA (Transport) 5,500 36
Banca Fideuram SpA (Finance) 3,100 29
Banca Nazionale del Lavoro * (Banks - Foreign) 16,000 50
Edison SpA (Utilities) 3,800 35
Riunione Adriatica di Sicurta SpA (Insurance) 5,282 65
San Paolo-IMI SpA (BANK) 12,300 158
Telecom Italia Mobile SpA (TELS) 11,500 59
Telecom Italia SpA (TELS) 30,683 275
UniCredito Italiano SpA (BANK) 60,500 260
-------
967
-------
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
Japan (22.25%)
Advantest (ETRN) 400 $ 34
Asahi Chemical Industry Co., Ltd. (CHEM) 22,000 92
Banyu Pharmaceutical Co., Ltd. (HEAL) 4,000 73
Bridgestone Corp (Rubber - Tires & Misc) 2,000 $ 21
Canon, Inc. (COMM) 7,000 283
Chiba Bank, Ltd. (BANK) 10,000 36
Circle K Japan Co., Ltd. (RETF) 2,900 84
Daikin Industries Ltd. (Building) 3,000 56
Daiwa Securities Group, Inc. (FUND) 18,000 188
Fast Retailing Co., Ltd. (Retail) 200 35
Fuji Photo Film (LEIS) 5,000 216 1,000 43
Honda Motor Co. (AUTO) 2,000 88
KAO Corp. (HNBA) 9,000 224
Keyence Corp. (OILX) 600 119
Kirin Brewery Co. (FOOD) 13,000 111
Konami Co., Ltd. (COMP) 1,300 59
Kyocera Corp. (Electronics) 500 44
Marui Co., Ltd. (Retail) 1,000 14
Matsushita Electric Industrial Co., Ltd.
(Electronics) 2,000 31
Mitsui Marine & Fire Insurance Co., Ltd. (INSU) 22,000 113 4,000 43
Mizuho Holdings, Inc. *(BANK) 26 121 8 37
Murata Manufacturing Co., Ltd. (ETRN) 1,300 86 300 20
NGK Insulators (PART) 10,000 88
Nintendo Co., Ltd. (Leisure) 100 18
Nippon Mitsubishi Oil Corp. (Oil & Gas) 3,000 17
Nippon Telegraph & Telephone Corp. (UTIT) 33 172 4 21
Nissan Motor Co., Ltd. (Automobile / Trucks) 12,000 83
Nomura Securities Co., Ltd. (FUND) 4,000 77 1,000 19
NTT Data Corp. (Telecommunications) 4 22
NTT DoCoMo, Inc. (Telecommunications) 3 52
Oriental Land Co., Ltd. (Leisure) 400 30
Pioneer Corp. (Electronics) 1,000 30
Ricoh Co., Ltd. (ETRN) 7,000 151
Rohm Co., Ltd. (ETRN) 1,200 186
Sanyo Electric Co. (ETRN) 36,000 227
Secom Co. (ETRN) 2,000 112
Seven-Eleven Japan Co., Ltd. (Retail) 1,000 39
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
Japan (22.25%)
Advantest (ETRN) 400 $ 34
Asahi Chemical Industry Co., Ltd. (CHEM) 22,000 92
Banyu Pharmaceutical Co., Ltd. (HEAL) 4,000 73
Bridgestone Corp (Rubber - Tires & Misc) 2,000 21
Canon, Inc. (COMM) 7,000 283
Chiba Bank, Ltd. (BANK) 10,000 36
Circle K Japan Co., Ltd. (RETF) 2,900 84
Daikin Industries Ltd. (Building) 3,000 56
Daiwa Securities Group, Inc. (FUND) 18,000 188
Fast Retailing Co., Ltd. (Retail) 200 35
Fuji Photo Film (LEIS) 6,000 259
Honda Motor Co. (AUTO) 2,000 88
KAO Corp. (HNBA) 9,000 224
Keyence Corp. (OILX) 600 119
Kirin Brewery Co. (FOOD) 13,000 111
Konami Co., Ltd. (COMP) 1,300 59
Kyocera Corp. (Electronics) 500 44
Marui Co., Ltd. (Retail) 1,000 14
Matsushita Electric Industrial Co., Ltd.
(Electronics) 2,000 31
Mitsui Marine & Fire Insurance Co., Ltd. (INSU) 26,000 156
Mizuho Holdings, Inc. *(BANK) 34 158
Murata Manufacturing Co., Ltd. (ETRN) 1,600 106
NGK Insulators (PART) 10,000 88
Nintendo Co., Ltd. (Leisure) 100 18
Nippon Mitsubishi Oil Corp. (Oil & Gas) 3,000 17
Nippon Telegraph & Telephone Corp. (UTIT) 37 193
Nissan Motor Co., Ltd. (Automobile / Trucks) 12,000 83
Nomura Securities Co., Ltd. (FUND) 5,000 96
NTT Data Corp. (Telecommunications) 4 22
NTT DoCoMo, Inc. (Telecommunications) 3 52
Oriental Land Co., Ltd. (Leisure) 400 30
Pioneer Corp. (Electronics) 1,000 30
Ricoh Co., Ltd. (ETRN) 7,000 151
Rohm Co., Ltd. (ETRN) 1,200 186
Sanyo Electric Co. (ETRN) 36,000 227
Secom Co. (ETRN) 2,000 112
Seven-Eleven Japan Co., Ltd. (Retail) 1,000 39
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
Sharp Corp. (ETRN) 14,000 $ 191
Shin-Etsu Chemical Co. (CHEM) 2,000 73
Skylark Co., Ltd. (FOOD) 6,000 171
SMC Corp. (MACH) 1,400 150
Sony Corp. (ETRN) 1,400 92 900 $ 59
Sumitomo Bank (BANK) 3,000 25
Sumitomo Corp. (DIOP) 20,000 140
Takeda Chemical Industries (HEAL) 7,000 326 1,000 47
Takefuji Corp. (LEND) 2,600 236
Tokyo Electric Power (UTIE) 7,300 189
Tokyo Electron Ltd. (Machinery) 500 30
Toppan Forms Co., Ltd. (COMM) 6,000 101
Toray Industries, Inc. (Textile) 8,000 32
Toyota Motor Corp. (AUTO) 6,500 229
UFJ Holdings, Inc. (FINL) 5 27
Yamanouchi Pharmaceutical Co., Ltd. (Medical) 1,000 28
Yamato Transport Co., Ltd. (Transport) 2,000 42
------- -------
4,890 913
------- -------
Mexico (0.08%)
America Movil SA de CV Ser L (ADR)
(Telecommunications) 1,000 21
-------
Netherlands (7.16%)
Aegon NV (INSU) 5,132 145
Akzo Nobel NV (Chemicals) 1,130 48
ASM Lithography Holding NV (COMP) 6,255 140
Heineken NV (Beverages) 1,375 56
ING Groep NV (BANK) 5,680 372 850 56
Koninklijke Ahold NV (Retail) 1,545 48
Koninklijke (Royal) Philips Electronics N.V. (ETRN) 7,510 199
Qiagen NV* (Medical) 1,400 31
Royal Dutch Petroleum Co. (OILE) 10,053 579
Unilever NV - CVA (CONS) 454 27
Unilever Plc (Food) 5,200 44
VNU NV (MEDP) 3,614 123
------- -------
1,585 283
------- -------
Portugal (0.33%)
Electricidade de Portugal, SA (UTIE) 17,717 42
Portugal Telecom, SGPS, SA (Telecommunications) 6,500 45
------- -------
42 45
------- -------
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
Sharp Corp. (ETRN) 14,000 $ 191
Shin-Etsu Chemical Co. (CHEM) 2,000 73
Skylark Co., Ltd. (FOOD) 6,000 171
SMC Corp. (MACH) 1,400 150
Sony Corp. (ETRN) 2,300 151
Sumitomo Bank (BANK) 3,000 25
Sumitomo Corp. (DIOP) 20,000 140
Takeda Chemical Industries (HEAL) 8,000 373
Takefuji Corp. (LEND) 2,600 236
Tokyo Electric Power (UTIE) 7,300 189
Tokyo Electron Ltd. (Machinery) 500 30
Toppan Forms Co., Ltd. (COMM) 6,000 101
Toray Industries, Inc. (Textile) 8,000 32
Toyota Motor Corp. (AUTO) 6,500 229
UFJ Holdings, Inc. (FINL) 5 27
Yamanouchi Pharmaceutical Co., Ltd. (Medical) 1,000 28
Yamato Transport Co., Ltd. (Transport) 2,000 42
-------
5,803
-------
Mexico (0.08%)
America Movil SA de CV Ser L (ADR)
(Telecommunications) 1,000 21
-------
Netherlands (7.16%)
Aegon NV (INSU) 5,132 145
Akzo Nobel NV (Chemicals) 1,130 48
ASM Lithography Holding NV (COMP) 6,255 140
Heineken NV (Beverages) 1,375 56
ING Groep NV (BANK) 6,530 428
Koninklijke Ahold NV (Retail) 1,545 48
Koninklijke (Royal) Philips Electronics N.V. (ETRN) 7,510 199
Qiagen NV* (Medical) 1,400 31
Royal Dutch Petroleum Co. (OILE) 10,053 579
Unilever NV - CVA (CONS) 454 27
Unilever Plc (Food) 5,200 44
VNU NV (MEDP) 3,614 123
-------
1,868
-------
Portugal (0.33%)
Electricidade de Portugal, SA (UTIE) 17,717 42
Portugal Telecom, SGPS, SA (Telecommunications) 6,500 45
-------
87
-------
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
Singapore (0.70%)
Singapore Technology Engineering, Ltd. (ENGI) 92,000 $ 130
Singapore Telecommunications Ltd.
(Telecommunications) 51,000 $ 53
------- -------
130 53
------- -------
South Korea (0.13%)
Korea Telecom Corp. (ADR) (Telecommunications) 1,500 33
-------
Spain (2.84%)
Acerinox SA (STEE) 4,439 124
Banco Santander Central Hispano SA (BANK) 10,471 95
Iberdrola SA (Utilities) 2,500 32
Inditex (FUSI) 6,648 106
Inditex SA *(Retail) 3,200 51
Repsol YPF, SA (Oil & Gas) 2,200 36
Tabacalera S.A. - Cl. A (FOOD) 4,920 70
Telefonica SA (UTIT) 16,606 205 1,546 19
Union Electrica Fenosa SA (UTIE) 218 4
------- -------
604 138
------- -------
Sweden (3.23%)
Electrolux AB, Ser B (Machinery) 3,800 53
Investor AB - B Shares (FUND) 12,183 155
Nordic Baltic Holding AB (BANK) 23,695 135
Securitas AB - B Shares (COMM) 11,074 194
Skandia Forsakrings AB (INSU) 17,002 156
Svenska Handelsbanken AB (Banks - Foreign) 3,600 52
Telefonaktiebolaget LM Ericsson AB *(TELS) 17,614 97
------- -------
737 105
------- -------
Switzerland (7.74%)
Adecco SA (COMM) 3,586 169
Credit Suisse Group - Reg. (BANK) 1,513 249
Nestle SA (FOOD) 2,213 471 300 64
NovartisS AG (HEAL) 6,292 228 1,009 37
Roche Holdings AG (HEAL) 4,387 316
Schweizerische Rueckversicherungs-Gesellschaft
(INSU) 92 184
Serona SA* (ADR) (Medical) 1,300 32
Swiss Re Co. (Insurance) 25 50
UBS AG (BANK) 1,207 173
Zurich Finance (FINL) 136 46
------- -------
1,836 183
------- -------
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
Singapore (0.70%)
Singapore Technology Engineering, Ltd. (ENGI) 92,000 $ 130
Singapore Telecommunications Ltd.
(Telecommunications) 51,000 53
-------
183
-------
South Korea (0.13%)
Korea Telecom Corp. (ADR) (Telecommunications) 1,500 33
-------
Spain (2.84%)
Acerinox SA (STEE) 4,439 124
Banco Santander Central Hispano SA (BANK) 10,471 95
Iberdrola SA (Utilities) 2,500 32
Inditex (FUSI) 6,648 106
Inditex SA *(Retail) 3,200 51
Repsol YPF, SA (Oil & Gas) 2,200 36
Tabacalera S.A. - Cl. A (FOOD) 4,920 70
Telefonica SA (UTIT) 18,152 224
Union Electrica Fenosa SA (UTIE) 218 4
-------
742
-------
Sweden (3.23%)
Electrolux AB, Ser B (Machinery) 3,800 53
Investor AB - B Shares (FUND) 12,183 155
Nordic Baltic Holding AB (BANK) 23,695 135
Securitas AB - B Shares (COMM) 11,074 194
Skandia Forsakrings AB (INSU) 17,002 156
Svenska Handelsbanken AB (Banks - Foreign) 3,600 52
Telefonaktiebolaget LM Ericsson AB *(TELS) 17,614 97
-------
842
-------
Switzerland (7.74%)
Adecco SA (COMM) 3,586 169
Credit Suisse Group - Reg. (BANK) 1,513 249
Nestle SA (FOOD) 2,513 535
NovartisS AG (HEAL) 7,301 265
Roche Holdings AG (HEAL) 4,387 316
Schweizerische Rueckversicherungs-Gesellschaft
(INSU) 92 184
Serona SA* (ADR) (Medical) 1,300 32
Swiss Re Co. (Insurance) 25 50
UBS AG (BANK) 1,207 173
Zurich Finance (FINL) 136 46
-------
2,019
-------
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
Taiwan (0.24%)
Taiwan Semiconductor Manufacturing Co., Ltd.*(ADR)
(Electronics) 2,100 $ 32
United Microelectronics Corp.* (ADR) (Electronics) 3,500 31
-------
63
-------
United Kingdom (23.69%)
Abbey National Plc (Banks - Foreign) 1,500 26
Amvescap PLC (BANK) 15,375 $ 267
AstraZeneca Group PLC (HEAL) 1,599 75 800 37
Bank of Ireland (BANK) 19,442 193
Barclay's PLC (BANK) 11,774 361 1,600 49
Bass PLC (FOOD) 5,938 62
BG Group Plc (Oil & Gas) 13,000 51
BP Amoco PLC (OILX) 50,616 417 4,600 38
British Airways PLC (Transport) 6,700 33
British American Tobacco Plc (Tobacco) 5,200 40
British Sky Broadcasting Group Plc* (Media) 5,200 50
British Telecommunications PLC (TELS) 44,070 277
Centrica Plc (Utilities) 15,640 50
CGU PLC (INSU) 9,546 132
Compass Group Plc (Consumer Services) 5,500 44
Diageo PLC (FOOD) 30,407 334 6,800 75
Energis Plc* (Telecommunications) 8,450 23
Exel (ETRN) 10,828 116
GlaxoSmithKline PLC *(HEAL) 24,243 683 1,600 45
HSBC Holdings PLC (BANK) 25,108 298
National Grid Group PLC (UTIE) 10,848 80 6,600 49
P&O Princess Cruises PLC *(LEIS) 39,239 204
Reckitt Benckiser PLC (HNBA) 7,177 104 4,100 59
Reuters Group PLC (B9) 8,712 113
Royal Bank of Scotland Group Plc (Banks - Foreign) 2,300 51
Scottish Power Plc (Utilities) 5,800 43
Shell Transport & Trading Co. PLC (OILX) 3,111 26 6,800 57
Shire Pharmaceuticals Group Plc* (Medical) 2,400 44
Smiths Group PLC (DIOP) 21,021 244
Standard Chartered Plc (Banks - Foreign) 2,600 33
Tesco PLC (RETF) 116,272 420
Unilever PLC (M4) 38,239 323
Vodafone AirTouch PLC (TELS) 231,703 513
Vodafone Group Plc (Telecommunications) 17,980 40
------- -------
5,242 937
------- -------
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
Taiwan (0.24%)
Taiwan Semiconductor Manufacturing Co., Ltd.*(ADR)
(Electronics) 2,100 $ 32
United Microelectronics Corp.* (ADR) (Electronics) 3,500 31
-------
63
-------
United Kingdom (23.69%)
Abbey National Plc (Banks - Foreign) 1,500 26
Amvescap PLC (BANK) 15,375 267
AstraZeneca Group PLC (HEAL) 2,399 112
Bank of Ireland (BANK) 19,442 193
Barclay's PLC (BANK) 13,374 410
Bass PLC (FOOD) 5,938 62
BG Group Plc (Oil & Gas) 13,000 51
BP Amoco PLC (OILX) 55,216 455
British Airways PLC (Transport) 6,700 33
British American Tobacco Plc (Tobacco) 5,200 40
British Sky Broadcasting Group Plc* (Media) 5,200 50
British Telecommunications PLC (TELS) 44,070 277
Centrica Plc (Utilities) 15,640 50
CGU PLC (INSU) 9,546 132
Compass Group Plc (Consumer Services) 5,500 44
Diageo PLC (FOOD) 37,207 409
Energis Plc* (Telecommunications) 8,450 23
Exel (ETRN) 10,828 116
GlaxoSmithKline PLC *(HEAL) 25,843 728
HSBC Holdings PLC (BANK) 25,108 298
National Grid Group PLC (UTIE) 17,448 129
P&O Princess Cruises PLC *(LEIS) 39,239 204
Reckitt Benckiser PLC (HNBA) 11,277 163
Reuters Group PLC (B9) 8,712 113
Royal Bank of Scotland Group Plc (Banks - Foreign) 2,300 51
Scottish Power Plc (Utilities) 5,800 43
Shell Transport & Trading Co. PLC (OILX) 9,911 83
Shire Pharmaceuticals Group Plc* (Medical) 2,400 44
Smiths Group PLC (DIOP) 21,021 244
Standard Chartered Plc (Banks - Foreign) 2,600 33
Tesco PLC (RETF) 116,272 420
Unilever PLC (M4) 38,239 323
Vodafone AirTouch PLC (TELS) 231,703 513
Vodafone Group Plc (Telecommunications) 17,980 40
-------
6,179
-------
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
United States (1.60%)
Amdocs Ltd.* (Telecommunications) 400 $ 22
Elan Corp. PLC - ADR (HEAL) 1,400 $ 86
Glaxo SmithKline PLC - ADR (HEAL) 2,300 129
Santa Fe International Corp. (Oil & Gas) 1,500 44
Schlumberger Ltd. (Oil & Gas) 900 47
Transocean Sedco Forex, Inc. (Oil & Gas) 1,000 41
XL Capital Ltd. (Class A) (Insurance) 600 49
------- -------
215 203
------- -------
TOTAL COMMON STOCK - (95.49%) 20,004 4,905
------- -------
RIGHTS
Portugal (0.00%)
Portugal Telecom, SGPS, SA* (Telecommunications) 6,500 -
-------
PAR VALUE PAR VALUE
(000's (000's
OMITTED) OMITTED)
--------- ---------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.60%)
Investment in joint repurchase agreement with
Goldman Sachs & Co. dated 06/29/01, 4.11% due
07/02/01 (Secured by various U.S. Treasury
Obligations and U.S. Government Agency Bonds) 4.110% $ 1,200 $ 1,200
-------
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. - Dated 06-29-01,
due 07-02-01 (Secured by U.S. Treasury Bonds, 6.875%
due 08-15-25 and U.S. Treasury Notes, 5.625% due
11-30-02) - Note B 3.970% $ 262 $ 262
-------
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
United States (1.60%)
Amdocs Ltd.* (Telecommunications) 400 $ 22
Elan Corp. PLC - ADR (HEAL) 1,400 86
Glaxo SmithKline PLC - ADR (HEAL) 2,300 129
Santa Fe International Corp. (Oil & Gas) 1,500 44
Schlumberger Ltd. (Oil & Gas) 900 47
Transocean Sedco Forex, Inc. (Oil & Gas) 1,000 41
XL Capital Ltd. (Class A) (Insurance) 600 49
-------
418
-------
TOTAL COMMON STOCK - (95.49%) 24,909
-------
RIGHTS
Portugal (0.00%)
Portugal Telecom, SGPS, SA* (Telecommunications) 6,500 -
-------
PAR VALUE
(000's
OMITTED)
---------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (5.60%)
Investment in joint repurchase agreement with
Goldman Sachs & Co. dated 06/29/01, 4.11% due
07/02/01 (Secured by various U.S. Treasury
Obligations and U.S. Government Agency Bonds) $ 1,200 $ 1,200
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. - Dated 06-29-01,
due 07-02-01 (Secured by U.S. Treasury Bonds, 6.875%
due 08-15-25 and U.S. Treasury Notes, 5.625% due
11-30-02) - Note B 262 262
-------
Schedule of Investments Exhibit C
June 30, 2001
The Schedule of Investments is a complete list of all securities owned by the
V.S.T. International Equity Fund and the V.A. International Fund, combined on
June 30, 2001.
-------------------------------------------------------------------------
John Hancock V.S.T. John Hancock
International Equity Fund V.A. International Fund
-------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
-------------------------------------------------------------------------
ISSUER, DESCRIPTION
Cash Equivalents (3.99%)
Navigator Securities Lending
Prime Portfolio** 1,040,206 $ 1,040
-------
------- -------
TOTAL SHORT TERM INVESTMENTS (9.59%) $ 1,200 1,302
------- -------
TOTAL INVESTMENTS (105.08%) 21,204 6,207
------- -------
OTHER ASSETS AND LIABILITIES, NET (5.08%) (118) (1,208)
------- -------
TOTAL NET ASSETS (100.00%) $21,086 $ 4,999
======= =======
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000's
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
Cash Equivalents (3.99%)
Navigator Securities Lending
Prime Portfolio** 1,040,206 $ 1,040
-------
-------
TOTAL SHORT TERM INVESTMENTS (9.59%) 2,502
-------
TOTAL INVESTMENTS (105.08%) 27,411
-------
OTHER ASSETS AND LIABILITIES, NET (5.08%) (1,326)
-------
TOTAL NET ASSETS (100.00%) $26,085
=======
NOTES TO THE SCHEDULE OF INVESTMENTS
ADR - American Depository Receipts
** Represents investment of security lending collateral.
* Non-income producing security
The percentage shown for each investment category is the total value of that
category as a percentage of the combined net assets of the Funds.
Exhibit C
JOHN HANCOCK V.S.T. FUNDAMENTAL GROWTH FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. Fundamental Growth Fund and the John Hancock V.A. Mid Cap Growth
Fund with information about the impact of the proposed merger by indicating how
the merger might have affected information had the merger been consummated as of
June 30, 2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. Fundamental Growth Fund and John Hancock V.A. Mid Cap Growth Fund
after giving effect to pro forma adjustments described in the notes below.
(a) Acquisition by John Hancock V.S.T. Fundamental Growth Fund of all assets
of John Hancock V.A. Mid Cap Growth Fund and issuance of John Hancock
V.S.T. Fundamental Growth Fund shares in exchange for all of the
outstanding shares of John Hancock V.A. Mid Cap Growth Fund.
(b) The investment management fee was adjusted to reflect the application of
the fee structure which will be in effect for John Hancock V.S.T.
Fundamental Growth Fund:
0.90% for the first $250,000,000 of the Fund's net assets;
0.85% for net assets in excess of $250,000,000.
(c) The actual expenses incurred by the John Hancock V.S.T. Fundamental Growth
Fund and the John Hancock V.A. Mid Cap Growth Fund were reduced to reflect
the estimated savings arising from the merger.
(d) Represents the Adviser's voluntary agreement to limit the fund's other
expenses to an annual rate of 0.10% of the Fund's average daily net
assets.
John Hancock V.S.T. Fundamental Growth Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. V.A.
Fundamental Mid Cap Growth Pro-Forma
Growth Fund Fund Adjustments Combined
------------ -------------- ----------- ---------
ASSETS
Long term investments at cost $ 43,668 $ 6,066 $ -- $ 49,734
Net unrealized appreciation (depreciation) of investments (4,054) (136) -- (4,190)
Short-term investments at value 1,186 503 -- 1,689
-------- -------- -------- --------
Total investments 40,800 6,433 -- 47,233
Cash 3 -- -- 3
Receivable for:
Investments sold 657 52 -- 709
Fund shares sold -- 1 -- 1
Dividends and interest 12 1 -- 13
Other assets -- 1 -- 1
-------- -------- -------- --------
Total Assets 41,472 6,488 -- 47,960
-------- -------- -------- --------
LIABILITIES
Payables for:
Investments purchased 1,114 159 -- 1,273
Payable to affiliates -- 2 -- 2
Accounts payable and accrued expenses -- 12 -- 12
Other liabilities 16 -- -- 16
-------- -------- -------- --------
Total Liabilities 1,130 173 -- 1,303
-------- -------- -------- --------
Net Assets 40,342 6,315 -- 46,657
======== ======== ======== ========
Net assets:
Capital paid-in 58,489 8,932 -- 67,421
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions (14,000) (2,451) -- (16,451)
Undistributed (distribution in excess of)
net investment income (loss) (93) (30) -- (123)
Net unrealized appreciation (depreciation) of investments,
futures and translation of assets and liabilities in
foreign currencies (4,054) (136) -- (4,190)
-------- -------- -------- --------
40,342 6,315 -- 46,657
======== ======== ======== ========
Net assets:
V.S.T. Fundamental Growth Fund 40,342 -- 6,315(a) 46,657
V.A. Mid Cap Growth Fund -- 6,315 (6,315)(a) --
-------- -------- -------- --------
40,342 6,315 -- 46,657
======== ======== ======== ========
Shares outstanding:
V.S.T. Fundamental Growth Fund 4,090 -- 642(a) 4,732
V.A. Mid Cap Growth Fund -- 546 (546)(a) --
-------- -------- -------- --------
4,090 546 96 4,732
======== ======== ======== ========
Net assets value per share:
V.S.T. Fundamental Growth Fund $ 9.86 -- -- $ 9.86
V.A. Mid Cap Growth Fund -- $ 11.56 $ (11.56)(a) --
======== ======== ======== ========
John Hancock V.S.T. Fundamental Growth Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. V.A.
Fundamental Mid Cap Growth
Growth Fund Fund
12 months ended 12 months ended Pro-Forma
June 30, 2001 June 30, 2001 Adjustments Combined
--------------- --------------- ----------- ---------
INVESTMENT INCOME
Interest $ 140 $ 28 $ -- $ 168
Dividends 91 17 -- 108
Securities Lending 3 1 -- 4
-------- -------- -------- --------
Total investment income 234 46 -- 280
-------- -------- -------- --------
EXPENSES
Investment management fee 360 85 17(b) 462
Auditing fees 3 12 (4)(c) 11
Custodian fees 47 20 (8)(c) 59
Accounting and legal services fee -- 2 (2)(c) --
Legal fees 1 -- -- 1
Printing & mailing fees 44 4 (4)(c) 44
Trustees' fee -- 1 -- 1
Miscellaneous -- 1 -- 1
Other fees 2 -- -- 2
-------- -------- -------- --------
Total expenses 457 125 (1) 581
Less expenses reimbursed (58) (11) 1(d) (68)
-------- -------- -------- --------
Net expenses 399 114 0 513
-------- -------- -------- --------
Net investment income (loss) (165) (68) (0) (233)
-------- -------- -------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (9,802) (2,791) -- (12,593)
Change in unrealized appreciation (depreciation) on: --
Investments (9,199) (2,198) -- (11,397)
-------- -------- -------- --------
Net realized and unrealized gain (loss) (19,001) (4,989) -- (23,990)
-------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations $(19,166) $ (5,057) $ (0) $(24,223)
======== ======== ======== ========
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
Common Stock
Advertising (0.19%)
Lamar Advertising Co.* 850 $ 37
TMP Worldwide, Inc.* 850 51
-------
88
-------
Bank (1.62%)
M & T Bank Corp. 3,750 $ 283
Zions Bancorp 6,400 378
Northern Trust Corp. 1,500 94
------- -------
661 94
------- -------
Beverages (0.08%)
Coors (Adolph) Co. (Class B) 742 37
-------
37
-------
Brokerage & Investment Management
(2.16%)
Investment Technology Group, Inc. 7,500 377
Legg Mason, Inc. 9,700 483 1,206 60
Lehman Brothers Holdings, Inc. 1,113 87
------- -------
860 147
------- -------
Business Services (1.43%)
Interpublic Group Cos., Inc. 22,800 669
-------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTION
Common Stock
Advertising (0.19%)
Lamar Advertising Co.* 850 $ 37
TMP Worldwide, Inc.* 850 51
-------
88
-------
Bank (1.62%)
M & T Bank Corp. 3,750 283
Zions Bancorp 6,400 378
Northern Trust Corp. 1,500 94
-------
755
-------
Beverages (0.08%)
Coors (Adolph) Co. (Class B) 742 37
-------
37
-------
Brokerage & Investment Management
(2.16%)
Investment Technology Group, Inc. 7,500 377
Legg Mason, Inc. 10,906 543
Lehman Brothers Holdings, Inc. 1,113 87
-------
1,007
-------
Business Services (1.43%)
Interpublic Group Cos., Inc. 22,800 669
-------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
Commercial Services (6.22%)
Cintas Corp. 10,700 $ 495
Concord EFS, Inc. 8,100 421
Convergys Corp.* 23,500 711
Ecolab, Inc. 9,600 393
Lamar Advertising Co.* 11,100 489
The Dun & Bradstreet Corp.* 11,800 395
-------
2,904
-------
Computer Equipment, Software, &
Services (13.33%)
Adobe Systems, Inc. 6,800 319
Brocade Communications Systems, Inc.* 8,600 378 2,580 $ 113
DST Systems, Inc.* 1,192 63
Electronic Arts, Inc.* 600 35
Emulex Corp.* 1,350 54
Fiserv, Inc. 10,300 659
Fiserv, Inc.* 1,015 65
i2 Technologies, Inc. 6,600 131
Informatica Corp. 9,400 163
Internet Security System, Inc. 5,555 270
Manugistics Group, Inc. 6,400 160
McData Corp. 3,900 69
Mercury Interactive Corp.* 2,070 124
Micromuse, Inc. * 12,100 339 2,200 62
Network Appliance, Inc. 13,800 189
Parametric Technology Corp.* 8,350 117
Peregrine Systems, Inc. 42,500 1,232
Retek, Inc. 11,800 566
SunGard Data Systems, Inc. 2,000 60 1,856 56
Synopsys, Inc. 3,550 172 2,250 135
VeriSign, Inc. 10,050 603
WebMethods, Inc. 4,000 85
------- -------
5,395 824
------- -------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTION
Commercial Services (6.22%)
Cintas Corp. 10,700 $ 495
Concord EFS, Inc. 8,100 421
Convergys Corp.* 23,500 711
Ecolab, Inc. 9,600 393
Lamar Advertising Co.* 11,100 489
The Dun & Bradstreet Corp.* 11,800 395
-------
2,904
-------
Computer Equipment, Software, &
Services (13.33%)
Adobe Systems, Inc. 6,800 319
Brocade Communications Systems, Inc.* 11,180 491
DST Systems, Inc.* 1,192 63
Electronic Arts, Inc.* 600 35
Emulex Corp.* 1,350 54
Fiserv, Inc. 10,300 659
Fiserv, Inc.* 1,015 65
i2 Technologies, Inc. 6,600 131
Informatica Corp. 9,400 163
Internet Security System, Inc. 5,555 270
Manugistics Group, Inc. 6,400 160
McData Corp. 3,900 69
Mercury Interactive Corp.* 2,070 124
Micromuse, Inc. * 14,300 401
Network Appliance, Inc. 13,800 189
Parametric Technology Corp.* 8,350 117
Peregrine Systems, Inc. 42,500 1,232
Retek, Inc. 11,800 566
SunGard Data Systems, Inc. 3,856 116
Synopsys, Inc. 5,800 307
VeriSign, Inc. 10,050 603
WebMethods, Inc. 4,000 85
-------
6,219
-------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
Consumer Miscellaneous (2.02%)
Harley-Davidson, Inc. 20,000 $ 942
-------
Cosmetic & Personal Care (1.37%)
Estee Lauder Cos., Inc. - Cl. A 14,800 638
-------
Electric Power (1.80%)
Calpine Corp. * 8,350 316
CMS Energy Corp. 10,700 298
Mirant Corp. * 6,600 227
-------
841
-------
Electronic Products & Services (14.63%)
Aeroflex, Inc.* 6,694 $ 70
Applera Corporation - Applied
Biosystems Group 14,600 390
ASML Holdings NV* (Netherlands) 1,750 39
Atmel Corp. * 41,500 560 5,450 74
Capstone Turbine Corp.* 2,950 65
Celestica, Inc. 9,150 471 993 51
Emulex Corp. * 7,000 283
GlobeSpan, Inc. 10,250 150
Integrated Device Technology, Inc. 8,400 266
International Rectifier Corp.* 994 34
Jabil Circuit, Inc. 11,200 346
KLA-Tencor Corp. * 4,150 243 500 29
Lam Research Corp. 6,000 178 950 28
LSI Logic Corp. 14,800 278
Maxim Integrated Products, Inc. * 4,600 203
Micrel, Inc. 8,500 280 1,200 40
National Semiconductor Corp.* 2,364 69
Novellus Systems, Inc.* 1,150 65
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTION
Consumer Miscellaneous (2.02%)
Harley-Davidson, Inc. 20,000 $ 942
-------
Cosmetic & Personal Care (1.37%)
Estee Lauder Cos., Inc. - Cl. A 14,800 638
-------
Electric Power (1.80%)
Calpine Corp. * 8,350 316
CMS Energy Corp. 10,700 298
Mirant Corp. * 6,600 227
-------
841
-------
Electronic Products & Services (14.63%)
Aeroflex, Inc.* 6,694 70
Applera Corporation - Applied
Biosystems Group 14,600 390
ASML Holdings NV* (Netherlands) 1,750 39
Atmel Corp. * 46,950 634
Capstone Turbine Corp.* 2,950 65
Celestica, Inc. 10,143 522
Emulex Corp. * 7,000 283
GlobeSpan, Inc. 10,250 150
Integrated Device Technology, Inc. 8,400 266
International Rectifier Corp.* 994 34
Jabil Circuit, Inc. 11,200 346
KLA-Tencor Corp. * 4,650 272
Lam Research Corp. 6,950 206
LSI Logic Corp. 14,800 278
Maxim Integrated Products, Inc. * 4,600 203
Micrel, Inc. 9,700 320
National Semiconductor Corp.* 2,364 69
Novellus Systems, Inc.* 1,150 65
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
ONI Systems Corp.* 1,950 $ 55
PerkinElmer, Inc. 26,000 $ 716 1,300 40
PMC-Sierra, Inc. 14,600 454
QLogic Corp. * 13,200 851 460 30
Tektronix, Inc.* 3,057 83
Waters Corp. * 14,000 386
------- -------
6,055 772
------- -------
Energy - Alternative Source (0.87%)
Calpine Corp.* 1,606 61
Dynegy, Inc. - Cl.A 7,470 347
------- -------
347 61
------- -------
Fiber Optics (0.09%)
Finisar Corp.* 2,150 40
-------
Financial Services (1.68%)
Affiliated Managers Group, Inc.* 1,346 83
Concord EFS, Inc.* 1,840 96
Providian Financial Corp. * 6,600 391 1,443 85
USA Education, Inc. 1,776 130
------- -------
391 394
------- -------
Food, Beverage & Tobacco (0.90%)
Sysco Corp. 15,400 418
-------
Health Care Products (15.45%)
Abgenix, Inc. * 5,550 250
Allergan, Inc. 9,250 791
Andrx Corp. * 8,600 662
Diversa Corp. 4,300 87
Forest Laboratories, Inc.* 550 39
Genzyme Corp. 3,800 232
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTION
ONI Systems Corp.* 1,950 $ 55
PerkinElmer, Inc. 27,300 756
PMC-Sierra, Inc. 14,600 454
QLogic Corp. * 13,660 881
Tektronix, Inc.* 3,057 83
Waters Corp. * 14,000 386
-------
6,827
-------
Energy - Alternative Source (0.87%)
Calpine Corp.* 1,606 61
Dynegy, Inc. - Cl.A 7,470 347
-------
408
-------
Fiber Optics (0.09%)
Finisar Corp.* 2,150 40
-------
Financial Services (1.68%)
Affiliated Managers Group, Inc.* 1,346 83
Concord EFS, Inc.* 1,840 96
Providian Financial Corp. * 8,043 476
USA Education, Inc. 1,776 130
-------
785
-------
Food, Beverage & Tobacco (0.90%)
Sysco Corp. 15,400 418
-------
Health Care Products (15.45%)
Abgenix, Inc. * 5,550 250
Allergan, Inc. 9,250 791
Andrx Corp. * 8,600 662
Diversa Corp. 4,300 87
Forest Laboratories, Inc.* 550 39
Genzyme Corp. 3,800 232
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
Gilead Sciences, Inc. * 5,850 $ 340
Human Genome Sciences, Inc. 3,950 238
IDEXX Laboratories, Inc. * 7,900 247
Inhale Therapeutic Systems, Inc. * 10,300 237
Invitrogen Corp. 1,500 108
Ivax Corp. 23,025 898
King Pharmaceuticals, Inc. 8,000 430
MedImmune, Inc. * 23,000 1,086
Millennium Pharmaceuticals, Inc. * 14,700 523
Protein Design Labs, Inc. * 2,800 243
Shire Pharmaceuticals Group Place
SPONSORED ADR 6,100 338
Stryker Corp. 8,350 458
-------
7,207
-------
Health Care Services (2.21%)
AmeriSource Health Corp. - Cl. A 7,600 420
Idec Pharmaceuticals Corp. 3,700 251
Quest Diagnostics, Inc. * 4,800 359
-------
1,030
-------
Instruments - Scientific (0.07%)
Millipore Corp. 533 $ 33
-------
Insurance (2.78%)
Ace, Ltd. * 14,600 571 2,095 82
Ambac Financial Group, Inc. 1,148 67
Everest Re Group Ltd. (Bermuda) 1,042 78
XL Capital, Ltd. - Cl. A 6,100 501
------- -------
1,072 227
------- -------
Leisure & Recreation (0.88%)
Four Seasons Hotels, Inc. 3,800 210
International Game Technology 3,200 201
-------
411
-------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTION
Gilead Sciences, Inc. * 5,850 $ 340
Human Genome Sciences, Inc. 3,950 238
IDEXX Laboratories, Inc. * 7,900 247
Inhale Therapeutic Systems, Inc. * 10,300 237
Invitrogen Corp. 1,500 108
Ivax Corp. 23,025 898
King Pharmaceuticals, Inc. 8,000 430
MedImmune, Inc. * 23,000 1,086
Millennium Pharmaceuticals, Inc. * 14,700 523
Protein Design Labs, Inc. * 2,800 243
Shire Pharmaceuticals Group Place
SPONSORED ADR 6,100 338
Stryker Corp. 8,350 458
-------
7,207
-------
Health Care Services (2.21%)
AmeriSource Health Corp. - Cl. A 7,600 420
Idec Pharmaceuticals Corp. 3,700 251
Quest Diagnostics, Inc. * 4,800 359
-------
1,030
-------
Instruments - Scientific (0.07%)
Millipore Corp. 533 33
-------
Insurance (2.78%)
Ace, Ltd. * 16,695 653
Ambac Financial Group, Inc. 1,148 67
Everest Re Group Ltd. (Bermuda) 1,042 78
XL Capital, Ltd. - Cl. A 6,100 501
-------
1,299
-------
Leisure & Recreation (0.88%)
Four Seasons Hotels, Inc. 3,800 210
International Game Technology 3,200 201
-------
411
-------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
Media - TV / Radio (2.97%)
BEA Systems, Inc. 11,200 $ 344
Charter Communications, Inc. (Class A)* 4,650 $ 108
Clear Channel Communications, Inc.* 882 55
Emmis Communications Corp. (Class A)* 2,150 66
Hispanic Broadcasting Corp.* 1,771 51
Radio One, Inc. * 3,100 71
Radio One, Inc. - Cl. D 4,600 101
Time Warner Telecom, Inc. - Cl. A 6,340 213
Univision Communications, Inc. - Cl. A* 5,700 244 1,516 65
USA Networks, Inc.* 2,350 66
------- -------
973 411
------- -------
Medical (2.93%)
Alkermes, Inc.* 1,730 61
Allergan, Inc. 870 74
AmeriSource Health Corp. (Class A)* 1,387 77
Apogent Technologies, Inc.* 1,686 41
Express Scripts, Inc.* 1,200 66
Forest Laboratories, Inc.* 1,036 74
Genzyme Corp.* 900 55
Human Genome Sciences, Inc.* 1,070 64
ICOS Corp.* 850 54
IDEC Pharmaceuticals Corp.* 1,250 85
Inhale Therapeutic Systems, Inc.* 3,150 72
Invitrogen Corp.* 800 45
MedImmune, Inc.* 1,490 70
Oxford Health Plans, Inc.* 2,328 67
Shire Pharmaceuticals Group Plc,
American Depositary Receipts (ADR)*
(United Kingdom) 2,502 139
Teva Pharmaceutical Industries Ltd.
(ADR) (Israel) 1,301 81
Trigon Healthcare, Inc.* 603 39
Universal Health Services, Inc.
(Class B)* 1,417 64
Varian Medical Systems, Inc.* 979 70
Wellpoint Health Networks, Inc.* 751 71
-------
1,369
-------
---------------------------
Combined
---------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
---------------------------
ISSUER, DESCRIPTION
Media - TV / Radio (2.97%)
BEA Systems, Inc. 11,200 $ 344
Charter Communications, Inc. (Class A)* 4,650 108
Clear Channel Communications, Inc.* 882 55
Emmis Communications Corp. (Class A)* 2,150 66
Hispanic Broadcasting Corp.* 1,771 51
Radio One, Inc. * 3,100 71
Radio One, Inc. - Cl. D 4,600 101
Time Warner Telecom, Inc. - Cl. A 6,340 213
Univision Communications, Inc. - Cl. A* 7,216 309
USA Networks, Inc.* 2,350 66
-------
1,384
-------
Medical (2.93%)
Alkermes, Inc.* 1,730 61
Allergan, Inc. 870 74
AmeriSource Health Corp. (Class A)* 1,387 77
Apogent Technologies, Inc.* 1,686 41
Express Scripts, Inc.* 1,200 66
Forest Laboratories, Inc.* 1,036 74
Genzyme Corp.* 900 55
Human Genome Sciences, Inc.* 1,070 64
ICOS Corp.* 850 54
IDEC Pharmaceuticals Corp.* 1,250 85
Inhale Therapeutic Systems, Inc.* 3,150 72
Invitrogen Corp.* 800 45
MedImmune, Inc.* 1,490 70
Oxford Health Plans, Inc.* 2,328 67
Shire Pharmaceuticals Group Plc,
American Depositary Receipts (ADR)*
(United Kingdom) 2,502 139
Teva Pharmaceutical Industries Ltd.
(ADR) (Israel) 1,301 81
Trigon Healthcare, Inc.* 603 39
Universal Health Services, Inc.
(Class B)* 1,417 64
Varian Medical Systems, Inc.* 979 70
Wellpoint Health Networks, Inc.* 751 71
-------
1,369
-------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
Oil & Natural Gas Exploration &
Production (4.08%)
Baker Hughes, Inc. 1,377 $ 46
Devon Energy Corp. 5,400 $ 284
Global Marine, Inc. * 21,600 402
Murphy Oil Corp. 3,750 276
Santa Fe International Corp. 2,487 72
Transocean Sedco Forex, Inc. 16,900 697 1,391 57
Weatherford International, Inc.* 1,452 70
------- -------
1,659 245
------- -------
Oil - Equipment & Service (1.92%)
Cooper Cameron Corp. * 4,900 273 1,164 65
Smith International, Inc. 9,300 557
------- -------
830 65
------- -------
Personal & Commercial Lending (1.80%)
AmeriCredit Corp. 3,900 202
Capital One Financial Corp. 8,100 486
Metris Cos., Inc. 4,500 152
-------
840
-------
Real Estate Investment Trust (0.68%)
Boston Properties, Inc. 7,700 315
-------
Real Estate Operations (0.53%)
HomeStore.com, Inc. 7,000 245
-------
Retail - Department Stores (3.72%)
Bed Bath & Beyond, Inc.* 2,200 66
BJ's Wholesale Club, Inc.* 1,693 90
Family Dollar Stores, Inc. 21,400 549
RadioShack Corp. 12,300 375
Talbots, Inc. 4,300 188 1,814 80
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTIONOil & Natural Gas Exploration &
Production (4.08%)
Baker Hughes, Inc. 1,377 $ 46
Devon Energy Corp. 5,400 284
Global Marine, Inc. * 21,600 402
Murphy Oil Corp. 3,750 276
Santa Fe International Corp. 2,487 72
Transocean Sedco Forex, Inc. 18,291 754
Weatherford International, Inc.* 1,452 70
-------
1,904
-------
Oil - Equipment & Service (1.92%)
Cooper Cameron Corp. * 6,064 338
Smith International, Inc. 9,300 557
-------
895
-------
Personal & Commercial Lending (1.80%)
AmeriCredit Corp. 3,900 202
Capital One Financial Corp. 8,100 486
Metris Cos., Inc. 4,500 152
-------
840
-------
Real Estate Investment Trust (0.68%)
Boston Properties, Inc. 7,700 315
-------
Real Estate Operations (0.53%)
HomeStore.com, Inc. 7,000 245
-------
Retail - Department Stores (3.72%)
Bed Bath & Beyond, Inc.* 2,200 66
BJ's Wholesale Club, Inc.* 1,693 90
Family Dollar Stores, Inc. 21,400 549
RadioShack Corp. 12,300 375
Talbots, Inc. 6,114 268
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
Tiffany & Co. 9,167 $ 332
TJX Cos., Inc. 1,820 $ 58
------- -------
1,444 294
------- -------
Retail - Food (2.82%)
Darden Restaurants, Inc. 14,650 409
Starbucks Corp. * 39,500 908
-------
1,317
-------
Telecommunication Equipment &
Services (5.23%)
Comverse Technology, Inc. * 3,950 226 1,570 90
Linear Technology Corp. 2,900 128
Sonus Networks, Inc. * 13,000 304
Symbol Technologies, Inc. 35,550 789
Amdocs Ltd.* 2,026 109
American Tower Corp. (Class A)* 3,243 67
Crown Castle International Corp. 19,000 312 2,975 49
Dobson Communications Corp. (Class A)* 7,230 123
Global Crossing Ltd.* (Bermuda) 5,493 47
Nextel Communications, Inc. (Class A)* 1,250 22
Scientific-Atlanta, Inc. 1,959 80
Sonus Networks, Inc.* 1,150 27
Western Wireless Corp. (Class A)* 1,590 68
------- -------
1,759 682
------- -------
Telephone (0.84%)
Telephone and Data Systems, Inc. 3,600 391
-------
Textile (0.14%)
Jones Apparel Group, Inc.* 1,462 63
-------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTION
Tiffany & Co. 9,167 $ 332
TJX Cos., Inc. 1,820 58
-------
1,738
-------
Retail - Food (2.82%)
Darden Restaurants, Inc. 14,650 409
Starbucks Corp. * 39,500 908
-------
1,317
-------
Telecommunication Equipment &
Services (5.23%)
Comverse Technology, Inc. * 5,520 316
Linear Technology Corp. 2,900 128
Sonus Networks, Inc. * 13,000 304
Symbol Technologies, Inc. 35,550 789
Amdocs Ltd.* 2,026 109
American Tower Corp. (Class A)* 3,243 67
Crown Castle International Corp. 21,975 361
Dobson Communications Corp. (Class A)* 7,230 123
Global Crossing Ltd.* (Bermuda) 5,493 47
Nextel Communications, Inc. (Class A)* 1,250 22
Scientific-Atlanta, Inc. 1,959 80
Sonus Networks, Inc.* 1,150 27
Western Wireless Corp. (Class A)* 1,590 68
-------
2,441
-------
Telephone (0.84%)
Telephone and Data Systems, Inc. 3,600 391
-------
Textile (0.14%)
Jones Apparel Group, Inc.* 1,462 63
-------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
Utilities (0.18%)
Orion Power Holdings, Inc.* 3,581 84
-------
TOTAL COMMON STOCK (97.62%)
------- -------
(Cost $49,734 and $6,065,678) 39,614 5,930
------- -------
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTION
Utilities (0.18%)
Orion Power Holdings, Inc.* 3,581 84
-------
TOTAL COMMON STOCK (97.62%)
-------
(Cost $49,734 and $6,065,678) 45,544
-------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Fundamental Growth Fund and the V.A. Mid Cap Growth Fund, combined on
June 30, 2001.
------------------------------------------------------------------------------
V.S.T. Fundamental Growth Fund V.A. Mid Cap Growth Fund
------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000'S INTEREST SHARES OR (000'S
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED)
------------------------------------------------------------------------------
ISSUER, DESCRIPTION
PAR VALUE PAR VALUE
(000'S (000'S
OMITTED) OMITTED)
--------- ---------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.08%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds,
10.625% due 8-15-15 and 6.250% due
08-15-23, U.S. Treasury Note 5.625%
due 11-30-02) 3.970% $ 503 $ 503
Rights/Warrants (2.54%)
JOHN HANCOCK JOINT ACCOUNT
3.97% due 07/02/01 3.970% 1,186 1,186
------- -------
TOTAL SHORT-TERM INVESTMENTS (3.62%) 1,186 503
------- -------
TOTAL INVESTMENTS (101.24%) 40,800 6,433
------- -------
Payables, less cash and
receivables (1.24%) (458) (118)
------- -------
NET ASSETS (100.00%) $40,342 $ 6,315
======= =======
--------------------------
Combined
--------------------------
NUMBER OF MARKET VALUE
SHARES OR (000'S
WARRANTS OMITTED)
--------------------------
ISSUER, DESCRIPTION
PAR VALUE
(000'S
OMITTED)
---------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement (1.08%)
Investment in a joint repurchase
agreement transaction with UBS Warburg,
Inc. - Dated 06-29-01, due 07-02-01
(Secured by U.S. Treasury Bonds,
10.625% due 8-15-15 and 6.250% due
08-15-23, U.S. Treasury Note 5.625%
due 11-30-02) $ 503 $ 503
Rights/Warrants (2.54%)
JOHN HANCOCK JOINT ACCOUNT
3.97% due 07/02/01 1,186 1,186
-------
TOTAL SHORT-TERM INVESTMENTS (3.62%) 1,689
-------
TOTAL INVESTMENTS (101.24%) 47,233
-------
Payables, less cash and
receivables (1.24%) (576)
-------
NET ASSETS (100.00%) $46,657
=======
NOTES TO THE SCHEDULE OF INVESTMENTS
ADR-American Depository Receipts.
* Non-income producing security.
The percentage shown for each investment category is the total value of that
category as a percentage of the combined net assets of the Funds.
Exhibit C
JOHN HANCOCK V.S.T. SMALL CAP GROWTH FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. Small Cap Growth Fund and the John Hancock V.A. Small Cap Growth
Fund with information about the impact of the proposed merger by indicating how
the merger might have affected information had the merger been consummated as of
June 30, 2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. Small Cap Growth Fund and John Hancock V.A. Small Cap Growth Fund
after giving effect to pro forma adjustments described in the notes below.
(a) Acquisition by John Hancock V.S.T. Small Cap Growth Fund of all assets of
John Hancock V.A. Small Cap Growth Fund and issuance of John Hancock
V.S.T. Small Cap Growth Fund shares in exchange for all of the outstanding
shares of John Hancock V.A. Small Cap Growth Fund.
(b) The deferred organization expense of John Hancock V.A. Small Cap Growth
Fund was written off as the Fund would no longer be in existence.
(c) The investment management fee was adjusted to reflect the application of
the fee structure which will be in effect for John Hancock V.S.T. Small
Cap Growth Fund: 1.05% of the Fund's average daily net assets.
(d) The actual expenses incurred by the John Hancock V.S.T. Small Cap Growth
Fund and the John Hancock V.A. Small Cap Growth Fund were reduced to
reflect the estimated savings arising from the merger.
(e) Represents the Adviser's voluntary agreement to limit the funds' other
expenses to an annual rate of 0.10% of the funds' average daily net
assets.
John Hancock V.S.T. Small Cap Growth Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. Small Cap V.A. Small Cap Pro-Forma
Growth Fund Growth Fund Adjustments Combined
---------------- -------------- ----------- --------
ASSETS
Long term investments at cost $193,543 $ 11,381 $ -- $204,924
Net unrealized appreciation (depreciation) of investments 1,583 1,812 -- 3,395
Short-term investments at value 22,608 111 -- 22,719
-------- -------- -------- --------
Total investments 217,734 13,304 -- 231,038
Receivable for:
Investments sold 1,582 157 -- 1,739
Fund shares sold -- 28 -- 28
Dividends and interest 10 1 -- 11
Other Assets -- 1 -- 1
-------- -------- -------- --------
Total assets 219,326 13,491 -- 232,817
-------- -------- -------- --------
LIABILITIES
Payables for:
Due to custodian 300 -- -- 300
Investments purchased 1,596 141 -- 1,737
Securities on loan 15,318 -- -- 15,318
Fund shares purchased -- 8 -- 8
Payable to John Hancock Advisers, Inc. and affiliates -- 8 -- 8
Other liabilities 59 21 -- 80
-------- -------- -------- --------
Total liabilities 17,273 178 -- 17,451
-------- -------- -------- --------
Net assets 202,053 13,313 -- 215,366
======== ======== ======== ========
Net assets:
Capital paid-in 243,011 15,585 -- 258,596
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions (42,095) (4,034) -- (46,129)
Undistributed (distributions in excess of)
net investment income (loss) (446) (51) -- (497)
Net unrealized appreciation (depreciation) of investments,
futures and translation of assets and liabilities in
foreign currencies 1,583 1,813 -- 3,396
-------- -------- -------- --------
202,053 13,313 -- 215,366
======== ======== ======== ========
Net assets:
V.S.T. Small Cap Growth Fund 202,053 -- 13,313(a) 215,366
V.A. Small Cap Growth Fund -- 13,313 (13,313)(a) --
-------- -------- -------- --------
202,053 13,313 -- 215,366
======== ======== ======== ========
Shares outstanding:
V.S.T. Small Cap Growth Fund 16,291 -- 1,073(a) 17,364
V.A. Small Cap Growth Fund -- 1,006 (1,006)(a) --
-------- -------- -------- --------
16,291 1,006 67 17,364
======== ======== ======== ========
Net asset value per share:
V.S.T. Small Cap Growth Fund $ 12.40 -- -- $ 12.40
V.A. Small Cap Growth Fund -- $ 13.24 $ (13.24)(a) --
======== ======== ======== ========
John Hancock V.S.T. Small Cap Growth Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. Small Cap V.A. Small Cap
Growth Fund Growth Fund
12 months ended 12 months ended Pro-Forma
June 30, 2001 June 30, 2001 Adjustments Combined
---------------- --------------- ----------- --------
INVESTMENT INCOME
Interest $ 287 $ 20 $ -- $ 307
Dividends 180 15 -- 195
Securities Lending 414 30 -- 444
--------- --------- --------- ---------
Total investment income 881 65 -- 946
--------- --------- --------- ---------
EXPENSES
Investment management fee 2,497 159 63(c) 2,719
Auditing fees 22 15 (9)(d) 28
Custodian fees 100 51 (43)(d) 108
Accounting and legal services fee -- 4 -- 4
Legal fees 5 -- --(d) 5
Printing & mailing fees 75 2 (2)(d) 75
Organization expense -- 2 (2)(b) --
Trustees' fee 5 1 -- 6
Miscellaneous -- 1 -- 1
Interest expense -- 2 -- 2
Other fees 5 -- -- 5
--------- --------- --------- ---------
Total expenses 2,709 237 7 2,953
Less expenses reimbursed -- (26) 26(e) --
--------- --------- --------- ---------
Net expenses 2,709 211 33 2,953
--------- --------- --------- ---------
Net investment loss (1,828) (146) (33) (2,007)
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (53,603) (2,804) -- (56,407)
Finacial futures contracts -- -- -- --
Foreign currency transactions -- -- -- --
Change in net unrealized appreciation (depreciation) on:
Investments (43,609) (6,161) -- (49,770)
Futures -- -- -- --
Translation of assets and liabilities in foreign currencies -- -- -- --
--------- --------- --------- ---------
Net realized and unrealized gain (loss) (97,212) (8,965) -- (106,177)
--------- --------- --------- ---------
Net increase (decrease) in net assets resulting from operations $ (99,040) $ (9,111) $ (33) $(108,184)
========= ========= ========= =========
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Small Cap Growth Fund and the V.A. Small Cap Growth Fund combined on
June 30, 2001.
---------------------------------------------------------------------------------------------
V.S.T. Small Cap Growth Fund V.A. Small Cap Growth Fund Combined
---------------------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED) WARRANTS OMITTED)
---------------------------------------------------------------------------------------------
ISSUER DESCRIPTION
COMMON STOCK
Apparel - (0.51%)
Skechers USA, Inc.* 35,100 $ 1,026 2,350 $ 69 37,450 $ 1,095
-------- -------- --------
Auto & Truck Parts - (0.39%)
O'Reilly Automotive, Inc.* 27,200 781 1,800 52 29,000 833
-------- -------- --------
Bank - (2.41%)
Greater Bay Bancorp 53,400 1,334 3,450 86 56,850 1,420
Southwest Bancorporation of
Texas, Inc.* 51,500 1,556 3,000 91 54,500 1,647
Sterling Bancshares, Inc. 105,400 2,021 5,850 112 111,250 2,133
-------- -------- --------
4,911 289 5,200
-------- -------- --------
Brokerage & Investment
Management - (1.13%)
Affiliated Managers Group, Inc.* 36,900 2,269 2,500 154 39,400 2,423
-------- -------- --------
Business Services - (4.95%)
Corporate Executive Board Co.* 67,100 2,818 4,450 187 71,550 3,005
Education Management Corp.* 63,100 2,527 4,200 168 67,300 2,695
EFunds Corp. COM* 47,400 882 3,150 59 50,550 941
Expedia, Inc. - Cl. A* 14,900 694 1,000 47 15,900 741
Forrester Research, Inc.* 41,700 942 2,800 63 44,500 1,005
Management Network Group, Inc.* 121,350 740 121,350 740
On Assignment, Inc.* 80,000 1,440 5,000 90 85,000 1,530
-------- -------- --------
10,043 614 10,657
-------- -------- --------
Commercial Services - (3.40%)
Corinthian Colleges, Inc.* 42,700 2,010 2,750 130 45,450 2,140
Plexus Corp.* 26,000 858 2,000 66 28,000 924
Profit Recovery Group
International, Inc.* 41,500 476 2,800 32 44,300 508
Quanta Services, Inc.* 23,749 523 2,879 63 26,628 586
Veritas DGC, Inc.* 41,100 1,141 1,300 36 42,400 1,177
Waste Connections, Inc.* 51,950 1,870 3,500 126 55,450 1,996
-------- -------- --------
6,878 453 7,331
-------- -------- --------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Small Cap Growth Fund and the V.A. Small Cap Growth Fund combined on
June 30, 2001.
---------------------------------------------------------------------------------------------
V.S.T. Small Cap Growth Fund V.A. Small Cap Growth Fund Combined
---------------------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED) WARRANTS OMITTED)
---------------------------------------------------------------------------------------------
ISSUER DESCRIPTION
Computer Equipment - (2.01%)
Cerner Corp.* 32,700 $ 1,374 2,800 $ 118 35,500 $ 1,492
M-Systems Flash Disk Pioneers, Ltd.* 128,500 912 8,700 62 137,200 974
PRI Automation, Inc.* 95,700 1,773 5,400 100 101,100 1,873
-------- -------- --------
4,059 280 4,339
-------- -------- --------
Computer Software & Services - (4.68%)
Advent Software, Inc.* 20,900 1,327 1,850 117 22,750 1,444
Avocent Corp.* 37,746 859 2,500 57 40,246 916
Data Return Corp.* 88,400 155 5,900 10 94,300 165
Embarcadero Technologies, Inc.* 54,900 1,225 3,100 69 58,000 1,294
Intranet Solutions, Inc.* 36,200 1,377 2,400 91 38,600 1,468
Macromedia, Inc.* 55,700 1,003 3,750 68 59,450 1,071
National Instruments Corp. 2,250 73 2,250 73
Secure Computing Corp.* 119,500 1,877 6,900 108 126,400 1,985
Skillsoft Corp.* 35,900 1,229 1,950 67 37,850 1,296
TeleCommunication Systems, Inc.* 110,200 331 10,800 33 121,000 364
-------- -------- --------
9,383 693 10,076
-------- -------- --------
Construction - (0.69%)
Ryland Group, Inc. 27,800 1,407 1,600 81 29,400 1,488
-------- -------- --------
Consumer Miscellaneous - (4.04%)
DigitalThink, Inc.* 70,600 495 495
GoTo.com, Inc.* 67,100 1,305 4,550 88 71,650 1,393
NetRatings, Inc.* 101,400 1,460 6,500 94 107,900 1,554
ScanSource, Inc.* 36,900 1,750 1,950 92 38,850 1,842
Strayer Education, Inc. 26,300 1,282 1,500 73 27,800 1,355
University of Phoenix Online* 45,500 1,934 3,050 130 48,550 2,064
-------- -------- --------
8,226 477 8,703
-------- -------- --------
Diversified Operations - (0.60%)
CoorsTek, Inc.* 31,900 1,196 2,300 86 34,200 1,282
-------- -------- --------
Electric Power - (1.59%)
Beacon Power Corp. COM* 129,350 893 8,600 59 137,950 952
Wilson Greatbatch Technologies, Inc.* 79,800 2,314 5,350 155 85,150 2,469
-------- -------- --------
3,207 214 3,421
-------- -------- --------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Small Cap Growth Fund and the V.A. Small Cap Growth Fund combined on
June 30, 2001.
---------------------------------------------------------------------------------------------
V.S.T. Small Cap Growth Fund V.A. Small Cap Growth Fund Combined
---------------------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED) WARRANTS OMITTED)
---------------------------------------------------------------------------------------------
ISSUER DESCRIPTION
Electrical Equipment - (0.74%)
LTX Corp.* 57,700 $ 1,475 4,300 $ 110 62,000 $ 1,585
-------- -------- --------
Electronic Products &
Services - (12.83%)
Aeroflex, Inc.* 109,000 1,144 7,000 73 116,000 1,217
Alpha Industries, Inc.* 45,600 1,347 2,900 86 48,500 1,433
Atmi, Inc.* 59,600 1,788 3,550 107 63,150 1,895
Brooks Automation, Inc.* 29,100 1,342 2,050 94 31,150 1,436
Credence Systems Corp.* 51,200 1,241 3,750 91 54,950 1,332
Cree, Inc.* 34,000 889 2,600 68 36,600 957
Cytyc Corp.* 38,000 876 5,150 119 43,150 995
DDI Corp.* 74,200 1,484 5,000 100 79,200 1,584
DuPont Photomasks, Inc.* 30,700 1,481 2,000 96 32,700 1,577
Elantec Semiconductor, Inc.* 32,400 1,095 2,650 90 35,050 1,185
Electro Scientific Industries, Inc.* 42,700 1,627 2,650 101 45,350 1,728
FEI Company* 4,800 197 350 14 5,150 211
FMC Technologies, Inc. COM* 1,800 37 100 2 1,900 39
Hanover Compressor Co.* 3,559 118 3,559 118
Microsemi Corp.* 38,700 2,748 2,650 188 41,350 2,936
Nanometrics, Inc.* 38,000 1,045 2,650 73 40,650 1,118
Pixelworks, Inc.* 48,350 1,728 2,600 93 50,950 1,821
PLX Technology, Inc.* 127,200 1,080 8,500 72 135,700 1,152
Rudolph Technologies, Inc.* 45,000 2,115 3,050 143 48,050 2,258
Semtech Corp.* 51,200 1,536 4,450 134 55,650 1,670
Silicon Storage Technology, Inc.* 88,400 895 7,150 72 95,550 967
-------- -------- --------
25,695 1,934 27,629
-------- -------- --------
Energy - Alternative Source - (0.25%)
Evergreen Solar, Inc. COM* 52,300 502 3,500 34 55,800 536
-------- -------- --------
Financial Services - (0.55%)
Actrade Financial Technologies, Ltd.* 20,455 484 1,366 32 21,821 516
Medallion Financial Corp. 66,100 677 66,100 677
-------- -------- --------
1,161 32 1,193
-------- -------- --------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Small Cap Growth Fund and the V.A. Small Cap Growth Fund combined on
June 30, 2001.
---------------------------------------------------------------------------------------------
V.S.T. Small Cap Growth Fund V.A. Small Cap Growth Fund Combined
---------------------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED) WARRANTS OMITTED)
---------------------------------------------------------------------------------------------
ISSUER DESCRIPTION
Food, Beverage & Tobacco - (2.49%)
American Italian Pasta Co.* 38,800 $ 1,800 2,450 $ 114 41,250 $ 1,914
Dean Foods Co. 25,000 1,005 1,650 66 26,650 1,071
Performance Food Group Co.* 73,800 2,231 4,700 142 78,500 2,373
-------- -------- --------
5,036 322 5,358
-------- -------- --------
Health Care Products - (6.56%)
Alkermes, Inc.* 41,200 1,446 3,350 118 44,550 1,564
Charles River Laboratories* 3,387 118 1,650 57 5,037 175
Cima Labs Inc. COM* 15,400 1,209 1,000 78 16,400 1,287
COR Therapeutics, Inc.* 2,300 70 2,300 70
Exelixis, Inc.* 34,400 653 2,300 44 36,700 697
Inhale Therapeutic Systems, Inc.* 64,400 1,481 4,300 99 68,700 1,580
Inspire Pharmaceuticals, Inc.* 20,500 287 1,400 20 21,900 307
Mid Atlantic Medical Services, Inc.* 62,600 1,122 4,300 77 66,900 1,199
Noven Pharmaceuticals, Inc.* 37,300 1,462 2,050 80 39,350 1,542
Pharmaceutical Product
Development, Inc.* 800 24 800 24
Regeneron Pharmaceuticals* 25,400 880 1,850 64 27,250 944
Renal Care Group, Inc.* 79,700 2,621 4,850 160 84,550 2,781
Salix Pharmaceuticals, Ltd.* 19,800 488 1,300 32 21,100 520
Unilab Corp.* 2,300 58 150 4 2,450 62
Urologix, Inc.* 71,100 1,302 4,350 80 75,450 1,382
-------- -------- --------
13,127 1,007 14,134
-------- -------- --------
Health Care Services - (8.15%)
Accredo Health, Inc.* 64,100 2,384 4,550 169 68,650 2,553
AmeriSource Health Corp. - Cl. A* 25,900 1,432 2,000 111 27,900 1,543
Apria Healthcare Group, Inc.* 32,400 935 2,150 62 34,550 997
Covance, Inc.* 75,800 1,717 5,350 121 81,150 1,838
DaVita, Inc.* 89,021 1,810 6,400 130 95,421 1,940
Gene Logic, Inc.* 18,100 395 1,200 26 19,300 421
LifePoint Hospitals, Inc.* 48,900 2,165 3,400 151 52,300 2,316
Lincare Holdings, Inc.* 36,800 1,104 4,700 141 41,500 1,245
Rightchoice Manage Care, Inc.* 35,000 1,554 1,200 53 36,200 1,607
Ventiv Health, Inc.* 67,400 1,391 3,350 69 70,750 1,460
Visible Genetics, Inc.* 61,200 1,521 4,150 103 65,350 1,624
-------- -------- --------
16,408 1,136 17,544
-------- -------- --------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Small Cap Growth Fund and the V.A. Small Cap Growth Fund combined on
June 30, 2001.
---------------------------------------------------------------------------------------------
V.S.T. Small Cap Growth Fund V.A. Small Cap Growth Fund Combined
---------------------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED) WARRANTS OMITTED)
---------------------------------------------------------------------------------------------
ISSUER DESCRIPTION
Household Appliances /
Furnishings - (0.50%)
Ethan Allen Interiors, Inc. 31,300 $ 1,017 1,950 $ 63 33,250 $ 1,080
-------- -------- --------
Insurance - (3.28%)
Fidelity National Financial, Inc. 57,600 1,415 4,350 107 61,950 1,522
HCC Insurance Holdings, Inc. 61,900 1,517 4,250 104 66,150 1,621
Philadelphia Consolidated
Holding Corp.* 25,900 901 1,750 61 27,650 962
Renaissancere Holdings, Ltd. 19,000 1,408 1,550 115 20,550 1,523
Stancorp Financial Group, Inc. 28,300 1,341 1,850 87 30,150 1,428
-------- -------- --------
6,582 474 7,056
-------- -------- --------
Machinery - (0.63%)
Global Power Equipment Group,
Inc. COM* 20,077 588 1,350 40 21,427 628
SureBeam Corporation - /CL. A* 40,300 690 2,700 46 43,000 736
-------- -------- --------
1,278 86 1,364
-------- -------- --------
Media - Publishing - (0.82%)
Scholastic Corp.* 35,000 1,575 2,700 121 37,700 1,696
Westwood One, Inc.* 2,050 76 2,050 76
-------- -------- --------
1,575 197 1,772
-------- -------- --------
Media - TV / Radio - (5.17%)
Entercom Communications Corp.* 32,500 1,742 2,450 131 34,950 1,873
Getty Images, Inc.* 57,200 1,502 3,800 100 61,000 1,602
Insight Communications Company, Inc.* 40,200 1,005 2,700 68 42,900 1,073
Pegasus Communications Corp.* 40,900 920 3,200 72 44,100 992
Radio One, Inc.* 42,500 978 3,150 72 45,650 1,050
Radio One, Inc. - Cl. D* 61,200 1,349 5,150 114 66,350 1,463
Regent Communications, Inc.* 190,600 2,285 14,000 168 204,600 2,453
Sinclair Broadcast Group, Inc. 62,000 639 62,000 639
-------- -------- --------
10,420 725 11,145
-------- -------- --------
Oil & Natural Gas Exploration &
Production - (5.37%)
Encore Acquisition Co.* 17,000 196 17,000 196
Evergreen Resources, Inc.* 28,000 1,064 1,500 57 29,500 1,121
Fuelcell Energy, Inc.* 27,800 642 1,800 42 29,600 684
Newfield Exploration Co.* 41,400 1,327 2,750 88 44,150 1,415
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Small Cap Growth Fund and the V.A. Small Cap Growth Fund combined on
June 30, 2001.
---------------------------------------------------------------------------------------------
V.S.T. Small Cap Growth Fund V.A. Small Cap Growth Fund Combined
---------------------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED) WARRANTS OMITTED)
---------------------------------------------------------------------------------------------
ISSUER DESCRIPTION
NPS Pharmaceuticals, Inc.* 59,300 $ 2,384 3,750 $ 151 63,050 $ 2,535
Patterson Uti Energy, Inc.* 55,500 992 4,000 71 59,500 1,063
Pride International, Inc.* 56,300 1,070 4,500 85 60,800 1,155
Spinnaker Exploration Co.* 40,900 1,630 2,700 108 43,600 1,738
Stone Energy Corp.* 35,200 1,559 2,350 104 37,550 1,663
-------- -------- --------
10,864 706 11,570
-------- -------- --------
Oil - Equipment & Service - (4.71%)
Dril Quip, Inc.* 61,300 1,320 2,750 59 64,050 1,379
Horizon Offshore, Inc.* 65,200 880 4,450 60 69,650 940
Hydril Co.* 73,000 1,662 4,900 112 77,900 1,774
Lone Star Technologies, Inc.* 38,100 1,379 2,700 98 40,800 1,477
Marine Drilling Companies, Inc.* 53,700 1,026 4,000 76 57,700 1,102
Natco Group, Inc. - Cl. A* 65,500 577 1,800 16 67,300 593
Oceaneering International, Inc.* 51,800 1,075 3,700 77 55,500 1,152
Torch Offshore, Inc.* 12,600 125 850 8 13,450 133
Universal Compression Holdings* 52,100 1,480 3,700 105 55,800 1,585
-------- -------- --------
9,524 611 10,135
-------- -------- --------
Personal & Commercial
Lending - (0.63%)
Metris Cos., Inc. 37,400 1,261 2,775 94 40,175 1,355
-------- -------- --------
Real Estate Investment Trust - (0.47%)
Extended Stay America, Inc.* 64,300 964 3,450 52 67,750 1,016
-------- -------- --------
Retail - (0.08%)
Galyans Trading, Inc.* 8,400 171 550 11 8,950 182
-------- -------- --------
Retail - Department Stores - (5.35%)
99 Cents Only Stores* 62,698 1,878 4,435 133 67,133 2,011
Bebe Stores, Inc.* 39,200 1,143 1,050 31 40,250 1,174
Cost Plus, Inc.* 59,050 1,771 3,250 97 62,300 1,868
Hot Topic, Inc.* 45,700 1,421 3,100 96 48,800 1,517
Rare Hospitality International, Inc.* 48,000 1,085 3,175 72 51,175 1,157
Too, Inc.* 44,000 1,206 3,000 82 47,000 1,288
Tweeter Home Entertainment
Group, Inc.* 67,100 2,369 4,100 145 71,200 2,514
-------- -------- --------
10,873 656 11,529
-------- -------- --------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Small Cap Growth Fund and the V.A. Small Cap Growth Fund combined on
June 30, 2001.
---------------------------------------------------------------------------------------------
V.S.T. Small Cap Growth Fund V.A. Small Cap Growth Fund Combined
---------------------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED) WARRANTS OMITTED)
---------------------------------------------------------------------------------------------
ISSUER DESCRIPTION
Retail - Drug Stores - (0.81%)
AnnTaylor Stores Corp. 8,200 $ 294 8,200 $ 294
Duane Reade, Inc.* 43,400 1,410 1,100 $ 36 44,500 1,446
-------- -------- --------
1,704 36 1,740
-------- -------- --------
Retail - Food - (4.57%)
Applebee's International, Inc. 51,000 1,632 750 24 51,750 1,656
Buca, Inc.* 59,700 1,299 4,000 87 63,700 1,386
California Pizza Kitchen, Inc.* 47,500 1,104 3,400 79 50,900 1,183
Krispy Kreme Doughnuts, Inc.* 46,200 1,848 2,400 96 48,600 1,944
P.F. Chang's China Bistro, Inc.* 40,600 1,539 2,800 106 43,400 1,645
Whole Foods Market, Inc.* 70,000 1,897 4,900 133 74,900 2,030
-------- -------- --------
9,319 525 9,844
-------- -------- --------
Shoe & Apparel Manufacturing - (2.05%)
Columbia Sportswear Co.* 45,000 2,294 3,375 172 48,375 2,466
Nautica Enterprises, Inc.* 10,600 217 700 14 11,300 231
Tommy Hilfiger Corp.* 117,400 1,644 5,050 71 122,450 1,715
-------- -------- --------
4,155 257 4,412
-------- -------- --------
Telecommunication Equipment - (0.57%)
Brightpoint, Inc.* 166,400 483 166,400 483
SBA Communications Corp.* 28,500 705 1,950 48 30,450 753
-------- -------- --------
1,188 48 1,236
-------- -------- --------
Telecommunication Services - (3.00%)
Airgate PCS, Inc.* 40,800 2,122 2,700 141 43,500 2,263
Alamosa Holdings, Inc.* 64,300 1,048 4,800 78 69,100 1,126
CTC Communications Group, Inc.* 87,000 266 6,650 20 93,650 286
Dobson Communications Corp.* 34,100 581 2,300 39 36,400 620
Metro One Telecom, Inc.* 31,300 2,031 2,050 133 33,350 2,164
Tellium, Inc.* 100 2 100 2
-------- -------- --------
6,048 413 6,461
-------- -------- --------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Small Cap Growth Fund and the V.A. Small Cap Growth Fund combined on
June 30, 2001.
---------------------------------------------------------------------------------------------
V.S.T. Small Cap Growth Fund V.A. Small Cap Growth Fund Combined
---------------------------------------------------------------------------------------------
NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE NUMBER OF MARKET VALUE
INTEREST SHARES OR (000's INTEREST SHARES OR (000's SHARES OR (000's
RATE WARRANTS OMITTED) RATE WARRANTS OMITTED) WARRANTS OMITTED)
---------------------------------------------------------------------------------------------
ISSUER DESCRIPTION
Transportation Services - (0.74%)
Expeditors International of
Washington, Inc. 1,950 $ 117 1,950 $ 117
Forward Air Corp.* 46,500 $ 1,393 2,850 85 49,350 1,478
-------- ------- --------
1,393 202 1,595
-------- ------- --------
-------- ------- --------
TOTAL COMMON STOCK (96.73%) 195,126 13,193 208,319
-------- ------- --------
PAR VALUE PAR VALUE PAR VALUE
(000's (000's (000's
OMITTED) OMITTED) OMITTED)
----------- --------- ----------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement - 3.38%
Investment in joint repurchase
agreement 3.77% due 07/02/01 3.770 $ 7,290 $ 7,290 $ 7,290 $ 7,290
-------- --------
Joint Repurchase Agreement - 0.05%
Investment in a joint repurchase
agreement transaction with UBS
Warburg, Inc. - Dated 06-29-01, due
07-02-01(Secured by U.S. Treasury
Bonds, 10.625% due 08-15-15 and
6.250% due 08-15-23, U.S. Treasury
Note 5.625% due 11-30-02) 3.970 $ 111 $ 111 111 111
------- --------
Navigator Securities Lending Prime
Portfolio** 7.110 15,318,473 15,318 15,318,473 15,318
-------- ------- --------
TOTAL SHORT-TERM INVESTMENTS (10.9%) 22,608 111 22,719
-------- ------- --------
TOTAL INVESTMENTS (107.7%) 217,734 13,304 231,038
-------- ------- --------
OTHER ASSETS AND LIABILITIES,
NET (7.67%) (15,681) 9 (15,672)
-------- ------- --------
TOTAL NET ASSETS (100.00%) $202,053 $13,313 $215,366
======== ======= ========
NOTES TO THE SCHEDULE OF INVESTMENTS
* Non-income producing securities.
** Represents investment of security lending collateral.
The percentage shown for each investment category is the total value of that
category as a percentage of the combined net assets of the Funds.
Exhibit C
JOHN HANCOCK V.S.T. ACTIVE BOND FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. Active Bond Fund and the John Hancock V.A. Bond Fund with
information about the impact of the proposed merger by indicating how the merger
might have affected information had the merger been consummated as of June 30,
2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. Active Bond Fund and John Hancock V.A. Bond Fund after giving
effect to pro forma adjustments described in the notes below.
(a) Acquisition by John Hancock V.S.T. Active Bond Fund of all assets of John
Hancock V.A. Bond Fund and issuance of John Hancock V.S.T. Active Bond
Fund shares in exchange for all of the outstanding shares of John Hancock
V.A. Bond Fund.
(b) The deferred organization expense of John Hancock V.A. Bond Fund was
written off as the Fund would no longer be in existence.
(c) The investment advisory fee was adjusted to reflect the application of the
fee structure which will be in effect for John Hancock V.S.T. Active Bond:
0.70% on the first $100,000,000 of the Fund's net assets;
0.65% for the net assets between $100,000,000 and $250,000,000;
0.61% for the net assets between $250,000,000 and $500,000,000;
0.58% for the net assets between $500,000,000 and $1,000,000,000;
0.55% for the net assets in excess of $1,000,000,000.
(d) The actual expenses incurred by the John Hancock V.S.T. Active Bond Fund
and the John Hancock V.A. Bond Fund were reduced to reflect the estimated
savings arising from the merger.
(e) Represents the Adviser's voluntary agreement to limit the funds' other
expenses to an annual rate of 0.10% of the funds' average daily net
assets.
John Hancock V.S.T. Active Bond Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. Active V.A. Bond Pro-Forma
Bond Fund Fund Adjustments Combined
------------- ------------ ----------- ----------
ASSETS
Long term investments at cost $ 751,001 $ 63,030 $ -- $ 814,031
Net unrealized appreciation (depreciation) of investments 7,394 112 -- 7,506
Short-term investments at value 300,881 6,265 -- 307,146
---------- ---------- ---------- ----------
Total investments 1,059,276 69,407 -- 1,128,683
Cash 4,508 1 -- 4,509
Receivable for:
Investments sold 11,436 1,400 -- 12,836
Fund shares sold -- 29 -- 29
Dividends and Interest 10,821 911 -- 11,732
Other assets -- 1 -- 1
---------- ---------- ---------- ----------
Total Assets 1,086,041 71,749 -- 1,157,790
---------- ---------- ---------- ----------
LIABILITIES
Payables for:
Investments purchased 22,293 3,984 -- 26,277
Fund shares purchased -- 10 -- 10
Dividends payable -- 22 -- 22
Securities on loan 247,041 -- -- 247,041
Payable at affiliates -- 28 -- 28
Accounts payable and accrued expenses -- 13 -- 13
Other liabilities 410 -- -- 410
---------- ---------- ---------- ----------
Total Liabilities 269,744 4,057 -- 273,801
---------- ---------- ---------- ----------
Net Assets 816,297 67,692 -- 883,989
========== ========== ========== ==========
Net assets:
Capital paid-in 832,574 67,763 -- 900,337
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions (25,862) (117) -- (25,979)
Undistributed (distribution in excess of)
net investment income (loss) 2,191 (66) -- 2,125
Net unrealized appreciation (depreciation) of
investments, futures and translation of assets and
liabilities in foreign currencies 7,394 112 -- 7,506
---------- ---------- ---------- ----------
816,297 67,692 -- 883,989
========== ========== ========== ==========
Net assets:
V.S.T. Active Bond Fund 816,297 -- 67,692 (a) 883,989
V.A. Bond Fund -- 67,692 (67,692)(a) --
---------- ---------- ---------- ----------
816,297 67,692 -- 883,989
========== ========== ========== ==========
Shares outstanding:
V.S.T. Active Bond Fund 86,035 -- 7,100(a) 93,135
V.A. Bond Fund -- 6,583 (6,583)(a) --
---------- ---------- ---------- ----------
86,035 6,583 517 93,135
========== ========== ========== ==========
Net asset value per shares:
V.S.T. Active Bond Fund $ 9.49 -- -- $ 9.49
V.A. Bond Fund -- $ 10.28 $ (10.28)(a) --
========== ========== ========== ==========
See Notes to Pro-forma Combined Financial Statements
John Hancock V.S.T. Active Bond Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. Active V.A. Bond
Bond Fund Fund
12 months ended 12 months ended Pro-Forma
June 30, 2001 June 30, 2001 Adjustments Combined
--------------- --------------- ----------- ---------
INVESTMENT INCOME
Interest $58,986 $ 1,947 $ -- $60,933
Securities Lending 137 -- -- 137
------- ------- ------- -------
Total investment income 59,123 1,947 -- 61,070
------- ------- ------- -------
EXPENSES
Investment management fee 5,146 151 24(c) 5,321
Auditing fees 125 12 (12)(d) 125
Custodian fees 430 49 (34)(d) 445
Fidelity bond fees 1 -- -- 1
Accounting and legal services fee -- 6 -- 6
Legal fees 36 -- --(d) 36
Printing & mailing fees 605 3 (3)(d) 605
Organization expense -- 2 (2)(b) --
Trustees' fee 33 1 -- 34
Miscellaneous -- 1 -- 1
Other fees 19 -- -- 19
------- ------- ------- -------
Total expenses 6,395 225 (27) 6,593
Less expenses reimbursed (286) (13) (134)(e) (433)
------- ------- ------- -------
Net expenses 6,109 212 (161) 6,160
------- ------- ------- -------
Net Investment Income 53,014 1,735 161 54,910
------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 15,419 317 -- 15,736
Change in net unrealized appreciation (depreciation) on:
Investments 19,153 224 -- 19,377
------- ------- ------- -------
Net realized and unrealized gain (loss) 34,572 541 -- 35,113
------- ------- ------- -------
Net increase (decrease) in net assets resulting from operations $87,586 $ 2,276 $ 161 $90,023
======= ======= ======= =======
See Notes to Pro-forma Combined Financial Statements
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Corporate Bonds
Financial Services - (0.24%)
American Express Credit Corp.
7.2% due 09/17/07 7.200% $ 2,000 $ 2,119
----------
Personal & Commercial Lending - (0.31%)
Prime Credit Card Master Trust
6.7% due 11/15/05
Standard Credit Card Master Trust
8.25% due 01/07/07 8.250 2,535 2,745
----------
2,745
----------
Publicly-Traded Bonds
Aerospace & Defense - (1.01%)
BAE Systems Asset Trust,
Pass Thru Ctf Ser 2001 Class B 12-15-11 (R) 7.156% $ 245 $ 245
Boeing Cap. Corp. - Sr. Notes
6.1% due 03/01/11 6.100 2,480 2,417
Jet Equipment Trust
10.91% due 08/15/14 10.910 2,100 2,268
Lockheed Martin Corp.
8.2% due 12/01/09
Lockheed Martin Corp. - Bonds
8.5% due 12/01/29 8.500 3,305 3,665 8.500 265 293
---------- ---------
8,350 538
---------- ---------
Agricultural Operations - (0.53%)
Archer-Daniels-Midland Co., Sr Deb 02-01-31 7.000 155 150
Cargill, Inc.
6.25% due 05/01/06 6.250 1,870 1,867 6.250 85 85
Marlin Water Trust - Sr. Notes 144A
7.09% due 12/15/01 7.090 2,553 2,570
Potash Corp. of Saskatchewan - Notes
7.75% due 05/31/11
---------- ---------
4,437 235
---------- ---------
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Corporate Bonds
Financial Services - (0.24%)
American Express Credit Corp.
7.2% due 09/17/07 $ 2,000 $ 2,119
----------
Personal & Commercial Lending - (0.31%)
Prime Credit Card Master Trust
6.7% due 11/15/05
Standard Credit Card Master Trust
8.25% due 01/07/07 2,535 2,745
----------
2,745
----------
Publicly-Traded Bonds
Aerospace & Defense - (1.01%)
BAE Systems Asset Trust,
Pass Thru Ctf Ser 2001 Class B 12-15-11 (R) 245 245
Boeing Cap. Corp. - Sr. Notes
6.1% due 03/01/11 2,480 2,417
Jet Equipment Trust
10.91% due 08/15/14 2,100 2,268
Lockheed Martin Corp.
8.2% due 12/01/09
Lockheed Martin Corp. - Bonds
8.5% due 12/01/29 3,570 3,958
----------
8,888
----------
Agricultural Operations - (0.53%)
Archer-Daniels-Midland Co., Sr Deb 02-01-31 155 150
Cargill, Inc.
6.25% due 05/01/06 1,955 1,952
Marlin Water Trust - Sr. Notes 144A
7.09% due 12/15/01 2,553 2,570
Potash Corp. of Saskatchewan - Notes
7.75% due 05/31/11
----------
4,672
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Automobile - (0.76%)
Delphi Automotive Systems Corp. - Notes
6.55% due 06/15/06 6.550% $ 3,100 $ 3,104 6.550% $ 240 $ 240
ERAC USA Finance Co.,
Note 02-15-05 (R) 6.625 19 19
Note 06-15-08 (R) 7.350 120 119
Note 12-15-09 (R) 7.950 200 205
Ford Motor Co. - Bonds
7.45% due 07/16/31 7.450 2,675 2,567 7.450 65 62
Ford Capital B.V.,
Gtd Deb (Netherlands) 05-15-02 (Y) 9.875 50 52
Honda Auto Receivables Owner Trust,
Pass Thru Ctf Ser 2001-1 Class A-4 06-19-06 5.560 310 312
---------- ---------
5,671 1,009
---------- ---------
Bank - (3.94%)
Abbey National First Capital - Sr. Sub. Notes
8.2% due 10/15/04 8.200 4,000 4,281 8.200 30 32
Bank of New York,
Cap Security 12-01-26 (R) 7.780 50 50
Bank One Corp.
7.875% due 08/01/10 7.875 1,575 1,686 7.875 70 75
Barclays Bank PLC - 144A
7.375% due 12/15/49 7.375 2,070 2,056
Barclays Bank PLC - Bonds 144A
8.55% due 09/29/49
Barclays Bank Plc,
Sub Note (United Kingdom) 06-15-49 (R) (Y) 7.375 160 162
BNP Paribus Capital Trust - Sub 144A
9.003% due 12/29/49 9.003 1,625 1,779 9.003 160 175
Capital One Bank - Sr. Notes
6.875% due 02/01/06 6.875 1,905 1,860 6.875 60 59
Colonial Bank Montgomery Al - Sub. Notes
9.375% due 06/01/11 9.375 1,555 1,589 9.375 115 119
HSBC Holdings PLC
7.5% due 07/15/09 7.500 2,115 2,210 7.500 55 57
International Bank of Reconstruction &
Development - Debs.
8.25% due 09/01/16 8.250 2,150 2,523
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Automobile - (0.76%)
Delphi Automotive Systems Corp. - Notes
6.55% due 06/15/06 $ 3,340 $ 3,344
ERAC USA Finance Co.,
Note 02-15-05 (R) 19 19
Note 06-15-08 (R) 120 119
Note 12-15-09 (R) 200 205
Ford Motor Co. - Bonds
7.45% due 07/16/31 2,740 2,629
Ford Capital B.V.,
Gtd Deb (Netherlands) 05-15-02 (Y) 50 52
Honda Auto Receivables Owner Trust,
Pass Thru Ctf Ser 2001-1 Class A-4 06-19-06 310 312
----------
6,680
----------
Bank - (3.94%)
Abbey National First Capital - Sr. Sub. Notes
8.2% due 10/15/04 4,030 4,313
Bank of New York,
Cap Security 12-01-26 (R) 50 50
Bank One Corp.
7.875% due 08/01/10 1,645 1,761
Barclays Bank PLC - 144A
7.375% due 12/15/49 2,070 2,056
Barclays Bank PLC - Bonds 144A
8.55% due 09/29/49
Barclays Bank Plc,
Sub Note (United Kingdom) 06-15-49 (R) (Y) 160 162
BNP Paribus Capital Trust - Sub 144A
9.003% due 12/29/49 1,785 1,954
Capital One Bank - Sr. Notes
6.875% due 02/01/06 1,965 1,919
Colonial Bank Montgomery Al - Sub. Notes
9.375% due 06/01/11 1,670 1,708
HSBC Holdings PLC
7.5% due 07/15/09 2,170 2,267
International Bank of Reconstruction &
Development - Debs.
8.25% due 09/01/16 2,150 2,523
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
RBSG Capital Corp. - Notes
10.125% due 03/01/04 10.125% $ 5,000 $ 5,500 10.125% $ 15 $ 17
Royal Bank of Scotland Group PLC
8.817% due 03/31/05 8.817 1,870 2,006
Royal Bank of Scotland Group Plc,
Bond (United Kingdom) 03-31-49 (Y) 8.817 30 32
Sanwa Bank , Ltd. - Sub. Notes
7.4% due 06/15/11 7.400 1,650 1,591 7.400 135 132
Skandinaviska Enskida Banken - Sub. Notes
STEP UP 144A
6.5% due 12/29/49 6.500 1,935 1,947 6.500 250 251
Standard Chartered Bank - Sub. Notes 144A
8.0% due 05/30/31 8.000 1,685 1,712
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (Netherlands) 11-01-06 (R) (Y) 8.850 95 104
UBS Preferred Funding Trust I,
Gtd Bond 10-01-49 8.622 165 181
Zions Financial Corp. - GTD 144A
6.95% due 05/15/11 6.950 2,255 2,255 6.950 350 353
---------- ---------
32,995 1,799
---------- ---------
Beverages (0.02%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 8.750 30 30
Fosters Finance Corp.,
Note 06-15-11 (R) 6.875 120 119
---------
149
---------
Brokerage & Investment Management - (0.40%)
Goldman Sachs Group, Inc.,
Bond 01-15-11 6.875 85 84
Salomon Brothers Mortgage Securities VII
6.75% due 07/25/24 6.750 1,890 1,897
Salomon, Inc. - Notes
5.875% due 03/15/06 5.875 1,540 1,530 5.875 55 55
---------- ---------
3,427 139
---------- ---------
Building (0.01%)
Vulcan Materials Co.,
Note 02-01-06 6.400 125 126
---------
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
RBSG Capital Corp. - Notes
10.125% due 03/01/04 $ 5,015 $ 5,517
Royal Bank of Scotland Group PLC
8.817% due 03/31/05 1,870 2,006
Royal Bank of Scotland Group Plc,
Bond (United Kingdom) 03-31-49 (Y) 30 32
Sanwa Bank , Ltd. - Sub. Notes
7.4% due 06/15/11 1,785 1,723
Skandinaviska Enskida Banken - Sub. Notes
STEP UP 144A
6.5% due 12/29/49 2,185 2,198
Standard Chartered Bank - Sub. Notes 144A
8.0% due 05/30/31 1,685 1,712
Scotland International Finance No. 2, B.V.,
Gtd Sub Note (Netherlands) 11-01-06 (R) (Y) 95 104
UBS Preferred Funding Trust I,
Gtd Bond 10-01-49 165 181
Zions Financial Corp. - GTD 144A
6.95% due 05/15/11 2,605 2,608
----------
34,794
----------
Beverages (0.02%)
Canandaigua Brands, Inc.,
Sr Sub Note Ser C 12-15-03 30 30
Fosters Finance Corp.,
Note 06-15-11 (R) 120 119
----------
149
----------
Brokerage & Investment Management - (0.40%)
Goldman Sachs Group, Inc.,
Bond 01-15-11 85 84
Salomon Brothers Mortgage Securities VII
6.75% due 07/25/24 1,890 1,897
Salomon, Inc. - Notes
5.875% due 03/15/06 1,595 1,585
----------
3,566
----------
Building (0.01%)
Vulcan Materials Co.,
Note 02-01-06 125 126
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Chemical - (0.72%)
Akzo Nobel, Inc. - Bonds 144A
6.0% due 11/15/03 6.000% $ 1,630 $ 1,644 6.000% $ 45 $ 46
Equistar Chemical - Notes
8.5% due 02/15/04 8.500 1,650 1,596 8.500 130 127
Millenium America , Inc. 144A
9.25% due 06/15/08 9.250 790 790 9.250 65 65
NOVA Chemicals Corp.- Notes
7.0% due 05/15/06 7.000 1,665 1,658 7.000 130 129
Potash Corp.,
Note (Canada) 05-31-11 (Y) 7.750 300 312
---------- ---------
5,688 679
---------- ---------
Computer Software & Services - (0.35%)
Systems 2001 LLC Cl. B 144A
7.156% due 12/15/11 7.156 3,120 3,117
----------
Container - (0.28%)
Sealed Air Corp.
8.75% due 07/01/08 8.750 985 959 8.750 80 79
Stone Container Corp.
9.75% due 02/01/11 9.750 1,315 1,338 9.750 100 102
---------- ---------
2,297 181
---------- ---------
Cosmetic & Personal Care - (0.24%)
International Flavors & Fragrances, Inc.-
Notes 144A
6.45% due 05/15/06 6.450 1,980 1,977 6.450 115 115
---------- ---------
Electric Power - (7.71%)
AES Corp.
9.375% due 09/15/10 9.375 725 730
AES Corp. - Sr. Notes
9.5% due 06/01/09 9.500 1,645 1,678
AES Corp. - Sr. Sub. Notes
10.25% due 07/15/06 10.250 2,243 2,254
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Chemical - (0.72%)
Akzo Nobel, Inc. - Bonds 144A
6.0% due 11/15/03 $ 1,675 $ 1,690
Equistar Chemical - Notes
8.5% due 02/15/04 1,780 1,723
Millenium America , Inc. 144A
9.25% due 06/15/08 855 855
NOVA Chemicals Corp.- Notes
7.0% due 05/15/06 1,795 1,787
Potash Corp.,
Note (Canada) 05-31-11 (Y) 300 312
----------
6,367
----------
Computer Software & Services - (0.35%)
Systems 2001 LLC Cl. B 144A
7.156% due 12/15/11 3,120 3,117
----------
Container - (0.28%)
Sealed Air Corp.
8.75% due 07/01/08 1,065 1,038
Stone Container Corp.
9.75% due 02/01/11 1,415 1,440
----------
2,478
----------
Cosmetic & Personal Care - (0.24%)
International Flavors & Fragrances, Inc.-
Notes 144A
6.45% due 05/15/06 2,095 2,092
----------
Electric Power - (7.71%)
AES Corp.
9.375% due 09/15/10 725 730
AES Corp. - Sr. Notes
9.5% due 06/01/09 1,645 1,678
AES Corp. - Sr. Sub. Notes
10.25% due 07/15/06 2,243 2,254
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
AES Eastern Energy
9.0% due 01/02/17 9.000% $ 2,130 $ 2,180
Beaver Valley Funding Corp. - Debs.
9.0% due 06/01/17 9.000 2,365 2,486
BVPS II Funding Corp. - Coll. Lease Bonds
8.89% due 06/01/17 8.890 2,464 2,620
CalEnergy Co., Inc. - Bonds
8.48% due 09/15/28 8.480 2,685 2,893
Calpine Canada Energy
8.5% due 05/01/08 8.500 1,600 1,536
Calpine Corp.
8.25% due 08/15/05 8.250 1,460 1,449
Calpine Corp. - Sr. Notes
8.5% due 02/15/11 8.500 1,595 1,534
10.5% due 05/15/06 10.500 1,920 1,958
Cleveland Electric Illuminating Co.
7.88% due 11/01/17 7.880 480 489
Cleveland Electric Illuminating Co. -
1st Mtge.
9.5% due 05/15/05 9.500 5,775 5,949
CMS Energy Corp. - Sr. Notes
6.75% due 01/15/04 6.750 2,040 1,960
8.125% due 05/15/02 8.125 2,650 2,655
CMS Energy Corp.
9.875% due 10/15/07 9.875 730 765
Exelon Generation Co. LLC - Sr. Notes 144A
6.95% due 06/15/11 6.950 3,090 3,070
Long Island Lighting Co. - Debs.
8.2% due 03/15/23 8.200 3,235 3,279
Mirant Corp.
8.3% due 05/01/11 8.300 1,940 1,954
Monterrey Power SA de CV - Sec. Bonds 144A
9.625% due 11/15/09 9.625 650 684
Niagara Mohawk Power Corp. - Debs.
8.77% due 01/01/18 8.770 3,909 3,984
Pinnacle West Capital Corp. - Sr. Notes
6.4% due 04/01/06 6.400 2,345 2,299
PNPP II Funding Corp. - Debs.
9.12% due 05/30/16 9.120 2,455 2,629
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
AES Eastern Energy
9.0% due 01/02/17 $ 2,130 $ 2,180
Beaver Valley Funding Corp. - Debs.
9.0% due 06/01/17 2,365 2,486
BVPS II Funding Corp. - Coll. Lease Bonds
8.89% due 06/01/17 2,464 2,620
CalEnergy Co., Inc. - Bonds
8.48% due 09/15/28 2,685 2,893
Calpine Canada Energy
8.5% due 05/01/08 1,600 1,536
Calpine Corp.
8.25% due 08/15/05 1,460 1,449
Calpine Corp. - Sr. Notes
8.5% due 02/15/11 1,595 1,534
10.5% due 05/15/06 1,920 1,958
Cleveland Electric Illuminating Co.
7.88% due 11/01/17 480 489
Cleveland Electric Illuminating Co. -
1st Mtge.
9.5% due 05/15/05 5,775 5,949
CMS Energy Corp. - Sr. Notes
6.75% due 01/15/04 2,040 1,960
8.125% due 05/15/02 2,650 2,655
CMS Energy Corp.
9.875% due 10/15/07 730 765
Exelon Generation Co. LLC - Sr. Notes 144A
6.95% due 06/15/11 3,090 3,070
Long Island Lighting Co. - Debs.
8.2% due 03/15/23 3,235 3,279
Mirant Corp.
8.3% due 05/01/11 1,940 1,954
Monterrey Power SA de CV - Sec. Bonds 144A
9.625% due 11/15/09 650 684
Niagara Mohawk Power Corp. - Debs.
8.77% due 01/01/18 3,909 3,984
Pinnacle West Capital Corp. - Sr. Notes
6.4% due 04/01/06 2,345 2,299
PNPP II Funding Corp. - Debs.
9.12% due 05/30/16 2,455 2,629
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Progress Energy, Inc. - Sr. Notes
7.1% due 03/01/11 7.100% $ 1,555 $ 1,575
PSEG Energy Holdings, Inc. - Sr. Notes 144A
8.625% due 02/15/08 8.625 1,665 1,673
PSEG Power LLC
8.625% due 04/15/31 8.625 1,665 1,794
Sierra Pacific Resources - Notes
8.75% due 05/15/05 8.750 1,125 1,151
System Energy Resources, Inc. - 1st Mtge.
7.71% due 08/01/01 7.710 2,590 2,596
TXU Electric & Gas
8.175% due 01/30/37 8.175 1,810 1,781
Waterford 3 Funding - Entergy - Bonds
8.09% due 01/02/17 8.090 4,136 4,073
XCEL Energy, Inc. - Sr. Notes
7.0% due 12/01/10 7.000 2,470 2,478
----------
68,156
----------
Electrical Equipment - (0.28%)
HQI Transelec Chile
7.875% due 04/15/11 7.875 2,500 2,509
----------
Electronic Products & Services - (0.03%)
CMS Energy Corp - Sr. Notes
8.5% due 04/15/11 8.500 310 301
----------
Energy (0.03%)
Enron Corp.,
Note 08-15-05 (R) 8.000% $ 60 $ 62
MidAmerican Energy Holdings,
Sr Bond 09-15-28 8.480 60 64
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 9.625 24 25
Progress Energy, Inc.,
Sr Note 03-01-11 7.100 150 151
---------
302
---------
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Progress Energy, Inc. - Sr. Notes
7.1% due 03/01/11 $ 1,555 $ 1,575
PSEG Energy Holdings, Inc. - Sr. Notes 144A
8.625% due 02/15/08 1,665 1,673
PSEG Power LLC
8.625% due 04/15/31 1,665 1,794
Sierra Pacific Resources - Notes
8.75% due 05/15/05 1,125 1,151
System Energy Resources, Inc. - 1st Mtge.
7.71% due 08/01/01 2,590 2,596
TXU Electric & Gas
8.175% due 01/30/37 1,810 1,781
Waterford 3 Funding - Entergy - Bonds
8.09% due 01/02/17 4,136 4,073
XCEL Energy, Inc. - Sr. Notes
7.0% due 12/01/10 2,470 2,478
----------
68,156
----------
Electrical Equipment - (0.28%)
HQI Transelec Chile
7.875% due 04/15/11 2,500 2,509
----------
Electronic Products & Services - (0.03%)
CMS Energy Corp - Sr. Notes
8.5% due 04/15/11 310 301
----------
Energy (0.03%)
Enron Corp.,
Note 08-15-05 (R) 60 62
MidAmerican Energy Holdings,
Sr Bond 09-15-28 60 64
P&L Coal Holdings Corp.,
Sr Sub Note Ser B 05-15-08 24 25
Progress Energy, Inc.,
Sr Note 03-01-11 150 151
----------
302
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Financial Services - (3.67%)
American Express Credit Account Master Trust,
Pass Thru Ctf Ser 2000-1 Class A 09-17-07 7.200% $ 280 $ 297
Bank of New York Institution Capital - 144A
7.78% due 12/01/26 7.780% $ 3,350 $ 3,282
Boeing Capital Corp.,
Sr Note 03-01-11 6.100 185 180
Bombardier Capital, Inc.,
Note 01-15-02 (R) 6.000 30 30
Citigroup, Inc.,
Note 01-18-11 6.500 155 154
ERAC USA Finance Co. - Notes 144A
6.625% due 02/15/05 6.625 900 892
ERAC USA Finance Co. - Notes GTD 144A
7.35% due 06/15/08 7.350 1,550 1,536
ERAC USA Finance Co.
7.95% due 12/15/09 7.950 1,675 1,707
Ford Motor Credit Co.,
Note 02-01-06 6.875 140 143
Fosters Finance Corp.- Notes 144A
6.875% due 06/15/11 6.875 1,490 1,476
General Motors Acceptance Corp.,
Note 07-15-05 7.500 60 63
Goldman Sachs Group, Inc.
6.875% due 01/15/11 6.875 2,385 2,372
Heller Financial, Inc. - Notes
6.375% due 03/15/06 6.375 1,490 1,501 6.375 115 116
Household Finance Corp.,
Sr Note 05-09-05 8.000 115 123
Note 01-24-06 6.500 150 152
Note 07-15-10 8.000 55 59
ING Capital Funding Trust III
8.439% due 12/31/49 8.439 1,770 1,878 8.439 50 53
Marlin Water Trust/ Marlin Water
Capital Corp.,
Sr Sec Note 12-15-01 (R) 7.090 30 30
Midland Funding Corp. II,
Deb Ser A 07-23-05 11.750 150 165
Pemex Project
9.125% due 10/13/10 9.125 2,500 2,639 9.125 190 200
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Financial Services - (3.67%)
American Express Credit Account Master Trust,
Pass Thru Ctf Ser 2000-1 Class A 09-17-07 $ 280 $ 297
Bank of New York Institution Capital - 144A
7.78% due 12/01/26 3,350 3,282
Boeing Capital Corp.,
Sr Note 03-01-11 185 180
Bombardier Capital, Inc.,
Note 01-15-02 (R) 30 30
Citigroup, Inc.,
Note 01-18-11 155 154
ERAC USA Finance Co. - Notes 144A
6.625% due 02/15/05 900 892
ERAC USA Finance Co. - Notes GTD 144A
7.35% due 06/15/08 1,550 1,536
ERAC USA Finance Co.
7.95% due 12/15/09 1,675 1,707
Ford Motor Credit Co.,
Note 02-01-06 140 143
Fosters Finance Corp.- Notes 144A
6.875% due 06/15/11 1,490 1,476
General Motors Acceptance Corp.,
Note 07-15-05 60 63
Goldman Sachs Group, Inc.
6.875% due 01/15/11 2,385 2,372
Heller Financial, Inc. - Notes
6.375% due 03/15/06 1,605 1,617
Household Finance Corp.,
Sr Note 05-09-05 115 123
Note 01-24-06 150 152
Note 07-15-10 55 59
ING Capital Funding Trust III
8.439% due 12/31/49 1,820 1,931
Marlin Water Trust/ Marlin Water
Capital Corp.,
Sr Sec Note 12-15-01 (R) 30 30
Midland Funding Corp. II,
Deb Ser A 07-23-05 150 165
Pemex Project
9.125% due 10/13/10 2,690 2,839
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Qwest Capital Funding - Bonds 144A
7.75% due 02/15/31 7.750% $ 3,215 $ 3,154
Standard Credit Master Trust,
Ser 1995-1 Class A 01-07-07 8.250% $ 400 $ 433
Sun Canada Financial Co. - Bonds 144A
6.625% due 12/15/07 6.625 3,345 3,247
Takefuji Corp.,
Sr Note (Japan) 04-15-11 (R) (Y) 9.200 95 98
The MONY Group, Inc. - Sr. Notes
7.45% due 12/15/05 7.450 2,395 2,444
UBS Preferred Funding
8.622% due 10/29/49 8.622 1,805 1,951
URC Holdings Corp. - Sr. Notes 144A
7.875% due 06/30/06 7.875 1,840 1,991
Verizon Global Funding Corp.,
Bond 12-01-30 (R) 7.750 110 115
Yanacocha Receivables Master Trust,
Pass Thru Ctf Ser 1997-A 06-15-04 (R) 8.400 3 3
---------- ---------
30,070 2,414
---------- ---------
Food, Beverage & Tobacco - (0.80%)
Archer Daniels Midland Co.
7.0% due 02/01/31 7.000 2,145 2,074
Canandaigua Brands, Inc. - Sr. Sub. Notes
8.75% due 12/15/03 8.750 2,365 2,383
Earthgrains Co.
8.375% due 08/01/03 8.375 2,500 2,569 8.375 50 51
---------- ---------
7,026 51
---------- ---------
Foreign Governmental - (0.88%)
Brazil, Federal Republic of,
Bond (Brazil) 04-15-14 (Y) 8.000 339 250
Hydro-Quebec - Debs. Ser. IF
7.375% due 02/01/03 7.375 1,000 1,037
Nova Scotia, Province of,
Deb (Canada) 11-15-19 (Y) 8.250 20 23
Province of Quebec - Debs
7.5% due 09/15/29 7.500 610 646
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Qwest Capital Funding - Bonds 144A
7.75% due 02/15/31 $ 3,215 $ 3,154
Standard Credit Master Trust,
Ser 1995-1 Class A 01-07-07 400 433
Sun Canada Financial Co. - Bonds 144A
6.625% due 12/15/07 3,345 3,247
Takefuji Corp.,
Sr Note (Japan) 04-15-11 (R) (Y) 95 98
The MONY Group, Inc. - Sr. Notes
7.45% due 12/15/05 2,395 2,444
UBS Preferred Funding
8.622% due 10/29/49 1,805 1,951
URC Holdings Corp. - Sr. Notes 144A
7.875% due 06/30/06 1,840 1,991
Verizon Global Funding Corp.,
Bond 12-01-30 (R) 110 115
Yanacocha Receivables Master Trust,
Pass Thru Ctf Ser 1997-A 06-15-04 (R) 3 3
----------
32,484
----------
Food, Beverage & Tobacco - (0.80%)
Archer Daniels Midland Co.
7.0% due 02/01/31 2,145 2,074
Canandaigua Brands, Inc. - Sr. Sub. Notes
8.75% due 12/15/03 2,365 2,383
Earthgrains Co.
8.375% due 08/01/03 2,550 2,620
----------
7,077
----------
Foreign Governmental - (0.88%)
Brazil, Federal Republic of,
Bond (Brazil) 04-15-14 (Y) 339 250
Hydro-Quebec - Debs. Ser. IF
7.375% due 02/01/03 1,000 1,037
Nova Scotia, Province of,
Deb (Canada) 11-15-19 (Y) 20 23
Province of Quebec - Debs
7.5% due 09/15/29 610 646
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Quebec, Government of,
Deb (Canada) 01-22-11 (Y) 6.125% $ 105 $ 102
Quebec, Province of,
Deb (Canada) 09-15-29 (Y) 7.500 205 219
Republic of Brazil STEPCPN
15APR14 USD250000 BR
8.0% due 04/15/14 8.000% $ 4,107 $ 3,029
Republic of Columbia
9.75% due 04/09/11 9.750 2,280 2,331 9.750 135 138
---------- ---------
7,043 732
---------- ---------
Health Care Products - (0.35%)
Fresenius Medical Capital Trust II
7.875% due 02/01/08 7.875 1,740 1,727
Fresenius Medical Capital Trust IV
TR PFD SECS 144A
7.875% due 06/15/11 7.875 1,360 1,326
----------
3,053
----------
Health Care Services - (1.13%)
Dynacare, Inc. - Sr. Notes
10.75% due 01/15/06 10.750 2,125 2,157
HCA-The Healthcare Corp. - Notes
7.125% due 06/01/06 7.125 2,350 2,318
HCA-The Healthcare Corp. - Notes
8.75% due 09/01/10 8.750 1,150 1,225
Healthsouth Corp. - Sr. Notes
8.5% due 02/01/08 8.500 1,240 1,252
Quest Diagnostics, Inc. - Sr. Notes
6.75% due 07/12/06 6.750 1,665 1,648
Tenet Healthcare Corp. - Sr. Notes
8.0% due 01/15/05 8.000 545 561
Triad Hospitals
8.75% due 05/01/09 8.750 830 842
----------
10,003
----------
Insurance - (1.64%)
AXA - Sub Notes
8.6% due 12/15/30 8.600 2,510 2,757 8.600 95 106
Equitable Life Assurance Society USA -
Notes 144A
6.95% due 12/01/05 6.950 1,240 1,274 6.950 15 16
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Quebec, Government of,
Deb (Canada) 01-22-11 (Y) $ 105 $ 102
Quebec, Province of,
Deb (Canada) 09-15-29 (Y) 205 219
Republic of Brazil STEPCPN
15APR14 USD250000 BR
8.0% due 04/15/14 4,107 3,029
Republic of Columbia
9.75% due 04/09/11 2,415 2,469
----------
7,775
----------
Health Care Products - (0.35%)
Fresenius Medical Capital Trust II
7.875% due 02/01/08 1,740 1,727
Fresenius Medical Capital Trust IV
TR PFD SECS 144A
7.875% due 06/15/11 1,360 1,326
----------
3,053
----------
Health Care Services - (1.13%)
Dynacare, Inc. - Sr. Notes
10.75% due 01/15/06 2,125 2,157
HCA-The Healthcare Corp. - Notes
7.125% due 06/01/06 2,350 2,318
HCA-The Healthcare Corp. - Notes
8.75% due 09/01/10 1,150 1,225
Healthsouth Corp. - Sr. Notes
8.5% due 02/01/08 1,240 1,252
Quest Diagnostics, Inc. - Sr. Notes
6.75% due 07/12/06 1,665 1,648
Tenet Healthcare Corp. - Sr. Notes
8.0% due 01/15/05 545 561
Triad Hospitals
8.75% due 05/01/09 830 842
----------
10,003
----------
Insurance - (1.64%)
AXA - Sub Notes
8.6% due 12/15/30 2,605 2,863
Equitable Life Assurance Society USA -
Notes 144A
6.95% due 12/01/05 1,255 1,290
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Hartford Life, Inc. - Sr. Notes
7.375% due 03/01/31 7.375% $ 1,655 $ 1,663 7.375% $ 55 $ 55
Mass. Mutual Life Insurance Co. - Notes 144A
7.625% due 11/15/23 7.625 2,640 2,671 7.625 5 5
MONY Group, Inc. (The),
Sr Note 12-15-05 7.450 215 220
New York Life Insurance Co. - Sr. Notes 144A
7.5% due 12/15/23 7.500 5,970 5,661 7.500 5 5
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 6.625 20 21
URC Holdings Corp.,
Sr Note 06-30-06 (R) 7.875 25 27
---------- ---------
14,026 455
---------- ---------
Leisure & Recreation - (0.70%)
Harrah's Operating , Inc. - Sr. Notes 144A
7.125% due 06/01/07 7.125 2,320 2,299 7.125 180 177
Harrahs Operating Co., Inc.
7.875% due 12/15/05 7.875 1,270 1,289 7.875 40 41
HMH Properties, Inc.,
Gtd Sr Sec Note Ser A 08-01-05 7.875 30 29
MGM Mirage, Inc.
8.5% due 09/15/10 8.500 1,430 1,483 8.500 165 172
Station Casinos, Inc. - Sr. Notes
8.375% due 02/15/08 8.375 675 679 8.375 20 20
Waterford Gaming LLC/Waterford Gaming
Finance Corp.,
Sr Note 03-15-10 (R) 9.500 20 20
---------- ---------
5,750 459
---------- ---------
Media - TV / Radio - (4.35%)
Adelphia Communications Corp. - Sr. Notes
8.125% due 07/15/03 8.125 1,270 1,232 8.125 15 14
9.25% due 10/01/02 9.250 2,460 2,472 9.250 17 17
Adelphia Communications Corp.
10.25% due 06/15/11 10.250 940 921 10.250 75 73
AOL Time Warner, Inc.
7.625% due 04/15/31 7.625 2,510 2,520 7.625 165 165
British Sky Broadcasting
8.2% due 07/15/09 8.200 1,845 1,834 8.200 40 40
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Hartford Life, Inc. - Sr. Notes
7.375% due 03/01/31 $ 1,710 $ 1,718
Mass. Mutual Life Insurance Co. - Notes 144A
7.625% due 11/15/23 2,645 2,676
MONY Group, Inc. (The),
Sr Note 12-15-05 215 220
New York Life Insurance Co. - Sr. Notes 144A
7.5% due 12/15/23 5,975 5,666
Sun Canada Financial Co.,
Gtd Sub Note 12-15-07 (R) 20 21
URC Holdings Corp.,
Sr Note 06-30-06 (R) 25 27
----------
14,481
----------
Leisure & Recreation - (0.70%)
Harrah's Operating , Inc. - Sr. Notes 144A
7.125% due 06/01/07 2,500 2,476
Harrahs Operating Co., Inc.
7.875% due 12/15/05 1,310 1,330
HMH Properties, Inc.,
Gtd Sr Sec Note Ser A 08-01-05 30 29
MGM Mirage, Inc.
8.5% due 09/15/10 1,595 1,655
Station Casinos, Inc. - Sr. Notes
8.375% due 02/15/08 695 699
Waterford Gaming LLC/Waterford Gaming
Finance Corp.,
Sr Note 03-15-10 (R) 20 20
----------
6,209
----------
Media - TV / Radio - (4.35%)
Adelphia Communications Corp. - Sr. Notes
8.125% due 07/15/03 1,285 1,246
9.25% due 10/01/02 2,477 2,489
Adelphia Communications Corp.
10.25% due 06/15/11 1,015 994
AOL Time Warner, Inc.
7.625% due 04/15/31 2,675 2,685
British Sky Broadcasting
8.2% due 07/15/09 1,885 1,874
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Century Communications Corp.,
Sr Note 03-01-05 9.500% $ 80 $ 78
Charter Communications Holdings LLC -
Sr. Notes 144A
10.0% due 05/15/11 10.000% $ 630 $ 639 10.000 60 60
Charter Communications Holdings LLC -
Sr. Notes
11.125% due 01/15/11 11.125 605 638 11.125 20 21
Clear Channel Communications, Inc. -
Sr. Notes
7.875% due 06/15/05 7.875 3,115 3,272 7.875 320 335
Continental Cablevision - Sr. Notes
8.3% due 05/15/06 8.300 2,940 3,156 8.300 120 129
CSC Holdings, Inc. - Sr. Notes Ser.144A
7.625% due 04/01/11 7.625 2,780 2,647 7.625 185 176
Sr Sub Deb 05-15-16 10.500 20 22
EchoStar DBS Corp. - Sr. Notes
9.375% due 02/01/09 9.375 965 963 9.375 35 34
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 8.625 45 42
Jones Intercable, Inc.,
Sr Note 04-15-08 7.625 90 92
Lenfest Communications, Inc.
8.375% due 11/01/05 8.375 1,690 1,810 8.375 40 43
Mediacom LLC
9.5% due 01/15/13 9.500 1,340 1,280
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 8.500 20 19
Sr Note 01-15-13 (R) 9.500 85 81
News America Holdings, Inc. - Debs.
8.25% due 08/10/18 8.250 1,095 1,090 8.250 125 127
News America, Inc. - Sr. Debs
7.3% due 04/30/28 7.300 1,585 1,409 7.300 55 49
Rogers Cablesystems - Sr. Notes
10.0% due 03/15/05 10.000 1,205 1,265
TCI Communications, Inc. - Debs.
7.875% due 02/15/26 7.875 1,780 1,800 7.875 155 156
Time Warner, Inc. - Debs.
9.125% due 01/15/13 9.125 2,108 2,409 9.125 58 67
Viacom, Inc. - 144A
6.4% due 01/30/06 6.400 1,305 1,324
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Century Communications Corp.,
Sr Note 03-01-05 $ 80 $ 78
Charter Communications Holdings LLC -
Sr. Notes 144A
10.0% due 05/15/11 690 699
Charter Communications Holdings LLC -
Sr. Notes
11.125% due 01/15/11 625 659
Clear Channel Communications, Inc. -
Sr. Notes
7.875% due 06/15/05 3,435 3,607
Continental Cablevision - Sr. Notes
8.3% due 05/15/06 3,060 3,285
CSC Holdings, Inc. - Sr. Notes Ser.144A
7.625% due 04/01/11 2,965 2,823
Sr Sub Deb 05-15-16 20 22
EchoStar DBS Corp. - Sr. Notes
9.375% due 02/01/09 1,000 997
Garden State Newspapers, Inc.,
Sr Sub Note 07-01-11 45 42
Jones Intercable, Inc.,
Sr Note 04-15-08 90 92
Lenfest Communications, Inc.
8.375% due 11/01/05 1,730 1,853
Mediacom LLC
9.5% due 01/15/13 1,340 1,280
Mediacom LLC/Mediacom Capital Corp.,
Sr Note Ser B 04-15-08 20 19
Sr Note 01-15-13 (R) 85 81
News America Holdings, Inc. - Debs.
8.25% due 08/10/18 1,220 1,217
News America, Inc. - Sr. Debs
7.3% due 04/30/28 1,640 1,458
Rogers Cablesystems - Sr. Notes
10.0% due 03/15/05 1,205 1,265
TCI Communications, Inc. - Debs.
7.875% due 02/15/26 1,935 1,956
Time Warner, Inc. - Debs.
9.125% due 01/15/13 2,166 2,476
Viacom, Inc. - 144A
6.4% due 01/30/06 1,305 1,324
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Viacom, Inc. - Sr. Notes 144A
6.4% due 01/30/06 6.400% $ 1,225 $ 1,243 6.400% $ 80 $ 81
Gtd Sr Note 01-30-06 (R) 6.400 85 85
Viacom, Inc.
7.875% due 07/30/30 7.875 2,430 2,560
---------- ---------
36,484 2,006
---------- ---------
Medical (0.09%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 (Y) 10.750 37 37
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security 02-01-08 7.875 10 10
Fresenius Medical Care Capital Trust IV,
Gtd Trust Preferred Security 06-15-11 (R) 7.875 95 93
HCA - The Healthcare Co.,
Sr Note 06-01-06 7.125 340 333
Note 09-01-10 8.750 35 37
HEALTHSOUTH Corp.,
Sr Note 02-01-08 8.500 55 55
Quest Diagnostic, Inc.,
Gtd Sr Note 07-12-06 6.750 135 134
Tenet Healthcare Corp.,
Sr Note 01-15-05 8.000 20 21
Triad Hospitals, Inc.,
Gtd Sr Note 05-01-09 (R) 8.750 60 61
---------
781
---------
Metal Production & Fabrication - (0.15%)
Yanacocha Receivables - Pass thru Certs. 144A
8.4% due 06/15/05 8.400 1,335 1,308
----------
1,308
----------
Metals & Mining - (0.44%)
Newmont Mining Corp.- Notes
8.625% due 05/15/11 8.625 1,575 1,555 8.625 100 98
Phelps Dodge Corp. - Notes
8.75% due 06/01/11 8.750 2,005 1,987 8.750 150 149
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Viacom, Inc. - Sr. Notes 144A
6.4% due 01/30/06 $ 1,305 $ 1,324
Gtd Sr Note 01-30-06 (R) 85 85
Viacom, Inc.
7.875% due 07/30/30 2,430 2,560
----------
38,490
----------
Medical (0.09%)
Dynacare, Inc.,
Sr Note (Canada) 01-15-06 (Y) 37 37
Fresenius Medical Care Capital Trust II,
Gtd Trust Preferred Security 02-01-08 10 10
Fresenius Medical Care Capital Trust IV,
Gtd Trust Preferred Security 06-15-11 (R) 95 93
HCA - The Healthcare Co.,
Sr Note 06-01-06 340 333
Note 09-01-10 35 37
HEALTHSOUTH Corp.,
Sr Note 02-01-08 55 55
Quest Diagnostic, Inc.,
Gtd Sr Note 07-12-06 135 134
Tenet Healthcare Corp.,
Sr Note 01-15-05 20 21
Triad Hospitals, Inc.,
Gtd Sr Note 05-01-09 (R) 60 61
----------
781
----------
Metal Production & Fabrication - (0.15%)
Yanacocha Receivables - Pass thru Certs. 144A
8.4% due 06/15/05 1,335 1,308
----------
1,308
----------
Metals & Mining - (0.44%)
Newmont Mining Corp.- Notes
8.625% due 05/15/11 1,675 1,653
Phelps Dodge Corp. - Notes
8.75% due 06/01/11 2,155 2,136
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
WMC Finance (USA), Ltd.,
Gtd Note (Australia) 11-15-03 (Y) 6.500% $ 80 $ 81
---------- ---------
$ 3,542 328
---------- ---------
Municipals - (0.36%)
New Hampshire State - Taxable Pease Dev. Auth.
7.7% due 07/01/12 7.700% $ 3,000 3,157
----------
Mortgage Banking (0.19%)
AMRESCO Residential Securities Corp.
Mortgage Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-6 08-25-27 6.510 143 144
Citibank Credit Card Master Trust I,
Class A Credit Card Part Cert Ser 1997-2
02-15-04 6.550 130 132
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-08 6.790 70 72
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5 08-15-25 8.100 9 9
Credit Suisse First Boston Mortgage
Securities Corp.,
Commercial Mtg Pass Thru Ctf Ser 1998-C1
Class A-1A 12-17-07 6.260 239 242
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9 02-15-29 6.570 145 146
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C1 Class A-2 07-15-29 6.853 50 51
Pass Thru Ctf Ser 1998-C1 Class A-1 05-15-30 6.411 244 247
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4 03-20-25 6.600 15 15
LB Commercial Conduit Mortgage Trust,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-07 6.410 50 51
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7 12-15-38 6.485 15 15
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class A-1
10-15-06 (R) 6.830 217 224
Pass Thru Ctf Ser 1999-CAM1 Class A-3
11-15-08 6.920 140 144
Salomon Brothers Mortgage Securities
VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2 Class A-2
07-25-24 6.750 6 6
Saxon Asset Securities Trust,
Pass Thru Ctf Ser 2000-2 Class AF-2 06-25-15 7.965 105 107
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
WMC Finance (USA), Ltd.,
Gtd Note (Australia) 11-15-03 (Y) $ 80 $ 81
----------
3,870
----------
Municipals - (0.36%)
New Hampshire State - Taxable Pease Dev. Auth.
7.7% due 07/01/12 3,000 3,157
----------
Mortgage Banking (0.19%)
AMRESCO Residential Securities Corp.
Mortgage Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-6 08-25-27 143 144
Citibank Credit Card Master Trust I,
Class A Credit Card Part Cert Ser 1997-2
02-15-04 130 132
Commercial Mortgage Acceptance Corp.,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-08 70 72
ContiMortgage Home Equity Loan Trust,
Pass Thru Ctf Ser 1995-2 Class A-5 08-15-25 9 9
Credit Suisse First Boston Mortgage
Securities Corp.,
Commercial Mtg Pass Thru Ctf Ser 1998-C1
Class A-1A 12-17-07 239 242
EQCC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-3 Class A-9 02-15-29 145 146
GMAC Commercial Mortgage Securities, Inc.,
Pass Thru Ctf Ser 1997-C1 Class A-2 07-15-29 50 51
Pass Thru Ctf Ser 1998-C1 Class A-1 05-15-30 244 247
IMC Home Equity Loan Trust,
Pass Thru Ctf Ser 1998-1 Class A-4 03-20-25 15 15
LB Commercial Conduit Mortgage Trust,
Pass Thru Ctf Ser 1999-C1 Class A-1 08-15-07 50 51
Money Store Home Equity Trust (The),
Pass Thru Ctf Ser 1997-D Class AF-7 12-15-38 15 15
Morgan Stanley Capital I, Inc.,
Pass Thru Ctf Ser 1997-WF1 Class A-1
10-15-06 (R) 217 224
Pass Thru Ctf Ser 1999-CAM1 Class A-3
11-15-08 140 144
Salomon Brothers Mortgage Securities
VII, Inc.,
Mtg Pass Thru Ctf Ser 1997-HUD2 Class A-2
07-25-24 6 6
Saxon Asset Securities Trust,
Pass Thru Ctf Ser 2000-2 Class AF-2 06-25-15 105 107
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8 06-15-28 7.220% $ 8 $ 8
Pass Thru Ctf Ser 1997-B Class A-6 10-15-28 6.900 56 58
---------
1,671
---------
Natural Gas Distribution - (0.68%)
Enron Corp. - Notes 144A
8.0% due 08/15/05 8.000% $ 2,510 $ 2,588
Keyspan Corp. - Sr. Notes
8.0% due 11/15/30 8.000 1,660 1,782
Louis Dreyfus Natural Gas Corp.
6.875% due 12/01/07 6.875 1,690 1,683
----------
6,053
----------
Oil & Natural Gas Exploration &
Production - (2.34%)
Alberta Energy, Ltd. - Notes
8.125% due 09/15/30 8.125 1,800 1,940 8.125 200 218
Chesapeake Energy Corp.
8.125% due 04/01/11 8.125 920 865 8.125 45 42
Forest Oil Corp. - Sr. Notes 144A
8.0% due 06/15/08 8.000 1,010 985 8.000 80 78
Louis Dreyfus Natural Gas Corp.,
Note 12-01-07 6.875 40 40
NRG Energy, Inc.
7.75% due 04/01/11 7.750 2,445 2,474
Occidental Petroleum Corp. - Sr. Debs.
10.125% due 09/15/09 10.125 3,000 3,498 10.125 15 18
Ocean Energy, Inc.
8.875% due 07/15/07 8.875 1,325 1,404 8.875 20 21
Petrobras International Finance Co.,
Sr Note 07-06-11 (R)+ 9.750 70 70
Petroleum Geo-Services ASA - Sr. Notes
7.125% due 03/30/28 7.125 2,165 1,772 7.125 50 41
Santa Fe Snyder Corp.,
Sr Sub Note 06-15-07 8.750 20 21
Snyder Oil Corp.
8.75% due 06/15/07 8.750 805 853
Transocean Forex, Inc. -Notes 144A
7.5% due 04/15/31 7.500 2,460 2,463
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
UCFC Home Equity Loan Trust,
Pass Thru Ctf Ser 1997-A1 Class A-8 06-15-28 $ 8 $ 8
Pass Thru Ctf Ser 1997-B Class A-6 10-15-28 56 58
----------
1,671
----------
Natural Gas Distribution - (0.68%)
Enron Corp. - Notes 144A
8.0% due 08/15/05 2,510 2,588
Keyspan Corp. - Sr. Notes
8.0% due 11/15/30 1,660 1,782
Louis Dreyfus Natural Gas Corp.
6.875% due 12/01/07 1,690 1,683
----------
6,053
----------
Oil & Natural Gas Exploration &
Production - (2.34%)
Alberta Energy, Ltd. - Notes
8.125% due 09/15/30 2,000 2,158
Chesapeake Energy Corp.
8.125% due 04/01/11 965 907
Forest Oil Corp. - Sr. Notes 144A
8.0% due 06/15/08 1,090 1,063
Louis Dreyfus Natural Gas Corp.,
Note 12-01-07 40 40
NRG Energy, Inc.
7.75% due 04/01/11 2,445 2,474
Occidental Petroleum Corp. - Sr. Debs.
10.125% due 09/15/09 3,015 3,516
Ocean Energy, Inc.
8.875% due 07/15/07 1,345 1,425
Petrobras International Finance Co.,
Sr Note 07-06-11 (R)+ 70 70
Petroleum Geo-Services ASA - Sr. Notes
7.125% due 03/30/28 2,215 1,813
Santa Fe Snyder Corp.,
Sr Sub Note 06-15-07 20 21
Snyder Oil Corp.
8.75% due 06/15/07 805 853
Transocean Forex, Inc. -Notes 144A
7.5% due 04/15/31 2,460 2,463
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Transocean Sedco Forex, Inc.,
Note 04-15-31 (R) 7.500% $ 115 $ 115
Union Pacific Resources Group, Inc. - Debs.
7.15% due 05/15/28 7.150% $ 2,685 $ 2,570 7.150 75 73
Valero Energy Corp. - Notes
8.375% due 06/15/05 8.375 1,005 1,077 8.375 80 86
---------- ---------
19,901 823
---------- ---------
Oil - Equipment & Service - (0.32%)
Humpuss Funding Corp. - 144A
7.72% due 12/15/09 7.720 998 805
TOSCO Corp.
8.125% due 02/15/30 8.125 1,840 2,006
----------
2,811
----------
Paper & Forest Products - (0.73%)
Georgia Pacific Corp. - Notes
7.5% due 05/15/06 7.500 1,550 1,558 7.500 120 120
8.875% due 05/15/31 8.875 1,635 1,637 8.875 135 137
International Paper Co.
8.125% due 07/08/05 8.125 2,540 2,689 8.125 260 275
---------- ---------
5,884 532
---------- ---------
Paper Products - (0.33%)
Stora Enso Corp. - Notes
7.375% due 05/15/11 7.375 2,545 2,578 7.375 370 375
---------- ---------
Personal & Commercial Lending - (6.56%)
Citigroup, Inc.
6.5% due 01/18/11 6.500 1,645 1,633
Commercial Mortgage Acceptance Corp. -
Ser. 1991-C1 A1
6.79% due 06/15/31 6.790 3,157 3,232
CS First Boston Mortgage Securities Corp. -
Ser. 1998-C1 A1A
6.26% due 04/11/30 6.260 5,095 5,153
Deutsche Mortgage & Asset Receiving Corp. -
Ser. 1998-C1 Cl. C
6.861% due 03/15/08 6.861 2,170 2,155
EQCC Home Equity Loan Trust
6.57% due 02/15/29 6.570 2,120 2,142
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Transocean Sedco Forex, Inc.,
Note 04-15-31 (R) $ 115 $ 115
Union Pacific Resources Group, Inc. - Debs.
7.15% due 05/15/28 2,760 2,643
Valero Energy Corp. - Notes
8.375% due 06/15/05 1,085 1,163
----------
20,724
----------
Oil - Equipment & Service - (0.32%)
Humpuss Funding Corp. - 144A
7.72% due 12/15/09 998 805
TOSCO Corp.
8.125% due 02/15/30 1,840 2,006
----------
2,811
----------
Paper & Forest Products - (0.73%)
Georgia Pacific Corp. - Notes
7.5% due 05/15/06 1,670 1,678
8.875% due 05/15/31 1,770 1,774
International Paper Co.
8.125% due 07/08/05 2,800 2,964
----------
6,416
----------
Paper Products - (0.33%)
Stora Enso Corp. - Notes
7.375% due 05/15/11 2,915 2,953
----------
Personal & Commercial Lending - (6.56%)
Citigroup, Inc.
6.5% due 01/18/11 1,645 1,633
Commercial Mortgage Acceptance Corp. -
Ser. 1991-C1 A1
6.79% due 06/15/31 3,157 3,232
CS First Boston Mortgage Securities Corp. -
Ser. 1998-C1 A1A
6.26% due 04/11/30 5,095 5,153
Deutsche Mortgage & Asset Receiving Corp. -
Ser. 1998-C1 Cl. C
6.861% due 03/15/08 2,170 2,155
EQCC Home Equity Loan Trust
6.57% due 02/15/29 2,120 2,142
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Ford Motor Credit Co. - Notes
6.875% due 02/01/06 6.875% $ 2,095 $ 2,122
General Motors Acceptance Corp.
7.5% due 07/15/05 7.500 2,535 2,651
GMAC Commercial Mortgage Securities, Inc. -
1997-C1 A2
6.853% due 09/15/06 6.853 7,325 7,540
Household Finance Corp. - Notes
8.0% due 07/15/10 8.000 1,650 1,767
Household Financial Corp.
6.5% due 01/24/06 6.500 1,620 1,642
Household Financial Corp. - Notes
8.0% due 05/09/05 8.000 3,175 3,387
LB Commercial Conduit Mortgage Trust -
Ser. 1999-C1
6.41% due 08/15/07 6.410 3,264 3,311
Midland Funding Corp. II - Debs.
11.75% due 07/23/05 11.750 4,665 5,132
Money Store Home Equity Trust -
Ser. 1997-C1 DAF7
6.485% due 12/15/28 6.485 3,791 3,843
Takefuji Corp.
9.2% due 04/15/11 9.200 2,110 2,178
Tiers Fixed Rate Certificates Ser. 2001 144A
7.2% due 06/15/04 7.200 3,095 3,095
UCFC Home Equity Loan
7.18% due 02/15/25 7.180 1,115 1,149
UCFC Home Equity Loan - Ser. 1997-A1 A8
7.22% due 06/15/28 7.220 5,660 5,841
----------
57,973
----------
Pollution Control - (0.10%)
Waste Management, Inc. - Sr. Notes
7.375% due 08/01/10 7.375 875 876
----------
Real Estate Development - (0.13%)
EOP Operating LP
6.625% due 02/15/05 6.625 985 991 6.625% $ 170 $ 173
---------- ---------
991 173
---------- ---------
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Ford Motor Credit Co. - Notes
6.875% due 02/01/06 $ 2,095 $ 2,122
General Motors Acceptance Corp.
7.5% due 07/15/05 2,535 2,651
GMAC Commercial Mortgage Securities, Inc. -
1997-C1 A2
6.853% due 09/15/06 7,325 7,540
Household Finance Corp. - Notes
8.0% due 07/15/10 1,650 1,767
Household Financial Corp.
6.5% due 01/24/06 1,620 1,642
Household Financial Corp. - Notes
8.0% due 05/09/05 3,175 3,387
LB Commercial Conduit Mortgage Trust -
Ser. 1999-C1
6.41% due 08/15/07 3,264 3,311
Midland Funding Corp. II - Debs.
11.75% due 07/23/05 4,665 5,132
Money Store Home Equity Trust -
Ser. 1997-C1 DAF7
6.485% due 12/15/28 3,791 3,843
Takefuji Corp.
9.2% due 04/15/11 2,110 2,178
Tiers Fixed Rate Certificates Ser. 2001 144A
7.2% due 06/15/04 3,095 3,095
UCFC Home Equity Loan
7.18% due 02/15/25 1,115 1,149
UCFC Home Equity Loan - Ser. 1997-A1 A8
7.22% due 06/15/28 5,660 5,841
----------
57,973
----------
Pollution Control - (0.10%)
Waste Management, Inc. - Sr. Notes
7.375% due 08/01/10 875 876
----------
Real Estate Development - (0.13%)
EOP Operating LP
6.625% due 02/15/05 1,155 1,164
----------
1,164
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Real Estate Investment Trust - (2.48%)
American Health Properties, Inc. - Notes
7.5% due 01/15/07 7.500% $ 1,350 $ 1,332 7.500% $ 20 $ 20
Amresco Residential Securities - Mtge. Loan
6.51% due 08/25/27 6.510 7,496 7,583
Cabot Industrial Properties LP - Notes
7.125% due 05/01/04 7.125 1,975 2,014 7.125 25 25
Camden Property Trust - Sr. Notes
7.0% due 04/15/04 7.000 2,170 2,205 7.000 30 31
Healthcare Realty Trust IN - Sr. Notes
8.125% due 05/01/11 8.125 1,570 1,563 8.125 105 105
IMC Home Equity Loan Trust - Ser. 1998-1 A4
6.6% due 03/20/25 6.600 3,280 3,346
Liberty Property LP - Notes
6.6% due 06/05/02 6.600 1,675 1,708 6.600 40 40
Mack-Cali Realty LP - Notes
7.75% due 02/15/11 7.750 1,655 1,673 7.750 210 212
ProLogis Trust,
Sr Note 04-15-04 6.700 25 25
---------- ---------
21,424 458
---------- ---------
Real Estate Operations - (0.23%)
HMH Properties, Inc. - Ser. A
7.875% due 08/01/05 7.875 2,075 2,002
----------
Retail - Department Stores - (0.20%)
Kingdom MART Corp. - Notes 144A
9.875% due 06/15/08 9.875 1,540 1,498
Kmart Corp.,
Sr Note 06-15-08 (R) 9.875 125 123
Kohl's Corp.,
Note 03-01-11 (R) 6.300 170 170
---------- ---------
1,498 293
---------- ---------
Retail - Food - (0.29%)
Delhaize America, Inc.
8.125% due 04/15/11 8.125 2,330 2,430 8.125 110 114
---------- ---------
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Real Estate Investment Trust - (2.48%)
American Health Properties, Inc. - Notes
7.5% due 01/15/07 $ 1,370 $ 1,352
Amresco Residential Securities - Mtge. Loan
6.51% due 08/25/27 7,496 7,583
Cabot Industrial Properties LP - Notes
7.125% due 05/01/04 2,000 2,039
Camden Property Trust - Sr. Notes
7.0% due 04/15/04 2,200 2,236
Healthcare Realty Trust IN - Sr. Notes
8.125% due 05/01/11 1,675 1,668
IMC Home Equity Loan Trust - Ser. 1998-1 A4
6.6% due 03/20/25 3,280 3,346
Liberty Property LP - Notes
6.6% due 06/05/02 1,715 1,748
Mack-Cali Realty LP - Notes
7.75% due 02/15/11 1,865 1,885
ProLogis Trust,
Sr Note 04-15-04 25 25
----------
21,882
----------
Real Estate Operations - (0.23%)
HMH Properties, Inc. - Ser. A
7.875% due 08/01/05 2,075 2,002
----------
Retail - Department Stores - (0.20%)
Kingdom MART Corp. - Notes 144A
9.875% due 06/15/08 1,540 1,498
Kmart Corp.,
Sr Note 06-15-08 (R) 125 123
Kohl's Corp.,
Note 03-01-11 (R) 170 170
----------
1,791
----------
Retail - Food - (0.29%)
Delhaize America, Inc.
8.125% due 04/15/11 2,440 2,544
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Telecommunication Equipment - (0.96%)
BellSouth Capital Funding - Debs.
7.875% due 02/15/30 7.875% $ 1,740 $ 1,853 7.875% $ 80 $ 86
Deutsche Telekom International Finance
7.75% due 06/15/05 7.750 3,100 3,241 7.750 230 240
8.25% due 06/15/30 8.250 1,680 1,728 8.250 130 132
Vulcan Materials - Notes
6.4% due 02/01/06 6.400 1,190 1,195
---------- ---------
8,017 458
---------- ---------
Telecommunication Services - (3.45%)
AT&T Wireless Group - Sr. Notes Ser.144A
8.75% due 03/01/31 8.750 3,195 3,319 8.750 260 270
Citizens Communications Co. - Notes
8.5% due 05/15/06 8.500 1,555 1,597 8.500 115 118
9.25% due 05/15/11 9.250 1,555 1,617 9.250 115 121
Cox Communications, Inc. - Notes
7.75% due 11/01/10 7.750 1,785 1,864 7.750 155 162
Crown Castle International Corp. - Sr. Notes
9.0% due 05/15/11 9.000 645 561 9.000 30 27
Crown Castle International Corp. -
Sr. Notes 144A
9.375% due 08/01/11 9.375 435 385 9.375 65 58
Dominion Resources, Inc.
8.125% due 06/15/10 8.125 2,680 2,886 8.125 60 65
France Telecom SA - Notes 144A
8.5% due 03/01/31 8.500 2,490 2,611 8.500 195 204
Qwest Capital Funding, Inc.,
Bond 02-15-31 (R) 7.750 260 254
Telefonos De Mexico, SA - Sr. Notes 144A
8.25% due 01/26/06 8.250 3,400 3,494 8.250 200 207
Tellus Corp. NT
8.0% due 06/01/11 8.000 2,490 2,545 8.000 200 203
Triton PCS, Inc. - Sr. Sub Notes
9.375% due 02/01/11 9.375 730 708 9.375 30 29
Verizon Global Funding Corp. - Bonds 144A
7.75% due 12/01/30 7.750 1,740 1,790
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Telecommunication Equipment - (0.96%)
BellSouth Capital Funding - Debs.
7.875% due 02/15/30 $ 1,820 $ 1,939
Deutsche Telekom International Finance
7.75% due 06/15/05 3,330 3,481
8.25% due 06/15/30 1,810 1,860
Vulcan Materials - Notes
6.4% due 02/01/06 1,190 1,195
----------
8,475
----------
Telecommunication Services - (3.45%)
AT&T Wireless Group - Sr. Notes Ser.144A
8.75% due 03/01/31 3,455 3,589
Citizens Communications Co. - Notes
8.5% due 05/15/06 1,670 1,715
9.25% due 05/15/11 1,670 1,738
Cox Communications, Inc. - Notes
7.75% due 11/01/10 1,940 2,026
Crown Castle International Corp. - Sr. Notes
9.0% due 05/15/11 675 588
Crown Castle International Corp. -
Sr. Notes 144A
9.375% due 08/01/11 500 443
Dominion Resources, Inc.
8.125% due 06/15/10 2,740 2,951
France Telecom SA - Notes 144A
8.5% due 03/01/31 2,685 2,815
Qwest Capital Funding, Inc.,
Bond 02-15-31 (R) 260 254
Telefonos De Mexico, SA - Sr. Notes 144A
8.25% due 01/26/06 3,600 3,701
Tellus Corp. NT
8.0% due 06/01/11 2,690 2,748
Triton PCS, Inc. - Sr. Sub Notes
9.375% due 02/01/11 760 737
Verizon Global Funding Corp. - Bonds 144A
7.75% due 12/01/30 1,740 1,790
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Voicestream Wireless Corp.
11.5% due 09/15/09 11.500% $ 1,540 $ 1,771 11.500% $ 20 $ 23
Worldcom, Inc.
Bond 05-15-31*** 8.250 135 135
8.0% due 05/15/06 8.000 3,125 3,240 8.000 225 233
---------- ---------
28,388 2,109
---------- ---------
Telephone - (1.40%)
LCI International, Inc. - Sr. Notes
7.25% due 06/15/07 7.250 2,205 2,267 7.250 30 30
Metronet Communications Corp. -
Sr. Disc. Notes
0.0% due 11/01/07 Zero 1,695 1,593
MetroNet Communications Corp. - Sr. Notes
12.0% due 08/15/07 12.000 1,770 1,950 12.000 15 16
Sr Disc Note, Step Coupon (10.750%, 11-01-02)
(Canada) 11-01-07 (A) Zero 135 128
Pinnacle Partners
8.83% due 08/15/04 8.830 2,355 2,422
Sprint Capital Corp.
6.875% due 11/15/28 6.875 2,450 2,080 6.875 200 168
Sprint Capital Corp. - Notes
7.125% due 01/30/06 7.125 1,550 1,564 7.125 120 121
---------- ---------
11,876 463
---------- ---------
Transportation Services - (2.49%)
America West Airlines, Inc. - Pass thru Certs.
6.93% due 01/02/08 6.930 1,522 1,519 6.930 3 3
Burlington Northern Santa Fe Corp.
7.95% due 08/15/30 7.950 3,305 3,478 7.950 255 269
Continental Airlines, Inc. - Pass thru Certs.
7.206% due 06/30/04 7.206 2,634 2,671 7.206 102 105
Pass Thru Ctf Ser 1999-1A 02-02-19 6.545 56 55
Delta Air lines, Inc.
7.7% due 12/15/05 7.700 1,935 1,916 7.700 100 98
Northwest Airlines Corp.
8.375% due 03/15/04 8.375 1,350 1,319 8.375 25 25
Northwest Airlines Corp. - Sr. Notes
8.875% due 06/01/06 8.875 1,555 1,491 8.875 115 109
Northwest Airlines Corp. - Ser. 1996-1
8.97% due 01/02/15 8.970 203 214 8.970 4 5
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Voicestream Wireless Corp.
11.5% due 09/15/09 $ 1,560 $ 1,794
Worldcom, Inc.
Bond 05-15-31*** 135 135
8.0% due 05/15/06 3,350 3,473
----------
30,497
----------
Telephone - (1.40%)
LCI International, Inc. - Sr. Notes
7.25% due 06/15/07 2,235 2,297
Metronet Communications Corp. -
Sr. Disc. Notes
0.0% due 11/01/07 1,695 1,593
MetroNet Communications Corp. - Sr. Notes
12.0% due 08/15/07 1,785 1,966
Sr Disc Note, Step Coupon (10.750%, 11-01-02)
(Canada) 11-01-07 (A) 135 128
Pinnacle Partners
8.83% due 08/15/04 2,355 2,422
Sprint Capital Corp.
6.875% due 11/15/28 2,650 2,248
Sprint Capital Corp. - Notes
7.125% due 01/30/06 1,670 1,685
----------
12,339
----------
Transportation Services - (2.49%)
America West Airlines, Inc. - Pass thru Certs.
6.93% due 01/02/08 1,525 1,522
Burlington Northern Santa Fe Corp.
7.95% due 08/15/30 3,560 3,747
Continental Airlines, Inc. - Pass thru Certs.
7.206% due 06/30/04 2,736 2,776
Pass Thru Ctf Ser 1999-1A 02-02-19 56 55
Delta Air lines, Inc.
7.7% due 12/15/05 2,035 2,014
Northwest Airlines Corp.
8.375% due 03/15/04 1,375 1,344
Northwest Airlines Corp. - Sr. Notes
8.875% due 06/01/06 1,670 1,600
Northwest Airlines Corp. - Ser. 1996-1
8.97% due 01/02/15 207 219
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
NWA Trust - Sr. Notes
9.25% due 06/21/14 9.250% $ 2,198 $ 2,377
Sr Note Ser A 12-21-12 9.250% $ 36 $ 39
Railcar Trust - Pass thru Notes - Ser. 1992-1
7.75% due 06/01/04 7.750 1,304 1,354 7.750 54 56
U.S. Air, Inc. - Pass thru Certs. -
Ser. 1990-A1
11.2% due 03/19/05 11.200 984 1,018 11.200 29 30
United Air Lines
7.032% due 04/01/12 7.032 2,339 2,393 7.032 66 66
Pass Thru Ctf Ser 2000-1 Class A-1 01-01-14 7.783 71 73
Wisconsin Central Transportation Corp. - Notes
6.625% due 04/15/08 6.625 1,360 1,360 6.625 8 8
---------- ---------
21,110 941
---------- ---------
U.S. Government Agencies - (29.10%)
Federal National Mortgage Assoc.
15 Yr Pass Thru Ctf 12-01-12 to 05-01-16 6.500 2,420 2,428
15 Yr Pass Thru Ctf 11-01-14 to 02-01-16 7.000 904 920
15 Yr Pass Thru Ctf 12-01-14 5.500 516 498
15 Yr Pass Thru Ctf 05-01-16 to 06-01-16 6.000 1,273 1,229
Note 03-15-11 5.500 1,780 1,692
Note 01-15-30 7.125 1,650 1,759
Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22 6.940 3 2
30 Yr Pass Thru Ctf 06-01-30 to 02-01-31 7.500 1,330 1,358
30 Yr Pass Thru Ctf 12-01-30 to 06-01-31 7.000 1,795 1,783
30 Yr Pass Thru Ctf 02-01-31 to 05-01-31 6.000 179 175
5.5% due 12/01/14 5.500 11,774 11,369
6.0% due 09/01/14 6.000 8,669 8,561
6.0% due 05/01/16 6.000 4,135 4,073
6.0% due 02/01/31 6.000 4,231 4,060
6.0% due 04/01/31 6.000 3,268 3,136
6.0% due 05/01/31 6.000 3,463 3,411
6.5% due 09/01/13 6.500 102 102
6.5% due 07/01/14 6.500 7,685 7,724
6.5% due 11/01/14 6.500 115 116
6.5% due 01/01/15 6.500 56 56
6.5% due 02/01/15 6.500 91 92
6.5% due 06/01/15 6.500 430 431
6.5% due 11/01/28 6.500 9,358 9,226
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
NWA Trust - Sr. Notes
9.25% due 06/21/14 $ 2,198 $ 2,377
Sr Note Ser A 12-21-12 36 39
Railcar Trust - Pass thru Notes - Ser. 1992-1
7.75% due 06/01/04 1,358 1,410
U.S. Air, Inc. - Pass thru Certs. -
Ser. 1990-A1
11.2% due 03/19/05 1,013 1,048
United Air Lines
7.032% due 04/01/12 2,405 2,459
Pass Thru Ctf Ser 2000-1 Class A-1 01-01-14 71 73
Wisconsin Central Transportation Corp. - Notes
6.625% due 04/15/08 1,368 1,368
----------
22,051
----------
U.S. Government Agencies - (29.10%)
Federal National Mortgage Assoc.
15 Yr Pass Thru Ctf 12-01-12 to 05-01-16 2,420 2,428
15 Yr Pass Thru Ctf 11-01-14 to 02-01-16 904 920
15 Yr Pass Thru Ctf 12-01-14 516 498
15 Yr Pass Thru Ctf 05-01-16 to 06-01-16 1,273 1,229
Note 03-15-11 1,780 1,692
Note 01-15-30 1,650 1,759
Pass Thru Ctf Ser 1997-M8 Class A-1 01-25-22 3 2
30 Yr Pass Thru Ctf 06-01-30 to 02-01-31 1,330 1,358
30 Yr Pass Thru Ctf 12-01-30 to 06-01-31 1,795 1,783
30 Yr Pass Thru Ctf 02-01-31 to 05-01-31 179 175
5.5% due 12/01/14 11,774 11,369
6.0% due 09/01/14 8,669 8,561
6.0% due 05/01/16 4,135 4,073
6.0% due 02/01/31 4,231 4,060
6.0% due 04/01/31 3,268 3,136
6.0% due 05/01/31 3,463 3,411
6.5% due 09/01/13 102 102
6.5% due 07/01/14 7,685 7,724
6.5% due 11/01/14 115 116
6.5% due 01/01/15 56 56
6.5% due 02/01/15 91 92
6.5% due 06/01/15 430 431
6.5% due 11/01/28 9,358 9,226
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
7.0% due 09/01/10 7.000% $ 3,574 $ 3,645
7.0% due 11/01/14 7.000 5,162 5,249
7.0% due 03/01/31 7.000 8,257 8,293
7.385% due 03/25/21 7.385 920 959
7.5% due 02/01/31 7.500 6,720 6,856
7.5% due 02/01/31 7.500 7,150 7,295
8.0% due 04/01/30 8.000 6,310 6,517
8.0% due 06/01/30 8.000 6,259 6,465
Federal National Mortgage Assoc.
Ser. 1997-M8 Cl.A
6.94% due 01/25/22 6.940 1,372 1,414
Federal National Mortgage Assoc. - Notes
7.0% due 02/01/16 7.000 4,845 4,926
Government National Mortgage Assoc.
30 Yr Pass Thru Ctf 07-15-26 8.000% $ 20 $ 21
30 Yr Pass Thru Ctf 04-15-28 to 06-15-29 6.500 2,405 2,382
30 Yr Pass Thru Ctf 08-15-28 to 06-15-31*** 7.000 3,857 3,902
30 Yr Pass Thru Ctf 12-15-30 7.500 1,915 1,965
6.0% due 05/15/31 6.000 9,376 9,074
6.5% due 07/15/28 6.500 13,622 13,482
6.5% due 01/15/29 6.500 2,725 2,697
6.5% due 02/15/29 6.500 3,634 3,595
6.5% due 06/15/29 6.500 25,069 24,794
6.5% due 08/15/29 6.500 6,296 6,227
7.0% due 09/15/25 7.000 1,891 1,914
7.0% due 08/15/28 7.000 5,609 5,659
7.0% due 09/15/29 7.000 13,878 14,000
7.0% due 06/15/31 7.000 1,655 1,669
7.0% due 06/15/31 7.000 1,825 1,841
7.0% due 12/31/99 7.000 4,060 4,095
7.5% due 09/15/29 7.500 4,460 4,573
7.5% due 09/15/29 7.500 9,089 9,319
7.5% due 12/15/29 7.500 6,977 7,154
8.0% due 05/15/25 8.000 244 254
8.0% due 06/15/25 8.000 208 216
8.0% due 09/15/25 8.000 444 461
8.0% due 01/15/26 8.000 231 240
8.0% due 08/15/27 8.000 1,207 1,252
8.0% due 07/15/30 8.000 4,075 4,222
8.0% due 07/15/30 8.000 855 885
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
7.0% due 09/01/10 $ 3,574 $ 3,645
7.0% due 11/01/14 5,162 5,249
7.0% due 03/01/31 8,257 8,293
7.385% due 03/25/21 920 959
7.5% due 02/01/31 6,720 6,856
7.5% due 02/01/31 7,150 7,295
8.0% due 04/01/30 6,310 6,517
8.0% due 06/01/30 6,259 6,465
Federal National Mortgage Assoc.
Ser. 1997-M8 Cl.A
6.94% due 01/25/22 1,372 1,414
Federal National Mortgage Assoc. - Notes
7.0% due 02/01/16 4,845 4,926
Government National Mortgage Assoc.
30 Yr Pass Thru Ctf 07-15-26 20 21
30 Yr Pass Thru Ctf 04-15-28 to 06-15-29 2,405 2,382
30 Yr Pass Thru Ctf 08-15-28 to 06-15-31*** 3,857 3,902
30 Yr Pass Thru Ctf 12-15-30 1,915 1,965
6.0% due 05/15/31 9,376 9,074
6.5% due 07/15/28 13,622 13,482
6.5% due 01/15/29 2,725 2,697
6.5% due 02/15/29 3,634 3,595
6.5% due 06/15/29 25,069 24,794
6.5% due 08/15/29 6,296 6,227
7.0% due 09/15/25 1,891 1,914
7.0% due 08/15/28 5,609 5,659
7.0% due 09/15/29 13,878 14,000
7.0% due 06/15/31 1,655 1,669
7.0% due 06/15/31 1,825 1,841
7.0% due 12/31/99 4,060 4,095
7.5% due 09/15/29 4,460 4,573
7.5% due 09/15/29 9,089 9,319
7.5% due 12/15/29 6,977 7,154
8.0% due 05/15/25 244 254
8.0% due 06/15/25 208 216
8.0% due 09/15/25 444 461
8.0% due 01/15/26 231 240
8.0% due 08/15/27 1,207 1,252
8.0% due 07/15/30 4,075 4,222
8.0% due 07/15/30 855 885
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
8.0% due 07/15/30 8.000% $ 323 $ 334
8.5% due 09/15/21 8.500 450 476
8.5% due 01/15/31 8.500 12,999 13,584
9.0% due 05/15/21 9.000 396 425
9.0% due 08/15/21 9.000 375 402
9.5% due 06/15/16 9.500 317 347
---------- ---------
237,167 $ 20,114
---------- ---------
U.S. Governmental - (8.84%)
U.S. Treasury
3.375% due 01/15/07 3.375 6,938 7,023
U.S. Treasury - Bonds
Bond 02-15-23 7.125% $ 675 774
6.25% due 05/15/30 6.250 8,845 9,369 6.250 4,085 4,327
U.S. Treasury - Bonds
8.875% due 08/15/17 8.875 2,919 3,832 8.875 277 363
Infl Indxd Note 01-15-07 3.375 541 550
U.S. Treasury - Notes
5.625% due 05/15/08 5.625 1,195 1,242 5.625 1,145 1,190
5.75% due 08/15/03 5.750 9,005 9,261 5.750 5,655 5,816
5.75% due 08/15/10 5.750 9,670 9,894 5.750 1,780 1,821
7.0% due 07/15/06 7.000 1,124 1,219 7.000 1,582 1,716
7.5% due 02/15/05 7.500 15,816 17,212 7.500 2,295 2,498
---------- ---------
59,052 19,055
---------- ---------
Utilities (0.32%) AES Corp.,
Sr Note 06-01-09 9.500 35 36
Sr Note 09-15-10 9.375 20 20
Sr Sub Note 07-15-06 10.250 10 10
AES Eastern Energy, L.P.,
Pass Thru Ctf Ser 1999-A 01-02-17 9.000 25 25
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-02 (R) (Y) 6.730 40 40
Beaver Valley Funding Corp.,
Deb 06-01-07 8.625 60 62
Sec Lease Oblig Bond 06-01-17 9.000 23 25
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 8.890 5 6
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
8.0% due 07/15/30 $ 323 $ 334
8.5% due 09/15/21 450 476
8.5% due 01/15/31 12,999 13,584
9.0% due 05/15/21 396 425
9.0% due 08/15/21 375 402
9.5% due 06/15/16 317 347
----------
257,281
----------
U.S. Governmental - (8.84%)
U.S. Treasury
3.375% due 01/15/07 6,938 7,023
U.S. Treasury - Bonds
Bond 02-15-23 675 774
6.25% due 05/15/30 12,930 13,696
U.S. Treasury - Bonds
8.875% due 08/15/17 3,196 4,195
Infl Indxd Note 01-15-07 541 550
U.S. Treasury - Notes
5.625% due 05/15/08 2,340 2,432
5.75% due 08/15/03 14,660 15,077
5.75% due 08/15/10 11,450 11,715
7.0% due 07/15/06 2,706 2,935
7.5% due 02/15/05 18,111 19,710
----------
78,107
----------
Utilities (0.32%) AES Corp.,
Sr Note 06-01-09 35 36
Sr Note 09-15-10 20 20
Sr Sub Note 07-15-06 10 10
AES Eastern Energy, L.P.,
Pass Thru Ctf Ser 1999-A 01-02-17 25 25
Avon Energy Partners Holdings,
Sr Note (United Kingdom) 12-11-02 (R) (Y) 40 40
Beaver Valley Funding Corp.,
Deb 06-01-07 60 62
Sec Lease Oblig Bond 06-01-17 23 25
BVPS II Funding Corp.,
Collateralized Lease Bond 06-01-17 5 6
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Calpine Canada Energy Finance ULC,
Gtd Sr Note (Canada) 05-01-08 (Y) 8.500% $ 75 $ 73
Calpine Corp.,
Sr Note 08-15-05 8.250 65 64
Sr Note 04-01-08 7.875 15 15
Sr Note 02-15-11 8.500 60 58
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 9.500 45 47
Sr Sec Note Ser D 11-01-17 7.880 20 20
CMS Energy Corp.,
Sr Note 05-15-02 8.125 60 61
Sr Note 10-15-07 9.875 15 16
Sr Note 04-15-11 8.500 25 24
Sr Note Ser B 01-15-04 6.750 55 53
EIP Funding-PNM,
Sec Fac Bond 10-01-12 10.250 38 41
Exelon Generation Co., LLC,
Sr Note 06-15-11 (R) 6.950 245 245
GG1B Funding Corp.,
Deb 01-15-11 7.430 23 23
HQI Transelec Chile SA,
Sr Note (Chile) 04-15-11 (R) (Y) 7.875 130 129
Hydro-Quebec,
Gtd Bond Ser HY (Canada) 01-15-22 (Y) 8.400 20 23
Iberdrola International B.V.,
Note 10-01-02 7.500 35 36
KeySpan Corp.,
Sr Note 11-15-30 8.000 60 64
Long Island Lighting Co.,
Deb 03-15-23 8.200 40 41
Mirant Americas Generation, Inc.,
Pass Thru Ctf Ser MIR 2001-14 06-15-04 (R) 7.200 240 239
Sr Note 05-01-11 (R) 8.300 100 100
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 8.770 43 44
Northeast Utilities,
Note Ser A 12-01-06 8.580 6 6
NRG Energy, Inc.,
Sr Note 04-01-11 7.750 200 203
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Calpine Canada Energy Finance ULC,
Gtd Sr Note (Canada) 05-01-08 (Y) $ 75 $ 73
Calpine Corp.,
Sr Note 08-15-05 65 64
Sr Note 04-01-08 15 15
Sr Note 02-15-11 60 58
Cleveland Electric Illuminating Co.,
1st Mtg Ser B 05-15-05 45 47
Sr Sec Note Ser D 11-01-17 20 20
CMS Energy Corp.,
Sr Note 05-15-02 60 61
Sr Note 10-15-07 15 16
Sr Note 04-15-11 25 24
Sr Note Ser B 01-15-04 55 53
EIP Funding-PNM,
Sec Fac Bond 10-01-12 38 41
Exelon Generation Co., LLC,
Sr Note 06-15-11 (R) 245 245
GG1B Funding Corp.,
Deb 01-15-11 23 23
HQI Transelec Chile SA,
Sr Note (Chile) 04-15-11 (R) (Y) 130 129
Hydro-Quebec,
Gtd Bond Ser HY (Canada) 01-15-22 (Y) 20 23
Iberdrola International B.V.,
Note 10-01-02 35 36
KeySpan Corp.,
Sr Note 11-15-30 60 64
Long Island Lighting Co.,
Deb 03-15-23 40 41
Mirant Americas Generation, Inc.,
Pass Thru Ctf Ser MIR 2001-14 06-15-04 (R) 240 239
Sr Note 05-01-11 (R) 100 100
Niagara Mohawk Power Corp.,
Sec Fac Bond 01-01-18 43 44
Northeast Utilities,
Note Ser A 12-01-06 6 6
NRG Energy, Inc.,
Sr Note 04-01-11 200 203
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Pinnacle Partners,
Sr Note 08-15-04 (R) 8.830% $ 85 $ 87
Pinnacle West Capital Corp.,
Sr Note 04-01-06 6.400 85 84
PNPP II Funding Corp.,
Deb 05-30-16 9.120 40 43
PSEG Energy Holdings, Inc.,
Sr Note 02-15-08 (R) 8.625 55 56
PSEG Power LLC,
Sr Note 04-15-31 (R) 8.625 130 140
Sierra Pacific Power Co.,
1st Mtg Note 06-01-08 (R) 8.000 330 332
Sierra Pacific Resources,
Note 05-15-05 8.750 45 46
TXU Electric Capital V,
Gtd Capital Sec 01-30-37 8.175 35 34
Waterford 3 Funding Corp.,
Sec Lease Oblig Bond 01-02-17 8.090 56 58
Xcel Energy, Inc.,
Sr Note 12-01-10 7.000 70 70
---------
2,799
---------
Waste Disposal Service & Equip (0.00%)
Waste Management, Inc.,
Sr Note 08-01-10 7.375 30 30
---------
---------- ---------
TOTAL CORPORATE AND PUBLICLY-TRADED-BONDS
(92.56%) 755,282 62,906
---------- ---------
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Pinnacle Partners,
Sr Note 08-15-04 (R) $ 85 $ 87
Pinnacle West Capital Corp.,
Sr Note 04-01-06 85 84
PNPP II Funding Corp.,
Deb 05-30-16 40 43
PSEG Energy Holdings, Inc.,
Sr Note 02-15-08 (R) 55 56
PSEG Power LLC,
Sr Note 04-15-31 (R) 130 140
Sierra Pacific Power Co.,
1st Mtg Note 06-01-08 (R) 330 332
Sierra Pacific Resources,
Note 05-15-05 45 46
TXU Electric Capital V,
Gtd Capital Sec 01-30-37 35 34
Waterford 3 Funding Corp.,
Sec Lease Oblig Bond 01-02-17 56 58
Xcel Energy, Inc.,
Sr Note 12-01-10 70 70
----------
2,799
----------
Waste Disposal Service & Equip (0.00%)
Waste Management, Inc.,
Sr Note 08-01-10 30 30
----------
----------
TOTAL CORPORATE AND PUBLICLY-TRADED-BONDS
(92.56%) 818,188
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
NUMBER OF NUMBER OF
SHARES OR SHARES OR
WARRANTS WARRANTS
--------- ---------
PREFERRED STOCK - 0.35%
Media - TV / Radio
CSC Holdings, Inc. 13 $ 1,345
CSC Holdings, Inc. 14 1,529
CSC Holdings, Inc., 11.125% Ser M,
Preferred Stock 1,040 $ 111
CSC Holdings, Inc., 11.750%, Ser H,
Preferred Stock 1,175 125
---------- ---------
TOTAL PREFERRED STOCK (0.35%) 2,874 236
---------- ---------
WARRANTS
Telephone - (0.03%)
MetroNet Communications Corp. - CW 144A
expires 01/01/80 (Cost $58) 2 239 5 0
---------- ---------
TOTAL WARRANTS (0.03%) 239 0
---------- ---------
SHORT-TERM INVESTMENTS - 6.80%
Investments in joint trading accounts
3.97% due 07/02/01 3.970% 53,840 53,840
Investment in joint trading account
3.97% due 07/02/01
U.S. Treasury Bill
3.435% due 09/13/01
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. - Dated
06-29-01, due 07-02-01 (Secured by U.S.
Treasury Bonds, 6.250% thru 10.625%, due
08-15-15 thru 08-15-23 and U.S. Treasury
Notes, 5.625%, due 11-30-02) - Note B 3.970% 6,265 6,265
---------- ---------
53,840 6,265
---------- ---------
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
NUMBER OF
SHARES OR
WARRANTS
---------
PREFERRED STOCK - 0.35%
Media - TV / Radio
CSC Holdings, Inc. 13 $ 1,345
CSC Holdings, Inc. 14 1,529
CSC Holdings, Inc., 11.125% Ser M,
Preferred Stock 1,040 111
CSC Holdings, Inc., 11.750%, Ser H,
Preferred Stock 1,175 125
----------
TOTAL PREFERRED STOCK (0.35%) 3,110
----------
WARRANTS
Telephone - (0.03%)
MetroNet Communications Corp. - CW 144A
expires 01/01/80 (Cost $58) 7 239
----------
TOTAL WARRANTS (0.03%) 239
----------
SHORT-TERM INVESTMENTS - 6.80%
Investments in joint trading accounts
3.97% due 07/02/01 53,840 53,840
Investment in joint trading account
3.97% due 07/02/01
U.S. Treasury Bill
3.435% due 09/13/01
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. - Dated
06-29-01, due 07-02-01 (Secured by U.S.
Treasury Bonds, 6.250% thru 10.625%, due
08-15-15 thru 08-15-23 and U.S. Treasury
Notes, 5.625%, due 11-30-02) - Note B 6,265 6,265
----------
60,105
----------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Active Bond Fund and the V.A. Bond Fund, combined on June 30, 2001.
-----------------------------------------------------------------------------
John Hancock V.S.T. Active Bond Fund John Hancock V.A. Bond Fund
-----------------------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000's INTEREST (000's (000's
RATE OMITTED) OMITTED) RATE OMITTED) OMITTED)
-----------------------------------------------------------------------------
ISSUER DESCRIPTION
Cash Equivalents - 27.95%
Navigator Securities Lending
Prime Portfolio** $ 247,041
---------- ---------
TOTAL SHORT-TERM INVESTMENTS (34.75%) 300,881 6,265
---------- ---------
TOTAL INVESTMENTS (127.68%) 1,059,276 69,407
---------- ---------
OTHER ASSETS AND LIABILITIES, NET(27.68%) (242,979) (1,715)
---------- ---------
NET ASSETS (100%) $ 816,297 $ 67,692
---------- ---------
---------------------------
Combined
---------------------------
PAR VALUE MARKET VALUE
(000's (000'S
OMITTED) OMITTED)
---------------------------
ISSUER DESCRIPTION
Cash Equivalents - 27.95%
Navigator Securities Lending
Prime Portfolio** $247,041 $ 247,041
----------
TOTAL SHORT-TERM INVESTMENTS (34.75%) 307,146
----------
TOTAL INVESTMENTS (127.68%) 1,128,683
----------
OTHER ASSETS AND LIABILITIES, NET(27.68%) (244,694)
----------
NET ASSETS (100%) $ 883,989
----------
NOTES TO THE SCHEDULE OF INVESTMENTS
(A) Cash interest will be paid on this obligation at the stated rate beginning
on the stated date.
(R) These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. Such securities may be resold, normally to
qualified institutional buyers, in transactions exempt from registration.
Rule 144A securities amounted to $6,955,627 or 10.28% of net assets as of
June 30, 2001.
(Y) Parenthetical disclosure of a foreign country in the security description
represents country of a foreign issuer; however, security is U. S. dollar
denominated.
* Non-income producing security.
** Credit Ratings are unaudited and rated by Standard & Poor's where
available, or Moody's Investor Services or John Hancock Advisers, Inc,
where Standard & Poor's ratings are not available.
*** A portion of these securities having an aggregate value of $424,471 or
0.63% of the Fund's net assets, has been purchased as forward commitments
- that is, the Fund has agreed on trade date to take delivery of and to
make payment for this security on a delayed basis subsequent to the date
of this schedule. The purchase price and interest rate of these securities
are fixed at trade date, although the Fund does not earn any interest on
these securities until settlement date. The Fund has instructed its
Custodian Bank to segregate assets with a current value at least equal to
the amount of the forward commitments. Accordingly, the market value of
$433,997 of United States Treasury Note, 5.750%, 08-15-03, has been
segregated to cover the forward commitments.
+ A portion of this security having an aggregate value of $59,849 or 0.09%
of the Fund's net assets, has been purchased on a when issued basis. The
purchase price and the interest rate of this security is fixed at trade
date, although the Fund does not earn any interest on this security until
settlement date. The Fund has instructed its Custodian Bank to segregate
assets with a current value at least equal to the amount of its when
issued commitment. Accordingly, the market value of $61,706 of United
States Treasury Note, 5.750%, 08-15-03, has been segregated to cover the
when issued commitment.
# Represents rate in effect on June 30, 2001.
The percentage shown for each investment category is the total value of that
category as a percentage of the combined net assets of the Funds.
Exhibit C
JOHN HANCOCK V.S.T. MONEY MARKET FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
JUNE 30, 2001
Pro forma information is intended to provide the shareholders of the John
Hancock V.S.T. Money Market Fund and the John Hancock V.A. Money Market Fund
with information about the impact of the proposed merger by indicating how the
merger might have affected information had the merger been consummated as of
June 30, 2000.
The pro forma combined statements of assets and liabilities and results of
operations as of June 30, 2001 have been prepared to reflect the merger of John
Hancock V.S.T. Money Market Fund and John Hancock V.A. Money Market Fund after
giving effect to pro forma adjustments described in the notes below.
(a) Acquisition by John Hancock V.S.T. Money Market Fund of all assets of John
Hancock V.A. Money Market Fund and issuance of John Hancock V.S.T. Money
Market Fund shares in exchange for all of the outstanding shares of John
Hancock V.A. Money Market Fund.
(b) The deferred organization expense of John Hancock V.A. Money Market Fund
was written off as the Fund would no longer be in existence.
(c) The investment management fee was adjusted to reflect the application of
the fee structure which will be in effect for John Hancock V.S.T. Money
Market Fund: 0.25% on an annual basis of the net assets of the Fund.
(d) The actual expenses incurred by the John Hancock V.S.T. Money Market Fund
and the John Hancock V.A. Money Market Fund were reduced to reflect the
estimated savings arising from the merger.
John Hancock V.S.T. Money Market Fund Exhibit C
Pro-forma combined statement of assets and liabilities
June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. Money V.A. Money Pro-Forma
Market Fund Market Fund Adjustments Combined
------------ ------------ ----------- ---------
ASSETS
Short-term investments at value $ 458,804 $ 143,342 -- $ 602,146
--------- --------- --------- ---------
Total investments 458,804 143,342 -- 602,146
Cash -- 1 -- 1
Receivable for:
Dividends and interest 618 244 -- 862
Other assets -- 3 -- 3
--------- --------- --------- ---------
Total assets 459,422 143,590 -- 603,012
--------- --------- --------- ---------
LIABILITIES
Payables for:
Dividends payable -- 28 -- 28
Payable to affiliates -- 61 -- 61
Accounts payable and accrued expenses -- 6 -- 6
Other liabilities 53 -- -- 53
--------- --------- --------- ---------
Total Liabilities 53 95 -- 148
--------- --------- --------- ---------
NET ASSETS 459,369 143,495 -- 602,864
========= ========= ========= =========
Net assets:
Capital paid-in 459,369 143,495 -- 602,864
Accumulated net realized gain (loss) on investments,
futures and foreign currency transactions (92) -- -- (92)
Undistributed (distribution in excess of)
net investment income (loss) 92 -- -- 92
--------- --------- --------- ---------
459,369 143,495 -- 602,864
========= ========= ========= =========
Net assets:
V.S.T. Money Market Fund 459,369 -- 143,495(a) 602,864
V.A. Money Market Fund -- 143,495 (143,495)(a) --
--------- --------- --------- ---------
459,369 143,495 -- 602,864
========= ========= ========= =========
Shares outstanding:
V.S.T. Money Market Fund 459,369 -- 143,495(a) 602,864
V.A. Money Market Fund -- 143,495 (143,495)(a) --
--------- --------- --------- ---------
459,369 143,495 -- 602,864
========= ========= ========= =========
Net assets value per share:
V.S.T. Money Market Fund $ 1.00 -- -- $ 1.00
V.A. Money Market Fund -- $ 1.00 $ (1.00)(a) --
========= ========= ========= =========
John Hancock V.S.T. Money Market Fund Exhibit C
Pro-forma combined statement of operations
For the year ended June 30, 2001
(000's omitted)
John Hancock John Hancock
V.S.T. Money V.A. Money
Market Fund Market Fund
12 months ended 12 months ended Pro-Forma
June 30, 2001 June 30, 2001 Adjustments Combined
--------------- --------------- ----------- ---------
INVESTMENT INCOME
Interest $26,170 $ 4,239 $ -- $30,409
------- ------- ------- -------
Total investment income 26,170 4,239 -- 30,409
------- ------- ------- -------
EXPENSES
Investment management fee 1,118 380 (186)(c) 1,312
Auditing fees 17 7 (6)(d) 18
Custodian fees 72 24 (13)(d) 83
Accounting and legal services fee -- 15 (15)(d) --
Legal fees 9 1 (1)(d) 9
Printing & mailing fees 44 1 (1)(d) 44
Organization expense -- 2 (2)(b) --
Trustees' fee 5 3 -- 8
Other fees 1 -- -- 1
------- ------- ------- -------
Total expenses 1,266 433 (224) 1,475
------- ------- ------- -------
Net investment income 24,904 3,806 224 28,934
Net realized and unrealized gain (loss) -- -- -- --
------- ------- ------- -------
Net increase (decrease) in net assets resulting from operations $24,904 $ 3,806 $ 224 $28,934
======= ======= ======= =======
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Money Market Fund and the V.A. Money Market Fund combined on June 30,
2001.
---------------------------------------
John Hancock V.S.T. Money Market Fund
---------------------------------------
PAR VALUE MARKET VALUE
INTEREST (000's (000'S
RATE OMITTED) OMITTED)
---------------------------------------
ISSUER, DESCRIPTION
COMMERCIAL PAPER
Banks - (19.73%)
Abbey National North America Corp.,
07-12-01 4.630% $ 5,000 $ 4,994
American Centurian Bank
07-10-01 3.960 11,000 11,000
Anz Delaware, Inc.
07-23-01 4.200 5,000 4,988
Bank America NA Charlotte
09-06-01 5.102 5,000 5,001
Branch Banking & Trust Co.
07-03-01 3.970 15,000 15,000
Citibank Canada DTC MMI CD
07-25-01 4.230 8,000 8,000
Credit Suisse First Boston
07-02-01 4.700 2,000 2,000
Credit Suisse First Boston NY
07-09-01 4.605 4,000 3,997
Credit Suisse First Boston, Inc.
08-09-01 5.052 5,000 5,000
Deutsche Bank AG
07-24-01 5.380 4,000 4,000
Deutsche Bank Financial,
07-09-01
Firststar Bank NA Milwaukee WI
08-01-01 3.980 10,000 10,000
Fleet National Bank
09-07-01 5.130 3,000 3,000
LaSalle Bank NA
09-05-01 3.750 14,000 14,000
National Bank of Canada
07-11-01 4.670 6,000 6,000
National City Bank
08-01-01 5.510 2,000 2,000
09-21-01 6.340 5,000 5,017
--------------------------------------------------------------
John Hancock V.A. Money Market Fund Combined
--------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000'S (000's (000'S
RATE OMITTED) OMITTED) OMITTED) OMITTED)
--------------------------------------------------------------
ISSUER, DESCRIPTION
COMMERCIAL PAPER
Banks - (19.73%)
Abbey National North America Corp.,
4.630% $ 2,500 $ 2,496 $ 7,500 $ 7,490
American Centurian Bank
11,000 11,000
Anz Delaware, Inc.
5,000 4,988
Bank America NA Charlotte
5,000 5,001
Branch Banking & Trust Co.
15,000 15,000
Citibank Canada DTC MMI CD
8,000 8,000
Credit Suisse First Boston
2,000 2,000
Credit Suisse First Boston NY
4,000 3,997
Credit Suisse First Boston, Inc.
5,000 5,000
Deutsche Bank AG
4,000 4,000
Deutsche Bank Financial,
4.635 4,000 3,996 4,000 3,996
Firststar Bank NA Milwaukee WI
10,000 10,000
Fleet National Bank
3,000 3,000
LaSalle Bank NA
14,000 14,000
National Bank of Canada
6,000 6,000
National City Bank
2,000 2,000
5,000 5,017
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Money Market Fund and the V.A. Money Market Fund combined on June 30,
2001.
---------------------------------------
John Hancock V.S.T. Money Market Fund
---------------------------------------
PAR VALUE MARKET VALUE
INTEREST (000's (000'S
RATE OMITTED) OMITTED)
---------------------------------------
ISSUER, DESCRIPTION
UBS Finance, Inc.,
08-08-01
Wells Fargo,
08-02-01
--------
$103,997
--------
Beverages - (0.91%)
Coca Cola Co.,
08-17-01
Broker Services - (0.81%)
Goldman Sachs Group, L.P.,
01-07-02
Building - (0.66%)
Halifax Group PLC,
08-23-01
Chemicals - (0.62%)
Dow Chemical Co.,
07-06-01
Cosmetic & Personal Care - (0.41%)
Unilever Capital Corp.
09-07-01 5.110% $ 2,500 2,500
--------
Diversified Operations - (2.49%)
Ciesco Puerto
07-03-01 4.650 6,000 5,999
Diageo Capital PLC
07-18-01 3.920 9,000 8,984
--------
14,983
--------
Electric Power - (0.50%)
National Rural Utilities Cooperative Finance Corp.
07-19-01 4.200 3,000 2,994
--------
--------------------------------------------------------------
John Hancock V.A. Money Market Fund Combined
--------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000'S (000's (000'S
RATE OMITTED) OMITTED) OMITTED) OMITTED)
--------------------------------------------------------------
ISSUER, DESCRIPTION
UBS Finance, Inc.,
5.000% $ 3,900 $ 3,879 $ 3,900 $ 3,879
Wells Fargo,
4.500 4,600 4,582 4,600 4,582
-------- --------
14,953 118,950
-------- --------
Beverages - (0.91%)
Coca Cola Co.,
4.110 5,500 5,470 5,500 5,470
-------- --------
Broker Services - (0.81%)
Goldman Sachs Group, L.P.,
3.720 5,000 4,902 5,000 4,902
-------- --------
Building - (0.66%)
Halifax Group PLC,
4.140 4,000 3,976 4,000 3,976
-------- --------
Chemicals - (0.62%)
Dow Chemical Co.,
4.220 3,778 3,776 3,778 3,776
-------- --------
Cosmetic & Personal Care - (0.41%)
Unilever Capital Corp.
2,500 2,500
--------
Diversified Operations - (2.49%)
Ciesco Puerto
6,000 5,999
Diageo Capital PLC
9,000 8,984
--------
14,983
--------
Electric Power - (0.50%)
National Rural Utilities Cooperative Finance Corp.
3,000 2,994
--------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Money Market Fund and the V.A. Money Market Fund combined on June 30,
2001.
---------------------------------------
John Hancock V.S.T. Money Market Fund
---------------------------------------
PAR VALUE MARKET VALUE
INTEREST (000's (000'S
RATE OMITTED) OMITTED)
---------------------------------------
ISSUER, DESCRIPTION
Finance - (21.64%)
Alpine Securitization Corp.
07-19-01 4.250% $ 5,000 $ 4,990
Apreco, Inc.
09-17-01 3.700 12,500 12,401
Centric Capital
07-05-01 4.220 3,600 3,599
07-09-01 4.680 4,000 3,996
Chevron Investment PLC
07-06-01 4.630 8,000 7,996
CIT Group Holdings, Inc.,
09-13-01
Corporate Recievables Corp.
09-07-01 3.600 8,000 7,946
Eureka Securitization, Inc.
08-31-01 3.780 10,000 9,937
Falcon Asset Securitization
08-03-01 3.700 13,000 12,957
07-20-01 4.200 1,793 1,789
General Electric Capital Corp.
10-31-01 3.720 14,000 13,825
7/18/2001 4.220 3,700 3,693
Goldman Sachs Group, Inc.
11-26-01 5.485 2,000 2,001
07-10-01 4.560 5,000 4,995
Greenwich Funding Corp.
07-26-01 4.200 1,669 1,664
07-05-01 4.650 1,490 1,489
Household Financial Corp.,
07-09-01
International Lease Finance Corp.
07-18-01 4.240 3,977 3,970
Merrill Lynch & Co., Inc.
11-01-01 5.605 2,000 2,001
National Rural Utilities Cooperative Finance Corp.
07-20-01 4.797 2,000 2,000
Sigma Finance Corp.
08-14-01 5.050 3,500 3,479
--------------------------------------------------------------
John Hancock V.A. Money Market Fund Combined
--------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000'S (000's (000'S
RATE OMITTED) OMITTED) OMITTED) OMITTED)
--------------------------------------------------------------
ISSUER, DESCRIPTION
Finance - (21.64%)
Alpine Securitization Corp.
$ 5,000 $ 4,990
Apreco, Inc.
12,500 12,401
Centric Capital
3,600 3,599
4,000 3,996
Chevron Investment PLC
8,000 7,996
CIT Group Holdings, Inc.,
3.680% $ 7,000 $ 6,947 7,000 6,947
Corporate Recievables Corp.
8,000 7,946
Eureka Securitization, Inc.
10,000 9,937
Falcon Asset Securitization
13,000 12,957
1,793 1,789
General Electric Capital Corp.
14,000 13,825
3,700 3,693
Goldman Sachs Group, Inc.
2,000 2,001
5,000 4,995
Greenwich Funding Corp.
1,669 1,664
1,490 1,489
Household Financial Corp.,
4.550 5,000 4,995 5,000 4,995
International Lease Finance Corp.
3,977 3,970
Merrill Lynch & Co., Inc.
2,000 2,001
National Rural Utilities Cooperative Finance Corp.
2,000 2,000
Sigma Finance Corp.
3,500 3,479
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Money Market Fund and the V.A. Money Market Fund combined on June 30,
2001.
---------------------------------------
John Hancock V.S.T. Money Market Fund
---------------------------------------
PAR VALUE MARKET VALUE
INTEREST (000's (000'S
RATE OMITTED) OMITTED)
---------------------------------------
ISSUER, DESCRIPTION
UBS Finance, Inc.
08-08-01 3.850% $ 3,800 $ 3,785
Variable Funding Capital
07-12-01 3.950 10,000 9,989
--------
118,502
--------
Food, Beverage & Tobacco - (4.28%)
Anheuser Busch, Inc.
09-21-01 3.600 14,000 13,886
Coca Cola Enterprises, Inc.
09-26-01 3.710 12,000 11,894
--------
25,780
--------
Health Care Products - (2.32%)
Merck & Co., Inc.
07-05-01 3.800 14,000 13,996
--------
Insurance - (0.83%)
American General Corp.,
07-16-01
Media - Publishing - (1.40%)
Washington Post Co.
09-14-01 3.680 8,500 8,436
--------
Media - TV / Radio - (2.32%)
Gannett, Inc.
07-06-01 3.950 14,000 13,994
--------
Paper Products - (1.39%)
Park Avenue Receivables Corp.
07-11-01 3.750 8,406 8,398
--------
Mortgage Banking - (1.16%)
Countrywide Home Loans,
07-27-01
--------------------------------------------------------------
John Hancock V.A. Money Market Fund Combined
--------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000'S (000's (000'S
RATE OMITTED) OMITTED) OMITTED) OMITTED)
--------------------------------------------------------------
ISSUER, DESCRIPTION
UBS Finance, Inc.
$ 3,800 $ 3,785
Variable Funding Capital
10,000 9,989
-------- --------
$ 11,942 130,444
-------- --------
Food, Beverage & Tobacco - (4.28%)
Anheuser Busch, Inc.
14,000 13,886
Coca Cola Enterprises, Inc.
12,000 11,894
--------
25,780
--------
Health Care Products - (2.32%)
Merck & Co., Inc.
14,000 13,996
--------
Insurance - (0.83%)
American General Corp.,
4.630% $ 5,000 4,990 5,000 4,990
-------- --------
Media - Publishing - (1.40%)
Washington Post Co.
8,500 8,436
--------
Media - TV / Radio - (2.32%)
Gannett, Inc.
14,000 13,994
--------
Paper Products - (1.39%)
Park Avenue Receivables Corp.
8,406 8,398
--------
Mortgage Banking - (1.16%)
Countrywide Home Loans,
3.770 7,000 6,981 7,000 6,981
-------- --------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Money Market Fund and the V.A. Money Market Fund combined on June 30,
2001.
---------------------------------------
John Hancock V.S.T. Money Market Fund
---------------------------------------
PAR VALUE MARKET VALUE
INTEREST (000's (000'S
RATE OMITTED) OMITTED)
---------------------------------------
ISSUER, DESCRIPTION
Personal & Commercial Lending - (9.64%)
Greyhawk Fund Corp.
09-10-01 3.700% $ 14,000 $ 13,899
Halifax PLC
09-17-01 3.600 14,000 13,892
Household Finance Corp.
08-01-01 5.675 4,000 4,000
President & Fellows Harvard Co.
07-16-01 3.860 14,000 13,979
Windmill Funding Corp.
09-12-01 3.750 9,400 9,330
07-05-01 4.230 3,000 2,999
--------
58,099
--------
Retail - Department Stores - (2.31%)
Wal Mart Stores, Inc.
07-31-01 3.600 14,000 13,959
--------
Telecommunication Services - (0.50%)
Verizon Network Fund
07-10-01 4.250 3,000 2,997
--------
TOTAL COMMERCIAL PAPER - 73.92% 388,635
--------
U.S. Government Obligations
Government - U.S. Agencies (17.27%)
Federal Home Loan Bank,
07-18-01 3.660 22,340 23,181
08-01-01 3.910 9,528 9,519
08-09-01
02-01-02
Federal Home Loan Mortgage Corp.,
07-05-01
08-09-01
Federal National Mortgage Assn.,
07-05-01 3.540 14,750 14,644
08-09-01
08-16-01
11-08-01
04-19-02
--------
TOTAL GOVERNMENT OBLIGATIONS - 17.27% 47,344
--------
--------------------------------------------------------------
John Hancock V.A. Money Market Fund Combined
--------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000'S (000's (000'S
RATE OMITTED) OMITTED) OMITTED) OMITTED)
--------------------------------------------------------------
ISSUER, DESCRIPTION
Personal & Commercial Lending - (9.64%)
Greyhawk Fund Corp.
$ 14,000 $ 13,899
Halifax PLC
14,000 13,892
Household Finance Corp.
4,000 4,000
President & Fellows Harvard Co.
14,000 13,979
Windmill Funding Corp.
9,400 9,330
3,000 2,999
--------
58,099
--------
Retail - Department Stores - (2.31%)
Wal Mart Stores, Inc.
14,000 13,959
--------
Telecommunication Services - (0.50%)
Verizon Network Fund
3,000 2,997
--------
TOTAL COMMERCIAL PAPER - 73.92% $ 56,990 445,625
-------- --------
U.S. Government Obligations
Government - U.S. Agencies (17.27%)
Federal Home Loan Bank,
4.650% $ 5,000 4,989 27,340 28,170
4.060 6,400 6,378 15,928 15,897
8.220 1,000 1,003 1,000 1,003
6.750 2,135 2,171 2,135 2,171
Federal Home Loan Mortgage Corp., -
4.570 5,000 4,997 5,000 4,997
3.880 6,500 6,473 6,500 6,473
Federal National Mortgage Assn., -
4.570 3,000 2,998 17,750 17,642
3.850 13,000 12,946 13,000 12,946
3.860 6,000 5,970 6,000 5,970
3.870 7,000 6,902 7,000 6,902
3.770 2,000 1,939 2,000 1,939
-------- --------
TOTAL GOVERNMENT OBLIGATIONS - 17.27% 56,766 104,110
-------- --------
Schedule of Investments Exhibit C
June 30, 2001
- --------------------------------------------------------------------------------
The Schedule of Investments is a complete list of all the securities owned by
the V.S.T. Money Market Fund and the V.A. Money Market Fund combined on June 30,
2001.
---------------------------------------
John Hancock V.S.T. Money Market Fund
---------------------------------------
PAR VALUE MARKET VALUE
INTEREST (000's (000'S
RATE OMITTED) OMITTED)
---------------------------------------
ISSUER, DESCRIPTION
CORPORATE INTEREST-BEARING OBLIGATIONS
Banks - United States - (0.50%)
First Chicago NBD Corp.,
11-01-01
Finance - (1.24%)
Associates Corp. of N. A.,
10-15-01
General Electric Capital Corp.,
09-17-01
TOTAL CORPORATE INTEREST-BEARING OBLIGATIONS - 1.74%
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. - Dated 06-29-01,
due 07-02-01 (Secured by U.S. Treasury Bonds, 6.875%
due 08-15-25 and 5.625% due 11-30-02, U.S. Treasury
Note 5.625% due 11-30-02)
Investments in joint repurchase agreement with
SBC Warburg, Ltd. dated 06/29/01, 3.95% due
07/02/01 (secured by various U.S. Treasury
obligations and U.S. Government Agency Bonds) 3.950% $ 22,825 $ 22,825
--------
TOTAL SHORT-TERM INVESTMENTS (6.95%) 22,825
--------
TOTAL INVESTMENTS (99.88%) 458,804
--------
OTHER ASSETS AND LIABILITIES, NET (0.12%) 565
--------
TOTAL NET ASSETS (100%) $459,369
========
--------------------------------------------------------------
John Hancock V.A. Money Market Fund Combined
--------------------------------------------------------------
PAR VALUE MARKET VALUE PAR VALUE MARKET VALUE
INTEREST (000's (000'S (000's (000'S
RATE OMITTED) OMITTED) OMITTED) OMITTED)
--------------------------------------------------------------
ISSUER, DESCRIPTION
CORPORATE INTEREST-BEARING OBLIGATIONS
Banks - United States - (0.50%)
First Chicago NBD Corp.,
6.300% $ 3,000 $ 3,025 $ 3,000 $ 3,025
-------- --------
Finance - (1.24%)
Associates Corp. of N. A.,
6.450 4,415 4,447 4,415 4,447
General Electric Capital Corp.,
6.330 3,000 3,015 3,000 3,015
-------- --------
7,462 7,462
-------- --------
-------- --------
TOTAL CORPORATE INTEREST-BEARING OBLIGATIONS - 1.74% 10,487 10,487
-------- --------
SHORT-TERM INVESTMENTS
Joint Repurchase Agreement
Investment in a joint repurchase agreement
transaction with UBS Warburg, Inc. - Dated 06-29-01,
due 07-02-01 (Secured by U.S. Treasury Bonds, 6.875%
due 08-15-25 and 5.625% due 11-30-02, U.S. Treasury
Note 5.625% due 11-30-02) 3.970 19,099 19,099 19,099 19,099
Investments in joint repurchase agreement with
SBC Warburg, Ltd. dated 06/29/01, 3.95% due
07/02/01 (secured by various U.S. Treasury
obligations and U.S. Government Agency Bonds) 22,825 22,825
-------- --------
TOTAL SHORT-TERM INVESTMENTS (6.95%) 19,099 41,924
-------- --------
TOTAL INVESTMENTS (99.88%) 143,342 602,146
-------- --------
OTHER ASSETS AND LIABILITIES, NET (0.12%) 153 718
-------- --------
TOTAL NET ASSETS (100%) $143,495 $602,864
======== ========
NOTES TO THE SCHEDULE OF INVESTMENTS
The percentage shown for each investment category is the total value of that
category as a percentage of the combined net assets of the Funds.
DRAFT - 9/7/01
- --------------
PART C OTHER INFORMATION
Item 15. Indemnification
In response to this item and the requirements of Rule 484 under the Securities
Act of 1933, Registrant hereby incorporates by reference its response to item 25
in Post-Effective Amendment No. 31 to its Form N-1A registration statement (File
No. 33-2081) filed on May 1, 2001.
Item 16. Exhibits
(1) Declaration of Trust of John Hancock Variable Series Trust I, dated February
21, 1988, incorporated by reference to Pre-Effective Amendment No. 2 on Form
N-14 (File No. 333- 47686) Filed on December 6, 2000.
(2) By-Laws of John Hancock Variable Series Trust I, adopted April 12, 1988, and
amended and restated as of September 27, 2000, incorporated by reference to
Pre-Effective Amendment No. 2 on Form N-14 (File No. 333- 47686) Filed on
December 6, 2000.
(3) Not Applicable.
(4) Form of Plan and Agreement of Reorganization (FILED HEREWITH).
(5) Not Applicable.
(6)(1) Investment Management Agreement by and between John Hancock Variable
Series Trust I, and John Hancock Mutual Life Insurance Company dated April 12,
1988 relating to the Initial Funds, included in Post- Effective Amendment No. 4
to this File No. 33-2081, filed in April, 1989.
(6)(2) Sub-Investment Management Agreement among John Hancock Variable Series
Trust I, Independence Investment Associates, Inc., and John Hancock Mutual Life
Insurance Company dated April 29, 1988, relating to the Large Cap Growth Fund,
included in Post-Effective Amendment No. 4 to this File No. 33-2081 filed in
April, 1989. Form of Sub-Investment Agreement among John Hancock Variable Series
Trust I, Independence Investment Associates, Inc., and John Hancock Life
Insurance Company, relating to the Managed and Growth & Income incorporated by
reference to this File No. 33-2081, filed in a definitive proxy statement on
September 14, 2000.
(6)(3) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Independence Investment Associates, and John Hancock Life Insurance
Company, pertaining to the Real Estate Equity Fund, incorporated by reference to
this File No. 33-2081, filed in the definitive proxy statement on September 14,
2000.
(6)(4) Investment Management Agreement by and between John Hancock Variable
Series Trust I and John Hancock Mutual Life Insurance Company dated as of April
12, 1988, relating to the Real Estate Equity and International Equity Index
Funds, included in Post-Effective Amendment No. 3 to this File No. 33-2081,
filed in April, 1988.
(6)(5) Amendment dated as of May 1, 1998 to the Investment Management Agreement
dated as of April 12, 1998 relating to the Real Estate Equity and International
Equity Index Funds, included in Post- Effective Amendment No. 19 to this File
No. 33-2081, filed on May 1, 1998.
(6)(6) Investment Management Agreement By and Between John Hancock Variable
Series Trust I and John Hancock Mutual Life Insurance Company relating to the
Short-Term Bond and Small/Mid Cap Growth Funds, included in Post- Effective
Amendment No. 9 to this File No. 33-2081, filed on March 1, 1994.
(6)(7) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Independence Investment Associates, Inc. and John Hancock Mutual Life
Insurance Company relating to the Short-Term Bond Fund, included in Post-
Effective Amendment No. 9 to this File No. 33-2081, filed on March 1, 1994.
(6)(8) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Wellington Management Company, LLP and John Hancock Mutual Life
Insurance Company relating to the Small/Mid Cap Growth Fund, included in
Post-Effective Amendment No. 21 to this File No. 33-2081, filed on May 3, 1999.
(6)(9) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, John Hancock Advisers, Inc., and John Hancock Mutual Life Insurance
Company, relating to the Sovereign Bond Fund (now named Active Bond Fund),
included in Post-Effective Amendment No. 11 to this File No. 33-2081, filed on
April 29, 1995.
(6)(10) Investment Management Agreement By and Between John Hancock Variable
Series Trust I and John Hancock Mutual Life Insurance Company relating to the
Equity Index, Large Cap Value, Mid Cap Growth, Large/Mid Cap Value II (formerly
Mid Cap Value), Small Cap Growth, Small Cap Equity (formerly Small Cap Value),
Global Bond, International Opportunities, and Global Balanced (formerly
International Balanced) Funds, included in Post-Effective Amendment No. 13 to
this File No. 33-2081, filed on April 30, 1996.
(6)(11) Amendment, dated May 1, 1997, to the Investment Management Agreements
dated April 12, 1988, April 15, 1994, and March 14, 1996, to reallocate Fund
expenses and to reduce the advisory fee of the Short-Term Bond Fund and the
Equity Index Fund, included in Post-Effective Amendment No. 16 to this File No.
33-2081, filed on May 1, 1997.
(6)(12) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, T. Rowe Price Associates, Inc., and John Hancock Mutual Life Insurance
Company, relating to the Large Cap Value Fund, included in Post-Effective
Amendment No. 13 to this File No. 33-2081, filed on April 30, 1996.
(6)(13) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Janus Capital Corporation, and John Hancock Mutual Life Insurance
Company, relating to the Amendment, included in Post- Effective Amendment No. 13
to this File No. 33-2081, filed on April 30, 1996.
(6)(14) Investment Management Agreement dated as of June 1, 2000, by and between
John Hancock Variable Series Trust I and John Hancock Life Insurance Company
relating to the Large Cap Value Core II and Active Bond II Funds (formerly the
American Leaders Large Cap Value and Core Bond Funds, respectively), is
incorporated by reference to PEA No. 30 to this File No. 33-2081, Filed on
February 21, 2001.
(6)(15) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, John Hancock Advisers, Inc., and John Hancock Mutual Life Insurance
Company, relating to the Small Cap Growth Fund, included in Post-Effective
Amendment No. 13 to this File No. 33-2081, filed on April 30, 1996.
(6)(16) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Capital Guardian Trust Company, and John Hancock Life Insurance
Company, relating to the Small Cap Equity Fund (formerly the Small Cap Value
Fund) incorporated by reference to this File No. 33- 2081, filed in the
definitive proxy statement on September 14, 2000.
(6)(17) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Capital Guardian Trust Company, and John Hancock Life Insurance
Company, relating to the Global Bond Fund, incorporated by reference to this
File No. 33-2081, filed in the definitive proxy statement on September 14, 2000.
(6)(18) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, T. Rowe Price International, Inc., and John Hancock Life Insurance
Company, relating to the International Opportunities Fund, incorporated by
reference to this File No. 33-2081, filed in the definitive proxy statement on
August 24, 2000.
(6)(19) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Capital Guardian Trust Company, and John Hancock Life Insurance
Company, relating to the Global Balanced Fund, incorporated by reference to this
File No. 33-2081, filed in the definitive proxy statement on September 14, 2000.
(6)(20) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, State Street Bank & Trust Company, and John Hancock Mutual Life
Insurance Company, relating to the Equity Index Fund, included in Post-
Effective Amendment No. 16 to this File No. 33-2081, filed on May 1, 1997.
(6)(21) Amendment to Sub-Investment Management Agreement among John Hancock
Variable Series Trust I, State Street Bank and Trust Company, and John Hancock
Mutual Life Insurance Company, included in Post-Effective Amendment No. 19 to
this File No. 33-2081, filed on May 1, 1998.
(6)(22) Investment Management Agreement dated as of April 14, 1998 By and
Between John Hancock Variable Series Trust I and John Hancock Mutual Life
Insurance Company relating to the Small/Mid Cap CORE, International
Opportunities II (Formerly Global Equity), Emerging Markets Equity, Bond Index,
and High Yield Bond Fund, included in Post-Effective Amendment No. 19 to this
File No. 33-2081, filed on May 1, 1998.
(6)(23) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Goldman Sachs Asset Management, and John Hancock Mutual Life Insurance
Company, relating to the Small/Mid Cap CORE Fund, included in Post-Effective
Amendment No. 21 to this File No. 33-2081, filed on May 3, 1999.
(6)(24) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Independence International Associates, Inc., and John Hancock Mutual
Life Insurance Company, relating to the International Equity Index Fund,
included in Post-Effective Amendment No. 21 to this File No. 33- 02081, filed on
May 3, 1999.
(6)(25) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Mellon Bond Associates, and John Hancock Mutual Life Insurance Company,
relating to the Bond Index Fund, included in Post-Effective Amendment No. 19 to
this File No. 33-2081, filed on May 1, 1998.
(6)(26) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Wellington Management Company, LLP, and John Hancock Mutual Life
Insurance Company, relating to the High Yield Bond Fund, included in
Post-Effective Amendment No. 19 to this File No. 33-2081, filed on May 1, 1998.
(6)(27) Amendment No. 2 to the Investment Management Agreement dated as of March
14, 1996 By and Between John Hancock Variable Series Trust I and John Hancock
Mutual Life Insurance Company included in Post-Effective Amendment No. 21 to
this File No. 33-2081 filed on May 3, 1999.
(6)(28) Amendment No. 3 to the Investment Management Agreement dated as of March
14, 1996 By and Between John Hancock Variable Series Trust I and John Hancock
Mutual Life Insurance Company included in Post-Effective Amendment No. 21 to
this File No. 33-2081 filed on May 3, 1999.
(6)(29) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Morgan Stanley Dean Witter Advisors, Inc., and John Hancock
Mutual Life Insurance Company, relating to the Emerging Markets Equity Fund
included in Post-Effective Amendment No. 23 to this File No. 33-2081 filed on
August 9, 1999.
(6)(30) Investment Management Agreement By and Between John Hancock Variable
Series Trust I and John Hancock Mutual Life Insurance Company relating to the
Large Cap Aggressive Growth, Fundamental Growth (formerly Fundamental Mid Cap
Growth), International Equity, Aggressive Balanced, Large Cap Value CORE,
Large/Mid Cap Value, Mid Cap Blend, and Small Cap Value (Formerly Small/Mid Cap
Value), Funds included in Post-Effective Amendment No. 23 to this File No.
33-2081 filed on August 9, 1999.
(6)(31) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Alliance Capital Management L.P., and John Hancock Mutual Life
Insurance Company relating to the Large Cap Aggressive Growth Fund, included in
Post-Effective Amendment No. 23 to this File No. 33-2081 filed on August 9,
1999.
(6)(32) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Putnam Investment Management, Inc., and John Hancock Life
Insurance Company relating to the Fundamental Growth Fund incorporated by
reference to this File No. 33-2081 filed in the definitive proxy statement on
August 24, 2000.
(6)(33) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Goldman Sachs Asset Management, and John Hancock Mutual Life
Insurance Company relating to the International Equity Fund included in
Post-Effective Amendment No. 23 to this File No. 33-2081 filed on August 9,
1999.
(6)(34) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Goldman Sachs Asset Management, and John Hancock Mutual Life
Insurance Company relating to the Large Cap Value CORE Fund included in
Post-Effective Amendment No. 23 to this File No. 33-2081 filed on August 9,
1999.
(6)(35) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Independence Investment Associates, Inc., and John Hancock
Mutual Life Insurance Company relating to the Aggressive Balanced Fund included
in Post-Effective Amendment No. 23 to this File No. 33-2081 filed on August 9,
1999.
(6)(36) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Independence Investment Associates, Inc., and John Hancock
Mutual Life Insurance Company relating to the Mid Cap Blend Fund included in
Post-Effective Amendment No. 23 to this File No. 33-2081 filed on August 9,
1999.
(6)(37) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Wellington Management Company, LLP, and John Hancock Mutual Life
Insurance Company relating to the Large/Mid Cap Value Fund included in
Post-Effective Amendment No. 23 to this File No. 33-2081 filed on August 9,
1999.
(6)(38) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, T. Rowe Price Associates, and John Hancock Life Insurance Company
relating to the Small Cap Value Fund is filed herewith.
(6)(39) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, John Hancock Advisers, Inc. and John Hancock Life Insurance Company
relating to the Active Bond II (formerly Core Bond) Fund, filed herewith.
(6)(40) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Morgan Stanley Dean Witter Investment Management Inc., and John
Hancock Life Insurance Company relating to the Real Estate Equity Fund to this
File No. 33-2081 on November 1, 2000.
(6)(41) Sub-Investment Management Agreement Among John Hancock Variable Series
Trust I, Goldman Sachs Asset Management and John Hancock Life Insurance Company,
relating to the Large Cap Value Core II Fund, is filed herewith.
(6)(42) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Putnam Investment Management, LLC and John Hancock Life
Insurance Company, relating to the Growth & Income Fund.
(6)(43) Form of Sub-Investment Management Agreement Among John Hancock Variable
Series Trust I, Capital Guardian Trust Company and John Hancock Life Insurance
Company, relating to the Managed Fund, incorporated by reference to this file
No. 33-2081, filed in the definitive proxy statement on September 14, 2000.
(6)(44) Form of Sub-Investment Management Agreement among John Hancock Variable
Series trust I, John Hancock Life Insurance Company and Putnam Investment
Management LLC, relating to the Health Sciences Fund is filed herewith.
(6)(45) Sub-Investment Management Agreement by and among John Hancock Variable
Series Trust I, Wellington Management Company, LLP and John Hancock Life
Insurance Company, relating to the Large Mid Cap Value II and Money Market
Funds, is filed herewith.
(6)(46) Amendment dated June 21, 2001 to the Sub-Investment Management
Agreement Among John Hancock Variable Series Trust I, T. Rowe Price Associates,
and John Hancock Life Insurance Company relating to the Small Cap Value Fund is
filed herewith.
(6)(47) Amendment dated June 21, 2001 to the Sub-Investment Management
Agreement Among John Hancock Variable Series Trust I, Putnam Investment
Management, LLC and John Hancock Life Insurance Company, relating to the Growth
& Income Fund, filed herewith.
(6)(48) Amendment dated June 21, 2001 to the Sub-Investment Management Agreement
Among John Hancock Variable Series Trust I, T. Rowe Price Associates, Inc., and
John Hancock Life Insurance Company, relating to the Large Cap Value Fund, filed
herewith.
(6)(49) Amendment dated June 21, 2001 to the Sub-Investment Management Agreement
Among John Hancock Variable Series Trust I, Mellon Bond Associates, and John
Hancock Mutual Life Insurance Company, relating to the Bond Index Fund, filed
herewith.
(6)(50) Amendment dated June 21, 2001 to the Sub-Investment Management Agreement
Among John Hancock Variable Series Trust I, State Street Bank & Trust Company,
and John Hancock Mutual Life Insurance Company, relating to the Equity Index
Fund, filed herewith.
(6)(51) Amendment dated June 21, 2001 to the Sub-Investment Management Agreement
Among John Hancock Variable Series Trust I, T. Rowe Price International, Inc.,
and John Hancock Life Insurance Company, relating to the International
Opportunities Fund, is filed herewith.
(6)(52) Amendment dated June 21, 2001 to the Sub-Investment Management Agreement
Among John Hancock Variable Series Trust I, Goldman Sachs Asset Management, and
John Hancock Mutual Life Insurance Company relating to the Large Cap Value CORE
Fund, filed herewith.
(6)(53) Amendment dated July 2, 2001 to the Sub-Investment Management Agreement
Among John Hancock Variable Series Trust I, Wellington Management Company, LLP,
and John Hancock Mutual Life Insurance Company, relating to the High Yield Bond
Fund, filed herewith.
(6)(54) Amendment dated July 2, 2001 to the Sub-Investment Management Agreement
Among John Hancock Variable Series Trust I, Wellington Management Company, LLP
and John Hancock Mutual Life Insurance Company relating to the Small/Mid Cap
Growth Fund, filed herewith.
(7) Underwriting and Indemnity Agreement among John Hancock Variable Series
Trust I, Signator Investors, Inc., (formerly named John Hancock Distributors,
Inc.), and John Hancock Life Insurance Company, incorporated by reference to
Post-Effective Amendment No. 14 to the Trust's Form N-1A registration statement
(File No. 33-2081), filed on February 28, 1997.
(8) Not Applicable.
(9)(a) Custodian Agreement Between John Hancock Variable Series Trust I and
State Street Bank and Trust Company, dated January 30, 1995, relating to the
International Equity Index and Small/Mid Cap CORE Fund, included in
Post-Effective Amendment No. 10 to this File No. 33-2081, filed on March 2,
1995.
(9)(b)Amendment dated as of March 18, 1996 to Custodian Agreement dated January
30, 1995, between John Hancock Variable Series Trust I and State Street Bank and
Trust Company, expanding the Agreement to cover additional Funds, included in
Post-Effective Amendment No. 13 to this File No. 33-2081, filed on April 30,
1996.
(9)(C) Amendment dated as of April 14, 1998 to Custodian Agreement dated
January 30, 1995, between John Hancock Variable Series Trust I and State Street
Bank and Trust Company, expanding this agreement to cover additional Funds,
included in Post-Effective Amendment No. 19 to this File No. 33-2081, filed on
May 1, 1998.
(9)(d) Form of Amendment dated as of July 28, 1999 to Custodian Agreement dated
January 30, 1995, between John Hancock Variable Series Trust I and State Street
Bank and Trust Company, expanding this agreement to cover additional Funds
included in Post-Effective Amendment No. 23 to this File No. 33-2081 filed on
August 9, 1999.
(9)(e) Amendment dated as of December 18, 1998 to Custodian Agreement dated
January 30, 1995, between John Hancock Variable Series Trust I and State Street
Bank and Trust Company, addressing "eligible foreign custodians" within the
meaning of Rule 17f-5, as amended, incorporated by reference to Post-Effective
Amendment No. 24 to this File No. 33- 2081, Filed on April 6, 2000.
(9)(f) Amendment dated as of June 27, 2000 to Custodian Agreement dated January
30, 1995, as amended, between John Hancock Variable Series Trust I and State
Street Bank and Trust Company, expanding this agreement to cover additional
Funds, is incorporated by reference to this File No. 33-2081, Filed on PEA No.
30 on February 21, 2001
(9)(g) Amendment dated as of July 26, 2000 to Custodian Agreement dated January
30 1995, as amended, between John Hancock Variable Series Trust I and State
Street Bank and Trust Company, addressing the change in the sub-advisor of the
Fundamental Growth Fund (formerly Fundamental-Mid Cap Growth), is incorporated
by reference to this File No. 33-2081, Filed on PEA No. 30 on February 21, 2001
(9)(h) Form of Amendment dated as of December 21, 2000 to Custodian Agreement
dated January 30, 1995, as amended, between John Hancock Variable Series Trust I
and State Street Bank and Trust Company, to reflect new names and new
sub-advisors for multiple Funds as well as the deletion of International
Opportunities II, is incorporated by reference to this File No. 33-2081, Filed
on PEA No. 30 on February 21, 2001
(9)(I) Amendment dated April 29, 1988 to Transfer Agency Agreement by and
between John Hancock Variable Series Fund I, Inc., and John Hancock Mutual Life
Insurance Company, January 27, 1986, which was priorly included in Exhibit 9 to
Pre-Effective Amendment No. 1 to this File No. 33-2081, filed March 13, 1986,
included in Post-Effective Amendment No. 4 to this File No. 33-2081, filed in
April, 1989.
(9)(j) Form of Amendment dated April 30, 2001 to the Custodian Agreement dated
January 30, 1995, as amended, between John Hancock Variable Series Trust I and
State Street Bank and Trust Company, to relflect the new Health Sciences Fund,
filed herwith.
(10) Not Applicable.
(11) Form of Opinion of Counsel as to Legality of Securities (FILED HEREWITH).
(12) Form of opinion as to tax matters and consent (FILED HEREWITH).
(13) Not Applicable.
(14) Consent of Independent Public Accountants to the incorporation by reference
of their opinion into the Statement of Additional Information (FILED HEREWITH).
(15) Not Applicable.
(16) Powers of Attorney for Elizabeth G. Cook, Kathleen F. Driscoll, Diane C.
Kessler, Michele G. Van Leer, Hassell H. McClellan, and Robert F. Verdonck,
(FILED HEREWITH).
(17) Code of Ethics, adopted by the John Hancock Variable Series Trust I, its
Investment Adviser and Principal Underwriter, revised July 2001, is incorporated
by reference to this File No. 33-2081, (FILED HEREWITH).
(18) Not Applicable.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a part of this
registration statement by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act of 1933, the reoffering
prospectus will contain the information called for by the C-2 applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, this registration statement has been
signed on behalf of the Registrant, in the City of Boston and Commonwealth of
Massachusetts, on the 14th day of September, 2001.
JOHN HANCOCK VARIABLE SERIES TRUST I
By: /s/Kathleen F. Driscoll
---------------------------
Kathleen F. Driscoll
As required by the Securities Act of 1933, this amendment to the registration
statement has been signed by the following person in the capacities and on the
date indicated.
SIGNATURE DATE
By: /s/Raymond F. Skiba September 14, 2001
-------------------
Raymond F. Skiba
Treasurer (Principal Financial and
Accounting Officer)
By: /s/Kathleen F. Driscoll September 14, 2001
-----------------------
Kathleen F. Driscoll
Vice Chairman, President and Trustee
(Acting Principal Executive Officer
For himself and as attorney-in-fact for:
Michele G. Van Leer, Chairman
Elizabeth G. Cook, Trustee
Diane C. Kessler, Trustee
Robert F. Verdonck, Trustee
Hassell H. McClellan, Trustee