UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04490
JOHN HANCOCK VARIABLE SERIES TRUST I
(Exact name of Registrant as specified in charter)
JOHN HANCOCK PLACE
INSURANCE AND SEPARATE ACCOUNTS DEPT. - LAW SECTOR
P.O. BOX 111
BOSTON, MASSACHUSETTS 02117-0111
(Address of principal executive offices)
RONALD J. BOCAGE, ESQ.
JOHN HANCOCK PLACE
INSURANCE AND SEPARATE ACCOUNTS DEPT. - LAW SECTOR
P.O. BOX 111
BOSTON, MASSACHUSETTS 02117-0111
(Name and Address of Agent for Service)
COPIES TO:
THOMAS C. LAUERMAN, ESQ.
FOLEY & LARDNER
3000 K STREET
WASHINGTON, D.C. 20007
Registrant's telephone number, including area code: (617) 572-6000
Date of fiscal year end: 12/31/2003
Date of reporting period: 12/31/2003
ITEM 1. REPORTS TO STOCKHOLDERS.
Annual Report
for John Hancock Variable Series Trust I
December 31, 2003
[LOGO] John Hancock
- --------------------------------------------------------------------------------
Not FDIC Insured Not Bank Guaranteed May Lose Value
- --------------------------------------------------------------------------------
Not a Deposit Not Insured by Any Federal Government Agency
- --------------------------------------------------------------------------------
Inception: March 29, 1986
- --------------------------------------------------------------------------------
Active Bond Fund
John Hancock Advisers, LLC Greene/Matthews
Declaration Management & Research, LLC James Shallcross
Pacific Investment Management Company LLC William H. Gross
- --------------------------------------------------------------------------------
.. The Fund employs a multi-manager approach with three sub-advisers
independently managing a portion of the Fund and each using distinct
investment strategies.
.. At year-end, John Hancock Advisers managed 37% of the Fund, Declaration
Management & Research managed 25% and PIMCO managed 38%.
.. 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.
.. John Hancock Advisers uses an active sector rotation strategy in which
proprietary research seeks to identify undervalued sectors and securities
with an emphasis on U.S. credit sectors including high yield.
.. Declaration Management & Research uses an active core strategy. The manager
employs proprietary research and quantitative tools in a risk controlled,
benchmark-relative approach with an emphasis on higher quality U.S.
investment-grade sectors.
.. PIMCO uses an active core plus strategy. The manager uses proprietary
research, economic analysis and quantitative tools seeking to add value
across all key decisions (duration, sector, security and derivatives) and
opportunistically invests broadly across key fixed income sectors including
high yield and non-U.S.
Fund Commentary
.. In 2003, the Fund returned 6.48%, outperforming its benchmark, the Lehman
Brothers Aggregate Bond Index.
.. On June 1st, the Fund's strategy changed to a multi-manager approach with
the addition of two new sub-advisers (Declaration and PIMCO).
John Hancock Advisers, LLC -- Active Sector Rotation
. In 2003, this portion of the Fund outperformed its benchmark due to
sector allocation and security selection decisions, while yield curve
decisions detracted.
. The Fund's exposure to corporate bonds and mortgages contributed the
most to absolute performance.
Declaration Management & Research, LLC - Active Core
. Since June 1st, this portion of the Fund outperformed its benchmark due
to security selection decisions, while sector and yield curve decisions
were neutral.
. The Fund's exposure to corporate bonds and mortgages contributed the
most to absolute performance.
Pacific Investment Management Company (PIMCO) -- Active Core Plus
. Since June 1st, this portion of the Fund outperformed its benchmark
primarily due to sector allocation decisions, with security selection
and yield curve positioning also adding value.
. The Fund's exposure to corporate bonds, emerging market bonds and high
yield contributed the most to absolute performance.
Inception: March 29, 1986
- --------------------------------------------------------------------------------
Active Bond Fund
John Hancock Advisers, LLC Greene/Matthews
Declaration Management & Research, LLC James Shallcross
Pacific Investment Management Company LLC William H. Gross
- --------------------------------------------------------------------------------
[CHART]
Line Chart
Historical Fund Return
$10,000 Investment made 12/31/93
(10-Year Period)
Lehman Brothers
Active Bond Fund Aggregate Bond Index
---------------- ---------------------
12/31/1993 10,000.00 10,000.00
1/31/1994 10,145.91 10,135.00
2/28/1994 9,958.81 9,958.65
3/31/1994 9,748.59 9,712.67
4/29/1994 9,661 9,634.97
5/31/1994 9,644.75 9,634.01
6/30/1994 9,635.31 9,612.81
7/29/1994 9,791.16 9,804.11
8/31/1994 9,815.02 9,815.87
9/30/1994 9,700.59 9,671.58
10/31/1994 9,684.77 9,662.87
11/30/1994 9,666.95 9,641.62
12/30/1994 9,743.05 9,708.14
1/31/1995 9,929.09 9,900.36
2/28/1995 10,166.64 10,135.99
3/31/1995 10,245.68 10,197.82
4/28/1995 10,393.88 10,340.59
5/31/1995 10,840.64 10,740.77
6/30/1995 10,934 10,819.18
7/31/1995 10,887 10,795.38
8/31/1995 11,012 10,926.00
9/29/1995 11,123 11,031.99
10/31/1995 11,304 11,175.40
11/30/1995 11,473 11,343.03
12/29/1995 11,647 11,501.83
1/31/1996 11,716 11,577.75
2/29/1996 11,491 11,376.29
3/29/1996 11,421 11,296.66
4/30/1996 11,363 11,233.40
5/31/1996 11,360 11,210.93
6/28/1996 11,475 11,361.16
7/31/1996 11,512 11,391.83
8/30/1996 11,520 11,372.47
9/30/1996 11,729 11,570.35
10/31/1996 11,978 11,827.21
11/29/1996 12,166 12,029.46
12/31/1996 12,125 11,917.58
1/31/1997 12,170.84 11,954.53
2/28/1997 12,228.36 11,984.41
3/31/1997 12,099.08 11,851.39
4/30/1997 12,264.09 12,029.16
5/30/1997 12,402.05 12,143.43
6/30/1997 12,564.59 12,287.94
7/31/1997 12,941.37 12,619.71
8/29/1997 12,814.5 12,512.45
9/30/1997 13,021.99 12,697.63
10/31/1997 13,134.43 12,881.75
11/28/1997 13,206.84 12,941.00
12/31/1997 13,351.32 13,071.71
1/31/1998 13,534.25 13,239.02
2/27/1998 13,523.08 13,228.43
3/31/1998 13,599.67 13,273.41
4/30/1998 13,665.75 13,342.43
5/29/1998 13,787.52 13,469.18
6/30/1998 13,919.71 13,583.67
7/31/1998 13,945.69 13,612.20
8/31/1998 14,082.9 13,834.08
9/30/1998 14,405.43 14,157.79
10/30/1998 14,270.81 14,082.76
11/30/1998 14,408 14,163.03
12/31/1998 14,450.56 14,205.52
1/29/1999 14,583.25 14,306.38
2/26/1999 14,284.5 14,056.02
3/31/1999 14,386.25 14,133.32
4/30/1999 14,431.36 14,178.55
5/28/1999 14,275.38 14,053.78
6/30/1999 14,239.7 14,008.81
7/30/1999 14,210.68 13,949.97
8/31/1999 14,182.71 13,943.00
9/30/1999 14,309.19 14,104.73
10/29/1999 14,338.25 14,156.92
11/30/1999 14,388.59 14,155.51
12/31/1999 14,314.56 14,087.56
1/31/2000 14,255 14,041.07
2/29/2000 14,415.21 14,210.97
3/31/2000 14,560.83 14,398.55
4/28/2000 14,504.74 14,356.80
5/31/2000 14,491.91 14,349.62
6/30/2000 14,795.93 14,648.09
7/31/2000 14,914.37 14,781.39
8/31/2000 15,140.73 14,995.72
9/29/2000 15,225.78 15,090.19
10/31/2000 15,306.59 15,189.79
11/30/2000 15,510.2 15,438.90
12/29/2000 15,810.55 15,726.06
1/31/2001 16,069.95 15,982.40
2/28/2001 16,203.44 16,121.44
3/30/2001 16,278.19 16,202.05
4/30/2001 16,220.47 16,134.00
5/31/2001 16,332.86 16,230.81
6/30/2001 16,383.78 16,292.48
7/31/2001 16,753.64 16,657.44
8/31/2001 16,922.53 16,849.00
9/28/2001 16,918.09 17,044.44
10/31/2001 17,235.59 17,400.67
11/30/2001 17,104.01 17,160.54
12/31/2001 16,993.48 17,050.72
1/31/2002 17,101.93 17,188.83
2/28/2002 17,207.27 17,355.56
3/30/2002 16,988.8 17,067.46
4/30/2002 17,260.07 17,398.57
5/31/2002 17,362.22 17,546.45
6/30/2002 17,307.39 17,699.11
7/31/2002 17,277.08 17,913.27
8/31/2002 17,608.7 18,216.00
9/28/2002 17,829.9 18,511.10
10/31/2002 17,696.29 18,425.95
11/30/2002 17,857.94 18,420.42
12/31/2002 18,225.32 18,801.72
1/31/2003 18,281.48 18,818.65
2/28/2003 18,559.69 19,078.34
3/31/2003 18,615.60 19,063.08
4/30/2003 18,857.19 19,221.30
5/30/2003 19,191.50 19,578.82
6/30/2003 19,210.87 19,539.66
7/31/2003 18,559.40 18,883.13
8/29/2003 18,697.95 19,007.76
9/30/2003 19,243.43 19,511.46
10/30/2003 19,124.17 19,330.01
11/30/2003 19,208.14 19,376.40
12/31/2003 19,405.93 19.574.04
Value on 12/31/03:
- ------------------
$19,406 Active Bond Fund
$19,574 Lehman Brothers Aggregate Bond Index
MORNINGSTAR
CATEGORY+:
.. Intermediate-Term
Bond
MORNINGSTAR
RISK+:
.. Below Average
(VL/VUL)
.. Below Average(VA)
MORNINGSTAR
RATING+:
.. ***(VL/VUL)
.. ***(VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Federal National Mortgage Assoc. 28.5%
U.S. Treasury 11.6%
Federal Republic of Germany 4.5%
Government National Mortgage Assoc. 3.2%
CWMBS, Inc. 2.1%
Federal Home Loan Mortgage Corp. 2.0%
Federal Home Loan Bank 1.7%
Ford Motor Co. 1.3%
General Motors Corp. 1.2%
Time Warner, Inc. 0.9%
AVERAGE ANNUAL TOTAL RETURNS*
Lehman Brothers
Active Bond Aggregate Bond
Fund Index
----------- ---------------
1 Year 6.48% 4.11%
3 Years 7.07 7.57
5 Years 6.07 6.62
10 Years 6.85 6.95
FUND COMPOSITION (as of December 31, 2003)(1)
% of
Credit Quality Assets
- ---------------------- ------
AAA 58.31%
AA 2.61%
A 7.58%
BBB 19.45%
BB & lower 10.54%
Not rated 1.51%
Weighted Average Yield 4.70%
(1) Statistics are based on bond assets only, excluding cash.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions, and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 289 VL/VUL subaccounts and 448 VA subaccounts in the
Morningstar Intermediate-Term Bond category. This represents the
Morningstar 3 year rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $413 of
securities loaned (Note B)) ................................... $ 891,496
Net unrealized appreciation of investments ....................... 21,944
Short-term investments at value .................................. 214,668
----------
Total investments .......................................... 1,128,108
Cash ............................................................. 2,679
Receivable for:
Investments sold .............................................. 10
Interest ...................................................... 12,052
Dividends ..................................................... 112
Other assets .................................................. 59
----------
Total assets ..................................................... 1,143,020
----------
LIABILITIES
Payables for:
Investments purchased ......................................... 85,452
Fund shares purchased ......................................... 417
Net payable for swap contracts ................................ 547
Written options at value (premium received $329) .............. 300
Collateral for securities on loan ............................. 420
Other liabilities ............................................. 275
----------
Total liabilities ................................................ 87,411
----------
Net assets ....................................................... $1,055,609
==========
Shares of beneficial interest outstanding ........................ 109,501
----------
Net asset value per share ........................................ $ 9.64
==========
Composition of net assets:
Capital paid-in ............................................... $1,043,818
Accumulated net realized loss on investments,
futures and foreign currency transactions .................. (8,898)
Net unrealized appreciation (depreciation) of:
Investments ................................................ 21,944
Written Options ............................................ 29
Swap contracts ............................................. (547)
Translation of assets and liabilities in
foreign currencies ...................................... (737)
----------
Net assets ....................................................... $1,055,609
==========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $53,156
Dividends ..................................................... 580
Securities lending ............................................ 89
-------
Total investment income ............................................. 53,825
-------
EXPENSES
Investment advisory fee ....................................... 6,384
Auditors fees ................................................. 146
Custodian fees ................................................ 299
Fidelity Bond fees ............................................ 2
Legal fees .................................................... 74
Printing & mailing fees ....................................... 331
Trustees' fees ................................................ 35
Other fees .................................................... 45
-------
Total expenses ...................................................... 7,316
-------
Net investment income ............................................... 46,509
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments ................................................... 25,318
Foreign currency transactions ................................. 17
Change in unrealized appreciation (depreciation) on:
Investments ................................................... (2,937)
Written options ............................................... 29
Swap contracts ................................................ (547)
Translation of assets and liabilities in foreign
currencies ................................................. (737)
-------
Net realized and unrealized gain .................................... 21,143
-------
Net increase in net assets resulting from operations ................ $67,652
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ..................................... $ 46,509 $ 50,024
Net realized gain ......................................... 25,335 2,847
Change in net unrealized appreciation (depreciation) ...... (4,192) 14,002
---------- ---------
Net increase in net assets resulting from operations ... 67,652 66,873
Distributions to shareholders from:
Net investment income ..................................... (46,318) (50,011)
Realized gains ............................................ (25,718) (2,663)
---------- ---------
Decrease in net assets resulting from distributions .... (72,036) (52,674)
From fund share transactions:
Proceeds from shares sold ................................. 111,060 133,638
Shares issued in reorganization ........................... 83,358
Distributions reinvested .................................. 72,036 52,674
Payment for shares redeemed ............................... (193,915) (160,571)
---------- ---------
Increase in net assets from fund share transactions .... 72,539 25,741
---------- ---------
NET INCREASE IN NET ASSETS ................................... 68,155 39,940
NET ASSETS
Beginning of Period ....................................... 987,454 947,514
---------- ---------
End of Period ............................................. $1,055,609 $ 987,454
========== =========
Analysis of fund share transactions:
Sold ...................................................... 11,585 13,944
Issued in reorganization .................................. 8,433
Reinvested ................................................ 7,389 5,525
Redeemed .................................................. (19,743) (16,811)
---------- ---------
Net increase in fund shares outstanding ...................... 7,664 2,658
========== =========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Active Bond Fund
---------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------
2003(f) 2002 2001 2000 1999
---------- -------- -------- -------- --------
Net Assets Value at Beginning of Period .............. $ 9.70 $ 9.55 $ 9.44 $ 9.12 $ 9.92
Income from Investment Operations:
Net Investment Income ............................. 0.43 0.50 0.58 0.64 0.67
Net Realized and Unrealized Gain (Loss) on
Investments(a) ................................. 0.18 0.18 0.11 0.28 (0.76)
---------- -------- -------- -------- --------
Total From Investment Operations .................. 0.61 0.68 0.69 0.92 (0.09)
Less Distributions:
Distribution from Net Investment Income ........... (0.43) (0.53) (0.58) (0.60) (0.71)
Distribution from Net Realized Gains on
Investments (0.24)
----------
Total Distributions ............................... (0.67) (0.53) (0.58) (0.60) (0.71)
---------- -------- -------- -------- --------
Net Assets Value at End of Period .................... $ 9.64 $ 9.70 $ 9.55 $ 9.44 $ 9.12
========== ======== ======== ======== ========
Total Investment Return(b) ........................... 6.48% 7.25% 7.48% 10.45% (0.94)%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net
Assets ......................................... 0.70% 0.69% 0.67% 0.41%(d) 0.28%
Ratio of Net Investment Income (Loss) to Average
Net Assets ..................................... 4.42% 5.24% 5.97%(e) 6.98% 6.97%
Portfolio Turnover Rate ........................... 465.90%(c) 290.73% 206.80%(c) 224.24% 182.90%
Net Assets End of Period (000s Omitted) .............. $1,055,609 $987,454 $947,514 $842,299 $850,286
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Excludes merger activity.
(d) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made, the expense ratio would have been .44% for the year ended
December 31, 2000.
(e) Had the Fund not amortized premiums and accreted discounts on debt
securities, the annual ratio of net investment income to average net assets
would have been 6.28% for the years ended December 31, 2001.
(f) The Fund entered into a new Sub-Advisory Agreements with PIMCO and
Declaration Management & Research LLC during the period shown.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 0.1%
Bombardier, Inc. - 144A (a)
6.75% due 05/01/12 ................................... $ 435 $ 475
Jet Equipment Trust - Notes
10.91% due 08/15/14 .................................. 2,100 144
-------
619
Airlines - 0.3%
American Airlines, Inc. - Ser. 2001-2
Cl. A2
7.858% due 10/01/11 .................................. 820 832
Continental Airlines - CTF Ser. 1999-1
Cl. A
6.545% due 02/02/19 .................................. 673 665
Continental Airlines, Inc. - Notes
7.206% due 06/30/04 .................................. 488 469
Northwest Airlines Corp. - Ser. 1996-1
8.97% due 01/02/15 ................................... 182 124
Popular North America, Inc.
6.125% due 10/15/06 .................................. 730 793
-------
2,883
Auto Components - 0.0%
Motor Gaming Group, Inc. - Sr. Notes
9.75% due 04/01/10 ................................... 390 417
Auto Loan - 1.4%
Ford Motor Credit Co. - Notes
6.875% due 02/01/06 .................................. 3,380 3,607
7.0% due 10/01/13 .................................... 1,235 1,303
7.375% due 10/28/09 .................................. 5,370 5,897
General Motors Acceptance Corp.
6.875% due 08/28/12 .................................. 590 635
General Motors Acceptance Corp. -
Notes
7.75% due 01/19/10 ................................... 2,730 3,095
GMAC Commercial Securities, Inc.
6.411% due 11/15/07 .................................. 115 120
-------
14,657
Automobiles - 1.2%
Auburn Hills Trust
12.375% due 05/01/20 ................................. 925 1,333
Daimler Chrysler NA Holding Corp. -
Sr. Notes
6.5% due 11/15/13 .................................... 500 527
DaimlerChrysler NA Holding Corp. -
Notes
4.75% due 01/15/08 ................................... 950 972
8.5% due 01/18/31 .................................... 340 406
Equus Cayman Finance, Ltd. - Sr.
Notes 144A (a)
5.5% due 09/12/08 .................................... 575 583
Ford Motor Co. - Bonds
7.45% due 07/16/31 ................................... 1,150 1,162
General Motors Corp. - Sr. Debs.
8.25% due 07/15/23 ................................... $3,600 $ 4,087
8.375% due 07/15/33 .................................. 2,687 3,119
Hertz Corp. - Notes
7.625% due 06/01/12 .................................. 775 840
-------
13,029
Banks - 2.4%
Abbey National First Capital - Sr. Sub.
Notes
8.2% due 10/15/04 .................................... 2,100 2,208
Banc America Commercial Mortgage,
Inc. - CTF 144A (a)
5.276% due 03/11/41 .................................. 1,000 969
Bank of New York Institution Capital -
Notes 144A (a)
7.78% due 12/01/26 ................................... 2,550 2,806
Bank One Corp. - Notes
6.5% due 02/01/06 .................................... 700 760
Barclays Bank plc - Notes 144A (a)
6.86% due 06/15/32 ................................... 2,870 3,112
Capital One Bank
6.5% due 06/13/13 .................................... 725 760
Capital One Bank - Notes
6.875% due 02/01/06 .................................. 820 887
Central American Bank - 144A (a)
6.75% due 04/15/13 ................................... 650 701
Colonial Bank Montgomery -
Sub. Notes
9.375% due 06/01/11 .................................. 1,120 1,297
Corporacion Andina De Fomento -
Notes
5.2% due 05/21/13 .................................... 550 547
Credit Suisse First Boston - Ser. 2003-
C3 Cl. F 144A (a)
4.518% due 05/15/38 .................................. 1,190 1,118
Credit Suisse First Boston - Sr. Notes
4.625% due 01/15/08 .................................. 451 470
Credit Suisse First Boston Mortgage
Securities Corp. - Notes
6.26% due 04/11/30 ................................... 1,501 1,568
JP Morgan Chase & Co. - Notes
6.625% due 03/15/12 .................................. 940 1,050
Popular North America, Inc.
3.875% due 10/01/08 .................................. 1,085 1,083
Royal Bank of Scotland plc - Notes
7.648% due 08/31/49 .................................. 3,615 4,313
Wachovia Bank Commercial Trust -
Ser. 2003-C8 Cl. F 144A (a)
5.031% due 11/15/35 .................................. 600 600
Westpac Capital Trust III - 144A (a)
5.819% due 12/29/49 .................................. 760 784
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Banks - Continued
Zions Financial Corp. - Notes
6.95% due 05/15/11 ................................... $ 656 $ 715
-------
25,748
Beverages - 0.0%
Commonwealth Brands, Inc. - 144A (a)
10.625% due 09/01/08 ................................. 365 398
Chemicals - 0.2%
ICI Wilmington, Inc. - Notes
5.625% due 12/01/13 .................................. 325 326
Lyondell Chemical Co. - Sr. Notes
9.5% due 12/15/08 .................................... 525 554
Lyondell Chemical Co. - Sr. Sec. Notes
9.5% due 12/15/08 .................................... 325 343
NOVA Chemicals Corp. - Notes
7.0% due 05/15/06 .................................... 685 723
-------
1,946
Commercial Services & Supplies - 1.4%
Allied Waste North America - Notes
10.0% due 08/01/09 ................................... 1,665 1,798
AVIS Group Holdings, Inc. - Notes
11.0% due 05/01/09 ................................... 530 574
Cendant Corp. - Notes
6.25% due 01/15/08 ................................... 1,260 1,374
6.875% due 08/15/06 .................................. 2,850 3,127
Cendant Corp. - Sr. Notes
6.25% due 03/15/10 ................................... 500 544
7.125% due 03/15/15 .................................. 268 302
Coinmach Corp. - Sr. Notes
9.0% due 02/01/10 .................................... 455 494
Delaware Montecorp - Sr. Sub. Notes
8.625% due 12/15/12 .................................. 363 401
Hutchison Whampoa International, Ltd.
- Notes 144A (a)
6.25% due 01/24/14 ................................... 1,350 1,371
7.45% due 11/24/33 ................................... 900 937
Mantis Reef, Ltd. - 144A (a)
4.692% due 11/14/08 .................................. 815 819
RPM International, Inc. - Sr. Notes
144A (a)
6.25% due 12/15/13 ................................... 905 918
Trinity Indiana Leasing Co. - 144A (a)
7.755% due 02/15/09 .................................. 570 603
Tyco International Group - Notes
144A (a)
6.0% due 11/15/13 .................................... 700 721
Tyco International Group SA - Notes
6.75% due 02/15/11 ................................... 900 981
-------
14,964
Communications Equipment - 0.6%
Corning, Inc. - Notes
6.3% due 03/01/09 .................................... 320 331
8.3% due 04/04/25 .................................... $ 620 $ 639
Deutsche Telekom International - Notes
8.5% due 06/15/10 .................................... 2,730 3,301
Deutsche Telekom International
Finance
8.75% due 06/15/30 ................................... 545 696
Intelsat, Ltd. - Sr. Notes 144A (a)
5.25% due 11/01/08 ................................... 490 504
Motorola, Inc. - Notes
6.75% due 02/01/06 ................................... 772 832
-------
6,303
Computers & Peripherals - 0.1%
NCR Corp. - Sr. Notes 144A (a)
7.125% due 06/15/09 .................................. 515 574
Unisys Corp. - Sr. Notes
6.875% due 03/15/10 .................................. 370 398
-------
972
Construction Materials - 0.1%
Toll Corp. - Sr. Sub Notes
8.125% due 02/01/09 .................................. 720 749
Containers & Packaging - 0.4%
BWAY Corp. - Sr. Sub. Notes
10.0% due 10/15/10 ................................... 355 387
Owens Brockway Glass Container - Sr.
Notes
8.25% due 05/15/13 ................................... 275 295
Owens Brockway Glass Container - Sr.
Notes 144A (a)
8.75% due 11/15/12 ................................... 635 706
Sealed Air Corp. - Sr. Notes 144A (a)
5.375% due 04/15/08 .................................. 930 982
Stone Container Corp. - Sr. Notes
8.375% due 07/01/12 .................................. 790 865
9.75% due 02/01/11 ................................... 625 691
-------
3,926
Credit Card - 1.1%
Citibank Credit Card Issuance Trust -
Notes
4.45% due 04/07/10 ................................... 2,400 2,440
MBNA Asset Backed Note Trust -
Notes 144A (a)
6.65% due 08/15/11 ................................... 985 1,069
MBNA Asset Backed Note Trust -
Notes Ser. 1998-E 144A (a)
6.6% due 09/15/10 .................................... 1,115 1,215
Midland Funding Corp. II - Bonds
Ser. A
11.75% due 07/23/05 .................................. 5,865 6,334
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Credit Card - Continued
Midland Funding Corp. II - Notes
13.25% due 07/23/06 .................................. $ 470 $ 541
-------
11,599
Diversified Financials - 3.3%
AXA Financial, Inc. - Sr. Notes
7.75% due 08/01/10 ................................... 543 643
Bunge Ltd. Financial Corp. - Sr. Notes
144A (a)
4.375% due 12/15/08 .................................. 585 589
Capital One Financial Corp. - Notes
7.25% due 05/01/06 ................................... 515 554
Citigroup, Inc. - Sub. Notes
5.625% due 08/27/12 .................................. 1,000 1,056
6.0% due 10/31/33 .................................... 895 895
Deutsche Mortgage & Asset Receiving
Corp. - Notes
6.861% due 03/15/08 .................................. 1,855 2,045
Duke Capital Corp. - Sr. Notes
6.25% due 02/15/13 ................................... 762 804
6.75% due 02/15/32 ................................... 600 606
ERAC USA Finance Co. - Notes
144A (a)
7.95% due 12/15/09 ................................... 2,050 2,427
Fund American Cos, Inc. - GTD
Sr. Notes
5.875% due 05/15/13 .................................. 723 732
General Electric Capital Corp. - Notes
6.75% due 03/15/32 ................................... 1,240 1,373
Hyatt Equities LC - Notes 144A (a)
6.875% due 06/15/07 .................................. 2,035 2,186
MDP Acquisitions plc - Sr. Notes
9.625% due 10/01/12 .................................. 550 616
Morgan Stanley Dean Witter Capital -
Ser. 2001 Cl. A1
4.57% due 12/18/32 ................................... 3,888 4,022
Newcourt Credit Group, Inc. - Notes
Ser. B
6.875% due 02/16/05 .................................. 2,325 2,452
Pemex Project Funding Master Trust -
Notes
6.125% due 08/15/08 .................................. 700 735
7.375% due 12/15/14 .................................. 700 747
Pemex Project Funding Trust - Notes
9.125% due 10/13/10 .................................. 4,735 5,611
Qwest Captial Funding, Inc. - Notes
7.75% due 08/15/06 ................................... 955 988
TFM SA de CV - Sr. Disc. Debs
11.75% due 06/15/09 .................................. 760 779
The MONY Group, Inc. - Sr. Notes
7.45% due 12/15/05 ................................... 1,650 1,804
URC Holdings Corp. - Sr. Notes
144A (a)
7.875% due 06/30/06 .................................. 1,600 1,799
Washington Mutual, Inc. - Notes
2.4% due 11/03/05 .................................... $ 835 $ 837
-------
34,300
Diversified Telecommunication Services - 2.9%
AT&T Broadband Corp. - Notes
8.375% due 03/15/13 .................................. 1,199 1,467
Citizens Communications Co. - Notes
8.5% due 05/15/06 .................................... 2,000 2,184
Cox Communications, Inc. - Notes
7.5% due 08/15/04 .................................... 3,685 3,808
France Telecom SA - Notes
9.25% due 03/01/11 ................................... 2,540 3,051
10.0% due 03/01/31 ................................... 319 424
GCI, Inc. - Sr. Notes
9.75% due 08/01/07 ................................... 475 488
Innova S DE R.L - Sr. Notes 144A (a)
9.375% due 09/19/13 .................................. 465 477
Innova S DE R.L. - Notes
12.875% due 04/01/07 ................................. 285 289
Nextel Communications, Inc. -
Sr. Notes
7.375% due 08/01/15 .................................. 365 392
9.375% due 11/15/09 .................................. 1,000 1,087
Qwest Corp. - Notes 144A (a)
8.875% due 03/15/12 .................................. 625 716
Sprint Capital Corp.
6.9% due 05/01/19 .................................... 1,220 1,246
Sprint Capital Corp. - Notes
6.125% due 11/15/08 .................................. 3,110 3,315
8.75% due 03/15/32 ................................... 346 409
Tele Communications, Inc.
10.125% due 04/15/22 ................................. 695 982
Tele-Communications, Inc.
9.8% due 02/01/12 .................................... 465 607
Telecom Italia Capital Corp. - Sr. Notes
Ser. A 144A (a)
4.0% due 11/15/08 .................................... 450 453
Telecom Italia Capital Corp. - Sr. Notes
Ser. C 144A (a)
6.375% due 11/15/33 .................................. 900 905
Telefonos de Mexico - Sr. Notes
144A (a)
4.5% due 11/19/08 .................................... 945 946
Telefonosde Mexico - Sr. Notes
8.25% due 01/26/06 ................................... 3,750 4,135
Tellus Corp. - Notes
8.0% due 06/01/11 .................................... 1,810 2,116
Verizon Pennsylvania, Inc. - Debs.
Ser. A
5.65% due 11/15/11 ................................... 1,530 1,605
-------
31,102
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Electric Utilities - 1.5%
Black Hills Corp. - Notes
6.5% due 05/15/13 .................................... $ 575 $ 583
CalEnergy Co., Inc. - Bonds
8.48% due 09/15/28 ................................... 2,670 3,303
DPL, Inc. - Sr. Notes
6.875% due 09/01/11 .................................. 1,385 1,440
Empresa Electrica Guacolda SA -
Notes 144A (a)
8.625% due 04/30/13 .................................. 1,705 1,800
Empresa Nacional De Electricid -
Notes
8.35% due 08/01/13 ................................... 1,575 1,770
Enersis SA - Notes 144A (a)
7.375% due 01/15/14 .................................. 970 1,002
FirstEnergy Corp. - Notes Ser. B
6.45% due 11/15/11 ................................... 490 508
FirstEnergy Corp. - Notes Ser. C
7.375% due 11/15/31 .................................. 815 834
Pennsylvania Power Co.
8.5% due 07/15/22 .................................... 610 635
Progress Energy, Inc. - Sr. Notes
6.75% due 03/01/06 ................................... 787 853
7.0% due 10/30/31 .................................... 325 348
Public Service Co. New Mexico -
Sr. Unsec. Notes
4.4% due 09/15/08 .................................... 680 689
TXU Australia Holdings, Ltd. - GTD
Sr. Notes 144A (a)
6.15% due 11/15/13 ................................... 814 830
TXU Energy Co. LLC - Sr. Notes
7.0% due 03/15/13 .................................... 887 981
-------
15,576
Electric/Gas - 1.8%
AES Eastern Energy - Notes
9.0% due 01/02/17 .................................... 910 987
Dominion Resources, Inc. - Notes
6.3% due 03/15/33 .................................... 1,036 1,050
EL Paso Electric Co. - Bonds Ser. E
9.4% due 05/01/11 .................................... 1,225 1,434
Ipalco Enterprises, Inc. - Notes
8.625% due 11/14/11 .................................. 705 788
Monterrey Power SA de CV - Sr. Sec
Bonds 144A (a)
9.625% due 11/15/09 .................................. 1,078 1,267
Noram Energy Corp. - Debs
6.5% due 02/01/08 .................................... 2,995 3,208
Oklahoma Gas & Electric Co. - Notes
6.65% due 07/15/27 ................................... 2,285 2,569
PNPP II Funding Corp. - Bonds
9.12% due 05/30/16 ................................... 935 1,040
PSEG Energy LLC - Sr. Notes
7.75% due 04/16/07 ................................... 1,605 1,703
PSEG Power LLC - Sr. Notes
6.875% due 04/15/06 .................................. $ 857 $ 934
Waterford 3 Funding - Entergy - Bonds
8.09% due 01/02/17 ................................... 3,585 4,084
Western Resources, Inc.
7.65% due 04/15/23 ................................... 310 326
-------
19,390
Electrical Equipment - 0.5%
HQI Transelec Chile SA - Notes
7.875% due 04/15/11 .................................. 4,835 5,565
Electronic Equipment & Instruments - 0.2%
Ametek, Inc. - Sr. Notes
7.2% due 07/15/08 .................................... 605 662
Pinnacle Partners - Sr. Notes 144A (a)
8.83% due 08/15/04 ................................... 1,760 1,811
-------
2,473
Energy Equipment & Services - 0.1%
Salton Sea Funding Corp. - Sr. Notes
Ser. E
8.3% due 05/30/11 .................................... 507 539
Finance - 2.6%
Beaver Valley Funding Corp.
8.625% due 06/01/07 .................................. 275 298
9.0% due 06/01/17 .................................... 1,465 1,678
BVPS II Funding Corp. - Bonds
8.89% due 06/01/17 ................................... 969 1,091
Conseco Finance Securitizations Co. -
Notes
5.33% due 04/15/27 ................................... 2,178 2,192
Financing Corp. - Notes
9.4% due 02/08/18 .................................... 420 599
10.35% due 08/03/18 .................................. 3,025 4,633
GG1B Funding Corp. - Bonds
7.43% due 01/15/11 ................................... 788 811
Household Financial Corp. - Global
Notes
4.625% due 01/15/08 .................................. 700 728
Household Financial Corp. - Notes
6.75% due 05/15/11 ................................... 3,290 3,704
Iowa Select Farms Finance - Notes
144A (a)
10.75% due 12/01/06 .................................. 6 3
Meditrust Medium - Notes
7.3% due 01/16/06 .................................... 520 534
Morgan Stanley & Co., Inc. - Notes
4.25% due 05/15/10 ................................... 2,665 2,661
NiSource Finance Corp. - Sr. Notes
6.15% due 03/01/13 ................................... 596 641
PDVSA Finance, Ltd. - Notes
8.5% due 11/16/12 .................................... 510 495
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Finance - Continued
PTC International Finance II SA - Sr. Sub. Notes
11.25% due 12/01/09 .................................. $ 1,190 $ 1,303
Rabobank Capital Fund II - Notes 144A (a)
5.26% due 12/31/49 ................................... 1,915 1,917
Saint George Funding Co. LLC - 144A (a)
8.485% due 12/31/49 .................................. 1,205 1,387
UFJ Finance Aruba - GTD Notes
6.75% due 07/15/13 ................................... 2,993 3,192
-------
27,867
Food & Drug Retailing - 0.1%
Delhaize America, Inc. - Notes
7.375% due 04/15/06 .................................. 605 650
Food Products - 0.4%
Corn Products International, Inc.- Sr. Notes
8.45% due 08/15/09 ................................... 3,240 3,621
Kraft Foods, Inc. - Global Notes
5.625% due 11/01/11 .................................. 985 1,038
-------
4,659
Foreign Governmental - 4.6%
Federal Republic of Germany
4.5% due 07/04/09 .................................... 31,300 40,998
Republic of Brazil - Ser. L
2.125% due 04/15/06 .................................. 1,254 1,239
Republic of Columbia - Notes
9.75% due 04/09/11 ................................... 727 825
Republic of Panama - Bonds
9.375% due 01/16/23 .................................. 1,250 1,363
Republic of Peru - Bonds
9.125% due 01/15/08 .................................. 1,250 1,462
United Mexican States
6.375% due 01/16/13 .................................. 800 830
8.375% due 01/14/11 .................................. 800 950
United Mexican States - Notes Ser. A
8.3% due 08/15/31 .................................... 500 564
-------
48,231
Gas Utilities - 0.8%
Kinder Morgan Energy Partners - Sr. Notes
6.5% due 09/01/12 .................................... 1,150 1,269
Korea Gascorp - Sr. Notes 144A (a)
4.75% due 11/26/10 ................................... 720 719
Louis Dreyfus Natural Gas Corp. - Notes
6.875% due 12/01/07 .................................. 1,730 1,913
Southern California Edison Co. - Ser. 2003-B
8.0% due 02/15/07 .................................... 2,300 2,621
Southern California Edison Co. - Ser. 93-C
7.25% due 03/01/26 ................................... $ 735 $ 752
Texas New Mexico Power Co. -Sr. Notes 144A (a)
6.125% due 06/01/08 .................................. 870 875
-------
8,149
Health Care Providers & Services - 0.8%
Columbia/HCA Healthcare Corp. - Notes
9.0% due 12/15/14 .................................... 755 914
Global Health Sciences, Inc. - Sr. Notes
11.0% due 05/01/08 ................................... 75 2
HCA, Inc. - Notes
6.75% due 07/15/13 ................................... 650 690
HCA-The Healthcare Corp. - Notes
8.75% due 09/01/10 ................................... 4,855 5,751
Manor Care, Inc.
8.0% due 03/01/08 .................................... 280 316
Quest Diagnostics, Inc. - Sr. Notes
6.75% due 07/12/06 ................................... 1,135 1,239
-------
8,912
Home Equity Loan - 0.8%
Contimortgage Home Equity Loan - CTF Cl. A5
8.1% due 08/15/25 .................................... 114 113
EQCC Home Equity Loan Trust - Notes
6.57% due 02/15/29 ................................... 1,440 1,449
Money Store Home Equity Trust -Notes
6.485% due 12/15/28 .................................. 2,422 2,453
Residential Asset Mortgage Products,
Inc. - Ser. 2003-R Cl. A12
2.904% due 10/25/23 .................................. 1,395 1,404
Residential Asset Mortgage Products,
Inc. - Ser. 2003-RS10 Cl. AI5
4.91% due 01/25/31 ................................... 1,260 1,257
UCFC Home Equity Loan - Sr. 1997- Al Cl. A8
7.22% due 06/15/28 ................................... 1,736 1,735
-------
8,411
Hotels Restaurants & Leisure - 0.7%
Argosy Gaming Co. - Sr. Sub. Notes
9.0% due 09/01/11 .................................... 445 493
Harrahs Operating Co., Inc. - Notes
7.875% due 12/15/05 .................................. 2,300 2,507
Mandalay Resort Group - Sr. Notes 144A (a)
6.375% due 12/15/11 .................................. 640 658
Meditrust - Notes
7.0% due 08/15/07 .................................... 375 388
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Hotels Restaurants & Leisure - Continued
MGM Mirage, Inc. - Ser. B
6.0% due 10/01/09 .................................... $ 832 $ 855
Mohegan Tribal Gaming Authority - Sr. Sub Notes
8.0% due 04/01/12 .................................... 400 432
Starwood Hotels & Resorts - Sr. Notes
7.375% due 05/01/07 .................................. 590 636
Starwood Hotels & Resorts Worldwide,
Inc. - Sr. Notes
7.875% due 05/01/12 .................................. 1,000 1,120
Trump Casino Holdings LLC - Notes
11.625% due 03/15/10 ................................. 385 371
Waterford Gaming LLC - Sr. Notes 144A (a)
8.625% due 09/15/12 .................................. 272 289
------
7,749
Household Durables - 0.1%
Salton Funding Corp. - Sr. Sec. Bonds.
Ser. C
7.84% due 05/30/10 ................................... 1,008 1,046
Household Products - 0.1%
Enterprise Products Operating LP - Sr. Notes
6.875% due 03/01/33 .................................. 1,130 1,129
Industrial Conglomerates - 0.2%
British Brunswick Holdings, Inc. - Sr. Notes
13.0% due 05/01/08 ................................... 120 24
General Electric Co. - Notes
5.0% due 02/01/13 .................................... 2,472 2,500
Pacific & Atlantic Holdings, Inc. -
Sr. Notes 144A(a)
10.5% due 12/31/07 ................................... 28 8
------
2,532
Insurance - 1.0%
Equitable Life Assurance Society USA -
Notes 144A(a)
6.95% due 12/01/05 ................................... 920 1,000
Mass. Mutual Life Insurance Co. - Notes 144A (a)
7.625% due 11/15/23 .................................. 2,645 3,191
New York Life Insurance Co. - Notes 144A (a)
5.875% due 05/15/33 .................................. 2,075 2,062
Odyssey Re Holdings Corp. - Sr. Notes
7.65% due 11/01/13 ................................... 2,000 2,089
QBE Insurance Group, Ltd. - Sub. Notes 144A (a)
5.647% due 07/01/23 .................................. 1,120 1,067
Travelers Property Casualty Corp.- Sr. Notes
5.0% due 03/15/13 .................................... $ 970 $ 971
UnumProvident Corp. - Sr. Notes
7.625% due 03/01/11 .................................. 425 468
------
10,848
Leisure Equipment & Products - 0.1%
Eastman Kodak Co. - Sr. Notes
7.25% due 11/15/13 ................................... 360 378
Hockey Co. - Sr. Sec. Notes
11.25% due 04/15/09 .................................. 410 469
------
847
Machinery - 0.1%
Kennametal, Inc. - Sr. Notes
7.2% due 06/15/12 .................................... 680 726
Media - 3.5%
Time Warner, Inc.
6.15% due 05/01/07 ................................... 700 762
Time Warner, Inc. - Debs.
7.7% due 05/01/32 .................................... 350 408
British Sky Broadcasting - Notes
8.2% due 07/15/09 .................................... 4,090 4,870
Chancellor Media Corp. - Notes
8.0% due 11/01/08 .................................... 2,200 2,569
Continental Cablevision - Notes
8.3% due 05/15/06 .................................... 900 1,009
Continental Cablevision, Inc. - Sr. Notes
9.5% due 08/01/13 .................................... 2,280 2,634
EchoStar DBS Corp. - Sr. Notes
9.375% due 02/01/09 .................................. 635 669
Garden State Newspapers, Inc. - Sr. Sub
Notes Ser. B
8.625% due 07/01/11 .................................. 335 355
Grupo Televisa SA De CV - Notes
8.0% due 09/13/11 .................................... 2,305 2,579
Lenfest Communications, Inc. - Notes
8.375% due 11/01/05 .................................. 2,530 2,788
Liberty Media Corp. - Sr. Debs
8.25% due 02/01/30 ................................... 325 389
Liberty Media Corp. - Sr. Notes
2.64% due 09/17/06 ................................... 900 910
3.5% due 09/25/06 .................................... 1,305 1,311
5.7% due 05/15/13 .................................... 1,345 1,360
News America Holdings, Inc.
8.25% due 08/10/18 ................................... 2,810 3,457
Panamsat Corp. - Sr. Notes
8.5% due 02/01/12 .................................... 440 486
Rogers Cable, Inc. - Sr. Notes
6.25% due 06/15/13 ................................... 235 237
Rogers Cablesystems - Sr. Notes Ser. B
10.0% due 03/15/05 ................................... 1,205 1,295
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Media - Continued
Shaw Communications, Inc. - Sr. Notes
8.25% due 04/11/10 ................................... $ 485 $ 545
Time Warner, Inc. - Sr. Notes
9.125% due 01/15/13 .................................. 5,486 6,970
XM Satellite Radio, Inc. - Sr. Sec.
Notes
12.0% due 06/15/10 ................................... 635 719
-------
36,322
Metals & Mining - 0.2%
Codelco, Inc. - Notes 144A (a)
5.5% due 10/15/13 .................................... 490 497
Freeport McMoran Copper & Gold -
Sr. Notes
10.125% due 02/01/10 ................................. 460 527
Golden Northwest Aluminum
12.0% due 12/15/06 ................................... 25 2
Metallurgy Holdings, Inc. - Notes
1.0% due 07/15/08 .................................... 50 19
Noranda, Inc. - Notes
8.375% due 02/15/11 .................................. 1,075 1,269
Yanacocha Receivables - 144A (a)
8.4% due 06/15/05 .................................... 301 304
-------
2,618
Multi-Utilities - 0.5%
CenterPoint Energy - Bonds Ser. K
144A (a)
6.95% due 03/15/33 ................................... 545 604
Centerpoint Energy Resources Corp. -
Sr. Notes 144A (a)
7.875% due 04/01/13 .................................. 700 795
CenterPoint Energy, Inc. - Sr. Notes
144A (a)
6.85% due 06/01/15 ................................... 565 578
7.25% due 09/01/10 ................................... 565 612
GTE California, Inc. - Ser. A
8.07% due 04/15/24 ................................... 1,390 1,465
Transalta Corp.
5.75% due 12/15/13 ................................... 900 904
-------
4,958
Multiline Retail - 0.1%
J.C. Penney Co., Inc. - Notes
8.0% due 03/01/10 .................................... 690 788
Municipal - 0.7%
De Kalb County Georgia Water &
Sewage - Ser. A
5.0% due 10/01/35 .................................... 2,200 2,258
Golden State Securitization
6.75% due 06/01/39 ................................... 4,275 4,213
Illinois Saint
5.1% due 06/01/33 .................................... $1,545 $ 1,421
-------
7,892
Office Electronics - 0.1%
Xerox Corp. - Sr. Notes
7.625% due 06/15/13 .................................. 570 616
Oil & Gas - 1.1%
Alberta Energy, Ltd. - Notes
7.375% due 11/01/31 .................................. 1,170 1,389
8.125% due 09/15/30 .................................. 1,275 1,631
Amerada Hess Corp. - Notes
7.3% due 08/15/31 .................................... 975 1,007
Humpuss Funding Corp. - 144A (a)
7.72% due 12/15/09 ................................... 1,350 1,147
Occidental Petroleum Corp.
10.125% due 09/15/09 ................................. 1,388 1,790
Ocean RigNorway AS - Sr. Sec. Notes
10.25% due 06/01/08 .................................. 255 240
Tosco Corp. - Notes
8.125% due 02/15/30 .................................. 1,840 2,346
Valero Energy Corp. - Notes
8.375% due 06/15/05 .................................. 700 757
XTO Energy, Inc. - Sr. Notes
6.25% due 04/15/13 ................................... 900 949
-------
11,256
Other Asset Backed - 0.5%
Ameriquest Mortgage Securities, Inc.-
Ser. 2003-10 Cl. AF3
3.23% due 05/25/28 ................................... 2,080 2,083
Ameriquest Mortgage Securities, Inc.-
Ser. 2003-IA1
4.965% due 11/25/33 .................................. 1,125 1,133
CWABS, Inc. Ser. 2003-5 Cl. AF 2
3.042% due 04/25/25 .................................. 1,300 1,309
Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3
3.531% due 12/25/33 .................................. 900 906
-------
5,431
Other Mortgage - 0.5%
Capital One Secured Note Trust - Notes
2000-3 Cl. C 144A (a)
7.9% due 10/15/10 .................................... 640 694
Commercial Mortgage Acceptance
Corp. - Ser. 1991-C1 A1
6.79% due 06/15/31 ................................... 1,445 1,570
LB UBS Commercial Mortgage Trust - CTF A4
4.166% due 04/17/13 .................................. 1,630 1,557
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Other Mortgage - Continued
LB UBS Commercial Mortgage Trust -
Ser. 2003-C5 Cl. K 144A (a)
5.25% due 04/15/37 ................................... $1,000 $ 950
-------
4,771
Paper & Forest Products - 0.5%
Boise Cascade Corp. - Sr. Notes
6.5% due 11/01/10 .................................... 570 595
Corporacion Durango SA de CV -
Sr. Notes
13.125% due 08/01/06 ................................. 631 379
13.75% due 07/15/09 .................................. 2,905 1,728
Donohue Forest Products, Inc. -
Sr. Notes
7.625% due 05/15/07 .................................. 885 912
Fort James Corp. - Sr. Notes
6.625% due 09/15/04 .................................. 910 928
International Paper Co. - Sr. Notes
4.25% due 01/15/09 ................................... 740 743
Longview Fibre Co. - Notes
10.0% due 01/15/09 ................................... 250 275
-------
5,560
Pharmaceuticals - 0.2%
Medco Health Solutions, Inc. -
Sr. Notes
7.25% due 08/15/13 ................................... 630 690
Schering Plough Corp. - Sr. Notes
6.5% due 12/01/33 .................................... 890 926
-------
1,616
Real Estate Investment Trust - 1.5%
American Health Properties, Inc. -
Notes
7.5% due 01/15/07 .................................... 1,405 1,561
Amresco Residential Securities - Notes
6.51% due 08/25/27 ................................... 2,665 2,781
Camden Property Trust - Sr. Notes
7.0% due 04/15/04 .................................... 2,880 2,919
Carramerica Realty Corp. - Notes
5.25% due 11/30/07 ................................... 275 286
Health Care Reit, Inc. - Notes
6.0% due 11/15/13 .................................... 330 334
Healthcare Realty Trust IN - Sr. Notes
8.125% due 05/01/11 .................................. 1,070 1,225
iStar Financial, Inc. - Sr. Notes
6.0% due 12/15/10 .................................... 185 189
6.5% due 12/15/13 .................................... 1,000 1,022
7.0% due 03/15/08 .................................... 410 443
Socgen Real Estate Co. LLC - Ser. A
144A (a)
7.64% due 12/29/49 ................................... 4,100 4,632
-------
15,392
Specialty Retail - 0.2%
Gap, Inc. - Notes
10.55% due 12/15/08 .................................. $ 970 $ 1,198
Office Depot, Inc. - Sr. Notes
6.25% due 08/15/13 ................................... 695 730
-------
1,928
Tobacco - 0.1%
Altria Group, Inc. - Notes
7.0% due 11/04/13 .................................... 1,278 1,363
U.S. Government Agencies - 30.0%
Federal Home Loan Bank - Bonds
5.0% due 04/01/18 .................................... 12,613 12,864
Federal Home Loan Mortgage Corp. - Bonds
4.25% due 03/15/31 ................................... 4,715 4,683
5.0% due 08/01/33 .................................... 4,901 4,840
5.5% due 07/15/31 .................................... 2,347 2,318
6.5% due 08/01/32 .................................... 3,338 3,497
Federal Home Loan Mortgage Corp. - Debs
4.5% due 07/15/13 .................................... 2,000 1,976
Federal Home Loan Mortgage Corp. -
Ser. 2640 Cl. WA
3.5% due 03/15/33 .................................... 948 937
Federal National Mortgage Assoc. - Bonds
1.0% due 10/01/33 .................................... 2,002 2,038
4.25% due 03/25/33 ................................... 1,028 1,036
4.5% due 01/25/18 .................................... 4,000 4,004
4.5% due 07/01/18 .................................... 12,952 12,981
5.0% due 10/25/16 .................................... 5,098 5,165
5.0% due 12/25/17 .................................... 4,000 4,079
5.0% due 08/25/27 .................................... 6,373 6,457
5.0% due 01/25/33 .................................... 15,000 14,841
5.0% due 08/01/33 .................................... 8,182 8,101
5.5% due 02/01/18 .................................... 11,153 11,571
5.5% due 11/25/32 .................................... 5,860 5,853
5.5% due 12/25/32 .................................... 15,000 15,192
5.5% due 05/01/33 .................................... 1,899 1,925
5.5% due 05/01/33 .................................... 2,406 2,439
5.5% due 05/01/33 .................................... 6,788 6,880
5.5% due 05/01/33 .................................... 6,510 6,598
5.5% due 06/01/33 .................................... 4,897 4,963
5.5% due 07/01/33 .................................... 22,475 22,780
5.5% due 10/01/33 .................................... 3,329 3,374
6.0% due 09/01/14 .................................... 2,778 2,920
6.0% due 01/25/32 .................................... 5,000 5,167
6.0% due 03/01/33 .................................... 14,012 14,490
6.0% due 09/01/33 .................................... 966 999
6.0% due 10/01/33 .................................... 4,237 4,382
6.0% due 10/01/33 .................................... 1,952 2,019
6.0% due 10/01/33 .................................... 2,423 2,506
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- --------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
6.0% due 11/01/33 ................................... $ 2,749 $ 2,843
6.0% due 11/01/33 ................................... 6,617 6,843
6.0% due 11/01/33 ................................... 2,172 2,246
6.5% due 07/01/32 ................................... 5,260 5,502
6.5% due 11/01/32 ................................... 1,460 1,527
6.5% due 02/01/33 ................................... 5,981 6,256
6.5% due 11/01/33 ................................... 1,583 1,656
6.5% due 12/01/33 ................................... 1,988 2,079
7.0% due 09/01/10 ................................... 878 938
7.0% due 01/01/12 ................................... 275 294
7.0% due 04/01/17 ................................... 886 948
7.0% due 04/01/17 ................................... 424 454
7.0% due 05/01/17 ................................... 197 211
Federal National Mortgage Assoc. - Bonds Cl. PE
3.5% due 07/25/33 ................................... 1,866 1,778
Federal National Mortgage Assoc. - Bonds Ser.
2003-49 Cl. JE
3.0% due 04/25/33 ................................... 2,528 2,413
Federal National Mortgage Assoc. - Debs
6.625% due 11/15/30 ................................. 1,000 1,137
Federal National Mortgage Assoc. - Notes
2.5% due 06/15/08 ................................... 2,000 1,933
3.25% due 08/15/08 .................................. 2,000 1,984
4.375% due 03/15/13 ................................. 7,080 6,953
5.0% due 01/20/07 ................................... 25,000 25,046
Government National Mortgage Assoc - Bonds
5.5% due 10/15/33 ................................... 7,368 7,499
6.0% due 01/15/33 ................................... 848 882
6.0% due 02/15/33 ................................... 87 91
6.0% due 03/15/33 ................................... 7,364 7,660
6.0% due 05/15/33 ................................... 7,580 7,885
6.5% due 09/15/28 ................................... 1,074 1,134
6.5% due 09/15/29 ................................... 713 753
6.5% due 08/15/31 ................................... 1,602 1,690
8.5% due 09/15/21 ................................... 49 54
9.0% due 05/15/21 ................................... 131 147
9.0% due 08/15/21 ................................... 154 172
9.5% due 06/15/16 ................................... 131 146
Government National Mortgage Assoc.
- Bonds Ser. 2003 Cl. XA
3.75% due 05/16/33 .................................. 858 853
--------
305,882
U.S. Governmental - 10.0%
U.S. Treasury - Bonds
0.0% due 08/15/05 ................................... 400 458
0.0% due 02/15/16 ................................... 615 883
0.0% due 08/15/19 ................................... 3,265 4,410
5.375% due 02/15/31 ................................. 1,978 2,063
7.5% due 11/15/16 ................................... $ 1,600 $ 2,037
U.S. Treasury - Notes
0.0% due 08/15/04 ................................... 2,240 2,325
0.0% due 03/31/05 ................................... 9,000 9,031
0.0% due 05/15/05 ................................... 1,300 1,389
0.0% due 08/15/05 ................................... 400 432
0.0% due 08/15/07 ................................... 940 1,052
1.5% due 07/31/05 ................................... 6,000 5,995
2.625% due 05/15/08 ................................. 2,000 1,970
3.0% due 02/15/08 ................................... 6,500 6,530
3.0% due 07/15/12 ................................... 8,232 8,974
3.25% due 08/15/08 .................................. 11,820 11,892
3.375% due 11/15/08 ................................. 4,519 4,555
3.5% due 01/15/11 ................................... 6,282 7,060
3.875% due 01/15/09 ................................. 7,333 8,280
4.25% due 11/15/13 .................................. 8,320 8,311
4.375% due 08/15/12 ................................. 4,000 4,079
5.0% due 08/15/11 ................................... 12,900 13,805
--------
105,531
Whole Loan CMOs - 2.6%
Bank One Issuance Trust - Notes
4.54% due 09/15/10 .................................. 2,140 2,188
CWMBS, Inc. - Ser. 2003-J14 Cl. 2A1
6.25% due 12/25/33 .................................. 9,033 9,557
CWMBS, Inc. - Ser. 2003-R4 Cl. 2A
144A (a)
6.5% due 01/25/34 ................................... 9,500 9,962
Greenwich Capital - Ser. 2003-C1
Cl. A4
4.111% due 07/05/12 ................................. 770 732
Greenwich Capital Commercial
Funding Corp. - Ser. 2003-C2 Cl. A2
4.022% due 07/05/10 ................................. 3,645 3,654
Specialty Underwriting - Ser. 2003-
BC4 Cl A3B
1.0% due 11/25/34 ................................... 1,825 1,823
--------
27,916
Wireless Telecommunications Services - 0.5%
AT&T Wireless, Inc. - Notes
7.875% due 03/01/11 ................................. 2,995 3,466
AT&T Wireless, Inc. - Sr. Notes
8.75% due 03/01/31 .................................. 340 419
Mobile Telesystems Finance - Notes
10.95% due 12/21/04 ................................. 675 716
Mobile Telesystems Finance - Notes
144A (a)
8.375% due 10/14/10 ................................. 270 275
9.75% due 01/30/08 .................................. 765 828
--------
5,704
--------
TOTAL PUBLICLY-TRADED BONDS- ..................... 83.8% 884,455
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Market
Name of Issuer Shares Value
-------------- ---------- -------
(000's)
COMMON STOCK
Banks - 0.1%
Wachovia Preferred Funding Corp. - Ser. A ........... 26,000 $ 733
U.S. Government Agencies - 1.6%
Federal Home Loan Bank .............................. 2,485,568 2,535
Federal National Mortgage Assoc. .................... 14,284,334 14,586
-------
17,121
-------
TOTAL COMMON STOCK- 1.7% 17,854
PREFERRED STOCK
Commercial Services & Supplies - 0.0%
Glass Tech., Inc. - Ser. A .......................... 1 1
Diversified Financials - 0.1%
J.P. Morgan Chase Capital XII ....................... 33,000 847
Diversified Telecommunication Services - 0.0%
Metrocall Holdings, Inc. - Ser. A ................... 154 2
Electric/Gas - 0.3%
Dominion Resources , Inc. - Notes ................... 47,000 2,691
Finance - 0.1%
HSBC Capital Funding ................................ 820,000 772
Media - 0.3%
CSC Holdings, Inc. - Ser. H ......................... 20,705 2,174
CSC Holdings, Inc. - Ser. M ......................... 13,740 1,443
-------
3,617
Real Estate Investment Trust - 0.3%
CarrAmerica Realty Corp. - Ser. E ................... 29,000 771
Delphi Properties, Inc .............................. 29,600 780
Health Care Property Investments,
Inc. - Ser. F .................................... 31,000 791
Prologis - Ser. F ................................... 33,400 859
-------
3,201
-------
TOTAL PREFERRED STOCK- .......................... 1.1% 11,131
WARRANTS
Commercial Services & Supplies - 0.0%
Sunterra Corp. expires 07/26/07 (Cost $0) ........... 152 0
-------
TOTAL WARRANTS- ............................... 0.0% 0
Par Market
Name of Issuer Value Value
-------------- ------- --------
(000's) (000's)
COMMERCIAL PAPER
Banks - 0.3%
Danske Corp.
1.065% due 01/20/04 ................................. $ 1,100 1,099
Rabobank USA Financial Corp.
1.06% due 01/30/04 .................................. $ 2,300 $ 2,298
--------
3,397
Finance - 0.2%
HBOS Treasury Services plc
1.10% due 02/24/04 .................................. 1,000 998
UBS Finance Delaware LLC
1.075% due 02/12/04 ................................. 800 799
--------
1,797
U.S. Government Agencies - 8.5%
Federal Home Loan Bank - Disc. Notes
1.04% due 03/12/04 .................................. 1,400 1,397
Federal Home Loan Mortgage Corp. -
Disc. Notes
1.07% due 02/19/04 .................................. 39,300 39,243
1.08% due 02/12/04 .................................. 14,800 14,782
1.085% due 03/01/04 ................................. 2,500 2,495
1.26% due 02/26/04 .................................. 2,200 2,196
1.00% due 02/04/04 .................................. 1,000 999
Federal National Mortgage Assoc. -
Disc. Notes
1.01% due 02/03/04 .................................. 300 300
1.06% due 03/31/04 .................................. 600 598
1.075% due 03/17/04 ................................. 19,200 19,158
1.075% due 05/04/04 ................................. 1,100 1,097
1.09% due 03/24/04 .................................. 2,300 2,294
1.135% due 02/25/04 ................................. 5,300 5,291
--------
89,850
U.S. Governmental - 5.5%
U.S. Treasury - Bills
0.935% due 02/19/04 ................................. 13,600 13,583
1.00% due 06/10/04 .................................. 7,900 7,865
1.025% due 05/06/04 ................................. 7,000 6,975
1.031% due 06/03/04 ................................. 19,900 19,812
1.04% due 05/13/04 .................................. 10,000 9,962
--------
58,197
--------
TOTAL COMMERCIAL PAPER- 14.5% 153,241
INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED
SECURITIES - 0.0%
State Street Navigator Securities
Lending Portfolio ................................ 420 420
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
ACTIVE BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- ----------
(000's) (000's)
SHORT-TERM INVESTMENTS - 5.8%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ................................. $61,007 $ 61,007
------- ----------
TOTAL INVESTMENTS- ............................ 106.9% 1,128,108
Payables, less cash and receivables- ............. (6.9)% (72,499
------- ----------
NET ASSETS- ................................ 100.0% $1,055,609
======= ==========
(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, 2003, securities aggregated
$71,261 or 6.7% of net assets of the Portfolio.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Active Bond Fund (the "Fund") is a diversified series of John
Hancock Variable Series Trust I (the "Trust"), an open-end investment management
company registered under the Investment Company Act of 1940. The Trust is
organized as a Massachusetts business trust and consists of thirty different
funds as of December 31, 2003. The results of this Fund are included in this
report. The results of the other Funds in the Trust are presented under separate
cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint repurchase agreements: The Fund, 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 Fund's custodian
bank receives delivery of the underlying securities for the joint repurchase
agreement on the Fund's behalf. The Adviser 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 Fund 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 December 31, 2003 are as follows:
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $ 29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Discount and premium on debt securities: The Fund accretes discount and
amortizes 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 the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$413 $420
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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 December 31, 2003, the Fund
had open forward currency contracts which contractually obligate the Fund to
deliver or receive currencies at a specified date as follows:
Principal Amount Unrealized
Covered by Contract Expiration Month Gain (Loss)
------------------- ---------------- -----------
Currency Purchased
Japanese Yen 701 January 04 $ 2
Currency Sold
Euro 307 January 04 (5)
---
$(3)
===
Options: The Fund may use option contracts to manage its exposure to the
bond market and to fluctuations in interest rates and currency values. Option
contracts tend to increase or decrease the Fund's exposure to the underlying
instrument or hedge other fund investments.
When the Fund purchases an option, the premium paid by the Fund is included
in the Fund's Statement of Assets and Liabilities as an investment and
subsequently "marked to market" to reflect the option's current market value.
Purchased options are valued at the last sale price on the market on which they
are principally traded. If the purchased option expires, the Fund realizes a
loss in the amount of the premium. If the Fund enters into a closing sale
transaction, it realizes a gain or loss, depending on whether the proceeds from
the sale are greater or less than the cost of the option. If the Fund exercises
a call option, the cost of the securities acquired by exercising the call is
increased by the premium paid to buy the call. If the Fund exercises a put
option, it realizes a gain or loss from the sale of the underlying security and
the proceeds from such sale are decreased by the premium originally paid. The
risk associated with purchasing options is limited to the premium originally
paid.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
When the Fund writes an option, the premium received by the Fund is
presented in the Fund's Statement of Assets and Liabilities as an asset and an
equivalent liability. The amount of the liability is subsequently "marked to
market" to reflect the current market value of the option written. Written
options are valued at the last sale price or, in the absence of a sale, the last
offering price on the market on which they are principally traded. If an option
expires on its stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a written option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received. If a written put option is exercised, the amount of the premium
originally received reduces the cost of the security which the Fund purchases
upon exercise of the option.
The risk in writing a call option is that the Fund relinquishes the
opportunity to profit if the market price of the underlying security increases
and the option is exercised. In writing a put option, the Fund assumes the risk
of incurring a loss if the market price of the underlying security decreases and
the option is exercised. In addition, there is a risk the Fund may not be able
to enter into a closing transaction because of an illiquid secondary market, or
if the counterparties do not preform under the contracts' terms.
As of December 31, 2003, the Fund had open written options as follows:
Open
Contracts Strike Price Expiration Month Market Value
--------- ------------ ---------------- ------------
OTC EWPO 3ML 6.0 (Put) 19,000 6.0 October 04 $(145)
OTC EWPO 3ML 3.8 (Call) 19,000 3.8 October 04 (155)
-----
$(300)
=====
Swap Agreements: The Fund may invest in swap agreements which involve the
exchange of cash payments based on the specified terms and conditions of such
agreements. A swap is an agreement to exchange the return generated by one
investment for the return generated by another instrument. The value of each
swap is determined by the counterparty to the swap agreement using a methodology
which discounts the expected future cash receipts or disbursements related to
the swap. The Fund may also enter into interest rate swap agreements which
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, (e.g., an exchange of floating rate
payments with respect to a notional amount of principal). Interest rate swaps
are "marked-to-market" daily. Net market value is reported as an asset or a
liability in the Statement of Assets and Liabilities. The cash paid or received
on a swap is recognized as income or expense when such a payment is paid or
received.
Entering into swap agreements involves, to varying degrees, elements of
credit risk, market risk and interest rate risk in excess of the amount
recognized in the Statement of Assets and Liabilities. Such risks involve the
possibility that there is not a liquid market for these agreements, that the
counterparty to the agreements may default on its obligation to perform and that
there may be unfavorable changes in market conditions or interest rates.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Swap agreements which were open for the year ended December 31, 2003 are
summarized as follows:
Net Unrealized
Appreciation
Par Value Interest Rate Swaps Counter Party (Depreciation)
- --------- ---------------------------------------- --------------- ---------------
71,100 To make or receive semi-annual payments Morgan Stanley $(140)
through 6/16/2009 based on the
difference between (A) the fixed rate of
4.00% and (B) floating rate of 3 Month
LIBOR, adjusted every 3 months.
32,600 To make or receive semi-annual payments Bank of America (64)
through 6/16/2009 based on the
difference between (A) the fixed rate of
4.00% and (B) floating rate of 3 Month
LIBOR, adjusted every 3 months.
2,400,000 To make or receive semi-annual payments Morgan Stanley (603)
(JPY) through 6/18/2013 based on the
difference between (A) the fixed rate of
1.645% and (B) floating rate of 6 Month
LIBOR, adjusted every 6 months.
45,400 To make or receive semi-annual payments Merrill Lynch 262
(Euro) through 3/15/2007 based on the
difference between (A) the fixed rate of
4.00% and (B) floating rate of 6 Month
LIBOR, adjusted every 6 months.
Credit Default Swaps
3,900 To make quarterly fixed coupon payments UBS (2)
through 3/6/2004 based on the annual
fixed rate of 0.5%. In the event of a
predefined "credit event notice" of the
Federative Republic of Brazil 14.5%,
10/15/2009 Note, the Fund will receive
amounts specified under the terms of the
swap agreement.
-----
$(547)
=====
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $693, $96, $3,265 and $2,190 which expire in 2007, 2008, 2009 and 2010,
respectively.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Certain of the above losses may be limited under sections 382 - 384 of the
Internal Revenue Code, as amended.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred approximately $1,579 in net realized capital losses. As
permitted by tax regulations, the Fund intends to elect to defer these losses
and treat them as arising in the fiscal year ending on December 31, 2004.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between Between Between
$100 Million $250 Million $500 Million Excess Over
First $100 Million and $250 Million and $500 Million and $1 Billion $1 Billion
- ------------------ ---------------- ---------------- -------------- -----------
0.70% 0.65% 0.61% 0.58% 0.55%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, there were no reimbursements to the Fund.
John Hancock has entered into Sub-Advisory Agreements with Independence
Investment LLC, John Hancock Advisers, Pacific Investment Management Company
LLC, and Declaration Management & Research LLC, with respect to the Fund. Each
is an affiliate of John Hancock, and under its supervision, is responsible for
the day-to-day investment management of the Fund.
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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- ---------- --------------------
$4,696,539 $4,625,560
As of December 31, 2003, transactions for written options were as follows:
Contracts Premium ($)
--------- -----------
Beginning of period -- --
Options opened 38,000 329
Options closed/expired -- --
------ ---
End of period 38,000 329
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------- ------------ --------------
$1,107,455 $172,839 $(151,784) $21,055
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss and premium amortization and market
discount accretion on debt securities. Additionally, as a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
it's capital accounts without impacting the net asset value of the Fund.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $6,244 $21,055
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $66,299 $5,737 $--
2002 52,675 -- --
Included in the Fund's 2003 distributions from ordinary income is $21,924
in excess of investment company taxable income, which in accordance with
applicable US tax law, is taxable to shareholders as ordinary income
distributions.
NOTE E--COMBINATION
On April 25, 2003, the shareholders of the Fund (acquiring fund) approved
the combination of the funds in the following table:
Acquiring Fund Target Fund
- --------------- -------------------
VST Active Bond VA Strategic Income
This combination provides for the transfer of substantially all of the
assets and liabilities of the target fund to the acquiring fund in exchange
solely for the fund shares of the acquiring fund. The acquisition was accounted
for as tax-free exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund
Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets
vs.Target Fund Acquiring Fund Net Assets Appreciation to Combination After Combination
- ------------------- -------------- ----------- ------------ ---------------- --------------------
VST Active Bond
vs.
VA Strategic Income 8,433 $83,358 $2,176 $1,016,994 $1,100,351
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE F--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 meeting of
Contract Owners/Policyholders held on September 19, 2003 on the following
matters:
For Against Abstain
--- ------- -------
To approve, as to the Active Bond Fund, a new Sub-Advisory Agreement among the
Trust, John Hancock, and Declaration Management & Research LLC. 85% 5% 10%
For Against Abstain
--- ------- -------
To approve, as to the Active Bond Fund, an amendment to the current Investment
Management Agreement between the Trust, John Hancock, and John Hancock Advisers. 85% 5% 10%
NOTE G--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE G--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- --------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE G--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Active Bond Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Active Bond Fund of John Hancock Variable Series Trust I at December 31, 2003,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1998
- --------------------------------------------------------------------------------
Bond Index Fund
Standish Mellon Asset Management Company LLC Gregory Curran
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 3.60%, underperforming its benchmark, the Lehman
Brothers Aggregate Bond Index.
.. The Fund continues to meet its long-term investment objective: to track the
performance of the Lehman Brothers Aggregate Bond Index, which covers the
U.S. investment grade fixed-rate bond market, including government and
credit securities, agency mortgage pass through securities, asset-backed
securities and commercial mortgage-backed securities.
.. On October 1, 2003, the Lehman Aggregate Bond Index was modified as
follows: increasing the liquidity criterion from $150 million to $250
million, use of the more conservative of Moody's or S&P ratings, addition
of taxable municipals, and moving captive finance to the parent sector.
.. The manager seeks to track the performance of its benchmark by investing in
a representative sample of securities selected through proprietary
quantitative techniques. Issues are selected to best match the risk
characteristics, including price sensitivity, industry, and quality
exposure of the nearly 6,800 plus securities in the benchmark.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/98
(Fund Inception Date)
Bond Index Fund Bond Index Benchmark(1)
--------------- -----------------------
5/1/1998 $10,000.00 $10,000.00
5/31/1998 10,101.92 10,107.00
6/30/1998 10,210.82 10,210.09
7/31/1998 10,220.22 10,218.26
8/31/1998 10,461.38 10,417.52
9/30/1998 10,756.83 10,715.46
10/31/1998 10,688.56 10,639.38
11/30/1998 10,703.12 10,703.21
12/31/1998 10,720.00 10,728.90
1/31/1999 10,794.75 10,805.08
2/28/1999 10,520.80 10,547.92
3/31/1999 10,584.46 10,600.65
4/30/1999 10,608.95 10,627.16
5/31/1999 10,484.98 10,517.70
6/30/1999 10,449.87 10,485.09
7/31/1999 10,419.87 10,455.73
8/31/1999 10,413.57 10,447.37
9/30/1999 10,497.22 10,541.40
10/31/1999 10,513.95 10,568.80
11/30/1999 10,512.84 10,562.46
12/31/1999 10,444.55 10,498.03
1/31/2000 10,424.87 10,494.88
2/29/2000 10,551.45 10,626.07
3/31/2000 10,713.16 10,779.08
4/30/2000 10,665.75 10,726.27
5/31/2000 10,639.83 10,716.61
6/30/2000 10,855.08 10,935.23
7/31/2000 10,956.44 11,051.14
8/31/2000 11,122.46 11,206.96
9/30/2000 11,165.15 11,249.55
10/31/2000 11,244.42 11,320.42
11/30/2000 11,445.41 11,514.00
12/31/2000 11,677.63 11,740.83
1/31/2001 11,840.38 11,938.07
2/28/2001 11,941.71 12,041.94
3/31/2001 11,992.74 12,102.15
4/30/2001 11,938.07 12,051.32
5/31/2001 12,008.36 12,123.62
6/30/2001 12,046.59 12,169.69
7/31/2001 12,310.04 12,442.30
8/31/2001 12,436.14 12,585.38
9/30/2001 12,595.00 12,731.37
10/31/2001 12,850.08 12,997.46
11/30/2001 12,670.29 12,818.09
12/31/2001 12,583.53 12,736.06
1/31/2002 12,673.71 12,839.22
2/28/2002 12,793.35 12,963.76
3/31/2002 12,553.58 12,748.56
4/30/2002 12,794.78 12,995.88
5/31/2002 12,894.47 13,106.35
6/30/2002 13,008.23 13,220.37
7/31/2002 13,191.56 13,380.34
8/31/2002 13,418.36 13,606.47
9/30/2002 13,634.36 13,826.89
10/31/2002 13,581.25 13,763.29
11/30/2002 13,550.90 13,759.16
12/31/2002 13,835.16 14,043.97
1/31/2003 13,832.90 14,056.61
2/28/2003 14,028.79 14,250.60
3/31/2003 14,018.37 14,239.19
4/30/2003 14,118.02 14,357.38
5/30/2003 14,366.73 14,624.43
6/30/2003 14,333.90 14,595.18
7/31/2003 13,849.35 14,104.78
8/31/2003 13,930.82 14,197.87
9/30/2003 14,304.05 14,574.12
10/31/2003 14,160.05 14,438.58
11/30/2003 14,185.81 14,473.23
12/31/2003 14,333.60 14,620.86
Value on 12/31/03:
- ------------------
$14,334 Bond Index Fund
$14,621 Bond Index Benchmark (1)
MORNINGSTAR
CATEGORY+:
.. Intermediate
Government
MORNINGSTAR
RISK+:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR
RATING+:
.. **** (VL/VUL)
.. **** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Federal National Mortgage Assoc. 21.6%
U.S. Treasury 19.8%
Federal Home Loan Mortgage Corp. 17.9%
Government National Mortgage Assoc. 5.0%
Federal Home Loan Bank 2.2%
General Motors Corp. 1.4%
Morgan Stanley 1.2%
General Electric 1.2%
KFW International Finance, Inc. 1.1%
JP Morgan Chase & Co. 1.1%
AVERAGE ANNUAL TOTAL RETURNS*
Bond Index Bond Index
Fund Benchmark(1)
---------- ------------
1 Year 3.60% 4.11%
3 Years 7.07 7.59
5 Years 5.98 6.39
Since Inception (5/1/98) 6.55 6.93
FUND COMPOSITION (as of December 31, 2003)(2)
% of
Credit Quality Assets
- ---------------------- ------
AAA Government/Agency 74.15%
AA 2.07%
A 12.09%
BBB 11.69%
Weighted Average Yield 4.28%
(1) The benchmark is the Lehman Brothers Government/Credit Bond Index from May
1998 to January 2001, and the Lehman Brothers Aggregate Bond Index from
February 2001 to present.
(2) Statistics are based on bond assets only, excluding cash.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 150 VL/VUL subaccounts and 215 VA subaccounts in the
Morningstar Intermediate Government category. This represents the
Morningstar 3 year rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $52,065 of
securities loaned (Note B)) ..................................... $206,149
Net unrealized appreciation of investments ......................... 5,808
Short-term investments at value .................................... 56,287
--------
Total investments ............................................ 268,244
Cash ............................................................... 8
Receivable for:
Investments sold ................................................ 1,502
Fund shares sold ................................................ 22
Interest ........................................................ 2,469
--------
Total assets ....................................................... 272,245
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 3,403
Collateral for securities on loan ............................... 53,178
Other liabilities ............................................... 3
--------
Total liabilities .................................................. 56,584
--------
Net assets ......................................................... $215,661
========
Shares of beneficial interest outstanding .......................... 21,283
--------
Net asset value per share .......................................... $ 10.13
========
Composition of net assets:
Capital paid-in ................................................. $209,929
Accumulated net realized loss on investments
futures and foreign currency transactions .................... (76)
Net unrealized appreciation of investments ...................... 5,808
--------
Net assets ......................................................... $215,661
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ......................................................... $11,229
Securities lending ............................................... 29
-------
Total investment income ............................................. 11,258
-------
EXPENSES
Investment advisory fee .......................................... 315
Auditors fees .................................................... 31
Custodian fees ................................................... 146
Legal fees ....................................................... 15
Printing & mailing fees .......................................... 27
Trustees' fees ................................................... 8
Other fees ....................................................... 10
-------
Total expenses ...................................................... 552
Less expenses reimbursed ......................................... (11)
-------
Net expenses ........................................................ 541
-------
Net investment income ............................................... 10,717
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on investments ................................. 207
Change in unrealized depreciation on
investments ................................................... (3,166)
-------
Net realized and unrealized loss .................................... (2,959)
-------
Net increase in net assets resulting from
operations ....................................................... $ 7,758
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ......................... $ 10,717 $ 9,325
Net realized gain ............................. 207 302
Change in net unrealized appreciation
(depreciation) ............................. (3,166) 7,403
--------- --------
Net increase in net assets resulting from
operations .............................. 7,758 17,030
Distributions to shareholders from:
Net investment income ......................... (10,677) (9,249)
Realized gains ................................ (947) (179)
Capital paid-in ............................... (217)
--------- --------
Decrease in net assets resulting from
distributions ........................... (11,624) (9,645)
From fund share transactions:
Proceeds from shares sold ..................... 108,981 130,836
Distributions reinvested ...................... 11,624 9,645
Payment for shares redeemed ................... (109,173) (69,129)
--------- --------
Increase in net assets from fund share
transactions ............................ 11,432 71,352
--------- --------
NET INCREASE IN NET ASSETS ....................... 7,566 78,737
NET ASSETS
Beginning of Period ........................... 208,095 129,358
--------- --------
End of Period ................................. $ 215,661 $208,095
========= ========
Analysis of fund share transactions:
Sold .......................................... 10,603 13,015
Reinvested .................................... 1,136 959
Redeemed ...................................... (10,661) (6,852)
--------- --------
Net increase in fund shares outstanding .......... 1,078 7,122
========= ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Bond Index Fund
--------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- ------- -------
Net Assets Value at Beginning of Period ................... $ 10.30 $ 9.89 $ 9.74 $ 9.32 $ 10.19
Income from Investment Operations:
Net Investment Income .................................. 0.48 0.54 0.57 0.62 0.63
Net Realized and Unrealized Gain (Loss) on
Investments(a) ...................................... (0.12) 0.42 0.17 0.43 (0.89)
-------- -------- -------- ------- -------
Total From Investment Operations ....................... 0.36 0.96 0.74 1.05 (0.26)
Less Distributions:
Distribution from Net Investment Income ................ (0.48) (0.51) (0.58) (0.63) (0.61)
Distribution from Net Realized Gains on Investments .... (0.05) (0.04) (0.01)
-------- -------- -------- ------- -------
Total Distributions .................................... (0.53) (0.55) (0.59) (0.63) (0.61)
-------- -------- -------- ------- -------
Net Assets Value at End of Period ......................... $ 10.13 $ 10.30 $ 9.89 $ 9.74 $ 9.32
======== ======== ======== ======= =======
Total Investment Return(b) ................................ 3.60% 9.95% 7.76% 11.81% (2.57)%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ...... 0.24%(c) 0.22%(c) 0.24% 0.25%(c) 0.29%(c)
Ratio of Net Investment Income to Average Net Assets ... 4.73% 5.30% 5.77%(d) 6.80% 6.56%
Portfolio Turnover Rate ................................ 40.22% 57.31% 68.70% 40.46% 17.06%
Net Assets End of Period (000s Omitted) ................... $215,661 $208,095 $129,358 $64,768 $38,436
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made, the annual expense ratio would have been .24%, .25%, .27%, and
.35%, for the years ended December 31, 2003, 2002, 2000, and 1999,
respectively.
(d) Had the Fund not amortized premiums and accreted discounts on debt
securities, the annual ratio of net investment income to average net assets
would have been 6.37% for the years ended December 31, 2001.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
PUBLICLY-TRADED BONDS (000's) (000's)
Aerospace & Defense - 0.8%
Boeing Cap. Corp. - Sr. Notes
7.1% due 09/27/05 ....................................... $ 500 $ 541
BOEING Co.
8.75% due 09/15/31 ...................................... 90 120
Lockheed Martin Corp.
8.2% due 12/01/09 ....................................... 200 243
Lockheed Martin Corp. - Bonds
8.5% due 12/01/29 ....................................... 245 321
Northrop-Grumman Corp. - Debs
7.75% due 03/01/16 ...................................... 75 90
Raytheon Co. - Notes
6.75% due 08/15/07 ...................................... 200 222
United Technologies Corp. - Debs
8.875% due 11/15/19 ..................................... 50 69
United Technologies Corp. - Notes
6.1% due 05/15/12 ....................................... 180 198
-------
1,804
Auto Loan - 2.0%
Ford Motor Credit Co.
6.125% due 01/09/06 ..................................... 800 831
Ford Motor Credit Co. - Bonds
7.375% due 02/01/11 ..................................... 250 273
General Motors Acceptance Corp. - Notes
6.125% due 09/15/06 ..................................... 400 428
7.75% due 01/19/10 ...................................... 400 453
8.0% due 11/01/31 ....................................... 430 483
GMAC Commercial Mortgaged Securities, Inc. - CTF -
Ser. 1998-C1 Cl. A2
6.7% due 05/15/30 ....................................... 900 1,007
Household Finance Corp. - Notes
8.0% due 07/15/10 ....................................... 350 419
Household Finance Corp. - Sr. Unsub. Notes
5.875% due 02/01/09 ..................................... 280 304
Toyota Motor Credit Corp. - Notes
5.5% due 12/15/08 ....................................... 60 66
-------
4,264
Automobiles - 0.9%
DaimlerChrysler NA Holding Co.
7.2% due 09/01/09 ....................................... 650 726
Delphi Automotive Systems Corp. - Debs
7.125% due 05/01/29 ..................................... 50 51
Delphi Automotive Systems Corp. - Notes
6.5% due 05/01/09 ....................................... 200 215
Ford Motor Co. - Bonds
6.625% due 02/15/28 ..................................... 350 322
General Motors Corp. - Sr. Notes
7.2% due 01/15/11 ....................................... 500 550
-------
1,864
Banks - 4.9%
African Development Bank - Sub. Notes
6.875% due 10/15/15 ..................................... $ 35 $ 41
Bank of America Corp. - Sub. Notes
7.8% due 02/15/10 ....................................... 350 416
Bank One Corp.
7.875% due 08/01/10 ..................................... 300 360
Bank One Corp. - Notes
6.875% due 08/01/06 ..................................... 1,000 1,106
BankAmerica Corp. - Sub. Notes
6.5% due 03/15/06 ....................................... 150 163
Chase Manhattan Corp. - Sub. Notes
7.125% due 02/01/07 ..................................... 225 252
Credit Suisse First Boston
6.5% due 01/15/12 ....................................... 400 445
Credit Suisse First Boston, Inc. - Notes
5.875% due 08/01/06 ..................................... 500 540
European Investment Bank - Global Notes
4.625% due 03/01/07 ..................................... 800 850
Fleet Boston Corp. - Sub. Notes
7.375% due 12/01/09 ..................................... 100 118
Fleet Financial Group, Inc. - Sub. Debs.
6.7% due 07/15/28 ....................................... 75 82
HSBC Holdings Plc
7.5% due 07/15/09 ....................................... 150 175
InterAmerican Development Bank - Debs.
8.5% due 03/15/11 ....................................... 200 252
Intermediate American Development Bank - Bonds
6.125% due 03/08/06 ..................................... 1,300 1,410
International Bank of Reconstruction & Development
- Notes
5.0% due 03/28/06 ....................................... 750 798
JP Morgan Chase & Co. - Notes
5.25% due 05/30/07 ...................................... 1,000 1,068
National City Bank of Pennsylvania - Sub. Notes
7.25% due 10/21/11 ...................................... 50 59
NationsBank Corp. - Sub. Notes
7.75% due 08/15/15 ...................................... 400 484
Royal Bank of Scotland PLC - Sub. Notes
6.4% due 04/01/09 ....................................... 150 168
United Bank National Association of Minneapolis
6.375% due 08/01/11 ..................................... 325 362
Wachovia Corp. - Notes
4.95% due 11/01/06 ...................................... 1,350 1,433
Wachovia Corp. - Sub. Notes
5.625% due 12/15/08 ..................................... 75 81
-------
10,663
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Beverages - 0.5%
Anheuser Busch Cos., Inc.
9.0% due 12/01/09 ....................................... $ 470 $ 596
Coca-Cola Enterprises, Inc. - Debs.
8.5% due 02/01/22 ....................................... 100 129
Kellogg Co. - Debs. - Ser. B
7.45% due 04/01/31 ...................................... 100 118
Pepsi Bottling Group, Inc. - Sr. Notes - Ser. B
7.0% due 03/01/29 ....................................... 100 115
SuperValu, Inc. - Notes
7.625% due 09/15/04 ..................................... 150 155
------
1,113
Chemicals - 0.2%
E.I. Du Pont De Nemours
6.5% due 01/15/28 ....................................... 150 165
Eastman Chemical - Debs.
7.6% due 02/01/27 ....................................... 50 56
Morton International, Inc. - Debs.
9.25% due 06/01/20 ...................................... 40 53
Rohm & Haas Co. - Notes
7.4% due 07/15/09 ....................................... 80 94
------
368
Commercial Services & Supplies - 0.3%
Electronic Data Systems Corp.
7.125% due 10/15/09 ..................................... 100 107
First Data Corp. - Sr. Notes
5.625% due 11/01/11 ..................................... 400 425
Honeywell International, Inc. - Notes
7.5% due 03/01/10 ....................................... 75 89
John Deere Capital Corp. - Notes
6.0% due 02/15/09 ....................................... 60 66
------
687
Communications Equipment - 0.4%
Deutsche Telekom International Finance
8.75% due 06/15/30 ...................................... 300 383
GTE Corp. - Debs
6.94% due 04/15/28 ...................................... 100 105
Motorola, Inc. - Notes
6.75% due 02/01/06 ...................................... 300 323
------
811
Computers & Peripherals - 0.4%
Hewlett - Packard Co. - Notes
7.15% due 06/15/05 ...................................... 200 215
International Business Machines Corp. - Debs.
7.0% due 10/30/25 ....................................... 100 115
International Business Machines Corp. - Notes
4.25% due 09/15/09 ...................................... 600 616
------
946
Credit Card - 1.0%
American Express Co. - Notes
4.875% due 07/15/13 ..................................... $ 150 $ 150
MBNA Credit Card Master Note Trust - Ser.
2002-1 Notes Cl. A
4.95% due 06/15/09 ...................................... 1,000 1,066
MBNA Master Credit Card Trust II - Notes
6.5% due 04/15/10 ....................................... 400 449
Standard Credit Card Master Trust
8.25% due 01/07/07 ...................................... 400 427
------
2,092
Diversified Financials - 6.5%
Bear Stearns Co., Inc.
7.625% due 02/01/05 ..................................... 250 266
Chase Commercial Mortgage Securities Corp.
- Ser. 200-2 CTF Cl. A2
7.631% due 07/15/32 ..................................... 300 351
Citicorp Capital II
8.015% due 02/15/27 ..................................... 100 116
Citigroup, Inc.
7.25% due 10/01/10 ...................................... 400 466
Citigroup, Inc. - Notes
6.625% due 01/15/28 ..................................... 100 109
Citigroup, Inc. - Sub. Notes
5.875% due 02/22/33 ..................................... 190 187
Devon Financing Corp. United L C - Notes
6.875% due 09/30/11 ..................................... 400 454
GE Capital Commercial Mortgage Corp.
- Ser. 2001-2 Cl. A4
6.59% due 08/11/33 ...................................... 550 607
General Electric Capital Corp.
6.0% due 06/15/12 ....................................... 550 596
6.125% due 02/22/11 ..................................... 1,150 1,265
Goldman Sachs Group, Inc. - Notes
7.35% due 10/01/09 ...................................... 500 583
Hartford Financial Services Group, Inc. - Sr. Notes
7.75% due 06/15/05 ...................................... 150 162
KFW International Finance, Inc. - Notes
2.5% due 10/17/05 ....................................... 2,000 2,025
KFW International Finance, Inc. - Sr. Notes
5.25% due 06/28/06 ...................................... 300 324
Lehman Brothers Holdings, Inc. - Notes
6.25% due 05/15/06 ...................................... 500 543
Lehman Brothers, Inc. - Sr. Sub. Notes
7.5% due 08/01/26 ....................................... 150 178
Merrill Lynch & Co., Inc. - Notes
8.0% due 06/01/07 ....................................... 200 229
Morgan Stanley Capital, Inc. - CTF 1998-
WF1 Cl. A1
6.25% due 03/15/30 ...................................... 290 297
Morgan Stanley Capital, Inc. - Pass Thru
Certs. Ser. 1999-RM1
6.37% due 12/15/31 ...................................... 811 871
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Diversified Financials - Continued
Morgan Stanley Group, Inc.
6.1% due 04/15/06 ....................................... $1,065 $ 1,152
6.75% due 04/15/11 ...................................... 250 283
Newcourt Credit Group, Inc. - Ser. B
6.875% due 02/16/05 ..................................... 100 105
Prudential Commercial Mortgage Trust -
Cl. A2
4.493% due 02/11/36 ..................................... 450 442
Salomon Brothers Mortgage Securities Inc. -
Pass Thru Certs - Ser. 2000-C1 Cl. A2
7.52% due 12/18/09 ...................................... 300 349
Sumitomo Bank International Finance NV -
Notes
8.5% due 06/15/09 ....................................... 100 120
Washington Mutual Capital I
8.375% due 06/01/27 ..................................... 60 70
Washington Mutual Finance Corp. - Sr. Notes
6.25% due 05/15/06 ...................................... 300 326
Wells Fargo & Co. - Sub. Notes
6.875% due 04/01/06 ..................................... 1,100 1,213
Wells Fargo Financial, Inc. - Sr. Notes
4.875% due 06/12/07 ..................................... 350 371
-------
14,060
Diversified Telecommunication Services - 1.6%
AT&T Corp. - Notes
6.5% due 03/15/13 ....................................... 340 353
Bell Canada
7.75% due 04/01/06 ...................................... 125 138
Bellsouth Corp. - Notes
6.875% due 10/15/31 ..................................... 200 219
British Telecommunications PLC - Notes
8.375% due 12/15/10 ..................................... 200 243
8.875% due 12/15/30 ..................................... 130 170
Cox Communications, Inc. - Debs
6.8% due 08/01/28 ....................................... 250 272
France Telecom SA - Notes
6.85% due 10/15/04 ...................................... 350 391
10.0% due 03/01/31 ...................................... 220 292
Sprint Capital Corp.
6.875% due 11/15/28 ..................................... 150 146
7.625% due 01/30/11 ..................................... 300 336
Telefonica Europe BV - Notes
8.25% due 09/15/30 ...................................... 100 126
Verizon Global Funding Corp. - Notes
7.25% due 12/01/10 ...................................... 230 265
Vodafone Group Plc
7.75% due 02/15/10 ...................................... 500 593
-------
3,544
Electric Utilities - 0.6%
CalEnergy Co., Inc. - Bonds
8.48% due 09/15/28 ...................................... 60 74
Cincinnati Gas & Electric Co. - Debs
5.7% due 09/15/12 ....................................... $ 300 $ 316
FirstEnergy Corp. - Notes Ser. C
7.375% due 11/15/31 .....................................
Oncor Electric Delivery Co. - Sr. Sec. Notes
6.375% due 05/01/12 ..................................... 400 440
Progress Energy, Inc. - Sr. Notes
7.1% due 03/01/11 ....................................... 500 563
-------
1,393
Electric/Gas - 0.5%
Constellation Energy Group, Inc. - Notes
7.0% due 04/01/12 ....................................... 240 271
Dominion Resources, Inc.
8.125% due 06/15/10 ..................................... 200 240
Niagara Mohawk Power Corp.
7.75% due 10/01/08 ...................................... 200 232
Ontario Hydro
6.1% due 01/30/08 ....................................... 100 111
Tennessee Valley Authority
6.75% due 11/01/25 ...................................... 100 115
Virginia Electric Power Co. - 1st Mtge.
7.625% due 07/01/07 ..................................... 150 173
-------
1,142
Finance - 0.5%
Ameritech Capital Funding Corp.
6.875% due 10/15/27 ..................................... 60 66
Anardarko Finance Co. - Sr. Notes
6.75% due 05/01/11 ...................................... 200 227
Bear Stearns & Co., Inc. - Notes
5.7% due 11/15/14 ....................................... 240 250
Countrywide Funding Corp.
5.5% due 02/01/07 ....................................... 200 214
Financing Corp.
8.6% due 09/26/19 ....................................... 150 203
Massachusetts Special Purpose Trust - Ser. BEC-1
Cl. A5
7.03% due 03/15/12 ...................................... 150 173
-------
1,133
Food & Drug Retailing - 0.6%
Albertson's, Inc. - Notes
6.625% due 06/01/28 ..................................... 50 50
Albertson's, Inc. - Sr. Notes
7.5% due 02/15/11 ....................................... 345 395
Safeway, Inc. - Notes
5.8% due 08/15/12 ....................................... 150 155
The Kroger Co.
8.05% due 02/01/10 ...................................... 500 595
-------
1,195
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000)'s
PUBLICLY-TRADED BONDS - Continued
Food Products - 0.7%
Conagra Foods, Inc. - Notes
7.875% due 09/15/10 ..................................... $ 250 $ 298
Conagra, Inc. - Debs.
9.75% due 03/01/21 ...................................... 75 101
General Mills, Inc. - Notes
6.0% due 02/15/12 ....................................... 250 267
Kraft Foods, Inc. - Notes
4.625% due 11/01/06 ..................................... 300 313
5.25% due 10/01/13 ...................................... 325 328
Sara Lee Corp. - Notes
6.25% due 09/15/11 ...................................... 100 111
------
1,418
Foreign Governmental - 2.3%
Government of Canada
5.25% due 11/05/08 ...................................... 125 135
Government of New Zealand - Debs.
8.75% due 12/15/06 ...................................... 120 140
Hydro-Quebec
8.4% due 01/15/22 ....................................... 100 131
Kingdom of Sweden - Debs.
12.0% due 02/01/10 ...................................... 75 105
Malaysia - Bonds
8.75% due 06/01/09 ...................................... 50 61
Manitoba Province Canada - Ser. BU
9.625% due 12/01/18 ..................................... 300 438
Province of Ontario - Bonds
6.0% due 02/21/06 ....................................... 300 323
Province of Quebec - Debs.
7.5% due 07/15/23 ....................................... 100 123
Republic of Greece - Notes
6.95% due 03/04/08 ...................................... 405 461
Republic of Italy - Debs.
6.875% due 04/15/03 ..................................... 460 543
Republic of Korea - Unsub. Notes
8.875% due 04/15/08 ..................................... 600 723
Spain Kingdom
7.0% due 07/19/05 ....................................... 250 269
United Mexican States - Notes
9.875% due 02/01/10 ..................................... 970 1,225
United Mexican States - Notes Ser. A
8.3% due 08/15/31 ....................................... 200 225
------
4,902
Gas Utilities - 0.6%
Keyspan Corp.
7.25% due 11/15/05 ...................................... 100 109
National Rural Utilities Cooperative Finance -
Notes
5.75% due 08/28/09 ...................................... 700 758
Sempra Energy - Notes
6.0% due 02/01/13 ....................................... 400 425
------
1,292
Health Care Equipment & Supplies - 0.3%
Abbott Laboratories - Notes
5.625% due 07/01/06 ..................................... $ 250 $ 270
Bristol Myers Squibb Co. - Notes
5.75% due 10/01/11 ...................................... 300 324
Eli Lilly & Co. - Notes
7.125% due 06/01/25 ..................................... 80 94
------
688
Home Equity Loan - 0.1%
Countrywide Home Loan Corp.
6.25% due 04/15/09 ...................................... 250 277
Insurance - 0.3%
Aetna Inc.
7.625% due 08/15/26 ..................................... 100 114
Allstate Corp.
7.2% due 12/01/09 ....................................... 170 198
Hartford Life, Inc. - Debs.
7.65% due 06/15/27 ...................................... 50 60
Torchmark, Inc. - Debs.
8.25% due 08/15/09 ...................................... 100 116
Travelers Property Casualty Corp. - Sr. Notes
7.75% due 12/19/29 ...................................... 50 60
------
548
Machinery - 0.0%
Caterpillar, Inc. - Debs.
8.0% due 02/15/23 ....................................... 50 62
Media - 1.6%
AOL Time Warner, Inc.
7.625% due 04/15/31 ..................................... 75 87
Clear Channel Communications, Inc.
7.65% due 09/15/10 ...................................... 400 468
Comcast Cable Communications - Notes
8.875% due 05/01/17 ..................................... 75 97
News America Holdings, Inc. - Debs.
7.7% due 10/30/25 ....................................... 100 116
News America Holdings, Inc. - Sr. Debs.
7.75% due 01/20/24 ...................................... 180 211
TCI Communications, Inc. - Sr. Notes
7.125% due 02/15/28 ..................................... 70 76
The Walt Disney Co. - Sr. Notes
6.75% due 03/30/06 ...................................... 1,000 1,088
Time Warner Entertainment, Inc. - Sr. Notes
8.375% due 07/15/33 ..................................... 200 254
Time Warner, Inc. - Notes
7.75% due 06/15/05 ...................................... 600 647
Viacom, Inc.
7.875% due 07/30/30 ..................................... 50 62
Viacom, Inc. - Sr. Notes
7.75% due 06/01/05 ...................................... 350 378
------
3,484
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Metals & Mining - 0.2%
ALCOA, Inc. - Notes
7.375% due 08/01/10 ..................................... $200 $ 235
Noranda, Inc. - Debs.
7.0% due 07/15/05 ....................................... 200 211
------
446
Multi-Utilities - 0.3%
Alabam Power Co. - Sr. Notes
5.7% due 02/15/33 ....................................... 80 78
Alabama Power Co. - Sr. Notes
5.5% due 10/15/17 ....................................... 100 103
Duke Energy Co. - Sr. Notes
5.625% due 11/30/12 ..................................... 400 416
United Utilities plc - Notes
6.875% due 08/15/28 ..................................... 100 108
------
705
Multiline Retail - 0.3%
Dayton Hudson Corp. - Debs.
6.75% due 01/01/28 ...................................... 25 27
Federated Department Stores, Inc.
6.625% due 04/01/11 ..................................... 200 225
Target Corp. - Notes
7.5% due 08/15/10 ....................................... 100 119
Wal Mart Stores, Inc.
7.55% due 02/15/30 ...................................... 110 135
Wal-Mart Stores, Inc. - Debs.
6.75% due 10/15/23 ...................................... 100 113
------
619
Municipal - 0.1%
Illinois Saint
5.1% due 06/01/33 ....................................... 230 212
Oil & Gas - 0.7%
Burlington Resources, Inc - Debs.
9.125% due 10/01/21 ..................................... 90 120
Chevron Texaco Capital Co. - Notes
3.5% due 09/17/07 ....................................... 600 611
Norsk Hydro AS
7.25% due 09/23/27 ...................................... 75 87
Occidental Petroleum Corp. - Debs.
7.2% due 04/01/28 ....................................... 40 46
Phillips Petroleum Co. - Debs.
6.65% due 07/15/18 ...................................... 50 57
Tosco Corp.
8.125% due 02/15/30 ..................................... 330 421
Trans-Canada Pipelines
7.7% due 06/15/29 ....................................... 100 122
Union Oil Co. of California
7.5% due 02/15/29 ....................................... 60 70
------
1,534
Other Mortgage - 0.8%
LB Commercial Conduit Mortgage Trust -
Ser. 1999-C2 Pass Thru Certs. Cl. A2
7.325% due 09/15/09 ..................................... $400 $ 462
LU UBS Commercial Mortgage Trust - Ser.
2000-C5 Pass Thru Certs. Cl. A1
6.41% due 01/15/10 ...................................... 606 660
Salomon Brothers Commercial & Mortgage
Trust - Ser. 2000-C3 Pass Thru Certs Cl. A2
6.592% due 12/18/33 ..................................... 500 561
------
1,683
Other Mortgages - 0.3%
Chase Commercial & Mortgage Securities
Corp. - Ser. 1997-2 Pass Thru Certs Cl. A2
6.6% due 12/19/29 ....................................... 500 549
Paper & Forest Products - 0.5%
Champion International Corp. - Debs.
7.35% due 11/01/25 ...................................... 50 55
International Paper Co. - Notes
6.75% due 09/01/11 ...................................... 250 278
MeadWestvaco Corp. - Notes
6.85% due 04/01/12 ...................................... 100 110
Westvaco Corp. - Notes
7.1% due 11/15/09 ....................................... 35 39
Weyerhaeuser Co.
7.125% due 07/15/23 ..................................... 130 137
Weyerhaeuser Co. - Notes
6.125% due 03/15/07 ..................................... 450 488
------
1,107
Personal Products - 0.4%
Gillette Co. - Notes
4.0% due 06/30/05 ....................................... 500 518
Procter & Gamble Co. - Debs.
6.45% due 01/15/26 ...................................... 100 109
Unilever Capital
7.125% due 11/01/10 ..................................... 200 232
------
859
Pharmaceuticals - 0.1%
Wyeth - Notes
5.25% due 03/15/13 ...................................... 200 204
Real Estate Investment Trust - 0.6%
EOP Operating LP - Notes
6.8% due 01/15/09 ....................................... 150 168
EOP Operating, Ltd. Partenership - Notes
7.0% due 07/15/11 ....................................... 250 282
Simon Property Group Puerto - Notes
6.375% due 11/15/07 ..................................... 700 772
------
1,222
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Road & Rail - 0.8%
Burlington Northern Railroad Company
6.125% due 03/15/09 ..................................... $ 150 $ 164
Canadian National Railway Co. - Notes
6.375% due 10/15/11 ..................................... 300 331
CSX Corp. - Debs.
7.45% due 05/01/07 ...................................... 125 142
Norfolk Southern Corp. - Notes
7.35% due 05/15/07 ...................................... 855 971
Union Pacific Corp. - Debs.
6.625% due 02/01/29 ..................................... 85 92
------
1,700
Telephone - 0.1%
Alltel Corp. - Sr. Notes
7.6% due 04/01/09 ....................................... 100 117
New York Telephone Co. - Debs.
7.25% due 02/15/24 ...................................... 100 103
------
220
U.S. Government Agencies - 45.9%
Federal Home Loan Bank - Disc. Notes
5.125% due 03/06/06 ..................................... 1,400 1,489
Federal Home Loan Bank - Notes
3.875% due 06/14/13 ..................................... 1,750 1,654
4.625% due 04/15/05 ..................................... 200 208
Federal Home Loan Bank - Sr. Notes
5.8% due 09/02/08 ....................................... 225 248
Federal Home Loan Bank - Bonds
4.5% due 06/01/18 ....................................... 1,003 1,004
Federal Home Loan Mortgage Corp. - Bonds
4.0% due 09/01/18 ....................................... 250 245
4.0% due 10/01/18 ....................................... 741 724
4.5% due 08/01/18 ....................................... 1,561 1,562
4.5% due 11/01/18 ....................................... 398 399
4.5% due 08/01/33 ....................................... 349 334
4.5% due 10/01/33 ....................................... 200 191
5.0% due 01/01/18 ....................................... 877 894
5.0% due 02/01/18 ....................................... 1,090 1,112
5.0% due 03/01/18 ....................................... 403 411
5.0% due 06/01/33 ....................................... 665 657
5.0% due 09/01/33 ....................................... 992 980
5.0% due 10/01/33 ....................................... 1,492 1,474
5.5% due 06/01/16 ....................................... 263 273
5.5% due 03/01/17 ....................................... 181 187
5.5% due 06/01/17 ....................................... 242 251
5.5% due 01/01/18 ....................................... 336 349
5.5% due 01/01/18 ....................................... 150 155
5.5% due 02/01/23 ....................................... 580 593
5.5% due 04/01/32 ....................................... 171 174
5.5% due 01/01/33 ....................................... 849 859
5.5% due 02/01/33 ....................................... 923 934
5.5% due 04/01/33 ....................................... 1,203 1,219
5.5% due 06/01/33 ....................................... 465 471
6.0% due 08/01/14 ....................................... 130 137
6.0% due 10/01/14 ....................................... $ 198 $ 207
6.0% due 07/01/16 ....................................... 159 167
6.0% due 11/01/16 ....................................... 82 86
6.0% due 02/01/17 ....................................... 185 194
6.0% due 02/01/17 ....................................... 170 178
6.0% due 06/01/22 ....................................... 195 203
6.0% due 05/01/29 ....................................... 244 253
6.0% due 08/01/29 ....................................... 212 219
6.0% due 07/01/31 ....................................... 142 147
6.0% due 01/01/32 ....................................... 177 183
6.0% due 01/01/32 ....................................... 397 410
6.0% due 02/01/32 ....................................... 411 425
6.0% due 02/01/32 ....................................... 386 399
6.0% due 11/01/32 ....................................... 502 519
6.0% due 12/01/32 ....................................... 569 589
6.0% due 02/01/33 ....................................... 298 308
6.5% due 11/01/15 ....................................... 37 39
6.5% due 07/01/16 ....................................... 91 96
6.5% due 11/01/16 ....................................... 160 170
6.5% due 05/01/17 ....................................... 72 76
6.5% due 01/01/21 ....................................... 44 46
6.5% due 06/01/21 ....................................... 186 196
6.5% due 09/01/28 ....................................... 78 82
6.5% due 06/01/29 ....................................... 14 14
6.5% due 07/01/29 ....................................... 20 21
6.5% due 07/01/29 ....................................... 178 186
6.5% due 11/01/30 ....................................... 75 79
6.5% due 12/01/30 ....................................... 50 52
6.5% due 03/01/31 ....................................... 238 249
6.5% due 05/01/31 ....................................... 270 283
6.5% due 05/01/31 ....................................... 265 277
6.5% due 07/01/31 ....................................... 34 36
6.5% due 11/01/31 ....................................... 148 155
6.5% due 11/01/31 ....................................... 128 134
6.5% due 12/01/31 ....................................... 377 395
6.5% due 04/01/32 ....................................... 134 140
6.5% due 05/01/32 ....................................... 54 56
6.5% due 08/01/32 ....................................... 278 291
7.0% due 02/01/16 ....................................... 73 78
7.0% due 04/01/17 ....................................... 235 251
7.0% due 04/01/29 ....................................... 207 220
7.0% due 02/01/30 ....................................... 131 138
7.0% due 04/01/31 ....................................... 41 43
7.0% due 05/01/31 ....................................... 28 30
7.0% due 05/01/31 ....................................... 32 33
7.0% due 07/01/31 ....................................... 46 49
7.0% due 08/01/31 ....................................... 111 118
7.0% due 04/01/32 ....................................... 234 248
7.1% due 04/10/07 ....................................... 2,500 2,837
7.5% due 02/01/16 ....................................... 30 32
7.5% due 09/01/30 ....................................... 19 20
7.5% due 11/01/30 ....................................... 88 95
7.5% due 03/01/32 ....................................... 192 206
8.0% due 02/01/30 ....................................... 50 54
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
8.0% due 09/01/30 ....................................... $ 48 $ 52
8.5% due 10/01/31 ....................................... 44 48
Federal Home Loan Mortgage Corp. - Debs.
5.75% due 04/15/08 ...................................... 2,500 2,745
6.0% due 06/15/11 ....................................... 1,000 1,110
7.0% due 07/15/05 ....................................... 4,855 5,245
Federal Home Loan Mortgage Corp. - Notes
2.75% due 08/15/06 ...................................... 1,300 1,312
5.0% due 11/01/07 ....................................... 144 148
5.0% due 10/01/09 ....................................... 142 146
5.5% due 12/31/08 ....................................... 400 411
6.0% due 01/01/09 ....................................... 110 113
Federal National Mortgage Assoc. - Bonds
4.0% due 09/01/18 ....................................... 495 483
4.0% due 12/01/18 ....................................... 350 342
4.5% due 04/01/18 ....................................... 644 646
4.5% due 05/01/18 ....................................... 1,061 1,064
4.5% due 07/01/18 ....................................... 394 395
4.5% due 10/01/18 ....................................... 900 902
4.5% due 12/01/18 ....................................... 847 849
4.5% due 09/01/33 ....................................... 849 813
4.5% due 10/01/33 ....................................... 548 524
5.0% due 12/01/17 ....................................... 528 539
5.0% due 04/01/18 ....................................... 997 1,018
5.0% due 06/01/18 ....................................... 466 476
5.0% due 03/01/23 ....................................... 1,057 1,080
5.0% due 08/01/23 ....................................... 626 628
5.0% due 11/01/32 ....................................... 499 494
5.0% due 06/01/33 ....................................... 432 427
5.0% due 06/01/33 ....................................... 695 689
5.0% due 08/01/33 ....................................... 1,284 1,272
5.0% due 09/01/33 ....................................... 844 835
5.0% due 09/01/33 ....................................... 1,188 1,177
5.0% due 12/01/33 ....................................... 650 644
5.5% due 03/01/16 ....................................... 58 60
5.5% due 04/01/16 ....................................... 42 44
5.5% due 02/01/17 ....................................... 299 310
5.5% due 04/01/17 ....................................... 166 172
5.5% due 07/01/17 ....................................... 315 327
5.5% due 09/01/17 ....................................... 250 260
5.5% due 09/01/17 ....................................... 281 291
5.5% due 02/01/23 ....................................... 449 459
5.5% due 01/01/32 ....................................... 817 828
5.5% due 01/01/32 ....................................... 119 121
5.5% due 12/01/32 ....................................... 550 557
5.5% due 02/01/33 ....................................... 553 561
5.5% due 03/01/33 ....................................... 459 465
5.5% due 04/01/33 ....................................... 1,141 1,157
5.5% due 04/01/33 ....................................... 933 946
5.5% due 06/01/33 ....................................... 1,303 1,320
5.5% due 08/01/33 ....................................... 1,687 1,710
6.0% due 05/01/14 ....................................... 45 47
6.0% due 02/01/16 ....................................... 98 103
6.0% due 08/01/17 ....................................... 233 244
6.0% due 01/01/29 ....................................... $ 200 $ 207
6.0% due 03/01/29 ....................................... 257 266
6.0% due 08/01/30 ....................................... 312 323
6.0% due 07/01/31 ....................................... 118 124
6.0% due 11/01/31 ....................................... 343 354
6.0% due 01/01/32 ....................................... 450 466
6.0% due 02/01/32 ....................................... 152 157
6.0% due 03/01/32 ....................................... 266 275
6.0% due 03/01/32 ....................................... 206 213
6.0% due 04/01/32 ....................................... 245 253
6.0% due 10/01/32 ....................................... 558 577
6.0% due 12/01/32 ....................................... 281 291
6.0% due 04/01/33 ....................................... 425 440
6.0% due 05/01/33 ....................................... 770 796
6.125% due 03/15/12 ..................................... 1,000 1,114
6.5% due 02/01/15 ....................................... 51 54
6.5% due 07/01/16 ....................................... 59 63
6.5% due 07/01/16 ....................................... 242 257
6.5% due 07/01/17 ....................................... 127 134
6.5% due 03/01/22 ....................................... 329 345
6.5% due 11/01/29 ....................................... 106 111
6.5% due 12/01/30 ....................................... 102 107
6.5% due 01/01/31 ....................................... 12 12
6.5% due 02/01/31 ....................................... 19 20
6.5% due 02/01/31 ....................................... 75 78
6.5% due 02/01/31 ....................................... 94 99
6.5% due 02/01/31 ....................................... 120 126
6.5% due 05/01/31 ....................................... 47 49
6.5% due 05/01/31 .......................................
6.5% due 07/01/31 ....................................... 92 96
6.5% due 08/01/31 ....................................... 103 108
6.5% due 12/01/31 ....................................... 215 225
6.5% due 02/01/32 ....................................... 250 262
6.5% due 04/01/32 ....................................... 394 412
6.5% due 04/01/32 ....................................... 81 85
6.5% due 04/01/32 ....................................... 158 166
6.5% due 04/01/32 ....................................... 136 142
6.5% due 05/01/32 ....................................... 51 54
6.5% due 05/01/32 ....................................... 740 774
6.5% due 07/01/32 ....................................... 328 343
6.5% due 07/01/32 ....................................... 356 372
7.0% due 12/01/15 ....................................... 92 98
7.0% due 03/01/16 ....................................... 73 78
7.0% due 01/01/30 ....................................... 92 98
7.0% due 02/01/31 ....................................... 141 149
7.0% due 04/01/31 ....................................... 31 32
7.0% due 05/01/31 ....................................... 142 150
7.0% due 08/01/31 ....................................... 226 239
7.0% due 12/01/31 ....................................... 294 311
7.0% due 02/01/32 ....................................... 199 210
7.0% due 05/01/32 ....................................... 129 136
7.0% due 10/01/32 ....................................... 204 216
7.125% due 01/15/30 ..................................... 709 854
7.25% due 05/15/30 ...................................... 150 183
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - Continued
7.5% due 10/01/15 ....................................... $ 78 $ 83
7.5% due 09/01/30 ....................................... 98 105
7.5% due 09/01/30 ....................................... 86 92
7.5% due 11/01/30 ....................................... 22 24
7.5% due 06/01/31 ....................................... 123 132
7.5% due 06/01/31 ....................................... 50 54
7.5% due 08/01/31 ....................................... 111 119
8.0% due 08/01/30 ....................................... 44 48
8.0% due 09/01/31 ....................................... 204 220
8.5% due 09/01/30 ....................................... 42 45
Federal National Mortgage Assoc. - Debs..................
6.25% due 05/15/29 ...................................... 1,165 1,262
6.375% due 06/15/09 ..................................... 800 905
Federal National Mortgage Assoc. - Notes
4.0% due 11/01/10 ....................................... 452 454
5.0% due 01/15/07 ....................................... 400 427
5.5% due 01/01/09 ....................................... 128 131
5.5% due 12/25/10 ....................................... 900 926
5.75% due 06/15/05 ...................................... 1,000 1,060
6.0% due 12/25/10 ....................................... 350 359
6.0% due 10/01/12 ....................................... 146 153
6.625% due 09/15/09 ..................................... 750 858
Government National Mortgage Assoc. -
Bonds
6.0% due 12/15/32 ....................................... 350 364
4.5% due 08/15/33 ....................................... 199 191
5.0% due 09/15/33 ....................................... 198 196
5.0% due 10/15/33 ....................................... 199 198
5.0% due 10/15/33 ....................................... 299 297
5.5% due 11/15/32 ....................................... 1,212 1,233
5.5% due 03/15/33 ....................................... 595 605
5.5% due 09/15/33 ....................................... 399 406
6.0% due 04/15/17 ....................................... 148 156
6.0% due 07/15/29 ....................................... 192 200
6.0% due 05/15/31 ....................................... 221 230
6.0% due 02/15/32 .......................................
6.0% due 04/15/32 ....................................... 325 339
6.0% due 11/15/32 ....................................... 612 637
6.0% due 01/15/33 ....................................... 339 352
6.5% due 01/15/16 ....................................... 59 63
6.5% due 05/15/28 ....................................... 267 282
6.5% due 05/15/29 ....................................... 292 308
6.5% due 04/15/31 ....................................... 139 146
6.5% due 05/15/31 ....................................... 102 107
6.5% due 05/15/31 ....................................... 176 185
6.5% due 08/15/31 ....................................... 204 215
6.5% due 01/15/32 ....................................... 435 459
6.5% due 05/15/32 ....................................... 204 215
6.5% due 05/15/32 ....................................... 97 103
7.0% due 08/15/29 ....................................... 141 150
7.0% due 12/15/30 ....................................... 292 311
7.0% due 03/15/31 ....................................... 335 358
7.0% due 06/15/31 ....................................... 69 74
7.0% due 08/15/31 ....................................... 114 121
7.0% due 09/15/31 ....................................... $ 193 $ 206
7.0% due 05/15/32 ....................................... 153 163
7.5% due 08/15/29 ....................................... 139 149
7.5% due 09/15/30 ....................................... 122 131
7.5% due 01/15/31 ....................................... 23 24
7.5% due 06/15/32 ....................................... 255 274
8.0% due 02/15/31 ....................................... 183 199
8.0% due 04/15/31 ....................................... 152 166
8.0% due 07/15/31 ....................................... 7 8
8.0% due 11/15/31 ....................................... 155 169
8.5% due 09/15/30 ....................................... 7 8
9.0% due 01/15/31 ....................................... 38 41
Government National Mortgage Assoc. -
Notes
5.0% due 08/15/33 ....................................... 492 488
-------
98,897
U.S. Governmental - 19.4%
U.S. Treasury - Bonds
0.0% due 08/15/19 ....................................... 1,000 1,351
5.375% due 02/15/31 ..................................... 645 673
5.5% due 08/15/28 ....................................... 270 281
6.125% due 11/15/27 ..................................... 520 586
6.125% due 08/15/29 ..................................... 100 113
6.25% due 05/15/30 ...................................... 1,250 1,442
6.5% due 11/15/26 ....................................... 300 353
6.625% due 02/15/27 ..................................... 295 352
6.75% due 08/15/26 ...................................... 1,075 1,301
7.5% due 11/15/16 ....................................... 500 637
7.875% due 02/15/21 ..................................... 1,500 1,996
8.125% due 08/15/21 ..................................... 2,080 2,837
8.75% due 08/15/20 ...................................... 1,400 2,002
8.875% due 08/15/17 ..................................... 1,450 2,054
10.375% due 11/15/12 .................................... 4,800 6,124
11.25% due 02/15/15 ..................................... 260 416
11.75% due 02/15/10 ..................................... 250 278
11.75% due 11/15/14 ..................................... 465 667
12.0% due 08/15/13 ...................................... 1,000 1,382
12.75% due 11/15/10 ..................................... 1,000 1,198
13.25% due 05/15/14 ..................................... 1,200 1,784
U.S. Treasury - Notes
1.25% due 05/31/05 ...................................... 100 100
2.0% due 05/15/06 ....................................... 200 200
3.25% due 08/15/07 ...................................... 5,125 5,228
4.25% due 08/15/13 ...................................... 400 401
4.625% due 05/15/06 ..................................... 300 318
4.75% due 11/15/08 ...................................... 200 214
5.0% due 02/15/11 ....................................... 1,100 1,181
5.0% due 08/15/11 ....................................... 285 305
5.5% due 02/15/08 ....................................... 500 551
6.5% due 10/15/06 ....................................... 3,550 3,954
7.0% due 07/15/06 ....................................... 1,450 1,624
-------
41,903
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
BOND INDEX FUND
Par Market
Name of Issuer Value Value
-------------- --------- --------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Wireless Telecommunications Services - 0.2%
AT&T Wireless, Inc. - Notes
7.875% due 03/01/11 ................................. $ 300 $ 347
--------
TOTAL PUBLICLY-TRADED BONDS- .................. 98.3% 211,957
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 24.7%
State Street Navigator Securities Lending
Portfolio ........................................ 53,178 53,178
SHORT-TERM INVESTMENTS - 1.4%
Investment in joint trading account (Note B)
1.061% due 01/02/04 ................................. 3,109 3,109
------- --------
TOTAL INVESTMENTS- ...................... 124.4% 268,244
Payables, less cash and receivables - ......... (24.4)% (52,583)
------- --------
NET ASSETS- .......................... 100.0% $215,661
======= ========
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Bond Index Fund (the "Fund") is a diversified series of John
Hancock Variable Series Trust I (the "Trust"), an open-end investment management
company registered under the Investment Company Act of 1940. The Trust is
organized as a Massachusetts business trust and consists of thirty different
funds as of December 31, 2003. The results of this Fund are included in this
report. The results of the other Funds in the Trust are presented under separate
cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Mortgage Int. Networking, 0.98%, due 01/02/04 $ 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Discount and premium on debt securities: The Fund accretes discount and
amortizes 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 the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$ 52,065 $ 53,178
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Federal income taxes: The Fund 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, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The Fund will distribute all of its net realized capital gains
annually, at the end of it's 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$100 Million and Excess Over
First $100 Million $250 Million $250 Million
- ------------------ ---------------- ------------
0.15% 0.13% 0.11%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the period ended December 31, 2003, the reimbursements paid from John
Hancock and JHVLICO were $11 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Mellon Bond
Associates, LLP, with respect to the Fund. Mellon Bond Associates, LLP is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the
principal underwriter and transfer agent
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$147,473 $87,456
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$262,513 $6,719 $(987) $5,732
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss and premium amortization and market
discount accretion on debt securities. Additionally, as a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- -------------- ------------- --------------
$-- $-- $-- $5,732
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $9,830 $1,105 $689
2002 9,249 179 217
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ------------------- -----------------------------
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Bond Index Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Bond Index Fund of John Hancock Variable Series Trust I at December 31, 2003,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1996
- --------------------------------------------------------------------------------
Earnings Growth Fund (FORMERLY MULTI-CAP GROWTH FUND)
Fidelity Management and Research Company Joseph Day
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 24.80%, underperforming its benchmark, the
Russell 1000 Growth Index.
.. On April 7th, the Fund's name, strategy and sub-adviser changed. The Fund
now invests primarily in large cap growth stocks. Previously, the Fund
invested broadly across growth stocks in all capitalizations.
.. Since April 8th, the Fund underperformed its benchmark primarily due to
unfavorable sector allocation decisions. The Fund's underweight to the
health care and consumer discretionary sectors was the primary detractor to
relative performance.
.. The Fund's exposure to information technology was the largest contributor
to absolute performance.
.. The top contributing stocks to absolute returns included Intel and Cisco
Systems, while the key detractors included Merck & Co and Johnson and
Johnson.
.. The manager employs a bottom-up, research approach to identify companies
with above average, long term growth potential and that are reasonably
priced.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Earnings Earnings
Growth Fund Growth Benchmark (1)
----------- --------------------
04/30/1996 10,000.00 10,000.00
05/31/1996 10,251.79 10,204.00
06/30/1996 10,020.18 9,895.84
07/31/1996 9,186.41 9,127.92
08/31/1996 9,881.14 9,621.74
09/30/1996 10,473.40 10,232.72
10/31/1996 10,325.04 10,113.00
11/30/1996 10,408.08 10,708.66
12/31/1996 10,268.97 10,528.75
01/31/1997 9,993.70 10,994.12
02/28/1997 9,826.76 10,752.25
03/31/1997 9,079.40 10,144.75
04/30/1997 9,186.08 10,393.30
05/31/1997 10,176.45 11,324.53
06/30/1997 10,693.34 11,638.22
07/31/1997 10,906.54 12,752.00
08/31/1997 10,949.96 12,627.03
09/30/1997 11,734.37 13,265.96
10/31/1997 11,385.11 12,601.34
11/30/1997 11,546.73 12,733.65
12/31/1997 11,979.95 12,900.46
01/31/1998 11,743.17 12,668.25
02/28/1998 12,727.51 13,859.07
03/31/1998 13,428.86 14,439.76
04/30/1998 13,655.58 14,636.14
05/31/1998 13,098.04 14,034.60
06/30/1998 14,210.98 14,431.78
07/31/1998 14,045.44 13,814.10
08/31/1998 11,448.27 11,176.99
09/30/1998 12,369.61 12,021.97
10/31/1998 13,332.17 12,906.78
11/30/1998 14,294.91 13,776.70
12/31/1998 16,660.12 15,203.97
01/31/1999 17,538.89 15,660.08
02/28/1999 16,892.48 14,894.31
03/31/1999 19,063.51 15,723.92
04/30/1999 20,312.55 16,440.93
05/31/1999 20,063.39 16,228.84
06/30/1999 21,163.77 17,361.62
07/31/1999 20,863.44 16,809.52
08/31/1999 21,976.72 16,634.70
09/30/1999 22,827.71 16,493.30
10/31/1999 26,426.65 17,768.23
11/30/1999 32,865.05 19,609.02
12/31/1999 35,635.68 23,003.35
01/31/2000 36,370.29 22,998.75
02/29/2000 37,510.20 27,833.08
03/31/2000 44,728.65 27,860.91
04/30/2000 37,360.82 25,155.62
05/31/2000 32,525.11 23,321.77
06/30/2000 30,324.75 25,796.22
07/31/2000 34,861.83 24,163.31
08/31/2000 32,535.05 27,807.14
09/30/2000 36,542.95 26,447.37
10/31/2000 32,968.18 24,638.37
11/30/2000 30,025.02 19,284.45
12/31/2000 21,906.15 20,300.75
01/31/2001 23,328.44 21,459.92
02/28/2001 24,488.20 17,747.35
03/31/2001 18,721.01 15,207.71
04/30/2001 15,605.98 17,742.83
05/31/2001 18,494.59 17,659.44
06/30/2001 18,247.59 17,668.27
07/31/2001 17,498.57 16,477.43
08/31/2001 16,632.90 15,282.81
09/30/2001 15,129.92 12,756.57
10/31/2001 12,868.42 14,097.28
11/30/2001 13,665.54 15,615.56
12/31/2001 14,500.75 16,208.95
01/31/2002 14,712.74 15,682.16
02/28/2002 13,396.41 14,792.98
03/31/2002 12,496.69 15,921.68
04/30/2002 13,256.40 15,079.43
05/31/2002 12,969.80 14,714.50
06/30/2002 12,490.46 13,353.41
07/31/2002 10,109.70 12,618.97
08/31/2002 10,118.14 12,656.83
09/30/2002 10,152.01 11,344.32
10/31/2002 9,438.30 12,384.59
11/30/2002 10,094.05 13,057.08
12/31/2002 9,893.01 12,154.83
01/31/2003 9,803.32 11,859.47
02/28/2003 9,651.81 11,804.92
03/31/2003 9,911.77 12,024.49
04/30/2003 10,462.07 12,913.10
05/31/2003 10,923.67 13,557.46
06/30/2003 10,992.00 13,744.55
07/31/2003 11,176.63 14,086.79
08/31/2003 11,432.54 14,437.55
09/30/2003 11,299.17 14,283.07
10/31/2003 11,823.18 15,085.78
11/30/2003 11,917.14 15,244.18
12/31/2003 12,415.25 15,771.63
Value on 12/31/03:
- -----------------
$12,415 Earnings Growth Fund
$15,772 Earnings Growth Benchmark(1)
MORNINGSTAR CATEGORY+:
.. Large Growth
MORNINGSTAR RISK+:
.. High (VL/VUL)
.. High (VA)
MORNINGSTAR RATING+:
.. * (VL/VUL)
.. * (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Pfizer, Inc. 5.4%
Microsoft Corp. 5.3%
Intel Corp. 3.9%
General Electric Co. 3.8%
Cisco Systems, Inc. 3.2%
Merck & Co., Inc. 2.6%
Johnson & Johnson 2.1%
Gillette Co. 2.1%
Wal-Mart Stores, Inc. 2.0%
Texas Instruments, Inc. 1.9%
AVERAGE ANNUAL TOTAL RETURNS*
Earnings Earnings Growth
Growth Fund Benchmark(1)
----------- ---------------
1 Year 24.80% 29.76%
3 Years -18.96 -8.07
5 Years -5.71 0.74
Since Inception (5/1/96) 2.86 6.12
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Information Technology 25.80%
Health Care 23.40%
Consumer Staples 13.80%
Industrials 10.57%
Consumer Discretion 10.54%
Financials 7.90%
Energy 4.37%
Telecommunication
Services 2.29%
Materials 1.32%
(1) The Earnings Growth Benchmark represents the Russell Mid Cap Growth Index
from May 1996 to April 2002 and then the Russell 1000 Growth Index from May
2002-present.
* Total returns are for the period ended December 31, 2003. Returns
represents past performance, assume reinvestment of all distributions and
are not indicative of future performance. 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. Performance would be lower if expenses and charges of the
separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 921 VL/VUL subaccounts and 1,733 VA subaccounts in the
Morningstar Large Growth category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $46,400 of
securities loaned (Note B)) .................................... $ 161,580
Net unrealized appreciation of investments ........................ 29,494
Short-term investments at value ................................... 52,936
---------
Total investments ........................................... 244,010
Receivable for:
Dividends ...................................................... 219
---------
Total assets ...................................................... 244,229
---------
LIABILITIES
Payables for:
Investments purchased .......................................... 181
Fund shares purchased .......................................... 168
Collateral for securities on loan .............................. 47,498
Other liabilities .............................................. 17
---------
Total liabilities ................................................. 47,864
---------
Net assets ........................................................ $ 196,365
=========
Shares of beneficial interest outstanding ......................... 24,042
---------
Net asset value per share ......................................... $ 8.17
=========
Composition of net assets:
Capital paid-in ................................................ $ 483,853
Accumulated net realized loss on investments,
futures and foreign currency transactions ................... (316,982)
Net unrealized appreciation of investments ..................... 29,494
---------
Net assets ........................................................ $ 196,365
=========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ......................................................... $ 169
Dividends ........................................................ 1,929
Securities lending ............................................... 23
-------
Total investment income ............................................. 2,121
-------
EXPENSES
Investment advisory fee .......................................... 1,666
Auditors fees .................................................... 25
Custodian fees ................................................... 73
Legal fees ....................................................... 13
Printing & mailing fees .......................................... 72
Trustees' fees ................................................... 6
Other fees ....................................................... 7
-------
Total expenses ...................................................... 1,862
Less expenses reimbursed ......................................... (42)
-------
Net expenses ........................................................ 1,820
-------
Net investment income ............................................... 301
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................... 2,753
Foreign currency transactions ................................. (155)
Change in unrealized appreciation on:
Investments ................................................... 36,063
Translation of assets and liabilities in foreign
currencies ................................................. 87
-------
Net realized and unrealized gain .................................... 38,748
-------
Net increase in net assets resulting from
operations ....................................................... $39,049
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31 December 31
2003 2002
----------- -----------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income (loss) ...................... $ 301 $ (801)
Net realized gain (loss) .......................... 2,598 (95,364)
Change in net unrealized appreciation ............. 36,150 16,632
-------- --------
Net increase (decrease) in net assets resulting
from operations ............................. 39,049 (79,533)
Distributions to shareholders from:
Net investment income ............................. (108)
Realized gains .................................... (3,020)
--------
Decrease in net assets resulting from
distributions ............................... (3,128)
From fund share transactions:
Proceeds from shares sold ......................... 40,423 56,048
Distributions reinvested .......................... 3,128
Payment for shares redeemed ....................... (42,966) (62,555)
-------- --------
Increase (decrease) in net assets from fund
share transactions .......................... 585 (6,507)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS ................ 36,506 (86,040)
NET ASSETS
Beginning of Period ............................... 159,859 245,899
-------- --------
End of Period ..................................... $196,365 $159,859
======== ========
Analysis of fund share transactions:
Sold .............................................. 5,521 7,156
Reinvested ........................................ 388
Redeemed .......................................... (5,896) (8,119)
-------- --------
Net increase (decrease) in fund shares outstanding ... 13 (963)
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Earnings Growth Fund
-------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------
2003(c) 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net Assets Value at Beginning of Period ................ $ 6.65 $ 9.84 $ 15.60 $ 29.22 $ 15.12
Income from Investment Operations:
Net Investment Income (Loss) ........................ 0.01 (0.04) (0.06) (0.05) (0.19)
Net Realized and Unrealized Gain (Loss) on
Investments(a) ................................... 1.64 (3.15) (5.70) (10.49) 17.70
-------- -------- -------- -------- --------
Total From Investment Operations .................... 1.65 (3.19) (5.76) (10.54) 17.51
Less Distributions:
Distribution from Net Realized Gains on
Investments ...................................... (0.13) (0.41) (3.41)
Distribution from Excess of Net Investment Income/
Gains ............................................ (1.61)
Distribution from Capital Paid-in ................... (1.06)
-------- -------- --------
Total Distributions ................................. (0.13) (3.08) (3.41)
-------- -------- -------- -------- --------
Net Assets Value at End of Period ...................... $ 8.17 $ 6.65 $ 9.84 $ 15.60 $ 29.22
======== ======== ======== ======== ========
Total Investment Return(b) ............................. 24.80% (32.39)% (36.93)% (35.86)% 118.31%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ... 1.05%(d) 1.04% 0.94% 0.85% 0.93%
Ratio of Net Investment Income (Loss) to Average
Net Assets ....................................... 0.17% (0.42)% (0.49)% (0.43)% (0.68)%
Portfolio Turnover Rate ............................. 124.28% 192.54% 111.69% 140.94% 106.06%
Net Assets End of Period (000s Omitted) ................ $196,365 $159,859 $245,899 $393,988 $452,937
(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 fluctuating
market values of the portfolio.
(b) The performance 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 Fidelity Management
Company during the period shown.
(d) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been 1.07% for the years ended
December 31, 2003.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EARNINGS GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 0.8%
Boeing Co. * ............................................ 14,500 $ 611
Lockheed Martin Corp. ................................... 15,755 810
Precision Castparts Corp. ............................... 3,300 150
-------
1,571
Air Freight & Couriers - 0.8%
United Parcel Service, Inc. - Cl. B ..................... 20,500 1,528
Banks - 1.3%
Bank of America Corp. * ................................. 11,100 893
Bank One Corp. * ........................................ 23,700 1,081
Fifth Third Bancorp * ................................... 9,669 571
-------
2,545
Beverages - 3.0%
Coca-Cola Co. * ......................................... 68,800 3,492
PepsiCo, Inc. * ......................................... 51,900 2,419
-------
5,911
Biotechnology - 1.9%
Amgen, Inc. * ........................................... 38,400 2,373
Cephalon, Inc. * ........................................ 3,800 184
Genetech, Inc. * ........................................ 10,600 992
Millennium Pharmaceuticals, Inc. * ...................... 6,900 129
-------
3,678
Building Products - 0.3%
Masco Corp. ............................................. 22,100 606
Chemicals - 1.1%
Dow Chemical Co. * ...................................... 33,300 1,384
Praxair, Inc. * ......................................... 20,200 772
-------
2,156
Commercial Services & Supplies - 1.9%
Avery Dennison Corp. * .................................. 10,700 599
Choicepoint, Inc. * ..................................... 9,400 358
First Data Corp. * ...................................... 27,900 1,146
Paychex, Inc. ........................................... 19,000 707
Waste Management, Inc. * ................................ 28,200 835
-------
3,645
Communications Equipment - 3.3%
Cisco Systems, Inc. * ................................... 252,315 6,129
Motorola, Inc. .......................................... 26,800 377
-------
6,506
Computers & Peripherals - 7.0%
Dell, Inc. * ............................................ 92,300 3,134
EMC Corp. * ............................................. 114,100 1,474
Intel Corp. ............................................. 230,000 7,406
International Business Machines Corp. ................... 18,600 1,724
-------
13,738
Credit Card - 0.9%
American Express Co. * .................................. 23,500 1,133
MBNA Corp. * ............................................ 22,900 $ 569
-------
1,702
Diversified Financials - 2.6%
Charles Schwab Corp. * .................................. 26,000 308
Citigroup, Inc. * ....................................... 50,703 2,461
Merrill Lynch & Co., Inc. * ............................. 10,000 586
Morgan Stanley, Dean Witter, Discover & Co. ............. 24,600 1,424
State Street Corp. ...................................... 7,100 370
-------
5,149
Diversified Telecommunication Services - 2.2%
Nextel Communications, Inc. - Cl. A * ................... 39,700 1,114
Qwest Communications International, Inc. ................ 73,700 318
SBC Communications, Inc. * .............................. 38,300 999
Verizon Communications * ................................ 55,600 1,950
-------
4,381
Electronic Equipment & Instruments - 0.4%
Gentex Corp. * .......................................... 9,400 415
Thermo Electron Corp. * ................................. 16,500 416
-------
831
Energy Equipment & Services - 2.6%
Baker Hughes, Inc. * .................................... 37,900 1,219
Nabors Industries, Ltd. * ............................... 25,500 1,058
Rowan Cos., Inc. * ...................................... 23,100 535
Schlumberger, Ltd. * .................................... 26,200 1,434
Transocean Sedco Forex, Inc. * .......................... 12,100 290
Weatherford Bermuda * ................................... 12,600 454
-------
4,990
Food & Drug Retailing - 1.0%
Safeway, Inc. * ......................................... 11,700 256
Sysco Corp. * ........................................... 28,800 1,072
Walgreen Co. * .......................................... 18,100 659
-------
1,987
Food Products - 1.0%
ConAgra, Inc. ........................................... 21,800 575
Hershey Foods Corp. * ................................... 7,400 570
J.M. Smucker Co. * ...................................... 19,400 879
-------
2,024
Health Care Equipment & Supplies - 2.9%
Alcon, Inc. * ........................................... 8,100 490
Baxter International, Inc. .............................. 34,800 1,062
Becton, Dickinson & Co. * ............................... 14,500 597
Boston Scientific Corp. * ............................... 18,000 662
C.R. Bard, Inc. * ....................................... 4,600 374
Medtronic, Inc. * ....................................... 45,180 2,196
St. Jude Medical, Inc. * ................................ 6,200 380
-------
5,761
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EARNINGS GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Health Care Providers & Services - 1.7%
Cardinal Health, Inc. * ................................. 13,647 $ 835
Health Management Assoc., Inc. - Cl. A * ................ 28,800 691
Quest Diagnostics, Inc. * ............................... 5,800 424
UnitedHealth Group, Inc. * .............................. 24,080 1,401
-------
3,351
Hotels Restaurants & Leisure - 0.3%
Cumulus Media, Inc. - Cl. A * ........................... 1,653 36
McDonald's Corp. * ...................................... 24,400 606
-------
642
Household Durables - 0.3%
Herman Miller, Inc. * ................................... 7,500 182
Leggett & Platt, Inc. * ................................. 16,400 355
-------
537
Household Products - 2.4%
Clorox Co. * ............................................ 21,500 1,044
Procter & Gamble Co. * .................................. 36,900 3,686
-------
4,730
Industrial Conglomerates - 6.1%
3M Co.................................................... 40,800 3,469
General Electric Co. * .................................. 236,200 7,317
Tyco International, Ltd. * .............................. 40,700 1,079
-------
11,865
Insurance - 2.2%
AFLAC, Inc. * ........................................... 26,370 954
Ambac Financial Group, Inc. ............................. 7,700 534
American International Group, Inc. * .................... 42,200 2,797
-------
4,285
Internet & Catalog Retail - 0.6%
Amazon.com, Inc. * ...................................... 9,810 516
eBay, Inc. * ............................................ 10,400 672
-------
1,188
Internet Software & Services - 0.4%
Yahoo, Inc. * ........................................... 18,200 822
IT Consulting & Services - 0.3%
Affiliated Computer Services, Inc. -
Cl. A * .............................................. 11,100 604
Machinery - 1.4%
Danaher Corp. * ......................................... 11,900 1,092
Parker-Hannifin Corp. ................................... 26,300 1,565
-------
2,657
Media - 4.7%
Clear Channel Communications, Inc. ...................... 21,500 1,007
Comcast Corp. - Cl. A ................................... 35,700 1,174
EchoStar Communications Corp. - Cl. A * ................. 6,825 232
New York Times Co. - Cl. A * ............................ 8,900 425
Omnicom Group, Inc. ..................................... 7,400 646
The Walt Disney Co. * ................................... 53,300 $ 1,244
Time Warner, Inc. * ..................................... 129,651 2,332
Univision Communications, Inc. - Cl. A * ................ 18,500 734
Viacom, Inc. - Cl. B * .................................. 31,900 1,416
-------
9,210
Multiline Retail - 2.3%
Big Lots, Inc. * ........................................ 53,700 763
Wal-Mart Stores, Inc. * ................................. 71,300 3,783
-------
4,546
Oil & Gas - 1.7%
Apache Corp. ............................................ 9,400 762
BJ Services Co. * ....................................... 35,800 1,285
Burlington Resources, Inc. * ............................ 10,000 554
Exxon Mobil Corp. * ..................................... 18,400 755
-------
3,356
Paper & Forest Products - 0.2%
International Paper Co. * ............................... 8,700 375
Personal Products - 3.4%
Avon Products, Inc. ..................................... 23,530 1,588
Colgate-Palmolive Co. ................................... 24,300 1,216
Gillette Co. ............................................ 107,400 3,945
-------
6,749
Pharmaceuticals - 16.3%
Abbott Laboratories * ................................... 70,600 3,290
Allergan, Inc. * ........................................ 10,000 768
Bristol-Myers Squibb Co. * .............................. 34,500 987
Eli Lilly & Co. * ....................................... 32,125 2,259
Forest Laboratories, Inc. * ............................. 13,230 818
Johnson & Johnson ....................................... 79,300 4,097
Merck & Co., Inc. * ..................................... 108,200 4,999
Pfizer, Inc. * .......................................... 293,424 10,367
Schering-Plough Corp. * ................................. 84,500 1,469
Wyeth * ................................................. 67,500 2,865
-------
31,919
Semiconductor Equipment & Products - 6.1%
Altera Corp. * .......................................... 24,600 559
Analog Devices, Inc. * .................................. 53,800 2,456
Applied Materials, Inc. * ............................... 79,095 1,776
KLA-Tencor Corp. * ...................................... 16,845 988
Linear Technology Corp. * ............................... 17,500 736
LTX Corp. * ............................................. 44,800 673
Texas Instruments, Inc. * ............................... 125,575 3,689
Xilinx, Inc. * .......................................... 27,800 1,077
-------
11,954
Software - 6.6%
Ariba, Inc. * ........................................... 48,500 146
BEA Systems, Inc. * ..................................... 39,200 482
Intuit, Inc. * .......................................... 21,000 1,111
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EARNINGS GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- --------
(000's)
COMMON STOCK - Continued
Software - Continued
Microsoft Corp. * ..................................... 366,410 $ 10,091
Oracle Corp. * ........................................ 88,200 1,164
--------
12,994
Specialty Retail - 3.0%
AutoZone, Inc. * ...................................... 4,000 341
CarMax, Inc. .......................................... 22,200 687
Gap, Inc. ............................................. 40,200 933
Home Depot, Inc. * .................................... 68,000 2,413
Lowe's Cos., Inc. * ................................... 22,200 1,230
Sherwin-Williams Co. * ................................ 11,000 382
--------
5,986
Textiles & Apparel - 0.8%
Nike, Inc. - Cl. B .................................... 23,100 1,581
Tobacco - 0.6%
Altria Group, Inc. .................................... 21,800 1,186
Trading Companies & Distributors - 0.2%
CDW Corp. ............................................. 7,200 416
U.S. Government Agencies - 0.7%
Federal National Mortgage Assoc. * .................... 18,809 1,412
--------
TOTAL COMMON STOCK- ................................ 97.3% 191,074
Par
Value
-------
(000's)
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 24.2%
State Street Navigator Securities Lending
Portfolio .......................................... $47,498 47,498
SHORT-TERM INVESTMENTS - 2.8%
Invesment in joint trading account
(Note B)
1.061% due 01/02/04 ................................ 5,438 5,438
------- --------
TOTAL INVESTMENTS- ........................... 124.3% 244,010
Payables, less cash and receivables- ............ (24.3)% (47,645)
------- --------
NET ASSETS- ............................... 100.0% $196,365
======= ========
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Earnings Growth Fund, (formerly Multi Cap Growth), (the
"Fund") is a diversified series of John Hancock Variable Series Trust I (the
"Trust"), an open-end investment management company registered under the
Investment Company Act of 1940. The Trust is organized as a Massachusetts
business trust and consists of thirty different funds as of December 31, 2003.
The results of this Fund are included in this report. The results of the other
Funds in the Trust are presented under separate cover. 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 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 $ 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For year ended December 31,
2003, the Fund had no bank borrowings.
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$46,400 $47,498
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 contract may not
correlate
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
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, 2003 the Fund had no open financial
futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $207,299, $105,946 and $2,956 which expire in 2009, 2010 and 2011,
respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $21. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
Excess Over
First $100 Million $100 Million
- ------------------ ------------
1.00% 0.90%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $42 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Fidelity
Investments Institutional Services Co., with respect to the Fund. Fidelity
Investments Institutional Services Co. is an affiliate of John Hancock, and
under its supervision, is responsible for the day-to-day investment management
of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$209,977 $211,755
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$215,297 $30,476 $(1,764) $28,712
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends paid deduction on it's federal
income tax return.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to certain
securities sold at a loss. Additionally, as a result, net investment income
(loss) and net realized gain (loss) on investment transactions for a reporting
period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
it's capital accounts without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $316,201 $28,712
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $118 $-- $3,010
2002 -- -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ---------------------------------
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ------------------------ ----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ---------------------------- ------------------------------------
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Earnings Growth Fund (formerly,
Multi Cap Growth Fund) (a portfolio included in the series of John Hancock
Variable Series Trust I {the "Trust"}) as of December 31, 2003, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Earnings Growth Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1998
- --------------------------------------------------------------------------------
Emerging Markets Equity Fund
Van Kampen Narayan Ramachandran
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 56.9% outperforming its benchmark, the MSCI EMF
Index.
.. The Fund outperformed its benchmark primarily due to favorable stock
selection and country allocation decisions. Sector allocation decisions
detracted, primarily due to the Fund's modest exposure to cash.
.. Stock selection exposures were most positive from the Fund's holdings in
Russia, South Korea and India and from overweight positions in
outperforming countries such Turkey and Thailand.
.. The Fund's exposure to the materials and financial sectors and to South
Africa, South Korea and Russia were some of the largest contributors to
absolute returns.
.. The top contributing stocks to absolute returns came from a variety of
sectors and included Samsung Electronics, Anglo American and Petrobras.
Stocks that detracted the most included LG Card Co. and SK Telecom.
.. The manager combines top-down country allocation decisions with bottom-up
fundamental stock selection. The manager selects stocks within undervalued
countries using fundamental proprietary research to identify companies with
strong earnings growth and reasonable valuations.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/98
(Fund Inception Date)
Emerging Markets MSCI Emerging Markets
Equity Fund Free Index (2)
---------------- ---------------------
5/01/1998 $10,000.00 $10,000.00
5/31/1998 8,687.98 8,630.00
6/30/1998 7,960.03 7,724.71
7/31/1998 8,533.05 7,969.59
8/31/1998 5,844.62 5,665.58
9/30/1998 6,556.15 6,024.78
10/31/1998 7,080.77 6,659.19
11/30/1998 7,667.81 7,213.23
12/31/1998 7,113.31 7,108.64
1/31/1999 6,933.57 6,994.19
2/28/1999 6,732.04 7,062.03
3/31/1999 7,577.83 7,992.81
4/30/1999 8,290.44 8,981.52
5/31/1999 7,990.48 8,929.43
6/30/1999 9,228.06 9,942.92
7/31/1999 8,932.36 9,672.47
8/31/1999 8,752.42 9,760.49
9/30/1999 8,575.24 9,430.58
10/31/1999 9,055.88 9,631.46
11/30/1999 10,560.14 10,495.40
12/31/1999 12,901.29 11,830.41
1/31/2000 12,556.47 11,901.39
2/29/2000 13,603.32 12,058.49
3/31/2000 13,829.75 12,117.58
4/30/2000 12,047.85 10,968.83
5/31/2000 11,235.00 10,515.82
6/30/2000 12,012.47 10,885.98
7/31/2000 11,066.32 10,326.44
8/31/2000 11,162.35 10,377.04
9/30/2000 9,707.19 9,471.12
10/31/2000 8,762.37 8,784.46
11/30/2000 7,692.06 8,016.70
12/31/2000 7,726.21 8,209.91
1/31/2001 8,827.46 9,340.41
2/28/2001 7,938.17 8,609.06
3/31/2001 7,092.43 7,763.65
4/30/2001 7,533.72 8,147.17
5/31/2001 7,613.46 8,244.12
6/30/2001 7,488.06 8,075.12
7/31/2001 7,035.61 7,564.77
8/31/2001 6,855.90 7,489.88
9/30/2001 5,800.53 6,330.45
10/31/2001 6,216.98 6,723.57
11/30/2001 6,947.56 7,425.51
12/31/2001 7,445.52 8,015.09
1/31/2002 7,710.67 8,286.80
2/28/2002 7,912.91 8,422.71
3/31/2002 8,414.89 8,929.75
4/30/2002 8,425.45 8,987.80
5/31/2002 8,339.70 8,844.89
6/30/2002 7,732.18 8,181.52
7/31/2002 7,180.60 7,558.91
8/31/2002 7,186.77 7,675.32
9/30/2002 6,437.58 6,847.15
10/31/2002 6,841.91 7,291.53
11/30/2002 7,280.03 7,793.19
12/31/2002 6,944.46 7,534.45
1/31/2003 6,806.33 7,501.30
2/28/2003 6,667.82 7,298.77
3/31/2003 6,440.33 7,091.48
4/30/2003 7,008.44 7,723.33
5/31/2003 7,541.39 8,277.87
6/30/2003 7,973.17 8,749.71
7/31/2003 8,454.58 9,297.44
8/31/2003 9,082.73 9,921.30
9/30/2003 9,205.9 9,993.72
10/31/2003 9,898.28 10,844.19
11/30/2003 10,103.15 10,977.57
12/31/2003 10,896.18 11,773.45
Value on 12/31/03:
- ------------------
$10,896 Emerging Markets Equity Fund
$11,773 MSCI Emerging Markets Free Index (2)
MORNINGSTAR CATEGORY+:
.. Diversified Emerging Markets
MORNINGSTAR RISK+:
.. Above Average (VL/VUL)
.. Above Average (VA)
MORNINGSTAR RATING+:
.. *** (VL/VUL)
.. *** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Samsung 8.5%
Anglo American 4.1%
Petroleo Brasileiro SA 2.6%
JSC Norilsk Nickel 2.4%
America Movil SA de CV 2.0%
Surgutneftegaz 1.7%
Telefonos de Mexico SA 1.6%
Companhia Vale Do Rio Doce 1.6%
Lukoil Holding 1.6%
Standard Bank Investment Corp., Ltd. 1.5%
AVERAGE ANNUAL TOTAL RETURNS*
Emerging Markets MSCI Emerging
Equity Fund(1) Markets Free Index(2)
---------------- ---------------------
1 Year 56.90% 56.26%
3 Years 12.14 12.77
5 Years 8.90 10.62
Since Inception (5/1/98) 1.52 2.92
DIVERSIFICATION BY REGION AND COUNTRY(3) (as of December 31, 2003)
% of
Assets
------
Asia 51.2%
United States 23.6%
Middle East/Africa 20.5%
Latin America 2.8%
Europe 2.1%
DIVERSIFICATION BY REGION(4)
Developed Markets 0%
Emerging Markets 100%
(1) Returns reflect extra-ordinary capital contribution of $445.000 in June
1999.
(2) On May 31, MSCI implemented the final phase of its enhanced methodology
which shifts to a weighting system based on freely floated or publicly
available shares, rather than just market capitalization. South Africa and
South Korea market weight increased the most while Mexico, India and
Malaysia declined the most.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 127 VL/VUL subaccounts and 227 VA subaccounts in the
Morningstar Diversified Emerging Markets category. This represents the
Morningstar 3 year rating.
"Van Kampen" is a registered trade name used by Morgan Stanley Investment
Management, Inc. in its role as a subadvisor to the Fund.
(3) Calculations based upon country in which security is traded (listed).
(4) Calculations based upon country in which security is domiciled.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ...................................... $ 47,315
Net unrealized appreciation of investments ......................... 16,144
Short-term investments at value .................................... 1,205
--------
Total investments ............................................ 64,664
Cash ............................................................... 1
Foreign currency at value (cost $261) .............................. 266
Receivable for:
Investments sold ................................................ 72
Dividends ....................................................... 222
--------
Total assets ....................................................... 65,225
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 8
Fund shares purchased ........................................... 230
Other liabilities ............................................... 314
--------
Total liabilities .................................................. 552
--------
Net assets ......................................................... $ 64,673
========
Shares of beneficial interest outstanding .......................... 7,263
--------
Net asset value per share .......................................... $ 8.90
========
Composition of net assets:
Capital paid-in ................................................. $ 65,342
Accumulated net realized loss on investments, and
foreign currency transactions ................................ (16,376)
Undistributed net investment loss ............................... (134)
Net unrealized appreciation/(depreciation) of:
Investments .................................................. 16,144
Translation of assets and liabilities in foreign
currencies ................................................ (303)
--------
Net assets ......................................................... $ 64,673
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 21
Dividends ..................................................... 1,249
-------
Total investment income ............................................. 1,270
-------
EXPENSES
Investment advisory fee ....................................... 661
Auditors fees ................................................. 6
Custodian fees ................................................ 308
Legal fees .................................................... 3
Printing & mailing fees ....................................... 3
Trustees' fees ................................................ 1
Other fees .................................................... 9
-------
Total expenses ...................................................... 991
Less expenses reimbursed ...................................... (286)
-------
Net expenses ........................................................ 705
-------
Net investment income ............................................... 565
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments ................................................... 2,193
Foreign currency transactions ................................. 586
Change in unrealized appreciation (depreciation) on:
Investments ................................................... 18,424
Translation of assets and liabilities in foreign
currencies ................................................. (311)
-------
Net realized and unrealized gain .................................... 20,892
-------
Net increase in net assets resulting from
operations ....................................................... $21,457
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ................................................ $ 565 $ 99
Net realized gain (loss) ............................................. 2,779 (1,885)
Change in net unrealized appreciation (depreciation) ................. 18,113 (1,219)
-------- --------
Net increase (decrease) in net assets resulting from operations ... 21,457 (3,005)
Distributions to shareholders from:
Net investment income ................................................ (803) (93)
Realized gains ....................................................... (2,285)
-------- --------
Decrease in net assets resulting from distributions ............... (3,088) (93)
From fund share transactions:
Proceeds from shares sold ............................................ 82,919 98,743
Distributions reinvested ............................................. 3,088 93
Payment for shares redeemed .......................................... (74,209) (90,188)
-------- --------
Increase in net assets from fund share transactions ............... 11,798 8,648
-------- --------
NET INCREASE IN NET ASSETS .............................................. 30,167 5,550
NET ASSETS
Beginning of Period .................................................. 34,506 28,956
-------- --------
End of Period ........................................................ $ 64,673 $ 34,506
======== ========
Analysis of fund share transactions:
Sold ................................................................. 12,330 15,252
Reinvested ........................................................... 376 14
Redeemed ............................................................. (11,202) (14,004)
-------- --------
Net increase in fund shares outstanding ................................. 1,504 1,262
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Emerging Markets Fund
-----------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999(c)
------- ------- ------- ------- -------
Net Assets Value at Beginning of Period ..................... $ 5.99 $ 6.44 $ 6.70 $ 12.26 $ 7.09
Income from Investment Operations:
Net Investment Income (Loss) ............................. 0.09 0.02 0.05 (0.02) 0.03
Net Realized and Unrealized Gain (Loss) on
Investments(a) ........................................ 3.27 (0.45) (0.29) (4.91) 5.35
------- ------- ------- ------- -------
Total From Investment Operations ......................... 3.36 (0.43) (0.24) (4.93) 5.38
Less Distributions:
Distribution from Net Investment Income .................. (0.12) (0.02) (0.01)
Distribution from Net Realized Gains on Investments ...... (0.33) (0.62) (0.10)
Distribution from Excess of Net Investment Income/Gains... (0.42)
Distribution from Capital Paid-in ........................ (0.02) (0.01)
------- ------- ------- ------- -------
Total Distributions ...................................... (0.45) (0.02) (0.02) (0.63) (0.53)
Capital Contributions .................................... 0.32
------- ------- ------- ------- -------
Net Assets Value at End of Period ........................... $ 8.90 $ 5.99 $ 6.44 $ 6.70 $ 12.26
======= ======= ======= ======= =======
Total Investment Return(b) .................................. 56.90% (6.73)% (3.63)% (40.11)% 81.37%(e)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ........ 1.60%(d) 1.60%(d) 1.40%(d) 1.32%(d) 1.39%(d)
Ratio of Net Investment Income (Loss) to Average Net
Assets ................................................ 1.28% 0.27% 0.77% (0.28)% 0.19%
Portfolio Turnover Rate .................................. 92.85% 88.40% 120.72% 103.90% 196.32%
Net Assets End of Period (000s Omitted) ..................... $64,673 $34,506 $28,956 $31,010 $32,596
(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 fluctuating
market values of the portfolio.
(b) The performance 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 Morgan Stanley Dean
Witter Investment Management, Inc. during the period shown.
(d) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been 2.24%, 3.45%, 4.02%, 2.49%, and
3.44%, for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
(e) 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%.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
-------------- --------- -------
(000's)
COMMON STOCK
Brazil - 0.5%
Aracruz Celulose SA - ADR * (BG) ...................... 9,100 $ 334
Egypt - 0.8%
Egypt Mobile Phone * (J2) ............................. 25,130 308
Orascom Construction Industries * (BJ) ................ 20,144 238
------
546
Hong Kong - 6.9%
ASIA Aluminum Holdings, Ltd. (BI) ..................... 418,000 83
Avichina Industry * (BV) .............................. 589,000 125
BYD Co. (BL) .......................................... 99,000 261
China Life Insurance Co., Ltd. * (JR) ................. 438,000 358
China Merchants Holdings
International Co., Ltd. * (BL) ..................... 98,000 129
China Oilfield Series * (BB) .......................... 768,000 272
China Petroleum (BB) .................................. 520,000 233
China Res Holdings (FB) ............................... 160,000 74
China Shipping Development * (BR) ..................... 322,000 236
China Telecom Corp. * (J2) ............................ 356,000 146
China Unicom, Ltd. (J2) ............................... 162,000 151
CNOOC, Ltd. * (BB) .................................... 436,000 856
Fountain Set Holdings (BY) ............................ 233,000 159
Grande Holdings (BW) .................................. 121,000 155
Hopewell Highway * (BT) ............................... 301,000 171
Huaneng Power International * (J3) .................... 144,000 249
Kingboard Chemical (JY) ............................... 89,000 137
Lianhua Supermarket * (JF) ............................ 125,000 132
Moulin International Holding * (JL) ................... 72,000 48
Norstar Founders * (BU) ............................... 216,000 70
PetroChina Company, Ltd. (BB) ......................... 274,000 157
PICC Property & Casualty (JR) ......................... 174,000 78
Shougang Concord (BF) ................................. 755,000 111
Victory City International (BY) ....................... 92,000 40
Wumart Stores, Inc. * (JD) ............................ 63,000 62
------
4,493
Hungary - 0.6%
Gedeon Richter * (JO) ................................. 3,503 412
India - 6.0%
Bharat Heavy Electricals, Ltd. (BK) ................... 31,450 351
Colgate Palmolive Co. * (JK) .......................... 19,051 67
Container Corp. of India, Ltd. (BJ) ................... 14,092 206
GlaxoSmithKline Pharmaceuticals (JO) .................. 7,000 88
Gujarat Ambuja Cements Ltd. (BD) ...................... 25,250 169
Hero Honda Motors, Ltd. (BV) .......................... 16,950 167
Hindlaco Industries (BD) .............................. 4,850 150
Hindustan Lever Ltd. (JJ) ............................. 29,700 134
Hindustan Petroleum Corp., Ltd. (BB) .................. 14,000 135
Indialnfo, Ltd. (JA) .................................. 10,639
Indiana Development Bank (JQ) ......................... 103,000 141
Infosys Technologies, Ltd. * (JU) ..................... 3,109 380
ITC, Ltd. (JI) ........................................ 6,500 141
Morgan Stanley Group (JQ) ............................. 705,000 261
Oil & Natural Gas (BB) ................................ 10,750 $ 189
Ranbaxy Laboratories, Ltd. (JO) ....................... 8,660 209
Reliance Industries, Inc. * (BC) ...................... 16,300 205
State Bank of India (JP) .............................. 19,600 263
Steel Author India * (BF) ............................. 129,000 145
Tata Ironsteel (BF) ................................... 20,000 195
Tata Engineering and Locomotive Co.,
Ltd. (BD) .......................................... 27,400 272
------
3,868
Indonesia - 3.1%
Astra International (BV) .............................. 650,961 386
Bank Central (JP) ..................................... 430,500 170
Bank Mandiri (JP) ..................................... 989,500 117
Bank Rakyat * (JP) .................................... 1,029,000 153
Bumi Resources Tbk (BB) ............................... 3,842,000 228
HM Sampoerna (JI) ..................................... 256,500 136
Indocement Tunggal * (BD) ............................. 593,000 150
Ramayana Lestari * (JD) ............................... 518,000 268
Telekomunikasi Indiana - Ser. B (J1) .................. 491,000 394
------
2,002
Jordan - 0.2%
Arab Bank (JP) ........................................ 300 129
Malaysia - 1.3%
Commerce Asset Holdings * (JP) ........................ 102,000 110
Magnum Corp. Berhad * (BZ) ............................ 259,000 189
Malayan Banking Berhad * (JP) ......................... 55,900 142
Resorts World Berhad * (BZ) ........................... 51,000 136
SP Setia (JS) ......................................... 168,499 155
YTL Corp., Berhad (J3) ................................ 81,000 92
------
824
Mexico - 1.4%
Cifra SA de CV - Ser. V * (JD) ........................ 125,472 358
GF BBVA Bancomer - Ser. B (JP) ........................ 372,861 319
Wal-Mart de Mexico SA de CV - Ser. C * (JD) ........... 81,706 218
------
895
Singapore - 0.4%
TPV Technology (JX) ................................... 453,000 240
South Africa - 13.1%
ABSA Group, Ltd. * (JP) ............................... 33,800 213
African Bank Investments, Ltd. * (JP) ................. 315,000 444
African Life Assured (JR) ............................. 146,600 335
Anglo American Platinum Corp., Ltd. * (BF) ............ 5,200 227
Anglo American plc * (BF) ............................. 84,827 1,813
Anglogold * (BF) ...................................... 9,100 427
Edgars Consolidated Stores * (JE) ..................... 10,100 193
FirstRand, Ltd. (JP) .................................. 451,698 602
Gold Fields Mining * (BF) ............................. 34,400 491
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
-------------- ----------- -------
(000's)
COMMON STOCK - Continued
South Africa - Continued
Harmony Gold Mining * (BF) .......................... 5,612 $ 91
Impala Platinum Holdings, Ltd. (BF) ................. 6,128 531
M-Cell, Ltd. (J2) ................................... 164,210 698
Massmart * (JF) ..................................... 41,100 187
Naspers, Ltd. - N Shares (BZ) ....................... 30,000 186
Pretoria Portland Cement (BD) ....................... 500 11
Shoprite Holdings, Ltd. (JF) ........................ 137,300 192
Standard Bank Investment Corp., Ltd. (JP) ........... 160,613 941
Steinhoff International Holdings (BW) ............... 108,000 124
Telkom Group, Ltd. (J1) ............................. 72,100 748
-------
8,454
South Korea - 15.7%
Cheil Industries (BY) ............................... 11,140 162
Daewoo Shipbuilding & Marine * (BM) ................. 35,860 460
Daishin Securities * (JQ) ........................... 22,290 327
Good Morning Securities Co., Ltd. (JQ) .............. 31,650 146
Handsome Corp. (BY) ................................. 24,870 253
Hankook Tire Co., Ltd. (BU) ......................... 33,190 251
Honam Petrochemical (BC) ............................ 6,530 337
Hyundai Department Store * (JE) ..................... 15,260 498
Hyundai Mobis (BM) .................................. 15,690 844
Kookmin Bank * (JP) ................................. 8,140 305
KT & G Corp. * (JI) ................................. 14,130 246
LG Card (JQ) ........................................ 5,810 15
LG Investment & Securities Co., Ltd. * (JQ) ......... 25,600 178
Pohang Iron & Steel Co., Ltd. (BF) .................. 500 68
Samsung Display Devices Co. (JY) .................... 15,000 1,769
Samsung Electronics * (JY) .......................... 8,750 3,312
Shinhan Financial (JP) .............................. 12,440 199
SK Telecom Co., Ltd. * (J2) ......................... 1,700 284
STX Corp. (BM) ...................................... 7,460 57
STX Shipbuilding * (BR) ............................. 16,510 220
Tongyang Cement Co. (BI) ............................ 2,940 216
-------
10,147
Taiwan - 10.4%
Acer, Inc. * (JX) ................................... 122,466 182
Asia Optical Co., Inc. (JL) ......................... 70,000 483
Catcher Technology Co., Ltd. (JY) ................... 30,000 108
China Trust Finance (JP) ............................ 360,109 362
CTCI Corp. (BJ) ..................................... 194,000 157
Cyberlink Corp. (JV) ................................ 31,000 128
Eva Airways (BQ) .................................... 255,655 104
Evergreen Marine Corp. (BR) ......................... 354,540 309
Fubon Financial HL (JQ) ............................. 282,000 270
Grand Hall Enterprises (BO) ......................... 12,000 56
Hon Hai Precision Insustry Co., Ltd. -
Cl. G * (JY) ..................................... 119,680 471
Infortrend Technologies (JT) ........................ 56,000 184
Kaulin Manufacturing (BO) ........................... 58,000 $ 84
Largan Precision Co. (BL) ........................... 26,450 257
Media Tekin Corp. (J0) .............................. 50,000 470
Nan Ya Plastic Corp. (BC) ........................... 151,180 218
Novatek Microelect * (J0) ........................... 48,500 137
Phoenixtec Power (J3) ............................... 216,695 254
Pihsiang Machinery (JL) ............................. 11,150 39
Polaris Securities (JQ) ............................. 623,680 292
Richtek Technologies * (J0) ......................... 9,792 53
Sunplus Technology * (J0) ........................... 59,000 110
Taishin Financial (JP) .............................. 216,000 160
Taiwan Cellular Corp. (J2) .......................... 222,000 193
Taiwan Cement (BD) .................................. 768,060 378
Taiwan Navigation (BO) .............................. 192,800 128
Taiwan Semiconductor * (J0) ......................... 99,114 185
Waffer Technology (BF) .............................. 81,000 247
Ya Hsing Indiana Co. * (JY) ......................... 343,000 444
Yuanta Core Pacific (JQ) ............................ 233,236 139
Zyxel Communication (JW) ............................ 46,000 96
-------
6,698
Thailand - 5.7%
Asian Property Development (JS) ..................... 880,800 120
Bangkok Bank Co., Ltd. * (JP) ....................... 290,000 842
Banpu Co. (BF) ...................................... 27,800 81
BEC World Public Co., Ltd. (JA) ..................... 11,000 68
Italian-Thai Development Public Co.,
Ltd. (BD) ........................................ 104,000 310
Kasikornbank plc (JP) ............................... 166,200 273
Land & Houses (BJ) .................................. 993,800 318
MBK PCL (JS) ........................................ 47,500 43
PTT Public Co. (BB) ................................. 52,400 211
Ratchaburi Electric (J3) ............................ 64,900 74
Seven Eleven * (JE) ................................. 45,300 64
Siam Cement Co. * (BD) .............................. 73,600 472
Siam Commercial Bank Public Co. *
(JP) ............................................. 149,800 210
Sino Thai Engineering * (BJ) ........................ 140,800 59
Thai Airways International plc (BQ) ................. 94,000 113
Thai Farmers Bank Public Co., Ltd. *
(JP) ............................................. 188,100 332
Thai Olefin Public * (BC) ........................... 52,100 58
Thai Plastic & Chemical Public Co.,
Ltd. (BC) ........................................ 14,300 71
-------
3,719
Turkey - 6.0%
Akbank TAS * (JP) ................................... 68,890,305 360
Akcansa Cimento SA (BD) ............................. 107,330,825 307
Arcelik AS (BW) ..................................... 58,868,750 327
Enka Insaat (BL) .................................... 9,803,129 255
Ford Otomotiv (BV) .................................. 5,505,000 37
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
Market
Name of Issuer Shares Value
-------------- ----------- -------
(000's)
COMMON STOCK - Continued
Turkey - Continued
Hurriyet Gazete * (JA) .............................. 114,886,700 $ 409
Migros Turk TAS (JF) ................................ 4,096,000 59
Tofas Otomobil (BV) ................................. 93,221,269 206
Trakya * (BI) ....................................... 64,478,650 142
Turkcell Iletisim Hizmetleri AS (J2) ................ 39,719,000 396
Turkiye Garanti Bankasi AS * (JP) ................... 177,759,700 519
Turkiye Is Bankasi - Cl. C * (JP) ................... 158,340,512 643
Yapi ve Kredi Bankasi AS * (JP) ..................... 102,596,000 212
-------
3,872
United Kingdom - 1.4%
Anglo American plc (BF) ............................. 23,420 505
Gazprom Oao * (BB) .................................. 16,500 427
-------
932
United States - 23.2%
Advanced Semiconductor Engineering, Inc. (JY) ....... 21,340 108
America Movil SA de CV - ADR Ser. L (J2) ........... 47,233 1,291
Banco Bradesco - ADR (JP) ........................... 6,039 160
Banco Itau SA - ADR * (JP) .......................... 8,594 419
Cemex SA de CV - ADR * (BD) ......................... 12,400 325
Check Point Software Technologies, Ltd. * (JT) ..... 36,512 614
Coca-Cola Co. - ADR (JG) ............................ 4,600 98
Companhia De Bebidas ADR (JG) ....................... 30,723 784
Companhia Energetica de Minas Gerias - ADR (J3) ..... 9,700 177
Companhia Siderurgica Nacional SA - ADR * (BF) ...... 4,300 230
Companhia Vale do Rio Doce - ADR (BF) ............... 15,547 793
Companhia Vale Do Rio Doce - ADR (BF) ............... 3,600 211
Compania Anonima Nacional
Telefonos De Venezuela - ADR (J1) ................ 10,056 153
Compania Brasileira de Distribuicao
Grupo Pao de Acucar - ADR (JF) ................... 8,100 204
Compania de Minas Buenaventura SA - ADR * (BF) ...... 15,500 438
ECI Telecommunications, Ltd. * (JW) ................. 7,073 41
Grupo Aeroportuario Sur - ADR * (BT) ................ 8,930 157
Grupo Financiero BBVA Bancomer,
SA de CV * (JP) .................................. 6,600 113
Grupo Televisa SA - GDR * (JA) ...................... 10,000 399
Harmony Gold Mining, Ltd. (BF) ...................... 1,200 19
JSC Norilsk Nickel - ADR (BF) ....................... 23,700 1,544
Lukoil Holding - ADR * (BB) ......................... 10,754 1,000
Magyar Tavkozlesi - ADR * (J1) ...................... 2,634 49
Marvell Technology Group, Ltd. * (J0) ............... 1
Mobile Systems - ADR * (J2) ......................... 4,100 339
Mobile Telesystems OJSC - GDR
144A (a) (J2) .................................... 3,000 238
OAO Gazprom - ADR * (BL) ............................ 4,200 $ 109
Orascom Construction Industries - GDR (BJ) .......... 10,110 195
Petroleo Brasileiro SA * (BB) ....................... 25,641 750
Petroleo Brasileiro SA - ADR (BB) ................... 33,828 896
Surgutneftegaz - ADR (BB) ........................... 37,064 1,103
Telefonos de Mexico SA - ADR (J1) ................... 30,480 1,007
Telesp Celular Participacoes SA - ADR * (J2) ........ 6,200 41
Telkom SA Ltd. - ADR * (J1) ......................... 2,600 110
Tenaris SA - ADR (BA) ............................... 4,100 137
Unibanco - Uniao de Bancos
Brasileiros SA - GDR * (JP) ...................... 11,200 279
Votorantim Celulose e Papel SA - ADR (BG) ........... 9,100 285
Wal-Mart de Mexico SA de CV - ADR (JD) .............. 3,016 86
Yukos Corp. - ADR * (BB) ............................ 2,096 88
-------
14,990
-------
TOTAL COMMON STOCK- ................................. 96.7% 62,555
PREFERRED STOCK
Brazil - 0.8%
Banco Bradesco SA (JP) .............................. 21,960,000 115
BCO Itau Holdings Financeira (JP) ................... 359,000 36
Companhia Energetica de Minas Gerais (J3) .......... 8,489,503 155
Telesp Celular Participacoes SA (J2) ................ 83,929,111 220
-------
526
South Korea - 0.6%
Daishin Securities (JQ) ............................. 5,840 42
Samsung Electronics (JY) ............................ 1,630 336
-------
378
-------
TOTAL PREFERRED STOCK- .............................. 1.4% 904
Par
Value
-------
(000's)
SHORT-TERM INVESTMENTS - 1.9%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 .................................. $1,205 1,205
------ -------
TOTAL INVESTMENTS- ................................ 100.0% 64,664
Cash and Receivables, less payables- ................. 0.0% 9
------ -------
NET ASSETS- ....................................... 100.0% $64,673
====== =======
* Non-income producing security.
ADR-American Depository 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, 2003, securities aggregated
$238 or 0.4% of net assets of the Portfolio.
See notes to financial statements.
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EMERGING MARKETS EQUITY FUND
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY (UNAUDITED)
Market % of
Industry Value Long-Term
Industry Abbreviation (000s) Investments
-------- ------------ ------- -----------
Banks .................................. JP $ 9,141 14.4%
Metals & Mining ........................ BF 8,168 12.9%
Electronic Equipment & Instruments ..... JY 6,684 10.5%
Oil & Gas .............................. BB 6,546 10.3%
Wireless Telecommunications Services ... J2 4,306 6.8%
Construction Materials ................. BD 2,543 4.0%
Diversified Telecommunication
Services ............................ J1 2,461 3.9%
Diversified Financials ................. JQ 1,812 2.9%
Machinery .............................. BM 1,362 2.1%
Construction & Engineering ............. BJ 1,174 1.8%
Industrial Conglomerates ............... BL 1,010 1.6%
Electric Utilities ..................... J3 1,002 1.6%
Multiline Retail ....................... JD 991 1.6%
Semiconductor Equipment & Products ..... J0 956 1.5%
Automobiles ............................ BV 921 1.4%
Chemicals .............................. BC 890 1.4%
Beverages .............................. JG 881 1.4%
Media .................................. JA 875 1.4%
Internet Software & Services ........... JT 798 1.3%
Food & Drug Retailing .................. JF 774 1.2%
Insurance .............................. JR 771 1.2%
Marine ................................. BR 765 1.2%
Specialty Retail ....................... JE 755 1.2%
Pharmaceuticals ........................ JO 710 1.1%
Paper & Forest Products ................ BG 620 1.0%
Textiles & Apparel ..................... BY 614 1.0%
Household Durables ..................... BW 606 1.0%
Health Care Equipment & Supplies ....... JL 569 0.9%
Tobacco ................................ JI 522 0.8%
Hotels Restaurants & Leisure ........... BZ 511 0.8%
Building Products ...................... BI 441 0.7%
Computers & Peripherals ................ JX 422 0.7%
IT Consulting & Services ............... JU 380 0.6%
Electrical Equipment ................... BK 351 0.6%
Transportation Infrastructure .......... BT 328 0.5%
Auto Components ........................ BU 320 0.5%
Commercial Services & Supplies ......... BO 267 0.4%
Airlines ............................... BQ 217 0.3%
Real Estate Investment Trust ........... JS 155 0.2%
Communications Equipment ............... JW 137 0.2%
Energy Equipment & Services ............ BA 137 0.2%
Household Products ..................... JJ 134 0.2%
Software ............................... JV 128 0.2%
Real Estate Development ................ JS 120 0.2%
Finance ................................ FB 74 0.1%
Personal Products ...................... JK 67 0.1%
Real Estate Operations ................. JS 43 0.1%
------- -----
$63,459 100.0%
======= =====
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Emerging Markets Equity Fund (the "Fund") is a diversified
series of John Hancock Variable Series Trust I (the "Trust"), an open-end
investment management company registered under the Investment Company Act of
1940. The Trust is organized as a Massachusetts business trust and consists of
thirty different funds as of December 31, 2003. The results of this Fund are
included in this report. The results of the other Funds in the Trust are
presented under separate cover. 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 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Fair value pricing, determined in good faith by the Board of Trustees, may
be used by the Fund when current market values are unavailable or when an event
occurs after the close of the exchange on which the Fund's portfolio securities
are principally traded that is likely to have changed the value of the
securities. The use of fair value pricing by the Fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. Securities for which prices are not
available from an independent pricing service, but where an active market
exists, are valued using market quotations obtained from one or more dealers
that make markets in the securities.
Investment security transactions are recorded on the date of purchase or
sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- ------------------------------------------------ ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 $ 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
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 Fund. 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 Fund does 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.
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$69 1.75% $-
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage Fund's currency exposure. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell are used to hedge the
Fund's investments against currency fluctuations. Neither type of forward
foreign currency transaction will eliminate fluctuations in the prices of the
Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $12,716 and $3,211 which expire in 2009 and 2010, respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $131. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
On February 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$10 Million and Excess Over
First $10 Million $150 Million $150 Million
- ----------------- --------------- ------------
1.65% 1.45% 1.35%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $286 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Morgan Stanley
Investment Management, Inc., with respect to the Fund. Morgan Stanley Investment
Management, Inc. is an affiliate of John Hancock, and under its supervision, is
responsible for the day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$48,158 $39,509
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$49,043 $16,200 $(579) $15,621
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to certain
securities sold at a loss and gains and losses related to certain foreign equity
investments. Additionally, as a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $15,927 $15,621
In addition, the tax character of distributions paid by the Fund are summarized
as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $2,228 $-- $860
2002 93 -- --
Included in the Fund's 2003 distributions from ordinary income is $870 in
excess of investment company taxable income, which in accordance with applicable
US tax law, is taxable to shareholders as ordinary income distributions.
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ---------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist,
c/o John Hancock Variable Series Dana- Farber Cancer
Trust I Institute; President, The
John Hancock Place Advertising Club of Greater
Boston, Massachusetts 02117 Boston
Diane C. Kessler (age 57) Trustee Executive Director,
c/o John Hancock Variable Series Massachusetts Council of
Trust I Churches
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East
Trust I Boston Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and
c/o John Hancock Variable Series Graduate Dean, The Graduate
Trust I School of the Wallace G.
John Hancock Place Carroll School of
Boston, Massachusetts 02117 Management, Boston College
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- --------------------------
Michele G. Van Leer* (age 46) Chairman Senior Vice President,
John Hancock Place and Trustee Product Management, John
Boston, Massachusetts 02117 Hancock Life Insurance
Company; Vice Chairman,
President & Director, John
Hancock Variable Life
Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, Senior Vice President,
John Hancock Place President and Signator Brokerage, John
Boston, Massachusetts 02117 Trustee Hancock Life Insurance
Company; Vice President
Corporate Communications,
John Hancock Life Insurance
Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ----------------------------
Jude A. Curtis (age 45) Compliance Vice President and Chief
John Hancock Place Officer Investment Compliance
Boston, Massachusetts 02117 Officer, John Hancock Life
Insurance Company; formerly
Second Vice President and
Counsel, Office of Business
Conduct; John Hancock Life
Insurance Company; formerly
a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Specialist, John
John Hancock Place Compliance Hancock Life Insurance
Boston, Massachusetts 02117 Officer Company
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 Company
Gladys C. Millan (age 57) Assistant Manager of Fund Operations,
John Hancock Place Treasurer John Hancock Life Insurance
Boston, Massachusetts 02117 Company
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock
Boston, Massachusetts 02117 Life Insurance Company
Arnold R. Bergman (age 53) Assistant Senior Counsel, Law
John Hancock Place Secretary Department, John Hancock
Boston, Massachusetts 02117 Life Insurance company;
formerly Vice President,
General Counsel and
Secretary, First Variable
Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Emerging Markets Equity Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Emerging Markets Equity Fund of John Hancock Variable Series Trust I at December
31, 2003, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1996
- --------------------------------------------------------------------------------
Equity Index Fund
SSgA Funds Management, Inc. J. Tucker/J. May
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 28.42% underperforming its benchmark, the S&P
500 Index.
.. The Fund underperformed its benchmark due to investment management fees.
.. The Fund's exposure to information technology was the largest contributor
to absolute performance, followed by financials. Information technology
stocks were the clear leaders posting a gain of over 45% during the year,
generating roughly one quarter of the fund and index return for the period.
All sectors had positive absolute returns.
.. The manager attempts to track the performance of the Index by using a full
replication strategy in which the Fund invests in each security at the
weight represented within the index. The Fund is broadly diversified across
sectors with sector weights similar to the benchmark.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Equity Index Fund S&P 500(R) Index (2)
----------------- --------------------
4/30/1996 10,000.00 10,000.00
5/31/1996 10,210.21 10,258.00
6/30/1996 10,231.27 10,300.06
7/31/1996 9,825.37 9,841.71
8/31/1996 9,970.93 10,050.35
9/30/1996 10,509.35 10,615.18
10/31/1996 10,787.24 10,906.03
11/30/1996 11,561.33 11,733.80
12/31/1996 11,423.37 11,503.82
1/31/1997 12,132.53 12,218.21
2/28/1997 12,220.87 12,317.18
3/31/1997 11,735.83 11,804.78
4/30/1997 12,408.96 12,509.53
5/31/1997 13,119.43 13,277.61
6/30/1997 13,727.15 13,869.79
7/31/1997 14,820.68 14,971.05
8/31/1997 13,993.35 14,138.66
9/30/1997 14,755.87 14,913.46
10/31/1997 14,266.68 14,415.35
11/30/1997 14,887.35 15,082.78
12/31/1997 15,168.85 15,342.21
1/31/1998 15,336.19 15,512.51
2/28/1998 16,441.16 16,630.96
3/31/1998 17,279.50 17,482.46
4/30/1998 17,454.65 17,659.04
5/31/1998 17,150.87 17,355.30
6/30/1998 17,849.77 18,059.92
7/31/1998 17,664.21 17,868.49
8/31/1998 15,095.58 15,284.71
9/30/1998 16,066.65 16,264.46
10/31/1998 17,368.66 17,586.76
11/30/1998 18,418.96 18,652.51
12/31/1998 19,484.37 19,726.90
1/31/1999 20,295.65 20,551.48
2/28/1999 19,668.88 19,912.33
3/31/1999 20,463.80 20,708.82
4/30/1999 21,252.00 21,510.26
5/31/1999 20,743.26 21,002.61
6/30/1999 21,904.36 22,168.26
7/31/1999 21,220.30 21,476.61
8/31/1999 21,115.14 21,369.23
9/30/1999 20,540.56 20,783.71
10/31/1999 21,833.37 22,099.32
11/30/1999 22,274.39 22,547.93
12/31/1999 23,592.37 23,876.01
1/31/2000 22,400.10 22,677.43
2/29/2000 21,977.89 22,248.83
3/31/2000 24,119.90 24,424.76
4/30/2000 23,394.26 23,689.58
5/31/2000 22,909.53 23,203.94
6/30/2000 23,474.64 23,774.76
7/31/2000 23,107.54 23,403.87
8/31/2000 24,545.85 24,857.25
9/30/2000 23,244.68 23,544.79
10/31/2000 23,145.58 23,445.90
11/30/2000 21,325.98 21,598.37
12/31/2000 21,433.41 21,704.20
1/31/2001 22,190.96 22,474.70
2/28/2001 20,163.63 20,425.00
3/31/2001 18,884.26 19,132.10
4/30/2001 20,349.88 20,618.67
5/31/2001 20,490.26 20,756.81
6/30/2001 19,989.35 20,252.42
7/31/2001 19,791.38 20,053.95
8/31/2001 18,550.00 18,798.57
9/30/2001 17,054.83 17,279.65
10/31/2001 17,378.41 17,609.69
11/30/2001 18,705.83 18,960.35
12/31/2001 18,866.25 19,127.20
1/31/2002 18,590.21 18,847.94
2/28/2002 18,228.98 18,484.18
3/31/2002 18,908.14 19,179.18
4/30/2002 17,755.94 18,016.92
5/31/2002 17,624.03 17,883.60
6/30/2002 16,365.09 16,610.29
7/31/2002 15,089.80 15,314.68
8/31/2002 15,184.36 15,415.76
9/30/2002 13,529.76 13,740.07
10/31/2002 14,716.71 14,949.19
11/30/2002 15,577.65 15,829.70
12/31/2001 14,658.15 14,898.92
1/31/2003 14,273.16 14,508.56
2/28/2003 14,057.18 14,290.94
3/31/2003 14,191.04 14,429.56
4/30/2003 15,358.80 15,618.55
5/31/2003 16,166.93 16,441.65
6/30/2003 16,368.60 16,652.10
7/31/2003 16,656.03 16,945.18
8/31/2003 16,977.21 17,275.61
9/30/2003 16,792.39 17,092.49
10/31/2003 17,739.90 18,059.93
11/30/2003 17,891.93 18,218.85
12/31/2003 18,824.58 19,173.52
Value on 12/31/03:
- -----------------
$18,825 Equity Index Fund
$19,174 S&P 500(R) Index (2)
MORNINGSTAR
CATEGORY +:
.. Large Blend
MORNINGSTAR
RISK +:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR
RATING +:
.. *** (VL/VUL)
.. *** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
General Electric Co. 3.0%
Microsoft Corp. 2.9%
Exxon Mobil Corp. 2.6%
Pfizer, Inc. 2.6%
Citigroup, Inc. 2.4%
Wal-Mart Stores, Inc. 2.2%
Intel Corp. 2.1%
American International Group, Inc. 1.7%
Cisco Systems, Inc. 1.6%
International Business Machines Corp. 1.6%
AVERAGE ANNUAL TOTAL RETURNS*
Equity Index S&P 500(R)
Fund(1) Index(2)
------------ ----------
1 Year 28.42% 28.69%
3 Years -4.23 -4.05
5 Years -0.69 -0.57
Since Inception (5/1/96) 8.59 8.86
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Financials 20.65%
Information Technology 17.76%
Health Care 13.30%
Consumer Discretionary 11.27%
Consumer Staples 11.01%
Industrials 10.88%
Energy 5.79%
Telecommunication Services 3.46%
Materials 3.04%
Utilities 2.83%
(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(R)" 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.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts. Hancock VL/VUL subaccounts were
rated against 933 VL/VUL subaccounts and 1,699 VA subaccounts in the
Morningstar Large Blend category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ...................................... $708,771
Net unrealized depreciation of investments ......................... (48,599)
Short-term investments at value .................................... 22,258
--------
Total investments ............................................ 682,430
Cash ............................................................... 1
Receivable for:
Fund shares sold ................................................ 1,119
Dividends ....................................................... 884
Futures contracts variation margin .............................. 52
Other assets .................................................... 67
--------
Total assets ....................................................... 684,553
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 2,702
Other liabilities ............................................... 170
--------
Total liabilities .................................................. 2,872
--------
Net assets ......................................................... $681,681
========
Shares of beneficial interest outstanding .......................... 48,059
--------
Net asset value per share .......................................... $ 14.18
========
Composition of net assets:
Capital paid-in ................................................. $762,858
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (33,277)
Net unrealized appreciation (depreciation) of:
Investments .................................................. (48,599)
Futures ...................................................... 699
--------
Net assets ......................................................... $681,681
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ..................................................... $ 272
Dividends .................................................... 9,609
--------
Total investment income ............................................ 9,881
--------
EXPENSES
Investment advisory fee ...................................... 734
Auditors fees ................................................ 74
Custodian fees ............................................... 163
Fidelity Bond fees ........................................... 1
Legal fees ................................................... 37
Printing & mailing fees ...................................... 44
Trustees' fees ............................................... 17
Other fees ................................................... 101
--------
Total expenses ..................................................... 1,171
Less custodian expense reduction offset
by commission recapture arrangement
(Note C) .................................................. (8)
--------
Net expenses ....................................................... 1,163
--------
Net investment income .............................................. 8,718
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments .................................................. (4,500)
Financial futures contracts .................................. 3,267
Change in unrealized appreciation on:
Investments .................................................. 134,810
Futures ...................................................... 971
--------
Net realized and unrealized gain ................................... 134,548
--------
Net increase in net assets resulting from
operations ...................................................... $143,266
========
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ................................................ $ 8,718 $ 6,944
Net realized loss .................................................... (1,233) (19,328)
Change in net unrealized appreciation (depreciation) ................. 135,781 (117,800)
-------- ---------
Net increase (decrease) in net assets resulting from operations ... 143,266 (130,184)
Distributions to shareholders from:
Net investment income ................................................ (14,075) (4,601)
Realized gains ....................................................... (3,229) (2,918)
-------- ---------
Decrease in net assets resulting from distributions ............... (17,304) (7,519)
From fund share transactions:
Proceeds from shares sold ............................................ 162,921 170,409
Distributions reinvested ............................................. 17,304 7,519
Payment for shares redeemed .......................................... (90,764) (112,758)
-------- ---------
Increase in net assets from fund share transactions ............... 89,461 65,170
-------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ................................... 215,423 (72,533)
NET ASSETS
Beginning of Period .................................................. 466,258 538,791
-------- ---------
End of Period ........................................................ $681,681 $ 466,258
======== =========
Analysis of fund share transactions:
Sold ................................................................. 13,034 13,047
Reinvested ........................................................... 1,303 598
Redeemed ............................................................. (7,307) (8,896)
-------- ---------
Net increase in fund shares outstanding ................................. 7,030 4,749
======== =========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Equity Index Fund
------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net Assets Value at Beginning of Period ................ $ 11.36 $ 14.85 $ 17.64 $ 20.46 $ 17.70
Income from Investment Operations:
Net Investment Income ............................... 0.20 0.16 0.19 0.22 0.27
Net Realized and Unrealized Gain (Loss) on
Investments(a). .................................. 3.00 (3.48) (2.30) (2.09) 3.41
-------- -------- -------- -------- --------
Total From Investment Operations .................... 3.20 (3.32) (2.11) (1.87) 3.68
Less Distributions:
Distribution from Net Investment Income ............. (0.31) (0.11) (0.19) (0.22) (0.26)
Distribution from Net Realized Gains on
Investments ...................................... (0.07) (0.06) (0.49) (0.72) (0.66)
Distribution from Capital Paid-in ................... (0.01)
-------- -------- -------- -------- --------
Total Distributions ................................. (0.38) (0.17) (0.68) (0.95) (0.92)
-------- -------- -------- -------- --------
Net Assets Value at End of Period ...................... $ 14.18 $ 11.36 $ 14.85 $ 17.64 $ 20.46
======== ======== ======== ======== ========
Total Investment Return(b) ............................. 28.42% (22.31)% (11.98)% (9.15)% 21.08%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ... 0.21%(e) 0.23% 0.20% 0.19% 0.00%(c)
Ratio of Net Investment Income to Average Net
Assets ........................................... 1.59% 1.39% 1.20% 1.12% 1.42%
Portfolio Turnover Rate ............................. 4.91% 10.63% 17.61%(d) 34.11% 55.24%
Net Assets End of Period (000s Omitted) ................ $681,681 $466,258 $538,791 $525,659 $451,296
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made, the annual expense ratio would have been .22%, for the year
ended December 31, 1999.
(d) Excludes merger activity.
(e) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 1.0%
Boeing Co. * ............................................ 53,837 $ 2,269
General Dynamics Corp. * ................................ 12,792 1,156
Lockheed Martin Corp. ................................... 29,132 1,498
Northrop Grumman Corp. .................................. 11,600 1,109
Raytheon Co. * .......................................... 26,959 810
Rockwell Collins, Inc. * ................................ 11,166 335
-------
7,177
Air Freight & Couriers - 1.0%
Fedex Corp. ............................................. 19,214 1,297
United Parcel Service, Inc. - Cl. B ..................... 72,000 5,368
-------
6,665
Airlines - 0.1%
Delta Air Lines, Inc. * ................................. 6,679 79
Southwest Airlines Co. .................................. 49,158 793
-------
872
Auto Components - 0.4%
B.F. Goodrich Co. * ..................................... 6,750 201
Cooper Tire & Rubber Co. * .............................. 5,206 111
Dana Corp ............................................... 8,430 155
Delphi Automotive Systems Corp. * ....................... 37,483 383
Goodyear Tire & Rubber Co. * ............................ 8,931 70
Ingersoll-Rand Co. - Cl. A * ............................ 11,349 770
Johnson Controls, Inc. .................................. 5,925 688
Visteon Corp. * ......................................... 6,356 66
-------
2,444
Automobiles - 0.7%
Ford Motor Co. .......................................... 119,097 1,906
General Motors Corp. * .................................. 36,098 1,928
Harley-Davidson, Inc. * ................................. 19,640 933
-------
4,767
Banks - 6.5%
AmSouth Bancorp. * ...................................... 23,039 564
Bank of America Corp. * ................................. 95,399 7,673
Bank of New York Co., Inc. .............................. 49,570 1,642
Bank One Corp. * ........................................ 71,945 3,280
BB&T Corp. * ............................................ 35,737 1,381
Charter One Financial, Inc. ............................. 13,730 474
Comerica, Inc. .......................................... 11,460 642
Fifth Third Bancorp * ................................... 36,391 2,151
First Tennessee National Corp. .......................... 8,300 366
FleetBoston Financial Corp. ............................. 67,295 2,937
Golden West Financial Corp. * ........................... 9,710 1,002
Huntington Bancshares, Inc. * ........................... 15,896 358
JP Morgan Chase & Co. ................................... 130,437 4,791
KeyCorp * ............................................... 27,217 798
Marshall & Ilsley Corp. * ............................... 13,900 532
Mellon Financial Corp. * ................................ 26,794 860
National City Corp. * ................................... 38,574 1,309
North Fork Bancorporation, Inc. * ....................... 9,800 397
Northern Trust Corp. .................................... 14,524 $ 674
PNC Bank Corp. * ........................................ 17,620 964
Regions Financial Corp. ................................. 13,631 507
SouthTrust Corp. * ...................................... 21,333 698
Suntrust Banks, Inc. * .................................. 18,125 1,296
Synovus Financial Corp. * ............................... 18,672 540
Union Planters Corp. * .................................. 12,098 381
US Bancorp * ............................................ 124,690 3,713
Wachovia Corp. * ........................................ 84,685 3,946
Zions Bancorp * ......................................... 5,634 346
-------
44,222
Beverages - 2.7%
Adolph Coors Co. - Cl. B * .............................. 2,054 115
Anheuser-Busch Cos., Inc................................. 52,705 2,777
Brown-Forman Corp. - Cl. B * ............................ 3,800 355
Coca-Cola Co. * ......................................... 156,817 7,958
Coca-Cola Enterprises, Inc. * ........................... 29,348 642
Pepsi Bottling Group, Inc. * ............................ 16,918 409
PepsiCo, Inc. * ......................................... 110,791 5,165
Starbucks Corp. * ....................................... 25,653 848
-------
18,269
Biotechnology - 1.1%
Amgen, Inc. * ........................................... 82,698 5,111
Biogen IDEC, Inc. * ..................................... 21,183 779
Chiron Corp. * .......................................... 11,876 677
Genzyme Corp. * ......................................... 14,200 701
MedImmune, Inc. * ....................................... 15,409 391
-------
7,659
Building Products - 0.1%
Crane Co. * ............................................. 3,037 94
Masco Corp. ............................................. 30,469 835
-------
929
Chemicals - 1.4%
Air Products & Chemicals, Inc. * ........................ 14,732 778
Dow Chemical Co. * ...................................... 59,048 2,455
E.I. du Pont de Nemours & Co. * ......................... 63,799 2,928
Eastman Chemical Co. * .................................. 5,012 198
Engelhard Corp. * ....................................... 8,490 254
Great Lakes Chemical Corp................................ 2,373 65
Hercules, Inc. * ........................................ 6,957 85
International Flavors & Fragrances, Inc. * .............. 5,339 187
Monsanto Co. ............................................ 17,136 493
PPG Industries, Inc. * .................................. 11,245 720
Praxair, Inc. * ......................................... 20,214 772
Rohm & Haas Co. ......................................... 14,547 621
Sigma-Aldrich Corp. * ................................... 4,410 252
-------
9,808
Commercial Services & Supplies - 2.2%
Allied Waste Industries, Inc. ........................... 21,697 301
Apollo Group, Inc. - Cl. A * ............................ 11,200 762
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Commercial Services & Supplies - Continued
Automatic Data Processing, Inc. ......................... 38,608 $ 1,529
Avery Dennison Corp. * .................................. 6,860 384
Cendant Corp. * ......................................... 65,307 1,454
Cintas Corp. * .......................................... 11,446 574
Concord EFS, Inc. * ..................................... 29,001 430
Convergys Corp. * ....................................... 7,949 139
Deluxe Corp. * .......................................... 3,303 137
Ecolab, Inc. * .......................................... 17,172 470
Equifax, Inc. * ......................................... 8,608 211
First Data Corp. * ...................................... 47,340 1,945
Fiserv, Inc. * .......................................... 12,181 481
H & R Block, Inc. * ..................................... 11,066 613
Honeywell International, Inc. ........................... 55,039 1,840
IMS Health, Inc. * ...................................... 14,387 358
Monster Worldwide, Inc. ................................. 7,355 161
Paychex, Inc. ........................................... 24,493 911
Pitney Bowes, Inc. * .................................... 14,859 604
R.R. Donnelley & Sons Co. * ............................. 7,271 219
Robert Half International, Inc. * ....................... 11,155 260
Sabre Group Holdings, Inc. * ............................ 9,067 196
Waste Management, Inc. * ................................ 37,567 1,112
-------
15,091
Communications Equipment - 2.8%
ADC Telecommunications, Inc. * .......................... 44,937 133
Andrew Corp. * .......................................... 10,368 119
Avaya, Inc. * ........................................... 25,215 326
Ciena Corp. * ........................................... 30,776 204
Cisco Systems, Inc. * ................................... 444,161 10,789
Comverse Technology, Inc. * ............................. 11,970 211
Corning, Inc. * ......................................... 84,653 883
JDS Uniphase Corp. * .................................... 95,191 347
Lucent Technologies, Inc. * ............................. 271,478 771
Motorola, Inc. .......................................... 148,989 2,096
Qualcomm, Inc. * ........................................ 51,801 2,794
Scientific-Atlanta, Inc. * .............................. 9,437 258
Tellabs, Inc. * ......................................... 24,895 210
-------
19,141
Computers & Peripherals - 5.7%
Apple Computer, Inc. * .................................. 22,508 481
Dell, Inc. * ............................................ 164,083 5,572
EMC Corp. * ............................................. 155,122 2,004
Gateway, Inc. * ......................................... 22,870 105
Hewlett-Packard Co. * ................................... 195,950 4,501
Intel Corp .............................................. 420,040 13,525
International Business Machines Corp .................... 110,327 10,225
Lexmark International Group, Inc. -
Cl. A * .............................................. 8,387 660
NCR Corp. * ............................................. 6,440 250
Network Appliance, Inc. * ............................... 22,373 460
Sun Microsystems, Inc. * ................................ 212,926 956
Unisys Corp. * .......................................... 21,261 316
-------
39,055
Construction & Engineering - 0.2%
American Standard Cos., Inc. * .......................... 4,700 $ 473
Fluor Corp. * ........................................... 5,615 223
Pulte Homes, Inc.. * .................................... 3,686 345
-------
1,041
Construction Materials - 0.1%
Nucor Corp. ............................................. 4,913 275
United States Steel Corp. * ............................. 7,229 253
Vulcan Materials Co. * .................................. 6,447 307
-------
835
Containers & Packaging - 0.2%
Ball Corp. .............................................. 3,380 201
Bemis Co., Inc. * ....................................... 2,977 149
Pactiv Corp. * .......................................... 9,831 235
Sealed Air Corp. * ...................................... 5,318 288
Temple-Inland, Inc. * ................................... 3,472 218
-------
1,091
Credit Card - 0.9%
American Express Co. * .................................. 83,124 4,009
MBNA Corp. * ............................................ 81,771 2,032
-------
6,041
Diversified Financials - 6.5%
Bear Stearns Cos., Inc. * ............................... 6,469 517
Capital One Financial Corp. ............................. 14,403 883
Charles Schwab Corp. * .................................. 84,591 1,002
Citigroup, Inc. * ....................................... 331,627 16,097
Countrywide Credit Industries, Inc. * ................... 11,696 887
Federated Investments, Inc. - Cl. B ..................... 6,900 203
Franklin Resources, Inc. * .............................. 16,385 853
Goldman Sachs Group, Inc. ............................... 30,200 2,982
Janus Capgroup, Inc. .................................... 14,819 243
Lehman Brothers Holdings, Inc. .......................... 17,758 1,371
Merrill Lynch & Co., Inc. * ............................. 60,807 3,566
Moody's Corp. * ......................................... 9,529 577
Morgan Stanley, Dean Witter, Discover &
Co. ................................................... 69,118 4,000
SLM Corp. * ............................................. 28,711 1,082
State Street Corp. ...................................... 21,517 1,121
T. Rowe Price Group, Inc. * ............................. 8,279 392
Washington Mutual, Inc. * ............................... 58,353 2,341
Wells Fargo & Co. * ..................................... 108,613 6,396
-------
44,513
Diversified Telecommunication Services - 3.1%
Alltel Corp. * .......................................... 19,855 925
AT&T Corp. * ............................................ 51,385 1,043
BellSouth Corp. ......................................... 117,626 3,329
CenturyTel, Inc. ........................................ 9,805 320
Citizens Communications Co. * ........................... 17,115 213
Nextel Communications, Inc. - Cl. A * ................... 71,513 2,007
Qwest Communications International, Inc. ................ 117,484 507
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
------------- ------- -------
(000's)
COMMON STOCK - Continued
Diversified Telecommunication Services - Continued
SBC Communications, Inc. * .............................. 212,795 $ 5,547
Sprint Corp. * .......................................... 58,289 957
Sprint PCS * ............................................ 69,263 389
Verizon Communications * ................................ 177,280 6,219
-------
21,456
Electric Utilities - 2.0%
AES Corp. * ............................................. 38,692 365
Allegheny Energy, Inc. * ................................ 6,781 87
Ameren Corp. * .......................................... 10,300 474
American Electric Power Co. * ........................... 25,329 773
Calpine Corp. ........................................... 21,334 103
Cinergy Corp. * ......................................... 10,931 424
CMS Energy Corp. * ...................................... 12,192 104
Consolidated Edison, Inc. * ............................. 14,608 628
Constellation Energy Group, Inc. * ...................... 11,138 436
DTE Energy Co. * ........................................ 10,440 411
Edison International * .................................. 19,838 435
Entergy Corp. * ......................................... 14,938 854
Exelon Corp. * .......................................... 21,416 1,421
Firstenergy Corp. * ..................................... 20,881 735
FPL Group, Inc. ......................................... 12,056 789
PG & E Corp. * .......................................... 26,763 743
Pinnacle West Capital Corp. * ........................... 5,523 221
PPL Corp. ............................................... 11,912 521
Progress Energy, Inc. * ................................. 15,372 696
Public Services Enterprise Group, Inc.*.................. 14,702 644
Southern Co. ............................................ 46,920 1,419
Teco Energy, Inc. * ..................................... 10,497 151
TXU Corp. ............................................... 20,786 493
Xcel Energy, Inc. ....................................... 26,349 447
-------
13,374
Electric/Gas - 0.2%
Dominion Resources, Inc. ................................ 21,031 1,342
Electrical Equipment - 0.9%
American Power Conversion ............................... 11,884 290
Cooper Industries, Ltd. - Cl. A * ....................... 6,136 355
Emerson Electric Co. .................................... 27,023 1,750
Molex, Inc. * ........................................... 12,634 441
Power One, Inc. * ....................................... 3,414 37
Rockwell International Corp. * .......................... 12,266 437
Thomas & Betts Corp. * .................................. 4,485 103
United Technologies Corp. * ............................. 30,085 2,851
-------
6,264
Electronic Equipment & Instruments - 0.5%
Agilent Technologies, Inc. * ............................ 30,938 905
Jabil Circuit, Inc. * ................................... 11,878 336
Millipore Corp. * ....................................... 2,568 111
PerkinElmer, Inc. * ..................................... 8,578 146
Sanmina Corp. * ......................................... 34,365 433
Solectron Corp. * ....................................... 52,270 309
Symbol Technologies, Inc. * ............................. 14,629 247
Tektronix, Inc. * ....................................... 5,036 $ 159
Thermo Electron Corp. * ................................. 10,264 259
Waters Corp. * .......................................... 7,400 245
-------
3,150
Energy Equipment & Services - 0.7%
Baker Hughes, Inc. * .................................... 21,388 688
Dynegy, Inc. - Cl.A * ................................... 19,274 83
Halliburton Co. * ....................................... 28,124 731
Nabors Industries, Ltd. * ............................... 8,814 366
Noble Corp. * ........................................... 8,295 297
Rowan Cos., Inc. * ...................................... 5,437 126
Schlumberger, Ltd. * .................................... 37,434 2,048
Transocean Sedco Forex, Inc. * .......................... 19,498 468
-------
4,807
Food & Drug Retailing - 1.1%
Albertson's, Inc. * ..................................... 23,466 531
CVS Corp. ............................................... 25,272 913
Safeway, Inc. * ......................................... 28,835 632
SuperValu, Inc. * ....................................... 8,593 246
Sysco Corp. * ........................................... 41,878 1,559
The Kroger Co. .......................................... 49,179 910
Walgreen Co. * .......................................... 65,680 2,389
Winn-Dixie Stores, Inc. * ............................... 8,104 81
-------
7,261
Food Products - 1.2%
Archer Daniels Midland Co. * ............................ 42,244 643
Campbell Soup Co. * ..................................... 25,994 697
ConAgra, Inc. ........................................... 34,581 913
General Mills, Inc. * ................................... 23,529 1,066
H.J. Heinz Co. .......................................... 22,607 823
Hershey Foods Corp. * ................................... 8,499 654
Kellogg Co. * ........................................... 25,890 986
McCormick & Co., Inc. ................................... 9,100 274
Sara Lee Corp. * ........................................ 51,361 1,115
WM Wrigley Jr. Co. ...................................... 14,229 800
-------
7,971
Gas Utilities - 0.3%
El Paso Corp ............................................ 41,028 336
KeySpan Corp. * ......................................... 10,600 390
Kinder Morgan, Inc. * ................................... 8,166 482
Nicor, Inc............................................... 2,666 91
Peoples Energy Corp. * .................................. 1,951 82
Sempra Energy * ......................................... 14,904 448
Williams Cos., Inc. * ................................... 32,248 317
-------
2,146
Health Care Equipment & Supplies - 2.0%
Amerisource Bergen Corp. * .............................. 7,355 413
Applera Corporation - Applied Biosystems
Group ................................................ 12,307 255
Bausch & Lomb, Inc. * ................................... 3,678 191
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Health Care Equipment & Supplies - Continued
Baxter International, Inc. .............................. 39,562 $ 1,207
Becton, Dickinson & Co. * ............................... 16,575 682
Biomet, Inc. * .......................................... 16,615 605
Boston Scientific Corp. * ............................... 52,768 1,940
C.R. Bard, Inc. * ....................................... 3,074 250
Guidant Corp. ........................................... 19,746 1,189
Medtronic, Inc. * ....................................... 77,358 3,760
St. Jude Medical, Inc. * ................................ 10,750 659
Stryker Corp. * ......................................... 12,785 1,087
Zimmer Holdings, Inc. * ................................. 15,715 1,106
-------
13,344
Health Care Providers & Services - 1.5%
Aetna US Healthcare, Inc. * ............................. 10,007 676
Anthem, Inc. * .......................................... 9,000 675
Cardinal Health, Inc. * ................................. 27,979 1,711
Express Scripts, Inc. - Cl. A * ......................... 4,800 319
HCA-The Healthcare Corp. * .............................. 31,432 1,350
Health Management Assoc., Inc. - Cl. A * ................ 15,856 381
Humana, Inc. * .......................................... 9,547 218
Manor Care, Inc. * ...................................... 5,065 175
McKesson HBOC, Inc. ..................................... 19,047 613
Quest Diagnostics, Inc. * ............................... 6,900 504
Tenet Healthcare Corp. * ................................ 30,658 492
UnitedHealth Group, Inc. * .............................. 38,122 2,218
Wellpoint Health Networks, Inc. * ....................... 9,584 930
-------
10,262
Hotels Restaurants & Leisure - 1.0%
Carnival Corp. .......................................... 40,650 1,615
Darden Restaurants, Inc. * .............................. 10,658 224
Harrah's Entertainment, Inc. ............................ 6,670 332
International Game Technology * ......................... 21,432 765
Marriott International, Inc. - Cl. A * .................. 14,555 672
McDonald's Corp. * ...................................... 81,381 2,021
Wendy's International, Inc. * ........................... 7,165 281
Yum Brands, Inc. * ...................................... 18,628 641
-------
6,551
Household Durables - 0.4%
American Greetings Corp. - Cl. A * ...................... 3,992 87
Black & Decker Corp. * .................................. 4,500 222
Centex Corp. * .......................................... 3,886 418
Fortune Brands, Inc. * .................................. 9,522 681
KB Home * ............................................... 2,764 201
Leggett & Platt, Inc. * ................................. 11,485 248
Maytag Corp. * .......................................... 4,311 120
Newell Rubbermaid, Inc. ................................. 17,604 401
Snap-On, Inc. * ......................................... 3,084 99
Stanley Works * ......................................... 5,324 202
Tupperware Corp. * ...................................... 2,584 45
Whirlpool Corp. * ....................................... 4,097 298
-------
3,022
Household Products - 1.6%
Clorox Co. * ............................................ 14,044 $ 682
Kimberly-Clark Corp. * .................................. 32,574 1,925
Procter & Gamble Co. * .................................. 83,484 8,338
-------
10,945
Industrial Conglomerates - 4.1%
3M Co. .................................................. 50,446 4,289
General Electric Co. * .................................. 645,300 19,991
Textron, Inc. * ......................................... 8,405 480
Tyco International, Ltd. * .............................. 127,347 3,375
-------
28,135
Insurance - 4.7%
Ace, Ltd. ............................................... 17,900 741
AFLAC, Inc. * ........................................... 33,265 1,204
Allstate Corp. .......................................... 45,154 1,943
Ambac Financial Group, Inc. ............................. 6,854 476
American International Group, Inc. * .................... 167,826 11,123
Aon Corp. * ............................................. 19,681 471
Chubb Corp. * ........................................... 12,055 821
CIGNA Corp. * ........................................... 8,918 513
Cincinnati Financial Corp. * ............................ 10,334 433
Hartford Financial Services Group, Inc. * ............... 18,145 1,071
Jefferson-Pilot Corp. * ................................. 8,796 445
John Hancock Financial Services * ....................... 18,848 707
Lincoln National Corp. * ................................ 11,673 471
Loews Corp. * ........................................... 12,487 617
Marsh & McLennan Cos., Inc. * ........................... 34,102 1,633
MBIA, Inc. * ............................................ 9,016 534
Metlife, Inc. * ......................................... 49,590 1,670
MGIC Investment Corp. * ................................. 6,156 351
Principal Financial Group. * ............................ 20,000 661
Progressive Corp. ....................................... 13,605 1,137
Providian Financial Corp. * ............................. 17,815 207
Prudential Financial, Inc. * ............................ 34,700 1,449
Safeco Corp. * .......................................... 9,186 358
St. Paul Cos., Inc. ..................................... 13,926 552
Torchmark, Inc. * ....................................... 7,282 332
Travelers Property Casualty Corp. - Cl. B ............... 65,455 1,111
UnumProvident Corp. * ................................... 19,771 312
XL Capital, Ltd. - Cl. A * .............................. 8,794 682
-------
32,025
Internet & Catalog Retail - 0.4%
eBay, Inc. * ............................................ 41,100 2,655
Internet Software & Services - 0.3%
Yahoo, Inc. * ........................................... 42,472 1,918
IT Consulting & Services - 0.3%
Computer Sciences Corp. * ............................... 11,745 520
Electronic Data Systems Corp. * ......................... 31,681 777
SunGard Data Systems, Inc. * ............................ 19,400 538
-------
1,835
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Leisure Equipment & Products - 0.2%
Brunswick Corp. * ....................................... 5,027 $ 160
Eastman Kodak Co. * ..................................... 18,922 486
Hasbro, Inc. * .......................................... 10,976 233
Mattel, Inc. * .......................................... 28,327 546
-------
1,425
Machinery - 1.2%
Caterpillar, Inc. * ..................................... 22,099 1,835
Cummins Engine Co., Inc. ................................ 2,460 120
Danaher Corp. * ......................................... 9,807 900
Deere & Co. * ........................................... 15,608 1,015
Dover Corp. ............................................. 12,996 517
Eaton Corp. * ........................................... 5,016 542
Illinois Tool Works, Inc. * ............................. 19,842 1,665
ITT Industries, Inc. * .................................. 5,728 425
Navistar International Corp., Inc. - Cl. B * ............ 4,486 215
Paccar, Inc. * .......................................... 7,266 618
Pall Corp. * ............................................ 7,379 198
Parker-Hannifin Corp. ................................... 8,020 477
-------
8,527
Media - 3.9%
Clear Channel Communications, Inc. ...................... 39,554 1,852
Comcast Corp. - Cl. A ................................... 144,167 4,739
Dow Jones & Co., Inc. * ................................. 5,726 285
Gannett Co., Inc. * ..................................... 17,385 1,550
Interpublic Group Cos., Inc. * .......................... 25,746 402
Knight-Ridder, Inc. * ................................... 5,306 411
McGraw-Hill Cos., Inc. .................................. 12,084 845
Meredith Corp. * ........................................ 2,872 140
New York Times Co. - Cl. A * ............................ 9,832 470
Omnicom Group, Inc. ..................................... 12,269 1,071
The Walt Disney Co. * ................................... 130,240 3,038
Time Warner, Inc. * ..................................... 288,994 5,199
Tribune Co. * ........................................... 19,899 1,027
Univision Communications, Inc. - Cl. A * ................ 20,903 830
Viacom, Inc. - Cl. B * .................................. 112,851 5,008
-------
26,867
Metals & Mining - 0.7%
Alcoa, Inc. * ........................................... 55,849 2,122
Allegheny Technologies, Inc. * .......................... 3,867 51
Freeport-McMoran Copper & Gold, Inc. -
Cl. B ................................................ 12,309 519
Newmont Mining Corp. .................................... 27,185 1,322
Phelps Dodge Corp. * .................................... 6,110 465
Worthington Industries, Inc. * .......................... 5,124 92
-------
4,571
Multi-Utilities - 0.3%
CenterPoint Energy, Inc. ................................ 19,857 193
Duke Energy Co. ......................................... 57,811 1,182
NiSource, Inc. * ........................................ 16,466 361
-------
1,736
Multiline Retail - 3.2%
Big Lots, Inc. * ........................................ 6,765 $ 96
Costco Wholesale Corp. .................................. 29,154 1,084
Dillard's, Inc. - Cl. A * ............................... 4,824 79
Dollar General Corp. .................................... 22,027 462
Family Dollar Stores, Inc. .............................. 11,350 407
Federated Department Stores, Inc. * ..................... 11,787 556
J.C. Penney Co., Inc. * ................................. 18,083 475
May Department Stores Co. * ............................. 17,785 517
Nordstrom, Inc. ......................................... 8,795 302
Sears, Roebuck & Co. * .................................. 15,978 727
Target Corp. * .......................................... 58,108 2,231
Wal-Mart Stores, Inc. * ................................. 278,298 14,764
-------
21,700
Office Electronics - 0.1%
Xerox Corp. * ........................................... 51,710 714
Oil & Gas - 4.9%
Amerada Hess Corp. * .................................... 6,056 322
Anadarko Petroleum Corp. * .............................. 16,637 849
Apache Corp. ............................................ 10,445 847
Ashland, Inc. ........................................... 4,501 198
BJ Services Co. * ....................................... 10,900 391
Burlington Resources, Inc. * ............................ 13,018 721
ChevronTexaco Corp. * ................................... 68,439 5,913
Conoco Phillips ......................................... 43,348 2,842
Devon Energy Corp. * .................................... 14,988 858
EEX Corp. ............................................... --
EOG Resources, Inc. * ................................... 7,169 331
Exxon Mobil Corp. * ..................................... 424,845 17,419
Kerr-McGee Corp. * ...................................... 6,315 294
Marathon Oil Corp. * .................................... 19,049 630
Occidental Petroleum Corp. * ............................ 25,047 1,058
Sunoco, Inc. * .......................................... 4,522 231
Unocal Corp. * .......................................... 16,854 621
-------
33,525
Paper & Forest Products - 0.6%
Boise Cascade Corp. * ................................... 6,062 199
Georgia-Pacific Corp. * ................................. 16,755 514
International Paper Co. * ............................... 30,569 1,318
Louisiana-Pacific Corp. * ............................... 7,452 133
MeadWestvaco Corp. * .................................... 13,833 412
Plum Creek Timber Co., Inc. * ........................... 11,400 347
Weyerhaeuser Co. ........................................ 14,335 917
-------
3,840
Personal Products - 0.8%
Alberto-Culver Co. - Cl. B * ............................ 4,182 264
Avon Products, Inc. ..................................... 15,545 1,049
Colgate-Palmolive Co. ................................... 34,516 1,728
Gillette Co. ............................................ 65,534 2,407
-------
5,448
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Pharmaceuticals - 8.1%
Abbott Laboratories * ................................... 100,442 $ 4,681
Allergan, Inc. * ........................................ 8,191 629
Bristol-Myers Squibb Co. * .............................. 125,426 3,587
Eli Lilly & Co. * ....................................... 71,835 5,052
Forest Laboratories, Inc. * ............................. 23,012 1,422
Johnson & Johnson ....................................... 190,361 9,834
King Pharmaceuticals, Inc. * ............................ 16,622 254
Medco Health Solutions, Inc. * .......................... 17,605 599
Merck & Co., Inc. * ..................................... 142,935 6,604
Pfizer, Inc. * .......................................... 490,585 17,332
Schering-Plough Corp. * ................................. 94,828 1,649
Watson Pharmaceuticals, Inc. * .......................... 6,654 306
Wyeth * ................................................. 84,812 3,600
-------
55,549
Real Estate Investment Trust - 0.3%
Apartment Investment & Management Co. ................... 6,200 214
Equity Office Properties Trust * ........................ 25,990 745
Equity Residential Properties Trust * ................... 16,786 495
Prologis Trust .......................................... 10,700 343
Simon Property Group, Inc. .............................. 12,800 593
-------
2,390
Real Estate Operations - 0.1%
Hilton Hotels Corp. * ................................... 24,936 427
Starwood Hotels & Resorts Worldwide,
Inc. * ............................................... 12,489 449
-------
876
Road & Rail - 0.5%
Burlington Northern Santa Fe Corp. * .................... 24,170 782
CSX Corp. * ............................................. 14,410 518
Norfolk Southern Corp. * ................................ 25,459 602
Ryder System, Inc. ...................................... 3,588 122
Union Pacific Corp. ..................................... 16,461 1,144
-------
3,168
Semiconductor Equipment & Products - 2.1%
Advanced Micro Devices, Inc. ............................ 23,600 352
Altera Corp. * .......................................... 23,662 537
Analog Devices, Inc. * .................................. 23,623 1,078
Applied Materials, Inc. * ............................... 106,054 2,381
Applied Micro Circuits Corp. * .......................... 19,737 118
Broadcom Corp. - Cl. A * ................................ 19,203 655
KLA-Tencor Corp. * ...................................... 12,570 737
Linear Technology Corp. * ............................... 20,446 860
LSI Logic Corp. * ....................................... 24,026 213
Maxim Integrated Products, Inc. * ....................... 21,077 1,050
Micron Technology, Inc. ................................. 40,167 541
National Semiconductor Corp. * .......................... 12,052 475
Novellus Systems, Inc. * ................................ 10,207 429
PMC-Sierra, Inc. * ...................................... 12,439 251
QLogic Corp. * .......................................... 5,834 301
Teradyne, Inc. * ........................................ 11,754 $ 299
Texas Instruments, Inc. * ............................... 110,525 3,247
Xilinx, Inc. * .......................................... 22,084 856
-------
14,380
Software - 4.6%
Adobe Systems, Inc. ..................................... 15,048 591
Autodesk, Inc. * ........................................ 6,156 151
BMC Software, Inc. * .................................... 13,454 251
Citrix Systems, Inc. .................................... 10,669 226
Computer Associates International, Inc. ................. 36,763 1,005
Compuware Corp. * ....................................... 20,235 122
Electronic Arts, Inc. * ................................. 19,100 913
Intuit, Inc. * .......................................... 13,203 699
Mercury Interactive Corp. * ............................. 6,104 297
Microsoft Corp. * ....................................... 694,869 19,137
Novell, Inc. * .......................................... 26,924 283
NVIDIA Corp. * .......................................... 9,603 223
Oracle Corp. * .......................................... 337,464 4,455
Parametric Technology Corp. ............................. 12,184 48
Peoplesoft, Inc. * ...................................... 22,828 520
Siebel Systems, Inc. * .................................. 33,059 459
Symantec Corp. * ........................................ 19,600 679
Veritas Software Corp. * ................................ 26,963 1,002
-------
31,061
Specialty Retail - 2.5%
AutoNation, Inc. * ...................................... 17,500 322
AutoZone, Inc. * ........................................ 5,763 491
Bed Bath & Beyond, Inc. * ............................... 18,620 807
Best Buy Co., Inc. * .................................... 20,807 1,087
Circuit City Stores, Inc. ............................... 15,903 161
Gap, Inc. ............................................... 57,825 1,342
Home Depot, Inc. * ...................................... 146,744 5,208
Kohl's Corp. * .......................................... 21,484 966
Limited, Inc. * ......................................... 31,972 577
Lowe's Cos., Inc. * ..................................... 50,919 2,820
Office Depot, Inc. * .................................... 21,548 360
RadioShack Corp. * ...................................... 10,370 318
Sherwin-Williams Co. * .................................. 8,928 310
Staples, Inc. * ......................................... 32,761 894
Tiffany & Co. * ......................................... 8,912 403
TJX Cos., Inc. * ........................................ 33,016 728
Toys "R" Us, Inc. * ..................................... 13,687 173
-------
16,967
Textiles & Apparel - 0.3%
Jones Apparel Group, Inc. ............................... 8,900 314
Liz Claiborne, Inc. * ................................... 6,652 236
Nike, Inc. - Cl. B ...................................... 17,094 1,170
Reebok International, Ltd. * ............................ 3,485 137
V.F. Corp. * ............................................ 7,263 314
-------
2,171
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- -------- --------
(000's)
COMMON STOCK - Continued
Tobacco - 1.1%
Altria Group, Inc. .................................... 130,799 $ 7,118
R.J. Reynolds Tobacco Holdings, Inc. .................. 5,700 332
UST, Inc. * ........................................... 10,237 365
--------
7,815
Trading Companies & Distributors - 0.1%
Genuine Parts Co. * ................................... 12,000 398
W.W. Grainger, Inc. * ................................. 5,338 253
--------
651
U.S. Government Agencies - 1.1%
Federal Home Loan Mortgage Corp. ...................... 44,507 2,596
Federal National Mortgage Assoc. * .................... 62,755 4,710
--------
7,306
Wireless Telecommunications Services - 0.2%
AT&T Wireless Group * ................................. 175,449 1,402
--------
TOTAL COMMON STOCK- 96.8% 660,172
Par
Value
--------
(000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account
(Note B) - 3.1%
1.061% due 01/02/04 .................................. $ 21,014 21,014
U.S. Governmental - 0.2%
U.S. Treasury - Bills
0.99% due 03/11/04 ................................... 1,244 1,244
--------
TOTAL SHORT-TERM INVESTMENTS- ............... 3.3% 22,258
-------- --------
TOTAL INVESTMENTS- ............................. 100.1% 682,430
Payables, less cash and receivables- .............. (0.1)% (749)
-------- --------
NET ASSETS- .............................. 100.0% $681,681
======== ========
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Equity Index Fund (the "Fund") is a diversified series of John
Hancock Variable Series Trust I (the "Trust"), an open-end investment management
company registered under the Investment Company Act of 1940. The Trust is
organized as a Massachusetts business trust and consists of thirty different
funds as of December 31, 2003. The results of this Fund are included in this
report. The results of the other Funds in the Trust are presented under separate
cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Fair value pricing, determined in good faith by the Board of Trustees, may
be used by the Fund when current market values are unavailable or when an event
occurs after the close of the exchange on which the Fund's portfolio securities
are principally traded that is likely to have changed the value of the
securities. The use of fair value pricing by the Fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. Securities for which prices are not
available from an independent pricing service, but where an active market
exists, are valued using market quotations obtained from one or more dealers
that make markets in the securities.
Investment security transactions are recorded on the date of purchase or
sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 $ 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit with Fleet Bank. This agreement
enables the Fund to participate in an unsecured line of credit, which permits
borrowing up to $10 million. Interest is charged to the Fund, based on its
borrowing. In addition, a commitment fee is charged to the Fund based on the
average daily unused portion of the line of credit and is allocated among the
participating Funds in the Trust. Interest expense paid under the line of credit
is included under the caption "Other fees" in the Statement of Operations. For
the year ended December 31, 2003, the Fund had no bank borrowings.
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, open financial
futures contracts for the Fund were as follows:
Open Unrealized
Contracts Position Expiration Month Appreciation
--------- -------- ---------------- ------------
S&P 500 Index Futures 72 Long March 04 $699
====
At December 31, 2003, the Fund had deposited $1,245 in segregated accounts
to cover initial margin requirements on open financial futures contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $396 and $15,815 which expire in 2009 and 2010, respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$75 Million and Excess Over
First $75 Million $125 Million $125 Million
- ----------------- --------------- ------------
0.15% 0.14% 0.13%
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, there were no reimbursements paid to the
Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $8.
John Hancock has entered into a Sub-Advisory Agreement with State Street
Global Bank & Trust N.A., with respect to the Fund. State Street Global Bank &
Trust N.A. is an affiliate of John Hancock, and under its supervision, is
responsible for the day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$103,525 $26,061
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Depreciation
- ---------- ------------ ------------ --------------
$747,395 $47,147 $(112,113) $(64,966)
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends paid deduction on its federal
income tax return.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Depreciation
- ------------- ------------- ------------- --------------
$-- $-- $16,211 $(64,966)
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions
from
Ordinary Distributions from
Year Income Long-Term Capital Gain Return of Capital
- ---- ------------- ---------------------- -----------------
2003 $16,969 $ -- $335
2002 4,601 2,918 --
Included in the Fund's 2003 distributions from ordinary income is $2,813 in
excess of investment company taxable income, which in accordance with applicable
US tax law, is taxable to shareholders as ordinary income distributions.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ---------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist,
c/o John Hancock Variable Series Dana-Farber Cancer
Trust I Institute; President, The
John Hancock Place Advertising Club of Greater
Boston, Massachusetts 02117 Boston
Diane C. Kessler (age 57) Trustee Executive Director,
c/o John Hancock Variable Series Massachusetts Council of
Trust I Churches
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East
Trust I Boston Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and
c/o John Hancock Variable Series Graduate Dean, The Graduate
Trust I School of the Wallace G.
John Hancock Place Carroll School of
Boston, Massachusetts 02117 Management, Boston College
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ---------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President,
John Hancock Place Product Management, John
Boston, Massachusetts 02117 Hancock Life Insurance
Company; Vice Chairman,
President & Director, John
Hancock Variable Life
Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President,
John Hancock Place and Trustee Signator Brokerage, John
Boston, Massachusetts 02117 Hancock Life Insurance
Company; Vice President
Corporate Communications,
John Hancock Life
Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief
John Hancock Place Investment Compliance
Boston, Massachusetts 02117 Officer, John Hancock Life
Insurance Company; formerly
Second Vice President and
Counsel, Office of Business
Conduct; John Hancock Life
Insurance Company; formerly
a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Compliance Specialist, John
John Hancock Place Officer Hancock Life Insurance
Boston, Massachusetts 02117 Company
Raymond F. Skiba (age 58) Treasurer Director of Fund
John Hancock Place Operations, John Hancock
Boston, Massachusetts 02117 Life Insurance Company
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ --------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock
Boston, Massachusetts 02117 Life Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law
John Hancock Place Department, John
Boston, Massachusetts 02117 Hancock Life Insurance
company; formerly Vice
President, General
Counsel and Secretary,
First Variable Life
Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Equity Index Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Equity Index Fund of John Hancock Variable Series Trust I at December 31, 2003,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: April 30, 1997
- --------------------------------------------------------------------------------
Financial Industries Fund
John Hancock Advisers, LLC J. Schmidt/L. Welch/J.McKelvey
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 26.03% underperforming its benchmark, the S&P
500 Financials Sector Index.
.. The Fund was created on April 30, 2003 with prior data representing the VA
Financial Industries Fund. Since May 1st, the Fund underperformed its
benchmark.
.. The Fund underperformed its benchmark due to unfavorable sector allocation
decisions. The overweight to the reinsurance sub-sector was the biggest
detractor to relative returns, followed by an overweight to insurance
brokers.
.. The Fund's exposure to asset management and custody bank was the largest
contributor to absolute performance. The biggest detractor to absolute
returns was the exposure to the industrial conglomerates sub-sector, with
all other sub-sectors having positive absolute returns.
.. The top and bottom contributors to absolute returns came from a variety of
sub-sectors. The biggest contributors to performance were FleetBoston,
State Street Corp., and Legg Mason. The main detractors included Bank
America Corp. and BB&T.
.. The portfolio was on average overweight the asset management & custody bank
sector, as well as the reinsurance sector, while underweight in the other
diversified financial services sub-sector.
.. The manager selects stocks using bottom-up fundamental research and focuses
on stocks presenting opportunities based upon market themes, takeover
potential and value relative to balance sheet and earnings.
[CHART]
Line Chart
Historical Fund Return
Investment Made 4/30/97
$10,000
Financial Standard & Poor's S&P 500
Industries Financial Index(1) Index(2)
---------- ------------------ ----------
4/30/1997 $10,000.00 $10,000.00 $10,000.00
5/31/1997 10,630.00 10,630.00 10,614.00
6/30/1997 11,240.00 11,240.00 11,087.38
7/31/1997 12,460.00 12,460.00 11,967.72
8/31/1997 12,140.00 12,140.00 11,302.32
9/30/1997 12,990.00 12,990.00 11,921.68
10/31/1997 12,620.00 14,270.72 11,523.50
11/30/1997 13,180.00 14,427.70 12,057.04
12/31/1997 13,505.12 14,916.80 12,264.42
1/31/1998 13,615.65 14,646.80 12,400.55
2/28/1998 14,409.48 15,531.47 13,294.63
3/31/1998 14,972.19 16,162.05 13,975.32
4/30/1998 15,042.53 16,241.24 14,116.47
5/31/1998 14,630.54 15,666.30 13,873.67
6/30/1998 15,173.16 15,578.57 14,436.94
7/31/1998 14,741.08 14,358.77 14,283.91
8/31/1998 11,987.80 12,110.18 12,218.45
9/30/1998 12,630.90 12,794.41 13,001.66
10/31/1998 13,665.89 13,174.40 14,058.69
11/30/1998 14,268.80 13,531.43 14,910.65
12/31/1998 14,662.52 13,956.32 15,769.50
1/31/1999 14,256.63 13,639.51 16,428.67
2/28/1999 14,145.02 12,707.93 15,917.73
3/31/1999 14,368.25 12,602.45 16,554.44
4/30/1999 15,403.25 13,753.06 17,195.10
5/31/1999 15,088.69 14,175.28 16,789.30
6/30/1999 15,332.22 14,688.42 17,721.10
7/31/1999 14,530.60 14,340.31 17,168.20
8/31/1999 13,931.93 13,816.89 17,082.36
9/30/1999 13,231.78 13,540.55 16,614.31
10/31/1999 14,784.28 13,269.74 17,665.99
11/30/1999 14,530.60 13,338.74 18,024.61
12/31/1999 14,842.25 13,748.24 19,086.26
1/31/2000 14,267.45 13,389.41 18,128.13
2/29/2000 12,912.55 14,207.50 17,785.51
3/31/2000 15,591.55 14,274.28 19,524.93
4/30/2000 15,180.97 14,358.50 18,937.23
5/31/2000 15,796.83 14,138.81 18,649.02
6/30/2000 15,694.19 14,551.66 19,005.32
7/31/2000 16,823.27 15,036.24 18,708.84
8/31/2000 18,291.07 15,708.35 19,870.66
9/30/2000 18,824.82 15,618.82 18,821.49
10/31/2000 18,886.40 15,562.59 18,742.44
11/30/2000 17,706.00 13,964.31 17,265.53
12/31/2000 18,872.69 15,163.85 17,350.14
1/31/2001 18,183.23 15,953.88 17,966.07
2/28/2001 17,195.34 14,907.31 16,327.56
3/31/2001 16,310.36 14,178.34 15,294.03
4/30/2001 17,051.28 15,287.09 16,482.37
5/31/2001 17,401.15 15,663.15 16,592.80
6/30/2001 17,257.08 16,203.53 18,189.60
7/31/2001 16,433.85 15,326.92 16,030.94
8/31/2001 15,384.22 14,831.86 15,027.40
9/30/2001 14,622.73 12,835.49 13,813.19
10/31/2001 14,231.69 13,586.37 14,077.02
11/30/2001 15,240.16 14,637.95 15,156.73
12/31/2001 15,567.54 15,541.11 15,290.11
1/31/2002 15,129.17 15,379.48 15,066.87
2/28/2002 14,840.48 14,958.09 14,776.08
3/31/2002 15,653.07 16,160.72 15,331.66
4/30/2002 15,043.63 16,307.78 14,402.56
5/31/2002 14,915.33 15,583.71 14,295.98
6/30/2002 13,856.82 14,810.76 13,278.11
7/31/2002 13,204.61 12,574.34 12,242.42
8/31/2002 12,851.77 12,541.64 12,323.22
9/30/2002 11,985.72 11,641.15 10,983.68
10/31/2002 12,905.23 12,014.83 11,950.25
11/30/2002 13,225.99 13,086.56 12,654.12
12/31/2002 12,537.71 12,357.64 11,910.06
1/31/2003 12,126.99 14,729.38 11,698.01
2/28/2003 11,694.66 14,268.35 11,424.04
3/31/2003 11,532.53 14,212.71 11,534.86
4/30/2003 12,884.20 15,953.76 12,485.33
5/31/2003 13,649.81 16,796.12 13,143.30
6/30/2003 13,686.39 16,838.11 13,311.54
7/31/2003 14,236.53 17,610.98 13,545.82
8/31/2003 14,192.76 17,433.11 13,809.97
9/30/2003 14,184.91 17,549.91 13,663.58
10/31/2003 15,173.17 18,759.10 14,436.94
11/30/2003 15,145.77 18,708.45 14,563.98
12/31/2003 15,801.75 19,627.04 15,327.14
Value on 12/31/02:
- ------------------
$ 15,802 Financial Industries Fund
$ 19,627 Standard & Poor's Financial Index (1)
$ 15,327 S&P 500 Index(2)
MORNINGSTAR
CATEGORY+:
.. Specialty Financial
MORNINGSTAR
RISK+:
.. (VL/VUL) NA
.. (VA) Average
MORNINGSTAR
RATING+:
.. NA (VL/VUL)
.. * (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Goldman Sachs Group, Inc. 5.3%
State Street Corp. 4.8%
Citigroup, Inc. 4.7%
Fifth Third Bancorp 4.7%
Wells Fargo & Co. 4.6%
JP Morgan Chase & Co. 4.2%
American Express Co. 4.1%
Federal National Mortgage Assoc. 4.0%
Berkshire Hathaway, Inc. 3.9%
Marsh & McLennan Cos., Inc. 3.8%
AVERAGE ANNUAL TOTAL RETURNS*
Financial Standard &
Industries Poor's Financial S&P 500(R)
Fund Index(1) Index(2)
---------- ---------------- ----------
1 Year 26.03% 31.03% 28.69%
3 Years -5.75 0.61 -4.05
5 Years 1.51 5.91 -0.57
Since Inception (4/30/97) 7.09 10.64 6.62
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
Banks: Outside New York
City 36.89%
Diversified Financial Services 21.57%
Banks: New York City 7.87%
Financial Miscellaneous 7.57%
Insurance: Multi-Line 7.02%
Insurance: Property-Casualty 6.26%
Securities Brokerage &
Services 4.18%
Multi-Sector Companies 3.90%
Savings & Loan 2.43%
Insurance: Life 1.07%
Investment Management
Companies 0.46%
Financial Data
Processing Svcs and
Systms 0.31%
Finance Companies 0.20%
Real Estate Investment
Trusts (REIT) 0.17%
Finance: Small Loan 0.11%
(1) The Standard & Poor's Financial Index is an unmanaged index of financial
sector stocks in the Standard & Poor's 500(R) Index.
(2) "S&P 500(R)" is an unmanaged stock index commonly used as a broad measure
of stock market performance.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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
additional risks associated with a non diversified fund, as outlined in the
current prospectus. Performance would be lower if expenses and charges of
the separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03, this fund is not yet rated
for VL/VUL.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ...................................... $ 54,619
Net unrealized appreciation of investments ......................... 6,660
Short-term investments at value .................................... 1,641
--------
Total investments ............................................ 62,920
Receivable for:
Dividends ....................................................... 101
Other assets .................................................... 3
--------
Total assets ....................................................... 63,024
--------
LIABILITIES
Payables for:
Fund shares purchased ........................................... 35
Other liabilities ............................................... 1
--------
Total liabilities .................................................. 36
--------
Net assets ......................................................... $ 62,988
========
Shares of beneficial interest outstanding .......................... 4,384
--------
Net asset value per share .......................................... $ 14.37
========
Composition of net assets:
Capital paid-in ................................................. 69,718
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (13,390)
Net unrealized appreciation of investments ...................... 6,660
--------
Net assets ......................................................... $ 62,988
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 6
Dividends ..................................................... 1,283
-------
Total investment income ............................................. 1,289
-------
EXPENSES
Investment advisory fee ....................................... 461
Auditors fees ................................................. 4
Custodian fees ................................................ 13
Legal fees .................................................... 2
Printing & mailing fees ....................................... 9
Trustees' fees ................................................ 1
Other fees .................................................... 8
-------
Total expenses ...................................................... 498
-------
Net investment income ............................................... 791
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investments ................................................... (1,520)
Foreign currency translations ................................. 1
Change in unrealized appreciation (depreciation) on:
Investments ...................................................... 14,170
Translation of assets and liabilities in foreign
currencies ....................................................... (1)
-------
Net realized and unrealized gain .................................... 12,650
-------
Net increase in net assets resulting from
operations ....................................................... $13,441
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ................................................. 791 639
Net realized loss ..................................................... (1,519) (7,404)
Change in net unrealized appreciation (depreciation) .................. 14,169 (9,486)
------- -------
Net increase (decrease) in net assets resulting from operations .... 13,441 (16,251)
Distributions to shareholders from:
Net investment income ................................................. (914) (641)
Realized gains ........................................................ (114)
------- -------
Decrease in net assets resulting from distributions ................ (1,028) (641)
From fund share transactions:
Proceeds from shares sold ............................................. 4,734 8,600
Distributions reinvested .............................................. 1,028 641
Payment for shares redeemed ........................................... (12,562) (23,894)
------- -------
Decrease in net assets from fund share transactions ................ (6,800) (14,653)
------- -------
NET INCREASE (DECREASE) IN NET ASSETS .................................... 5,613 (31,545)
NET ASSETS
Beginning of Period ................................................... 57,375 88,920
------- -------
End of Period ...................................................... 62,988 57,375
======= =======
Analysis of fund share transactions:
Sold .................................................................. 318 673
Reinvested ............................................................ 59 53
Redeemed .............................................................. (619) (1,891)
------- -------
Decrease in fund shares outstanding ................................ (242) (1,165)
======= =======
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Financial Industries Fund
---------------------------------------------------
Year Ended December 31,
---------------------------------------------------
2003(f) 2002 2001 2000 1999
-------- ------- ------- ------- -------
Net Assets Value at Beginning of Period .................. $ 11.60 $ 14.56 $ 18.34 $ 14.46 $ 14.45
Income from Investment Operations:
Net Investment Income ................................. 0.18 0.12 0.11 0.06 0.11
Net Realized and Unrealized Gain (Loss) on
Investments(a) ..................................... 2.82 (2.95) (3.33) 3.87 0.06
------- ------- ------- ------ -------
Total From Investment Operations ...................... 3.00 (2.83) (3.22) 3.93 0.17
Less Distributions:
Distribution from Net Investment Income ............... (0.20) (0.13) (0.09) (0.05) (0.10)
Distribution from Net Realized Gains on Investments ... (0.03) (0.47) (0.05)
Distribution from Capital Paid-in ..................... (0.01)
------- ------- ------- ------ -------
Total Distributions ................................... (0.23) (0.13) (0.56) (0.05) (0.16)
Capital Contributions ....................................
------- ------- ------- ------- -------
Net Assets Value at End of Period ........................ $ 14.37 $ 11.60 $ 14.56 $ 18.34 $ 14.46
======= ======= ======= ======= =======
Total Investment Return .................................. 26.03%(c) (19.46)% (17.51)% 27.16% 1.23%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ..... 0.85%(d) 0.90% 0.89% 0.90% 0.90%
Ratio of Net Investment Income (Loss) to Average
Net Assets ......................................... 1.35%(d) 0.87% 0.71% 0.36% 0.77%
Portfolio Turnover Rate ............................... 50.20%(c) 2.00% 97.00%(e) 41.00% 72.00%
Net Assets End of Period (000s Omitted) .................. $62,988 $57,375 $88,920 $71,367 $49,312
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Excludes merger activity.
(f) Commencement of investment operations.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
FINANCIAL INDUSTRIES FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK
Banks - 36.1%
Bank of America Corp. * .................................. 27,000 $ 2,172
Bank of New York Co., Inc. ............................... 68,000 2,252
Bank One Corp. * ......................................... 23,000 1,049
Charter One Financial, Inc. .............................. 10,000 345
Fifth Third Bancorp * .................................... 48,842 2,887
First Tennessee National Corp. ........................... 3,000 132
FleetBoston Financial Corp. .............................. 51,600 2,252
Golden West Financial Corp. * ............................ 6,600 681
JP Morgan Chase & Co. .................................... 70,000 2,571
M & T Bank Corp. * ....................................... 14,400 1,415
Mellon Financial Corp. * ................................. 46,500 1,493
National City Corp. * .................................... 10,000 339
National Commerce Financial Corp. ........................ 3,000 82
PNC Bank Corp. * ......................................... 18,344 1,004
SouthTrust Corp. * ....................................... 20,000 655
Suntrust Banks, Inc. * ................................... 6,500 465
US Bancorp * ............................................. 17,500 521
Wachovia Corp. * ......................................... 47,942 2,234
Wintrust Financial Corp. ................................. 3,250 147
-------
22,696
Commercial Services & Supplies - 0.4%
Benfield * ............................................... 13,795 64
Fiserv, Inc. * ........................................... 4,800 190
-------
254
Credit Card - 5.9%
American Express Co. * ................................... 52,000 2,508
MBNA Corp. * ............................................. 48,475 1,204
-------
3,712
Diversified Financials - 27.9%
Ameritrade Holding Corp. * ............................... 11,750 165
Bear Stearns Cos., Inc. * ................................ 7,400 592
Capital One Financial Corp. .............................. 2,000 123
Citigroup, Inc. * ........................................ 60,000 2,912
Eaton Vance Corp. * ...................................... 7,000 257
Goldman Sachs Group, Inc. ................................ 32,700 3,228
Legg Mason, Inc. * ....................................... 15,000 1,158
Lehman Brothers Holdings, Inc. ........................... 8,350 645
Merrill Lynch & Co., Inc. * .............................. 32,800 1,924
Morgan Stanley, Dean Witter, Discover &
Co. ................................................... 6,000 347
National Financial Partners Corp. * ...................... 850 23
State Street Corp. ....................................... 56,300 2,932
Washington Mutual, Inc. * ................................ 11,500 461
Wells Fargo & Co. * ...................................... 48,000 2,827
-------
17,594
Finance - 0.1%
Nelnet, Inc. - Cl. A * ................................... 3,093 69
Insurance - 22.8%
Allstate Corp. ........................................... 13,200 568
American International Group, Inc. * ..................... 30,004 1,989
Arch Capital Group, Ltd. * ............................... 29,200 $ 1,164
Aspen Insurance Holdings, Ltd. * ......................... 400 10
Axis Capital Holdings, Ltd. * ............................ 8,435 247
Berkshire Hathaway, Inc. - Cl. B * ....................... 850 2,393
China Life Insurance Co., Ltd. * ......................... 574 19
Direct General Corp. * ................................... 5,000 165
Hartford Financial Services Group,Inc. * ................. 18,350 1,083
Marsh & McLennan Cos., Inc. * ............................ 48,000 2,299
PartnerRe, Ltd. .......................................... 4,500 261
Prudential Financial, Inc. * ............................. 4,000 167
Radian Group, Inc. ....................................... 12,050 587
Renaissancere Holdings, Ltd. ............................. 18,000 883
Scottish Annuity & Life .................................. 22,500 468
Torchmark, Inc. * ........................................ 12,900 587
Transatlantic Holdings, Inc. ............................. 7,200 582
Travelers Property Casualty Corp. - Cl. B ................ 30,900 524
United National Group, Ltd. - Cl. A * .................... 4,050 72
Willis Group Holdings, Ltd. * ............................ 8,975 306
-------
14,374
Real Estate Investment Trust - 0.2%
Apartment Investment & Management Co. .................... 3,000 103
U.S. Government Agencies - 3.9%
Federal National Mortgage Assoc. * ....................... 33,000 2,477
-------
TOTAL COMMON STOCK- .............................. 97.3% 61,279
Par
Value
------
(000's)
SHORT-TERM INVESTMENTS - 2.6%
Investment in joint trading account (Note B)
1.061% due 01/02/04 ................................... $1,641 1,641
------ -------
TOTAL INVESTMENTS- ............................... 99.9% 62,920
Cash and Receivables, less payables- .................. 0.1% 68
------ -------
NET ASSETS- .................................. 100.0% $62,988
====== =======
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Financial Industries Fund (the "Fund") is a diversified series
of John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%,due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 $ 31,156
Mortgage Int. Networking, 0.98% due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the period ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$143 1.56% $--
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $1,143, $9,571 and $2,372 which expire in 2006, 2008 and 2011,
respectively.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Certain of the above losses may be limited under sections 382 - 384 of the
Internal Revenue Code, as amended.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate of 0.80% on an annual basis of the
Fund's net assets.
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. For the year
ended December 31, 2003, there were no reimbursements paid to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with John Hancock
Advisers, with respect to the Fund. John Hancock Advisers is an affiliate of
John Hancock, and under its supervision, is responsible for the day-to-day
investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$79,857 $24,934
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$56,440 $8,483 $(2,003) $6,480
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $13,086 $6,480
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions Distributions
from from
Ordinary Long-Term
Year Income Capital Gain Return of Capital
- ---- ------------- ------------- -----------------
2003 $787 $-- $241
2002 -- -- --
NOTE E--COMBINATION
On April 25, 2003, the shareholders of the Fund (acquiring fund) approved
the combination of the funds in the following table:
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE E--COMBINATION--Continued
Acquiring Fund Target Fund
- ------------------------ -----------------------
VST Financial Industries VA Financial Industries
This combination provides for the transfer of substantially all of the
assets and liabilities of the target fund to the acquiring fund in exchange
solely for the fund shares of the acquiring fund. Accordingly, the former VA
Financial Industries is the accounting survivor of this merger and historical
performance for it's periods prior to April 28, 2003 will be used by the
surviving fund. The acquisition was accounted for as tax-free exchange as
follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund
Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets
vs. Target Fund Acquiring Fund Net Assets Depreciation to Combination After Combination
- --------------- -------------- ----------- ------------ ---------------- --------------------
VST Financial
Industries vs.
VA Financial
Industries 4,640 $55,074 $(5,280) $200 $55,274
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ----------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ------------------------------------
Janet Wang (age 35) Assistant Compliance Compliance Specialist, John
John Hancock Place Officer Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Financial Industries Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statements of operations for
the year then ended, the statement of changes in net assets and the financial
highlights for each of the five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, by correspondence with the custodian. 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 the
Financial Industries Fund of John Hancock Variable Series Trust I at December
31, 2003, the results of its operations for the year then ended, the changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: August 31, 1999
- --------------------------------------------------------------------------------
FUNDAMENTAL GROWTH FUND
INDEPENDENCE INVESTMENT LLC M. Lapman/J. Forelli
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 31.77%, underperforming its benchmark, the
Russell MidCap Growth Index.
.. The Fund underperformed its benchmark primarily due to unfavorable stock
selection decisions broadly across sectors, while sector allocation
exposures modestly added value. Stock selection detracted the most
significantly within the information technology, health care and consumer
discretionary sectors.
.. The Fund's exposure to information technology was the largest contributor
to absolute performance, followed by its exposure to health care. Nearly
all sectors produced positive absolute returns during the year.
.. Stocks that detracted from performance included Newell Rubbermaid, King
Pharmaceutical and Concord EFS.
.. Independence Investment LLC assumed management of the Fund effective
December 15th. Independence implemented an investment strategy for the Fund
that is substantially the same as the investment strategy it now employs
for the Large Cap Growth Fund. Under that strategy, the Fund will invest
primarily in large cap growth stocks.
.. The manager uses both fundamental equity research and quantitative
portfolio construction to identify stocks having both favorable valuations
and improving earnings growth prospects. The Fund is broadly diversified
across sectors with sector weights similar to the benchmark.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Fundamental Russell Mid Cap(TM)
Growth Fund Growth Index
----------- -------------------
8/31/1999 $10,000.00 $10,000.00
9/30/1999 10,000.46 9,915.00
10/31/1999 10,835.61 10,681.43
11/30/1999 12,529.18 11,788.03
12/31/1999 15,457.31 13,828.53
1/31/2000 15,971.69 13,825.77
2/29/2000 22,029.65 16,731.94
3/31/2000 18,800.95 16,748.68
4/30/2000 16,531.98 15,122.38
5/31/2000 14,460.68 14,019.96
6/30/2000 18,224.49 15,507.48
7/31/2000 17,401.55 14,525.85
8/31/2000 18,979.45 16,716.35
9/30/2000 18,950.32 15,898.92
10/31/2000 17,464.99 14,811.43
11/30/2000 13,822.29 11,592.91
12/31/2000 14,988.72 12,203.86
1/31/2001 15,137.52 12,900.70
2/28/2001 12,556.69 10,668.88
3/31/2001 10,435.26 9,142.16
4/30/2001 12,128.32 10,666.16
5/31/2001 12,013.25 10,616.03
6/30/2001 11,811.06 10,621.33
7/31/2001 10,738.12 9,905.46
8/31/2001 9,931.85 9,187.31
9/30/2001 8,117.67 7,668.65
10/31/2001 8,823.48 8,474.62
11/30/2001 9,770.93 9,387.34
12/31/2001 10,157.18 9,744.06
1/31/2002 9,836.37 9,427.38
2/28/2002 9,289.70 8,892.85
3/31/2002 9,876.64 9,571.37
4/30/2002 9,496.82 9,065.04
5/31/2002 9,201.30 8,794.91
6/30/2002 8,207.97 7,823.95
7/31/2002 7,477.24 7,063.46
8/31/2002 7,370.59 7,038.74
9/30/2002 6,735.15 6,479.16
10/31/2002 7,239.79 6,981.29
11/30/2002 7,585.64 7,527.93
12/31/2002 7,081.49 7,073.24
1/31/2003 6,987.19 7,003.92
2/28/2003 6,808.34 6,942.99
3/31/2003 6,916.32 7,072.13
4/30/2003 7,320.41 7,553.74
5/31/2003 7,919.05 8,280.41
6/30/2003 8,036.15 8,398.82
7/31/2003 8,319.73 8,698.66
8/31/2003 8,735.77 9,177.96
9/30/2003 8,540.77 8,999.90
10/31/2003 9,219.67 9,725.30
11/30/2003 9,397.98 9,985.93
12/31/2003 9,331.06 10,094.78
Value on 12/31/03:
- -----------------
$9,331 Fundamental Growth Fund
$10,095 Russell MidCap(TM) Growth Index
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
General Electric Co. 5.9%
Pfizer, Inc. 5.6%
Intel Corp. 4.7%
Microsoft Corp. 4.7%
Cisco Systems, Inc. 3.6%
Texas Instruments, Inc. 2.5%
Home Depot, Inc. 2.5%
Dell, Inc. 2.0%
3M Co. 2.0%
Amgen, Inc. 2.0%
AVERAGE ANNUAL TOTAL RETURNS*
Fundamental Russell MidCap(TM)
Growth Fund Growth Index
----------- ------------------
1 Year 31.77% 42.72%
3 Years -14.61 -6.13
Since Inception (8/31/99) -1.58 0.22
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Information Technology 34.13%
Health Care 20.71%
Industrials 12.76%
Consumer Discretionary 11.41%
Financials 9.03%
Consumer Staples 8.99%
Energy 1.80%
Telecommunication
Services 0.75%
Materials 0.41%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 480 VL/VUL subaccounts and 787 VA subaccounts in the
Morningstar Mid Cap Growth category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ...................................... $ 24,732
Net unrealized appreciation of investments ......................... 1,215
Short-term investments at value .................................... 159
--------
Total investments ............................................ 26,106
Cash ............................................................... 84
Receivable for:
Fund shares sold ................................................ 7
Dividends ....................................................... 19
--------
Total assets ....................................................... 26,216
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 153
Other liabilities ............................................... 6
--------
Total liabilities .................................................. 159
--------
Net assets ......................................................... $ 26,057
========
Shares of beneficial interest outstanding .......................... 3,653
--------
Net asset value per share .......................................... $ 7.13
========
Composition of net assets:
Capital paid-in ................................................. $ 58,344
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (33,502)
Net unrealized appreciation of investments ...................... 1,215
--------
Net assets ......................................................... $ 26,057
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ....................................................... $ 7
Dividends ...................................................... 129
Securities lending ............................................. 1
------
Total investment income .............................................. 137
------
EXPENSES
Investment advisory fee ........................................ 202
Auditors fees .................................................. 3
Custodian fees ................................................. 10
Legal fees ..................................................... 6
Printing & mailing fees ........................................ 1
Trustees' fees ................................................. 1
------
Total expenses ....................................................... 223
------
Net investment loss .................................................. (86)
------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments .................................. 1,982
Change in unrealized appreciation on investments .................. 4,240
------
Net realized and unrealized gain ..................................... 6,222
------
Net increase in net assets resulting from
operations ........................................................ $6,136
======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss .................................................. $ (86) $ (145)
Net realized gain (loss) ............................................. 1,982 (9,185)
Change in net unrealized appreciation (depreciation) ................. 4,240 (1,424)
------- --------
Net increase (decrease) in net assets resulting from operations ... 6,136 (10,754)
Distributions to shareholders from:
Realized gains ....................................................... (2,176)
-------
Decrease in net assets resulting from distributions ............... (2,176)
From fund share transactions:
Proceeds from shares sold ............................................ 6,270 6,642
Distributions reinvested ............................................. 2,176
Payment for shares redeemed .......................................... (6,414) (13,720)
------- --------
Increase (decrease) in net assets from fund share transactions .... 2,032 (7,078)
------- --------
NET INCREASE (DECREASE) IN NET ASSETS ................................... 5,992 (17,832)
NET ASSETS
Beginning of Period .................................................. 20,065 37,897
------- --------
End of Period ........................................................ $26,057 $ 20,065
======= ========
Analysis of fund share transactions:
Sold ................................................................. 907 999
Reinvested ........................................................... 309
Redeemed ............................................................. (956) (2,073)
------- --------
Net increase (decrease) in fund shares outstanding ...................... 260 (1,074)
======= ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each fund share of beneficial interest outstanding throughout
the year end indicated:
Fundamental Growth Fund
-----------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------
Period from
August 31(g),
to December 31,
2003(i) 2002 2001 2000(e) 1999
------- ------- ------- ------- ---------------
Net Assets Value at Beginning of Period ................ $ 5.91 $ 8.48 $ 12.52 $ 14.42 $10.00
Income from Investment Operations:
Net Investment Loss ................................. (0.01) (0.06) (0.03) (0.02) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments(a) ................................... 1.88 (2.51) (4.01) (0.44) 5.34
------- ------- ------- ------- ------
Total From Investment Operations .................... 1.87 (2.57) (4.04) (0.46) 5.32
Less Distributions:
Distribution from Net Realized Gains on
Investments ...................................... (0.65) (0.76) (0.90)
Distribution from Excess of Net Investment
Income/Gains ..................................... (0.65)
Distribution from Capital Paid-in ................... (0.03)
------- ------- ------
Total Distributions ................................. (0.65) (1.44) (0.90)
------- ------- ------- ------- ------
Net Assets Value at End of Period ...................... $ 7.13 $ 5.91 $ 8.48 $ 12.52 $14.42
======= ======= ======= ======= ======
Total Investment Return(b) ............................. 31.77% (30.28)% (32.23)% (3.03)% 54.57%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ... 1.00% 1.00%(f) 1.00%(f) 0.96%(f) 0.95%(d)(f)
Ratio of Net Investment Loss to Average Net
Assets ........................................... (0.38)% (0.52)% (0.46)% (0.38)% (0.55)%(d)
Portfolio Turnover Rate ............................. 201.18% 93.77% 118.01%(h) 250.46% 61.66%(c)
Net Assets End of Period (000s Omitted) ................ $26,057 $20,065 $37,897 $46,114 $9,175
(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 fluctuating
market values of the portfolio.
(b) The performance 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) The fund entered into a new Sub-Advisory Agreement with Putnam Investment
Management, Inc. during the period shown.
(f) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been 1.16%, 1.19%, 1.00%, and 1.09%
for the years ended December 31, 2002, 2001, 2000, and 1999, respectively.
(g) Commencement of investment operations.
(h) Excludes merger activity.
(i) The Fund entered into a new Sub-Advisory Agreement with Independence
Investment LLC during the period shown.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
FUNDAMENTAL GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK
Aerospace & Defense - 1.0%
Boeing Co. *.............................................. 6,100 $ 257
Air Freight & Couriers - 0.3%
United Parcel Service, Inc. - Cl. B....................... 1,100 82
Beverages - 2.5%
Anheuser-Busch Cos., Inc.................................. 3,900 206
PepsiCo, Inc. *........................................... 9,400 438
-------
644
Biotechnology - 2.0%
Amgen, Inc. *............................................. 8,300 513
Chemicals - 0.4%
Rohm & Haas Co............................................ 2,500 107
Commercial Services & Supplies - 0.4%
Ceridian Corp. *.......................................... 4,600 96
Communications Equipment - 4.0%
Cisco Systems, Inc. *..................................... 38,200 928
Comverse Technology, Inc. *............................... 6,000 105
-------
1,033
Computers & Peripherals - 9.9%
Dell, Inc. *.............................................. 15,400 523
EMC Corp. *............................................... 31,400 406
Intel Corp................................................ 38,200 1,230
International Business Machines Corp. .................... 3,100 287
Network Appliance, Inc. *................................. 6,000 123
-------
2,569
Diversified Financials - 4.6%
Capital One Financial Corp................................ 2,300 141
Citigroup, Inc. *......................................... 6,100 296
Goldman Sachs Group, Inc.................................. 3,100 306
Merrill Lynch & Co., Inc. *............................... 5,400 317
Wells Fargo & Co. *....................................... 2,300 135
-------
1,195
Diversified Telecommunication Services - 0.7%
Nextel Communications, Inc. - Cl. A *..................... 6,900 194
Electrical Equipment - 1.6%
United Technologies Corp. *............................... 4,500 427
Electronic Equipment & Instruments - 0.6%
Sanmina Corp. *........................................... 12,200 154
Energy Equipment & Services - 0.5%
Halliburton Co. *......................................... 5,400 140
Food & Drug Retailing - 0.5%
Whole Foods Market, Inc. *................................ 1,800 121
Health Care Equipment & Supplies - 3.3%
Boston Scientific Corp. *................................. 7,000 257
Guidant Corp.............................................. 3,600 217
St. Jude Medical, Inc. *.................................. 2,500 154
Health Care Equipment & Supplies - Continued
Zimmer Holdings, Inc. *................................... 3,400 $ 239
-------
867
Health Care Providers & Services - 3.1%
Anthem, Inc. *............................................ 4,200 315
PacifiCare Health Systems, Inc. *......................... 3,400 230
UnitedHealth Group, Inc. *................................ 1,500 87
Wellpoint Health Networks, Inc. *......................... 1,800 175
-------
807
Hotels Restaurants & Leisure - 0.5%
International Game Technology *........................... 3,800 136
Household Products - 1.5%
Procter & Gamble Co. *.................................... 4,000 400
Industrial Conglomerates - 9.0%
3M Co. ................................................... 6,100 519
General Electric Co. * ................................... 49,000 1,518
Tyco International, Ltd. * ............................... 11,600 307
-------
2,344
Insurance - 2.7%
American International Group, Inc. * ..................... 3,600 239
Everest Re Group, Ltd. ................................... 1,400 118
Hartford Financial Services Group, Inc. * . .............. 2,000 118
Metlife, Inc. *........................................... 3,100 104
Progressive Corp.......................................... 1,600 134
-------
713
IT Consulting & Services - 2.3%
Accenture, Ltd. - Cl. A *................................. 12,600 332
Computer Sciences Corp. *................................. 3,100 137
Electronic Data Systems Corp. *........................... 5,400 132
-------
601
Machinery - 0.8%
Danaher Corp. *........................................... 2,200 202
Media - 4.7%
Clear Channel Communications, Inc......................... 2,200 103
Comcast Corp. - Cl. A..................................... 11,200 368
Interactive Corp.......................................... 4,700 159
Omnicom Group, Inc. ...................................... 1,500 131
The Walt Disney Co. *..................................... 10,400 243
Time Warner, Inc. *....................................... 12,400 223
-------
1,227
Multiline Retail - 2.4%
BJ's Wholesale Club, Inc. *............................... 7,700 177
Wal-Mart Stores, Inc. *................................... 8,700 461
-------
638
Oil & Gas - 1.3%
Murphy Oil Corp........................................... 2,600 170
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
FUNDAMENTAL GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Oil & Gas - Continued
Newfield Exploration Co. *................................ 3,500 $ 156
-------
326
Personal Products - 0.9%
Avon Products, Inc........................................ 3,600 243
Pharmaceuticals - 12.2%
Abbott Laboratories *..................................... 10,900 508
Johnson & Johnson......................................... 9,100 470
Merck & Co., Inc. *....................................... 7,100 328
Pfizer, Inc. *............................................ 41,100 1,452
Watson Pharmaceuticals, Inc. *............................ 4,000 184
Wyeth *................................................... 5,800 246
-------
3,188
Semiconductor Equipment & Products - 6.9%
Analog Devices, Inc. *.................................... 3,400 155
Applied Materials, Inc. *................................. 12,400 279
Maxim Integrated Products, Inc. *......................... 3,400 169
Novellus Systems, Inc. *.................................. 6,300 265
QLogic Corp. *............................................ 5,200 269
Texas Instruments, Inc. *................................. 22,100 649
-------
1,786
Software - 8.3%
Electronic Arts, Inc. *................................... 7,100 339
Mercury Interactive Corp. *............................... 3,100 151
Microsoft Corp. *......................................... 44,200 1,217
Symantec Corp. *.......................................... 3,400 118
Veritas Software Corp. *.................................. 9,000 335
-------
2,160
Specialty Retail - 5.2%
Best Buy Co., Inc. *...................................... 2,700 141
Home Depot, Inc. *........................................ 18,100 643
Kohl's Corp. *............................................ 3,100 139
Lowe's Cos., Inc. *....................................... 3,700 205
Staples, Inc. *........................................... 4,700 128
Tiffany & Co. *........................................... 2,200 100
-------
1,356
Textiles & Apparel - 0.9%
Coach, Inc. *............................................. 3,700 139
Nike, Inc. - Cl. B........................................ 1,500 103
-------
242
Tobacco - 1.1%
Altria Group, Inc......................................... 5,300 288
Trading Companies & Distributors - 1.8%
CDW Corp.................................................. 7,900 456
U.S. Government Agencies - 1.7%
Federal National Mortgage Assoc. *........................ 5,800 435
-------
TOTAL COMMON STOCK- 99.6% 25,947
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
SHORT-TERM INVESTMENTS - 0.6%
Investment in joint trading account (Note B)
1.061% due 01/02/04................................. $ 159 $ 159
------ -------
TOTAL INVESTMENTS- ........................... 100.2% 26,106
Payables, less cash and receivables- ............ (0.2)% (49)
------ -------
NET ASSETS- ............................... 100.0% $26,057
====== =======
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Fundamental Growth Fund (the "Fund") is a diversified series
of John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 $ 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to that
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Trust.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$178 1.68% $--
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $171, $3,440, $20,156 and $9,696 which expire in 2007, 2008, 2009 and
2010, respectively.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Certain of the above losses may be limited under sections 382-384 of the
Internal Revenue Code, as amended.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Excess Over
First $250 Million $250 Million
- ------------------ ------------
0.90% 0.85%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. For the year
ended December 31, 2003, there were no reimbursements paid to the Fund.
As of December 15, 2003, John Hancock has entered into a Sub-Advisory
Agreement with Independence Investment LLC, with respect to the Fund.
Independence Investment LLC is an affiliate of John Hancock, and under its
supervision, is responsible for the day-to-day investment management of the
Fund.
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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$44,550 $44,421
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$24,929 $1,193 $(17) $1,176
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $33,461 $1,176
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------- ---------------------- -----------------
2003 $569 $-- $1,607
2002 -- -- --
Included in the Fund's 2003 distributions from ordinary income is $569 in
excess of investment company taxable income, which in accordance with applicable
US tax law, is taxable to shareholders as ordinary income distributions.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------- ----------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist,
c/o John Hancock Variable Series Dana-Farber Cancer
Trust I Institute; President, The
John Hancock Place Advertising Club of Greater
Boston, Massachusetts 02117 Boston
Diane C. Kessler (age 57) Trustee Executive Director,
c/o John Hancock Variable Series Massachusetts Council of
Trust I Churches
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East
Trust I Boston Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and
c/o John Hancock Variable Series Graduate Dean, The
Trust I Graduate School of the
John Hancock Place Wallace G. Carroll
Boston, Massachusetts 02117 School of Management,
Boston College
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ---------------------------- ----------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President,
John Hancock Place Product Management, John
Boston, Massachusetts 02117 Hancock Life Insurance
Company; Vice Chairman,
President & Director, John
Hancock Variable Life
Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President,
John Hancock Place and Trustee Signator Brokerage, John
Boston, Massachusetts 02117 Hancock Life Insurance
Company; Vice President
Corporate Communications,
John Hancock Life Insurance
Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief
John Hancock Place Investment Compliance
Boston, Massachusetts 02117 Officer, John Hancock Life
Insurance Company; formerly
Second Vice President and
Counsel, Office of Business
Conduct; John Hancock Life
Insurance Company; formerly
a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance
Boston, Massachusetts 02117 Company
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 Company
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------- ----------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock
Boston, Massachusetts 02117 Life Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law
John Hancock Place Department, John
Boston, Massachusetts 02117 Hancock Life Insurance
company; formerly Vice
President, General
Counsel and Secretary,
First Variable Life
Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Fundamental Growth Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, 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. 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Fundamental Growth Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, 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 6, 2004
Inception: August 31, 1999
- --------------------------------------------------------------------------------
Fundamental Value Fund
Wellington Management Company, LLP C. Duckworth/M. Cillan
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 28.70% underperforming its benchmark, the
Russell 1000 Value Index.
.. The Fund underperformed its benchmark due to unfavorable sector allocation
decisions. Despite a modest allocation, cash was the biggest detractor to
relative returns, followed by an underweight to information technology.
Security selection modestly aided performance, most notably in industrials.
.. The Fund's exposure to financials was the largest contributor to absolute
performance, followed by consumer discretionary. The biggest detractor to
absolute returns was the Fund's exposure to the telecommunication services
sector; all other sectors had positive absolute returns.
.. The top and bottom contributors to absolute returns came from a variety of
sectors. The biggest contributors to performance were Citigroup, Merrill
Lynch & Co., and Altria Group. The main detractors included Schering Plough
and Qwest.
.. The manager's strategy is to combine the firm's research analysts' best
ideas within the large-cap value universe using a bottom-up stock selection
process. The Fund is broadly diversified across sectors and industries with
sector weights closely aligned with the benchmark to minimize
industry-specific risk.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Fundamental Value Russell 1000(R) Value Index
----------------- ---------------------------
8/31/1999 $10,000.00 $10,000.00
9/30/1999 9,787.13 9,650.00
10/31/1999 10,352.08 10,205.84
11/30/1999 10,294.94 10,126.23
12/31/1999 10,472.48 10,174.84
1/31/2000 10,030.71 9,843.14
2/29/2000 9,613.85 9,111.80
3/31/2000 10,829.48 10,223.43
4/30/2000 10,444.72 10,104.84
5/31/2000 10,607.42 10,210.94
6/30/2000 10,217.67 9,744.30
7/31/2000 10,451.75 9,866.11
8/31/2000 11,178.92 10,414.66
9/30/2000 11,404.89 10,510.48
10/31/2000 11,709.97 10,769.04
11/30/2000 11,229.41 10,369.50
12/31/2000 11,877.02 10,889.02
1/31/2001 11,882.92 10,931.48
2/28/2001 11,470.78 10,627.59
3/31/2001 11,162.22 10,252.43
4/30/2001 11,708.70 10,754.80
5/31/2001 11,919.45 10,996.79
6/30/2001 11,613.28 10,752.66
7/31/2001 11,579.16 10,730.08
8/31/2001 11,157.46 10,299.80
9/30/2001 10,311.48 9,574.70
10/31/2001 10,346.72 9,492.35
11/30/2001 10,818.25 10,043.86
12/31/2001 11,046.47 10,279.89
1/31/2002 10,817.55 10,200.73
2/28/2002 10,739.67 10,217.06
3/31/2002 11,193.96 10,700.32
4/30/2002 10,597.18 10,333.30
5/31/2002 10,620.01 10,384.97
6/30/2002 10,028.91 9,788.87
7/31/2002 9,158.25 8,878.51
8/31/2002 9,208.92 8,945.98
9/30/2002 8,286.11 7,951.19
10/31/2002 8,954.90 8,540.37
11/30/2002 9,498.46 9,078.42
12/31/2002 9,124.39 8,684.41
1/31/2003 8,863.88 8,474.25
2/28/2003 8,633.45 8,247.99
3/31/2003 8,625.30 8,262.01
4/30/2003 9,361.97 8,989.07
5/31/2003 9,984.56 9,569.76
6/30/2003 10,138.80 9,689.38
7/31/2003 10,189.21 9,833.75
8/31/2003 10,399.33 9,987.16
9/30/2003 10,258.10 9,889.28
10/31/2003 10,902.39 10,494.51
11/30/2003 11,036.90 10,637.23
12/31/2003 11,742.64 11,292.49
Value on 12/31/03:
- ------------------
$11,743 Fundamental Value Fund
$11,292 Russell 1000(R) Value Index
MORNINGSTAR CATEGORY+:
.. Large Value
MORNINGSTAR RISK+:
.. Below Average
(VL/VUL)
.. Below Average (VA)
MORNINGSTAR RATING+:
.. ***(VL/VUL)
.. ***(VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Citigroup, Inc. 5.4%
Bank One Corp. 3.6%
Bank of America Corp. 3.5%
Total Fina SA 2.8%
BP Amoco plc. 2.8%
Time Warner, Inc. 2.4%
Golden West Financial Corp. 2.2%
Altria Group, Inc. 2.2%
MBIA, Inc. 2.1%
UnionBanCal Corp. 2.0%
AVERAGE ANNUAL TOTAL RETURNS*
Fundamental Russell 1000(R)
Value Fund Value Index
----------- --------------
1 Year 28.70% 30.03%
3 Years -0.38 1.22
Since Inception (8/31/99) 3.77 2.84
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Financials 34.83%
Consumer Discretionary 11.11%
Energy 10.56%
Industrials 7.80%
Information Technology 7.45%
Consumer Staples 7.02%
Utilities 6.11%
Materials 5.79%
Telecommunication
Services 5.33%
Health Care 4.01%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 538 VL/VUL subaccounts and 1,013 VA subaccounts in the
Morningstar Large Value category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $2,464 of
securities loaned (Note B))...................................... $114,490
Net unrealized appreciation of investments.......................... 21,232
Short-term investments at value..................................... 5,079
--------
Total investments............................................. 140,801
Receivable for:
Investments sold................................................. 362
Fund shares sold................................................. 52
Dividends........................................................ 218
Futures contracts variation margin............................... 5
Other assets..................................................... 5
--------
Total assets........................................................ 141,443
--------
LIABILITIES
Payables for:
Investments purchased............................................ 188
Collateral for securities on loan................................ 2,398
Other liabilities................................................ 2
--------
Total liabilities................................................... 2,588
--------
Net assets.......................................................... $138,855
========
Shares of beneficial interest outstanding........................... 12,600
--------
Net asset value per share........................................... $ 11.02
========
Composition of net assets:
Capital paid-in.................................................. $143,991
Accumulated net realized loss on investments,
futures and foreign currency transactions..................... (26,425)
Net unrealized appreciation of:
Investments................................................... 21,232
Futures....................................................... 57
--------
Net assets.......................................................... $138,855
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest....................................................... $ 51
Dividends...................................................... 2,767
Securities lending............................................. 6
-------
Total investment income.............................................. 2,824
-------
EXPENSES
Investment advisory fee........................................ 965
Auditors fees.................................................. 17
Custodian fees................................................. 81
Legal fees..................................................... 9
Printing & mailing fees........................................ 10
Trustees' fees................................................. 4
Other fees..................................................... 5
-------
Total expenses....................................................... 1,091
Less expenses reimbursed....................................... (8)
Less custodian expense reduction offset by
commission recapture arrangement (Note C)................... (10)
-------
Net expenses......................................................... 1,073
-------
Net investment income................................................ 1,751
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments.................................................... (3,838)
Financial futures contracts.................................... 135
Foreign currency transactions.................................. 1
Change in unrealized appreciation on:
Investments.................................................... 32,759
Futures........................................................ 161
-------
Net realized and unrealized gain..................................... 29,218
-------
Net increase in net assets resulting from
operations........................................................ $30,969
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ............................................... $ 1,751 $ 1,794
Net realized loss ................................................... (3,702) (20,300)
Change in net unrealized appreciation (depreciation) ................ 32,920 (10,611)
-------- --------
Net increase (decrease) in net assets resulting from operations... 30,969 (29,117)
Distributions to shareholders from:
Net investment income ............................................... (1,730) (1,766)
Realized gains ...................................................... (135) (28)
-------- --------
Decrease in net assets resulting from distributions .............. (1,865) (1,794)
From fund share transactions:
Proceeds from shares sold ........................................... 32,368 39,206
Distributions reinvested ............................................ 1,865 1,794
Payment for shares redeemed ......................................... (45,584) (50,697)
-------- --------
Decrease in net assets from fund share transactions .............. (11,351) (9,697)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS .................................. 17,753 (40,608)
NET ASSETS
Beginning of Period ................................................. 121,102 161,710
-------- --------
End of Period ....................................................... $138,855 $121,102
======== ========
Analysis of fund share transactions:
Sold ................................................................ 3,382 3,997
Reinvested .......................................................... 197 190
Redeemed ............................................................ (4,906) (5,425)
-------- --------
Net decrease in fund shares outstanding ................................ (1,327) (1,238)
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Fundamental Value Fund
-------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------
Period from
August 31, to
December 31,
2003 2002 2001 2000 1999(g)
-------- -------- -------- ------- -------------
Net Assets Value at Beginning of Period............ $ 8.70 $ 10.66 $ 11.57 $ 10.42 $10.00
Income from Investment Operations:
Net Investment Income........................... 0.14 0.12 0.10 0.09 0.03
Net Realized and Unrealized Gain (Loss) on
Investments(a).............................. 2.33 (1.96) (0.91) 1.30 0.45
-------- -------- -------- ------- ------
Total From Investment Operations................ 2.47 (1.84) (0.81) 1.39 0.48
Less Distributions:
Distribution from Net Investment Income......... (0.14) (0.12) (0.10) (0.10) (0.03)
Distribution from Net Realized Gains on
Investments ................................. (0.01) (0.08) (0.02)
Distribution from Excess of Net Investment
Income/Gains................................. (i) (0.06) (0.01)
-------- -------- -------- ------- ------
Total Distributions............................. (0.15) (0.12) (0.10) (0.24) (0.06)
-------- -------- -------- ------- ------
Net Assets Value at End of Period.................. $ 11.02 $ 8.70 $ 10.66 $ 11.57 $10.42
======== ======== ======== ======= ======
Total Investment Return(b)......................... 28.70% (17.40)% (6.99)% 13.41% 4.72%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net
Assets....................................... 0.89%(e)(h) 0.85% 0.99%(e) 1.05%(e) 1.05%(d)(e)
Ratio of Net Investment Income to Average Net
Assets....................................... 1.44% 1.26% 0.91% 0.97% 0.94%(d)
Portfolio Turnover Rate......................... 69.21% 82.22% 85.20%(f) 86.97% 23.03%(c)
Net Assets End of Period (000s Omitted)............ $138,855 $121,102 $161,710 $15,728 $6,101
(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 fluctuating
market values of the portfolio.
(b) The performance 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 expense ratio would have been .90%, 1.20%, 1.36%, and 1.42%
for the years ended December 31, 2003, 2001, 2000, and 1999, respectively.
(f) Excludes merger activity.
(g) Commencement of investment operations.
(h) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
(i) Amount is less than $0.01.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
FUNDAMENTAL VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 1.1%
General Dynamics Corp. * ................................ 17,100 $ 1,546
Air Freight & Couriers - 0.5%
Fedex Corp. ............................................. 9,700 655
Airlines - 0.4%
Continental Airlines, Inc. - Cl. B * .................... 32,800 534
Auto Components - 1.9%
Dana Corp. .............................................. 17,900 329
Johnson Controls, Inc. .................................. 5,100 592
Lear Corp. * ............................................ 28,500 1,748
-------
2,669
Banks - 14.3%
Bank of America Corp. * ................................. 58,500 4,705
Bank One Corp. * ........................................ 105,600 4,814
Comerica, Inc. .......................................... 19,800 1,110
Commerce Bancshares, Inc. ............................... 18,959 929
FirstMerit Corp. ........................................ 27,700 747
Golden West Financial Corp. * ........................... 29,000 2,993
Hibernia Corp. - Cl. A .................................. 20,600 484
UBS AG .................................................. 20,200 1,374
UnionBanCal Corp. ....................................... 46,600 2,681
-------
19,837
Beverages - 0.7%
Constellation Brands, Inc. - Cl. A * .................... 28,700 945
Building Products - 0.8%
Masco Corp. ............................................. 40,300 1,105
Chemicals - 2.9%
Dow Chemical Co. * ...................................... 29,600 1,230
E.I. du Pont de Nemours & Co. * ......................... 33,600 1,542
Rohm & Haas Co. ......................................... 30,500 1,303
-------
4,075
Commercial Services & Supplies - 1.0%
Alliance Data Systems Corp. * ........................... 800 22
Cendant Corp. * ......................................... 64,100 1,428
-------
1,450
Communications Equipment - 1.1%
Brocade Communications Systems, Inc. * .................. 26,400 153
Corning, Inc. * ......................................... 52,900 552
Motorola, Inc. .......................................... 58,100 817
-------
1,522
Computers & Peripherals - 3.7%
Hewlett-Packard Co. * ................................... 112,957 2,595
International Business Machines Corp. ................... 17,000 1,575
Maxtor Corp. * .......................................... 84,800 941
-------
5,111
Diversified Financials - 11.0%
Capital One Financial Corp. ............................. 8,500 521
Citigroup, Inc. * ....................................... 150,266 $ 7,294
Countrywide Credit Industries, Inc. * ................... 12,666 961
Franklin Resources, Inc. * .............................. 16,500 859
Goldman Sachs Group, Inc. ............................... 12,200 1,204
Legg Mason, Inc. * ...................................... 16,600 1,281
Merrill Lynch & Co., Inc. * ............................. 39,400 2,311
Morgan Stanley, Dean Witter, Discover & Co. ............. 14,400 833
-------
15,264
Diversified Telecommunication Services - 5.2%
AT&T Corp. * ............................................ 51,900 1,054
Citizens Communications Co. * ........................... 103,900 1,290
Qwest Communications International, Inc. ................ 335,800 1,451
Sprint Corp. * .......................................... 48,800 801
Verizon Communications * ................................ 75,200 2,638
-------
7,234
Electric Utilities - 4.5%
Cinergy Corp. * ......................................... 27,900 1,083
Exelon Corp. * .......................................... 38,312 2,542
PG & E Corp. * .......................................... 33,800 939
Pinnacle West Capital Corp. * ........................... 17,400 696
TXU Corp. ............................................... 43,200 1,025
-------
6,285
Electric/Gas - 0.7%
Dominion Resources, Inc. ................................ 15,800 1,008
Electrical Equipment - 1.7%
American Power Conversion ............................... 57,300 1,401
United Technologies Corp. * ............................. 10,500 995
-------
2,396
Electronic Equipment & Instruments - 0.2%
Thermo Electron Corp. * ................................. 12,300 310
Energy Equipment & Services - 0.5%
Halliburton Co. * ....................................... 24,700 642
Food & Drug Retailing - 0.8%
SuperValu, Inc. * ....................................... 37,200 1,064
Food Products - 1.5%
General Mills, Inc. * ................................... 21,100 956
Kraft Foods, Inc. - Cl. A ............................... 35,200 1,134
-------
2,090
Gas Utilities - 0.7%
El Paso Corp ............................................ 54,600 447
Kinder Morgan, Inc. * ................................... 9,300 550
-------
997
Health Care Providers & Services - 0.8%
McKesson HBOC, Inc ...................................... 33,100 1,064
Household Products - 0.5%
Procter & Gamble Co. * .................................. 6,900 689
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
FUNDAMENTAL VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------- --------
(000's)
COMMON STOCK - Continued
Insurance - 5.4%
American International Group, Inc. * ................... 15,250 $ 1,011
Marsh & McLennan Cos., Inc. * .......................... 23,400 1,121
MBIA, Inc. * ........................................... 48,950 2,899
St. Paul Cos., Inc. .................................... 39,200 1,554
XL Capital, Ltd. - Cl. A * ............................. 11,100 861
--------
7,446
Internet Software & Services - 0.3%
VeriSign, Inc. * ....................................... 26,700 435
Machinery - 1.6%
Caterpillar, Inc. * .................................... 10,000 830
Deere & Co. * .......................................... 7,100 462
ITT Industries, Inc. * ................................. 12,200 905
--------
2,197
Media - 6.8%
Comcast Corp. - Cl. A .................................. 47,400 1,494
Gannett Co., Inc. * .................................... 12,300 1,097
Interactive Corp. ...................................... 17,600 597
Liberty Media Corp. - Ser. A * ......................... 134,100 1,594
Sirius Satellite Radio, Inc. * ......................... 432,200 1,366
Time Warner, Inc. * .................................... 182,100 3,276
--------
9,424
Metals & Mining - 1.1%
Alcoa, Inc. * .......................................... 39,400 1,497
Multiline Retail - 1.1%
Big Lots, Inc. * ....................................... 53,600 762
Federated Department Stores, Inc. * .................... 16,000 754
--------
1,516
Office Electronics - 0.7%
Xerox Corp. * .......................................... 70,900 978
Oil & Gas - 9.9%
BP Amoco plc - ADR ..................................... 77,400 3,820
ChevronTexaco Corp. * .................................. 23,700 2,047
Conoco Phillips ........................................ 20,185 1,324
Exxon Mobil Corp. * .................................... 65,300 2,677
Total Fina SA - ADR .................................... 41,300 3,821
--------
13,689
Paper & Forest Products - 1.6%
Bowater, Inc. .......................................... 32,200 1,491
Weyerhaeuser Co. ....................................... 12,400 794
--------
2,285
Personal Products - 1.3%
Alberto-Culver Co. - Cl. B * ........................... 8,500 536
Gillette Co. ........................................... 33,100 1,216
--------
1,752
Pharmaceuticals - 3.1%
Abbott Laboratories * .................................. 19,100 890
Eli Lilly & Co. * ...................................... 17,200 $ 1,210
King Pharmaceuticals, Inc. * ........................... 41,300 630
Medco Health Solutions, Inc. * ......................... 13,700 466
Schering-Plough Corp. * ................................ 67,600 1,175
--------
4,371
Real Estate Investment Trust - 2.3%
General Growth Properties .............................. 59,100 1,640
Kimco Realty Corp. ..................................... 34,650 1,551
--------
3,191
Road & Rail - 0.5%
Canadian National Railway Co. .......................... 11,500 728
Semiconductor Equipment & Products - 1.3%
Fairchild Semiconductor Corp. - Cl. A * ................ 43,000 1,074
Novellus Systems, Inc. * ............................... 15,800 664
--------
1,738
Specialty Retail - 0.7%
Foot Locker, Inc. * .................................... 38,700 907
Textiles & Apparel - 0.4%
Reebok International, Ltd. * ........................... 14,400 566
Tobacco - 2.1%
Altria Group, Inc. ..................................... 54,800 2,982
U.S. Government Agencies - 1.1%
Federal Home Loan Mortgage Corp. ....................... 26,200 1,528
--------
TOTAL COMMON STOCK- ................................. 97.8% 135,722
Par
Value
------
(000's)
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 1.7%
State Street Navigator Securities Lending
Portfolio ........................................... $ 2,398 2,398
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
FUNDAMENTAL VALUE FUND
Par Market
Name of Issuer Value Value
-------------- ------- --------
(000's) (000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account
(Note B) - 1.8%
1.061% due 01/02/04 ................................... $2,466 $ 2,466
U.S. Treasury - Bills - 0.1%
0.895% due 01/08/04 ................................... 25 25
0.91% due 03/04/04 .................................... 25 25
0.93% due 02/05/04 .................................... 30 30
0.935% due 02/12/04 ................................... 35 35
0.94% due 01/22/04 .................................... 100 100
--------
TOTAL SHORT-TERM
INVESTMENTS- .................................... 1.9% 2,681
------ --------
TOTAL INVESTMENTS- ................................. 101.4% 140,801
Payables, less cash and receivables- .................. (1.4)% (1,946)
------ --------
NET ASSETS- .................................. 100.0% $138,855
====== ========
* Non-income producing security.
ADR-American Depository Receipts.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Fundamental Value Fund (the "Fund") is a diversified series of
John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 $ 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$ 838 1.75% $--
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$2,464 $2,398
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, open financial
futures contracts for the Fund were as follows:
Open Expiration Unrealized
Contracts Position Month Appreciation
--------- -------- ---------- ------------
S&P Mini 500 Index Futures 22 Long March 04 $26
S&P 500 Index Futures 3 Long March 04 31
---
$57
===
At December 31, 2003, the Fund had deposited $215 in segregated accounts to
cover initial margin requirements on open financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $406, $18,314 and $5,972 which expire in 2009, 2010 and 2011,
respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $13. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The Fund will distribute all of its net realized capital gains
annually, at the end of its fiscal year.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between Between
$25 Million and $50 Million and Excess Over
First $25 Million $50 Million $100 Million $100 Million
- ----------------- --------------- --------------- ------------
0.95% 0.85% 0.75% 0.65%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $8 to the Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $10.
John Hancock has entered into a Sub-Advisory Agreement with Wellington
Management Company LLP, with respect to the Fund. Wellington Management Company
LLP is an affiliate of John Hancock, and under its supervision, is responsible
for the day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$82,347 $94,347
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$121,238 $21,179 $(1,616) $19,563
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss and to certain distributions
received from investments in Real Estate Investment Trusts. Additionally, as a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $24,693 $19,563
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from Return
Year Ordinary Income Long-Term Capital Gain of Capital
- ---- ------------------ ---------------------- ----------
2003 $1,729 $-- $136
2002 1,766 -- 28
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ----------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist,
c/o John Hancock Variable Series Dana Farber Cancer
Trust I Institute; President, The
John Hancock Place Advertising Club of Greater
Boston, Massachusetts 02117 Boston
Diane C. Kessler (age 57) Trustee Executive Director,
c/o John Hancock Variable Series Massachusetts Council of
Trust I Churches
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East
Trust I Boston Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and
c/o John Hancock Variable Series Graduate Dean, The Graduate
Trust I School of the Wallace G.
John Hancock Place Carroll School of
Boston, Massachusetts 02117 Management, Boston College
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -------------------------------
Michele G. Van Leer* (age 46) Chairman and Senior Vice President, Product
John Hancock Place Trustee Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice
Chairman, President & Director,
John Hancock Variable Life
Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ---------------------------- -----------------------------------
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Fundamental Value Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, 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. 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Fundamental Value Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, 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 6, 2004
Inception: May 1, 1996
- --------------------------------------------------------------------------------
Global Bond Fund
Capital Guardian Trust Company Management Team
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 15.91%, outperforming its benchmark, the
Citigroup World Government Bond Index, Unhedged.
.. The Fund outperformed the benchmark from three key strategy decisions -
security selection, country allocation and duration / yield curve shifts.
.. The most important contributor was security selection due to the Fund's
overweight to corporate bonds. Country allocation decisions also aided
performance.
.. The top contributing securities to absolute returns included Deutsche
Telekom and General Motors, while there were no significant major
detractors.
.. The manager employs a multiple-manager approach, with the Fund managed by
several portfolio managers. The managers select securities using
proprietary fundamental research and economic analysis to identify
attractive markets and currencies and undervalued sectors and securities.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Global Bond Fund Global Bond Benchmark(1)
---------------- ------------------------
5/01/1996 $10,000.00 $10,000.00
5/31/1996 9,983.20 10,002.00
6/30/1996 10,068.31 10,123.02
7/31/1996 10,102.86 10,162.50
8/31/1996 10,111.98 10,183.85
9/30/1996 10,297.03 10,371.23
10/31/1996 10,489.94 10,586.95
11/30/1996 10,674.48 10,775.40
12/31/1996 10,671.49 10,704.28
1/31/1997 10,722.54 10,763.15
2/28/1997 10,754.51 10,800.82
3/31/1997 10,634.45 10,697.14
4/30/1997 10,760.52 10,846.90
5/31/1997 10,870.77 10,938.01
6/30/1997 11,020.78 11,082.39
7/31/1997 11,261.56 11,350.59
8/31/1997 11,193.90 11,281.35
9/30/1997 11,395.94 11,456.21
10/31/1997 11,458.96 11,599.41
11/30/1997 11,518.08 11,660.89
12/31/1997 11,637.30 11,786.83
1/31/1998 11,774.15 11,938.88
2/28/1998 11,794.60 11,957.98
3/31/1998 11,843.53 12,015.38
4/30/1998 11,898.89 12,077.86
5/31/1998 12,011.80 12,205.88
6/30/1998 12,100.95 12,296.20
7/31/1998 12,132.81 12,344.16
8/31/1998 12,315.35 12,556.48
9/30/1998 12,623.67 12,851.56
10/31/1998 12,538.26 12,796.29
11/30/1998 12,639.21 12,885.87
12/31/1998 12,702.48 12,910.35
1/31/1999 12,811.39 13,018.80
2/28/1999 12,563.89 12,826.12
3/31/1999 12,667.30 12,917.19
4/30/1999 12,704.36 12,989.52
5/31/1999 12,577.16 12,911.59
6/30/1999 12,446.11 12,765.68
7/31/1999 12,561.54 12,738.88
8/31/1999 12,511.52 12,752.89
9/30/1999 12,435.31 12,817.93
10/31/1999 12,429.96 12,843.56
11/30/1999 12,454.41 12,887.23
12/31/1999 12,428.11 12,888.52
1/31/2000 12,394.66 12,898.83
2/29/2000 12,496.24 13,029.11
3/31/2000 12,673.26 13,245.39
4/30/2000 12,670.06 13,278.51
5/31/2000 12,738.74 13,356.85
6/30/2000 12,827.03 13,473.06
7/31/2000 12,902.83 13,575.45
8/31/2000 12,936.48 13,637.90
9/30/2000 13,004.50 13,717.00
10/31/2000 13,112.96 13,832.22
11/30/2000 13,319.01 14,107.48
12/31/2000 13,919.44 14,612.53
1/31/2001 13,912.11 14,593.53
2/28/2001 13,914.92 14,587.70
3/31/2001 13,482.06 14,167.57
4/30/2001 13,456.13 14,116.57
5/31/2001 13,356.10 14,074.22
6/30/2001 13,268.16 13,944.73
7/31/2001 13,612.00 14,296.14
8/31/2001 14,147.37 14,833.68
9/30/2001 14,167.64 14,941.96
10/31/2001 14,244.47 15,060.00
11/30/2001 14,108.06 14,849.16
12/31/2001 13,717.29 14,467.54
1/31/2002 13,454.87 14,199.89
2/28/2002 13,525.74 14,273.73
3/31/2002 13,489.72 14,233.76
4/30/2002 13,930.41 14,743.33
5/31/2002 14,368.11 15,160.57
6/30/2002 14,940.45 15,892.82
7/31/2002 14,997.64 16,048.57
8/31/2002 15,281.46 16,329.42
9/30/2002 15,420.72 16,507.41
10/31/2002 15,409.03 16,439.73
11/30/2002 15,468.12 16,461.11
12/31/2002 16,303.11 17,289.10
1/31/2003 16,565.02 17,525.96
2/28/2003 16,830.50 17,771.32
3/31/2003 16,846.57 17,826.41
4/30/2003 17,089.57 18,040.33
5/30/2003 17,908.14 18,823.28
6/30/2003 17,630.45 18,518.34
7/31/2003 17,040.28 17,968.35
8/29/2003 16,956.91 17,871.32
9/30/2003 17,958.83 18,884.62
10/31/2003 17,790.65 18,790.20
11/30/2003 18,111.72 19,107.76
12/31/2003 18,896.14 19,870.16
Value on 12/31/03:
- ------------------
$18,896 Global Bond Fund
$19,870 Global Bond Benchmark(1)
MORNINGSTAR
CATEGORY+:
.. World Bond
MORNINGSTAR
RISK+:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR
RATING+:
.. **** (VL/VUL)
.. **** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Federal Republic of Germany 17.1%
Government of France 12.6%
Government of Japan 11.8%
U.S. Treasury 8.3%
Kingdom of Spain 3.9%
Swedish Government 3.3%
KFW International Finance, Inc. 3.1%
Republic of Finland 2.7%
Federal National Mortgage Assoc. 2.4%
Government of Canada 2.2%
AVERAGE ANNUAL TOTAL RETURN*
Global Global Bond
Bond Fund Benchmark(1)
--------- -----------
1 Year 15.91% 14.93%
3 Years 10.73 10.79
5 Years 8.27 9.01
Since Inception (5/1/96) 8.65 9.37
FUND COMPOSITION (as of December 31, 2003)(2)
% of
Credit Quality Assets
- -------------------------------- ------
AAA Government/Agency 82.03%
AA 0.52%
A 5.53%
BBB 10.63%
BB & lower 0.59%
Not Rated/Other 0.70%
Weighted Average Yield 3.28%
(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 Government Bond Index (Hedged), May 1999 to October
2000, and the Citigroup Government Bond Index, Unhedged, November 2000 to
present.
(2) Statistics are based on bond assets only, excluding cash.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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 a
nondiversified fund and 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. Performance would be lower if
expenses and charges of the separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 54 VL/VUL subaccounts and 131 VA subaccounts in the
Morningstar World Bond category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $9,819 of
securities loaned (Note B)) ..................................... $ 90,740
Net unrealized appreciation of investments ......................... 14,318
Short-term investments at value .................................... 10,360
--------
Total investments ............................................ 115,418
Foreign currency at value (cost $11) ............................... 11
Receivable for:
Interest ........................................................ 2,590
Unrealized appreciation in forward currency
contracts .................................................... 232
--------
Total assets ....................................................... 118,251
--------
LIABILITIES
Payables for:
Fund shares purchased ........................................... 79
Collateral for securities on loan ............................... 10,024
Unrealized depreciation in forward currency
contracts .................................................... 836
Other liabilities ............................................... 17
--------
Total liabilities .................................................. 10,956
--------
Net assets ......................................................... $107,295
========
Shares of beneficial interest outstanding .......................... 8,965
--------
Net asset value per share .......................................... $ 11.97
========
Composition of net assets:
Capital paid-in ................................................. $ 94,128
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (1,091)
Undistributed net investment income ............................. 346
Net unrealized appreciation/(depreciation) of:
Investments .................................................. 14,318
Translation of assets and liabilities in foreign
currencies ................................................ (406)
--------
Net assets ......................................................... $107,295
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ......................................................... $ 3,655
Securities lending ............................................... 2
-------
Total investment income ............................................. 3,657
-------
EXPENSES
Investment advisory fee .......................................... 817
Auditors fees .................................................... 12
Custodian fees ................................................... 89
Legal fees ....................................................... 7
Printing & mailing fees .......................................... 10
Trustees' fees ................................................... 3
Other fees ....................................................... 6
-------
Total expenses ...................................................... 944
Less expenses reimbursed ......................................... (31)
-------
Net expenses ........................................................ 913
-------
Net investment income ............................................... 2,744
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on:
Investments ................................................... 1,809
Foreign currency transactions ................................. 2,752
Change in unrealized appreciation (depreciation) on:
Investments ................................................... 7,284
Translation of assets and liabilities in foreign
currencies ................................................. (472)
-------
Net realized and unrealized gain .................................... 11,373
-------
Net increase in net assets resulting from operations ................ $14,117
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income .................................... $ 2,744 $ 2,048
Net realized gain ........................................ 4,561 704
Change in net unrealized appreciation .................... 6,812 7,395
-------- -------
Net increase in net assets resulting from operations .. 14,117 10,147
Distributions to shareholders from:
Net investment income .................................... (5,347) (3,132)
Realized gains ........................................... (1,873) (335)
-------- -------
Decrease in net assets resulting from distributions .... (7,220) (3,467)
From fund share transactions:
Proceeds from shares sold ................................ 73,381 64,973
Distributions reinvested ................................. 7,220 3,467
Payment for shares redeemed .............................. (58,674) (44,295)
-------- -------
Increase in net assets from fund share transactions ... 21,927 24,145
-------- -------
NET INCREASE IN NET ASSETS .................................. 28,824 30,825
NET ASSETS
Beginning of Period ...................................... 78,471 47,646
-------- -------
End of Period ............................................ $107,295 $78,471
======== =======
Analysis of fund share transactions:
Sold ..................................................... 6,269 6,063
Reinvested ............................................... 598 313
Redeemed ................................................. (4,995) (4,176)
-------- -------
Net increase in fund shares outstanding ..................... 1,872 2,200
======== =======
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Global Bond Fund
--------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------
2003 2002 2001 2000(c) 1999
-------- ------- ------- ------- -------
Net Assets Value at Beginning of Period ................... $ 11.06 $ 9.74 $ 10.34 $ 9.82 $ 10.60
Income from Investment Operations:
Net Investment Income .................................. 0.40 0.40 0.38 0.48 0.48
Net Realized and Unrealized Gain (Loss) on
Investments(a) ...................................... 1.36 1.43 (0.53) 0.67 (0.70)
-------- ------- ------- ------- -------
Total From Investment Operations ....................... 1.76 1.83 (0.15) 1.15 (0.22)
Less Distributions:
Distribution from Net Investment Income ................ (0.63) (0.46) (0.45) (0.63) (0.56)
Distribution from Net Realized Gains on Investments .... (0.22) (0.05)
-------- ------- ------- ------- -------
Total Distributions .................................... (0.85) (0.51) (0.45) (0.63) (0.56)
-------- ------- ------- ------- -------
Net Assets Value at End of Period ......................... $ 11.97 $ 11.06 $ 9.74 $ 10.34 $ 9.82
======== ======= ======= ======= =======
Total Investment Return(b) ................................ 15.91% 18.85% (1.45)% 12.00% (2.16)%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ...... 0.95%(d) 0.95%(d) 0.95%(d) 0.81%(d) 0.83%(d)
Ratio of Net Investment Income to Average Net Assets ... 2.85% 3.53% 3.73%(e) 4.71% 4.70%
Portfolio Turnover Rate ................................ 51.09% 64.15% 41.75% 259.60% 332.06%
Net Assets End of Period (000s Omitted) ................... $107,295 $78,471 $47,646 $68,473 $70,991
(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 fluctuating
market values of the portfolio.
(b) The performance 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 Capital Guardian
Trust Company during the period shown.
(d) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been .98%, 1.01%, .95%, .91%, and
.84%, for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
(e) Had the Fund not amortized premiums and accreted discounts on debt
securities, the annual ratio of net investment income to average net assets
would have been 3.96% for the year ended December 31, 2001.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
Par Market
Name of Issuer Value Value
-------------- -------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS
Australia - 0.4%
Commonwealth of Australia - Bonds
(FG)
7.5% due 07/15/05 .................................. $ 500 $ 389
Canada - 2.2%
Government of Canada (FG)
5.5% due 06/01/10 .................................. 2,340 1,931
Government of Canada - Bonds (FG)
7.0% due 12/01/06 .................................. 125 106
Government of Canada (FG)
7.25% due 06/01/07 ................................. 250 216
Province of British Columbia - Debs.
(FG)
6.35% due 06/18/31 ................................. 125 108
-------
2,361
Denmark - 2.8%
NY Kredit (AC)
5.0% due 10/01/35 .................................. 6,674 1,087
RealKredit Danmark - Notes (JP)
5.0% due 10/01/35 .................................. 11,811 1,924
-------
3,011
Finland - 2.6%
Republic of Finland - Bonds (FG)
5.75% due 02/23/11 ................................. 2,030 2,832
France - 12.3%
Government of France (FG)
5.0% due 10/25/11 .................................. 3,220 4,295
Government of France - Bonds (FG)
5.25% due 04/25/08 ................................. 6,580 8,890
-------
13,185
Germany - 18.4%
Bayer Hypo Vereins - Bonds (JP)
6.0% due 02/14/14 .................................. 650 878
Federal Republic of Germany - Bonds
(FG)
5.25% due 01/04/08 ................................. 500 674
Federal Republic of Germany (FG)
4.5% due 07/04/09 .................................. 3,150 4,126
5.25% due 01/04/11 ................................. 6,375 8,654
6.0% due 07/04/07 .................................. 1,900 2,609
6.25% due 01/04/30 ................................. 1,250 1,876
Kredit Fuer Wiederaufbau (JP)
5.0% due 07/04/11 .................................. 250 334
Treuhandanstalt (JQ)
6.75% due 05/13/04 ................................. 500 640
-------
19,791
Greece - 0.4%
Hellenic Republic - Bonds (FG)
8.8% due 06/19/07 .................................. 293 437
Japan - 11.6%
Government of Japan - Bonds (FG)
0.9% due 12/22/08 .................................. $720,000 $ 6,829
1.1% due 03/21/11 .................................. 225,000 2,112
Government of Japan (FG)
1.8% due 03/22/10 .................................. 350,000 03,461
-------
12,402
Luxembourg - 3.0%
KFW International Finance, Inc. (FB)
1.75% due 03/23/10 ................................. 330,000 3,257
Netherlands - 1.3%
Government of Netherlands (FG)
5.5% due 01/15/28 .................................. 1,020 1,387
New Zealand - 0.3%
Government of New Zealand - Bonds
(FG)
8.0% due 11/15/06 .................................. 500 347
Norway - 2.1%
Kingdom of Norway (FG)
6.0% due 05/16/11 .................................. 13,700 2,248
Spain - 2.7%
Kingdom of Spain (FG)
6.15% due 01/31/13 ................................. 2,000 2,882
Supra National - 13.8%
Allied Irish Banks plc (JP)
7.5% due 12/29/49 .................................. 500 730
Arena Brands Co. (JG)
6.1% due 11/15/62 .................................. 500 692
Bank of America (JP)
3.625% due 03/03/08 ................................ 250 315
Bank of Ireland (JP)
6.45% due 02/10/10 ................................. 1,000 1,406
BNP Paribas (JP)
5.25% due 01/23/14 ................................. 125 166
Clear Channel Commerce (JA)
6.5% due 07/07/05 .................................. 210 276
Daimler Chrysler International Finance
Co. (AL)
6.125% due 03/21/06 ................................ 850 1,129
Deutsche Telekom International Finance
(FB)
7.5% due 05/29/07 .................................. 125 176
Deutsche Telekom International Finance
BV (FB)
8.125% due 05/29/12 ................................ 540 835
E On International Finance (FB)
5.75% due 05/29/09 ................................. 710 969
European Investment Bank (JP)
2.125% due 09/20/07 ................................ 90,000 895
European Investment Bank - Notes (JP)
3.0% due 09/20/06 .................................. 60,000 603
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
Par Market
Name of Issuer Value Value
-------------- -------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Supra National - Continued
Federal National Mortgage Assoc. -
Bonds (FD)
2.125% due 10/09/07 ............................... $100,000 $ 991
Fixed Link Finance BV (JQ)
6.3% due 08/28/25 ................................. 250 463
France Telecom (J1)
8.25% due 03/14/08 ................................ 250 354
9.0% due 03/14/11 ................................. 280 568
GIE Psa Tresorerie - Bonds (BO)
5.875% due 09/27/11 ............................... 250 339
International Bank of Reconstruction &
Development - Notes (JP)
2.0% due 02/18/08 ................................. 80,000 795
International-American Development
Bank - Bonds (JP)
1.9% due 07/08/09 ................................. 100,000 991
Kingdom of Spain - Notes (FG)
3.1% due 09/20/06 ................................. 120,000 1,209
RWE Finance BV (FB)
6.125% due 10/26/12 ............................... 125 174
Sogerim SA (TL)
7.25% due 04/20/11 ................................ 125 179
Veolia Environment (BO)
4.875% due 05/28/13 ............................... 440 548
-------
14,803
Sweden - 4.0%
Spintab - Bonds (BO)
6.0% due 04/20/09 ................................. 5,000 741
Swedish Government (FG)
5.0% due 01/28/09 ................................. 24,200 3,494
-------
4,235
United Kingdom - 5.2%
Imperial Tobacco Finance plc (JI)
6.375% due 09/27/06 ............................... 510 687
MMO2 (JQ)
6.375% due 01/25/07 ............................... 780 1,060
National Grid Group Finance (FB)
5.25% due 08/23/06 ................................ 410 541
6.125% due 08/23/11 ............................... 250 343
Royal Bank of Scotland (JP)
4.875% due 03/26/09 ............................... 125 163
Standard Chartered Bank (JP)
5.375% due 05/06/09 ............................... 500 664
U.K. Treasury (FG)
4.25% due 06/07/32 ................................ 200 333
U.K. Treasury - Bonds (FG)
6.0% due 12/07/28 ................................. 50 106
U.K. Treasury (FG)
7.25% due 12/07/07 ................................ 385 753
8.0% due 12/07/15 ................................. 150 345
8.0% due 06/07/21 ................................. 125 307
United Kingdom Treasury Stock (FG)
5.0% due 03/07/12 ................................. $ 150 $ 272
-------
5,574
United States - 14.8%
American Tower Corp. - Sr. Notes (JW)
9.375% due 02/01/09 ............................... 225 240
Bank Americorp - Sr. Notes (JP)
4.875% due 09/15/12 ............................... 400 402
Cingular Wireless LLC - 144A (a) (J2)
6.5% due 12/15/11 ................................. 125 137
Clear Channel Communications, Inc.
(JA)
7.65% due 09/15/10 ................................ 125 146
Crown Castle International Corp. -
Sr. Notes (J1)
10.75% due 08/01/11 ............................... 75 84
Delhaize America, Inc. - Notes (JF)
8.125% due 04/15/11 ............................... 35 40
Dominion Resources, Inc. - Sr. Notes Ser. B (EU)
4.125% due 02/15/08 ............................... 250 255
Federal National Mortgage Assoc. - Notes (FD)
5.125% due 02/13/04 ............................... 500 502
6.0% due 05/15/08 ................................. 900 998
General Motors Acceptance Corp. - Notes (AL)
6.875% due 09/15/11 ............................... 1,025 1,104
Household Financial Corp. - Notes (FB)
6.4% due 06/17/08 ................................. 250 277
Kellogg Co. - Notes Ser. B (JH)
6.6% due 04/01/11 ................................. 500 560
Liberty Media Corp. - Bonds (JA)
7.875% due 07/15/09 ............................... 75 87
Metlife, Inc. - Debs. (JR)
3.911% due 05/15/05 ............................... 190 195
News America, Inc. - Sr. Notes (JA)
6.75% due 01/09/38 ................................ 125 140
NiSource Finance Corp. - Sr. Notes (FB)
6.15% due 03/01/13 ................................ 80 86
Pogo Producing Co. - Sr. Sub. Notes (BB)
10.375% due 02/15/09 .............................. 50 53
Pulte Homes, Inc. - Sr. Notes (BJ)
6.25% due 02/15/13 ................................ 100 106
8.125% due 03/01/11 ............................... 25 30
Schering Plough Corp. - Sr. Notes (JO)
5.3% due 12/01/13 ................................. 125 127
Six Flags, Inc. - Sr. Notes (BZ)
9.5% due 02/01/09 ................................. 100 104
SLM Corp. (JQ)
5.0% due 04/15/15 ................................. 375 370
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
Par Market
Name of Issuer Value Value
-------------- -------- --------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
United States - Continued
Solectron Corp. - Sr. Notes (JY)
9.625% due 02/15/09 ............................... $ 50 $ 56
Sprint Capital Corp. - Notes (J1)
8.375% due 03/15/12 ............................... 100 117
Telstra, Ltd. - Notes (J1)
6.375% due 04/01/12 ............................... 125 138
U.S. Treasury - Notes (TN)
1.875% due 09/30/04 ............................... 2,125 2,137
3.25% due 05/31/04 ................................ 400 404
3.25% due 08/15/07 ................................ 1,500 1,530
5.75% due 08/15/10 ................................ 900 1,009
6.5% due 02/15/10 ................................. 500 581
U.S. Treasury - Bonds (TB)
5.25% due 02/15/29 ................................ 500 504
6.375% due 08/15/27 ............................... 600 697
8.875% due 08/15/17 ............................... 1,325 1,876
Univision Communications, Inc. -
Sr. Notes (JA)
7.85% due 07/15/11 ................................ 100 118
Viacom, Inc. - Sr. Notes (JA)
6.625% due 05/15/11 ............................... 250 284
Washington Mutual, Inc. (JQ)
5.625% due 01/15/07 ............................... 125 135
Wells Fargo & Co. - Notes (JQ)
3.5% due 04/04/08 ................................. 250 251
Young Broadcasting, Inc. - Sr. Sub. Notes
(JA)
10.0% due 03/01/11 ................................ 34 37
--------
15,917
--------
TOTAL PUBLICLY-TRADED BONDS- ......................... 97.9% 105,058
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 9.3%
State Street Navigator Securities Lending
Portfolio ......................................... 10,024 10,024
SHORT-TERM INVESTMENTS - 0.3%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ............................... 336 336
------- --------
TOTAL INVESTMENTS- .......................... 107.5% 115,418
Payables, less cash and receivables- ........... (7.5)% (8,123)
------- --------
NET ASSETS- ................................. 100.0% $107,295
======= ========
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY (UNAUDITED)
% of
Industry Market Long-Term
Industry Abbreviation Value Investments
-------- ------------ -------- -----------
(000's)
Foreign Governmental ................... FG $ 63,227 60.2%
Banks .................................. JP 10,266 9.8%
Finance ................................ FB 6,658 6.3%
U.S. Treasury Notes .................... TN 5,661 5.4%
U.S. Treasury Bonds .................... TB 3,078 2.9%
Diversified Financials ................. JQ 2,919 2.8%
U.S. Government Agencies ............... FD 2,491 2.4%
Commercial Services & Supplies ......... BO 1,628 1.5%
Diversified Telecommunication
Services ............................ J1 1,261 1.2%
Auto Loan .............................. AL 1,129 1.1%
Automobiles ............................ AL 1,104 1.1%
Media .................................. JA 1,087 1.0%
Credit Card ............................ AC 1,087 1.0%
Beverages .............................. JG 692 0.7%
Tobacco ................................ JI 687 0.7%
Food Products .......................... JH 560 0.5%
Electric/Gas ........................... EU 255 0.2%
Communications Equipment ............... JW 240 0.2%
Insurance .............................. JR 195 0.2%
Telephone .............................. TL 179 0.2%
Wireless Telecommunications
Services ............................ J2 137 0.1%
Construction & Engineering ............. BJ 136 0.1%
Pharmaceuticals ........................ JO 127 0.1%
Hotels Restaurants & Leisure ........... BZ 105 0.1%
Electronic Equipment &
Instruments ......................... JY 56 0.1%
Oil & Gas .............................. BB 53 0.1%
Food & Drug Retailing .................. JF 40 0.0%
-------- -----
$105,058 100.0%
======== =====
(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, 2003, securities aggregated
$125 or 0.1% of net assets of the Portfolio.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Global Bond Fund (the "Fund") is a diversified series of John
Hancock Variable Series Trust I (the "Trust"), an open-end investment management
company registered under the Investment Company Act of 1940. The Trust is
organized as a Massachusetts business trust and consists of thirty different
funds as of December 31, 2003. The results of this Fund are included in this
report. The results of the other Funds in the Trust are presented under separate
cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Fair value pricing, determined in good faith by the Board of Trustees, may
be used by the Fund when current market values are unavailable or when an event
occurs after the close of the exchange on which the Fund's portfolio securities
are principally traded that is likely to have changed the value of the
securities. The use of fair value pricing by the Fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. Securities for which prices are not
available from an independent pricing service, but where an active market
exists, are valued using market quotations obtained from one or more dealers
that make markets in the securities.
Investment security transactions are recorded on the date of purchase or
sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Danske Corp., 1.07%, due 01/05/04 $ 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Discount and premium on debt securities: The Fund accretes discount and
amortizes 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 the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$320 1.57% $--
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$9,819 $10,024
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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 December 31, 2003, the Fund
had open forward currency contracts, which contractually obligate the Fund to
deliver or receive currencies at a specified date, as follows:
Unrealized
Principal Amount Appreciation/
Covered by Contract Expiration Month (Depreciation)
------------------- ---------------- --------------
Currency Purchased
Euro 2,098 January 04 $ 94
Japanese Yen 6,539 January 04 76
Japanese Yen 1,002 January 04 16
Japanese Yen 2,107 February 04 20
Japanese Yen 742 February 04 6
Japanese Yen 1,007 February 04 20
-----
$ 232
=====
Currency Sold
Japanese Yen 2,098 January 04 $ (34)
Euro 6,539 January 04 (538)
Euro 1,959 January 04 (150)
Euro 517 February 04 (49)
Euro 1,007 February 04 (62)
Euro 121 March 04 (3)
-----
$(836)
=====
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $1,028 and $1 which expire in 2008 and 2010, respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred approximately $258 in net realized currency losses. As
permitted by tax regulations, the Fund intends to elect to defer these losses
and treat them as arising in the fiscal year ending on December 31, 2004.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between Between
$150 Million and $300 Million and Excess Over
First $150 Million $300 Million $500 Million $500 Million
- ------------------ ---------------- ---------------- ------------
0.85% 0.80% 0.75% 0.70%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the period ended December 31, 2003, the reimbursements paid from John
Hancock and JHVLICO were $31 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Capital
Guardian Trust Company, with respect to the Fund. Capital Guardian Trust Company
is an affiliate of John Hancock, and under its supervision, is responsible for
the day-to-day investment management of the Fund.
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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$66,185 $47,343
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$101,162 $14,298 $(42) $14,256
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to certain
securities sold at a loss, premium amortization and market discount accretion on
debt securities, and sale of certain foreign currency denominated debt
securities. Additionally, as a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $1,029 $14,256
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $6,998 $-- $222
2002 3,132 -- 335
Included in the Fund's 2003 distributions from ordinary income is $1,714 in
excess of investment company taxable income, which in accordance with applicable
US tax law, is taxable to shareholders as ordinary income distributions.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Global Bond Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Global Bond Fund of John Hancock Variable Series Trust I at December 31, 2003,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: March 29, 1986
- --------------------------------------------------------------------------------
Growth & Income Fund
Independence Investment LLC P. McManus/T. Spicer
T. Rowe Price Associates, Inc. Robert W. Sharps
- --------------------------------------------------------------------------------
. The Fund employs a multi-style and multi-manager approach with two
sub-advisers independently managing portions of the Fund. The Fund
uses three distinct investment styles intended to complement each
other: growth, value and blend. As of quarter end, Independence
managed 82% of the Fund (63% blend sleeve / 19% value sleeve) and T.
Rowe Price managed 18% of the Fund (growth sleeve).
. 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 selects stocks using a combination of fundamental equity
research and quantitative portfolio construction tools. Stocks are
purchased that combine cheapness and improving fundamentals with
favorable valuations and earnings growth prospects.
. T. Rowe Price selects stocks using a bottom-up, fundamental equity
research approach, focusing on companies with above-average earnings
growth and cash flow relative to peers and sustainable earnings
momentum. T. Rowe Price assumed management of this portion of the Fund
in mid December 2003.
Fund Commentary
. In 2003, the Fund returned 24.35%, underperforming its custom
benchmark.
Independence Investment LLC
. Blend Sleeve: This portion of the Fund underperformed its benchmark
primarily due to unfavorable stock selection broadly across sectors,
while sector allocation exposures were neutral.
. The largest absolute performance contributors were exposures to
companies in the technology and financial services sectors.
Specifically, Texas Instruments and Intel within the Information
Technology sector performed best, as well as Citigroup in the
Financials sector. General Electric also contributed to positive
performance. Conversely, HCA-Healthcare and Sun Microsystems were the
largest detractors from performance. Sector exposures are similar to
that of the benchmark.
. Value Sleeve: This portion of the Fund underperformed its benchmark
primarily due to unfavorable stock selection broadly across sectors,
while sector allocation exposures were modestly positive.
. The largest absolute performance contributor was exposure to companies
in the financial services sector. Specifically, these included
Citigroup, FleetBoston and Merrill Lynch. Conversely, the biggest
detractors from the portfolio's performance were Textron, J.C. Penney,
and Kraft. Sector exposures are similar to that of the benchmark.
Putnam
. Growth Sleeve: This portion of the Fund underperformed its benchmark
primarily due to unfavorable stock selection broadly across sectors,
while sector allocation exposures were modestly negative. This
sub-adviser was replaced effective December 15th.
T. Rowe Price Associates, Inc.
. Growth Sleeve: T. Rowe assumed management of this portion of the Fund
effective December 15th.
Inception: March 29, 1986
- --------------------------------------------------------------------------------
Growth & Income Fund
Independence Investment LLC P. McManus/T. Spicer
T. Rowe Price Associates, Inc. Robert W. Sharps
- --------------------------------------------------------------------------------
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 12/31/93
(10-year period)
Growth & Income Fund Growth & Income Benchmark (1)
-------------------- -----------------------------
12/31/1993 10,000.00 10,998.98
1/31/1994 10,296.98 11,367.45
2/28/1994 9,997.30 11,060.52
3/31/1994 9,609.92 10,579.39
4/29/1994 9,776.91 10,716.92
5/31/1994 9,814.32 10,891.61
6/30/1994 9,636.56 10,622.59
7/29/1994 9,896.60 10,974.19
8/31/1994 10,264.91 11,420.84
9/30/1994 9,961.92 11,145.60
10/31/1994 10,120.80 11,400.84
11/30/1994 9,784.90 10,982.43
12/30/1994 9,944.42 11,142.77
1/31/1995 10,149.25 11,432.48
2/28/1995 10,549.81 11,876.06
3/31/1995 10,783.23 12,227.59
4/28/1995 11,097.72 12,583.42
5/31/1995 11,466.98 13,080.46
6/30/1995 11,728.25 13,387.85
7/31/1995 12,102.47 13,833.67
8/31/1995 12,181.41 13,871.02
9/29/1995 12,709.33 14,452.21
10/31/1995 12,626.20 14,401.63
11/30/1995 13,158.58 15,035.30
12/29/1995 13,346.76 15,313.46
1/31/1996 13,702.13 15,840.24
2/29/1996 13,879.23 15,992.30
3/29/1996 14,056.69 16,145.83
4/30/1996 14,215.04 16,383.17
5/31/1996 14,544.11 16,805.86
6/28/1996 14,623.64 16,874.76
7/31/1996 13,932.81 16,123.84
8/30/1996 14,264.80 16,465.66
9/30/1996 14,927.11 17,391.03
10/31/1996 15,292.18 17,867.55
11/29/1996 16,309.64 19,223.69
12/31/1996 16,029.07 18,846.91
1/31/1997 16,854.17 20,017.30
2/28/1997 16,946.57 20,179.44
3/31/1997 16,286.32 19,339.98
4/30/1997 17,075.83 20,494.57
5/30/1997 18,001.92 21,752.94
6/30/1997 18,711.84 22,723.12
7/31/1997 20,383.92 24,527.34
8/29/1997 19,351.34 23,163.62
9/30/1997 20,476.82 24,432.98
10/31/1997 19,706.65 23,616.92
11/28/1997 20,448.03 24,710.39
12/31/1997 20,803.99 25,135.41
1/31/1998 21,028.72 25,414.41
2/27/1998 22,745.23 27,246.79
3/31/1998 24,017.11 28,641.82
4/30/1998 24,083.56 28,931.11
5/29/1998 23,820.51 28,433.49
6/30/1998 24,831.51 29,587.89
7/31/1998 24,541.80 29,274.26
8/31/1998 20,774.11 25,041.20
9/30/1998 21,839.98 26,646.34
10/30/1998 23,786.72 28,812.69
11/30/1998 25,210.74 30,558.74
12/31/1998 27,096.49 32,318.92
1/29/1999 28,005.66 33,669.85
2/26/1999 27,135.96 32,622.72
3/31/1999 27,939.22 33,927.63
4/30/1999 29,116.57 35,240.63
5/28/1999 28,267.55 34,408.95
6/30/1999 30,216.69 36,318.65
7/30/1999 29,182.33 35,185.50
8/31/1999 28,837.12 35,009.58
9/30/1999 28,041.57 34,050.31
10/29/1999 29,681.82 36,205.70
11/30/1999 30,025.80 36,940.67
12/31/1999 31,493.15 39,116.48
1/31/2000 29,573.85 37,152.83
2/29/2000 28,831.12 36,450.64
3/31/2000 32,058.29 40,015.52
4/28/2000 31,273.83 38,811.05
5/31/2000 30,861.88 38,015.42
6/30/2000 31,355.63 38,950.60
7/31/2000 30,974.38 38,342.97
8/31/2000 32,890.93 40,724.07
9/29/2000 30,902.78 38,573.84
10/31/2000 30,978.25 38,411.83
11/30/2000 27,478.95 35,384.98
12/29/2000 27,366.40 35,558.37
1/31/2001 28,212.18 36,820.69
2/28/2001 25,252.19 33,462.64
3/30/2001 23,180.34 31,344.46
4/30/2001 25,408.00 33,779.92
5/31/2001 25,455.14 34,006.25
6/30/2001 24,867.21 33,179.89
7/31/2001 24,269.22 32,854.73
8/31/2001 22,590.39 30,798.02
9/28/2001 20,642.00 28,309.54
10/31/2001 21,300.20 28,850.26
11/30/2001 22,950.91 31,063.07
12/31/2001 23,140.76 31,336.43
1/31/2002 22,819.80 30,878.91
2/28/2002 22,288.31 30,282.95
3/31/2002 23,283.02 31,421.59
4/30/2002 22,171.20 29,517.44
5/31/2002 21,987.99 29,257.69
6/30/2002 20,506.26 27,098.47
7/31/2002 18,866.69 25,093.18
8/31/2002 18,992.57 25,223.67
9/28/2002 16,990.96 22,514.65
10/31/2002 18,233.54 24,385.61
11/30/2002 19,080.56 25,812.17
12/31/2002 18,007.53 24,351.20
1/31/2003 17,545.60 21,603.73
2/28/2003 17,325.84 21,268.88
3/31/2003 17,427.09 21,490.07
4/30/2003 18,625.30 23,224.32
5/31/2003 19,461.33 24,548.11
6/30/2003 19,567.73 24,872.14
7/31/2003 19,944.01 25,367.10
8/31/2003 20,389.36 25,882.05
9/28/2003 20,196.22 25,618.05
10/31/2003 21,373.73 27,119.27
11/30/2003 21,495.89 27,444.70
12/31/2003 22,392.41 28,759.30
Value on 12/31/03:
- ------------------
$22,392 Growth & Income Fund
$28,759 Growth & Income Benchmark (1)
MORNINGSTAR
CATEGORY+:
.. Large Blend
MORNINGSTAR
RISK+:
.. Above Average (VL/VUL)
.. Average (VA)
MORNINGSTAR
RATING+:
.. **(VL/VUL)
.. **(VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Citigroup, Inc. 3.6%
ExxonMobil Corp. 3.0%
Pfizer, Inc. 2.7%
Microsoft Corp. 2.5%
General Electric Co. 2.3%
American International Group, Inc. 1.7%
Procter & Gamble Co. 1.7%
Bank of America Corp. 1.6%
Cisco Systems, Inc. 1.6%
Wells Fargo & Co. 1.5%
AVERAGE ANNUAL TOTAL RETURNS*
Growth & Income Growth & Income
Fund Benchmark(1)
--------------- ---------------
1 Year 24.35% 29.90%
3 Years -6.47 -3.82
5 Years -3.74 -0.43
10 Years 8.40 11.14
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Financials 23.13%
Information Technology 19.04%
Consumer Discretionary 15.08%
Health Care 11.95%
Industrials 8.85%
Consumer Staples 6.75%
Energy 5.80%
Utilities 3.18%
Materials 3.12%
Telecommunication Services 3.10%
(1) The Growth & Income Benchmark represents the S&P 500 Index from April 1986
to April 2002 and then the Russell 1000 from May 2002 to present.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 933 VL/VUL subaccounts and 1,699 VA subaccounts in the
Morningstar Large Blend category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $85,919 of
securities loaned (Note B)) ................................... $1,846,535
Net unrealized appreciation of investments ....................... 268,289
Short-term investments at value .................................. 107,338
----------
Total investments .......................................... 2,222,162
Cash ............................................................. 58
Receivable for:
Dividends ..................................................... 2,174
----------
Total assets ..................................................... 2,224,394
----------
LIABILITIES
Payables for:
Investments purchased ......................................... 7,644
Fund shares purchased ......................................... 178
Collateral for securities on loan ............................. 87,940
Other liabilities ............................................. 611
----------
Total liabilities ................................................ 96,373
----------
Net assets ....................................................... $2,128,021
==========
Shares of beneficial interest outstanding ........................ 188,430
----------
Net asset value per share ........................................ $ 11.29
==========
Composition of net assets:
Capital paid-in ............................................... $2,665,699
Accumulated net realized loss on investments,
futures and foreign currency transactions .................. (805,967)
Net unrealized appreciation of investments .................... 268,289
----------
Net assets ....................................................... $2,128,021
==========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ....................................................... $ 2,084
Dividends ...................................................... 30,536
Securities lending ............................................. 37
--------
Total investment income ........................................... 32,657
--------
EXPENSES
Investment advisory fee ........................................ 12,774
Auditors fees .................................................. 269
Custodian fees ................................................. 314
Fidelity Bond fees ............................................. 3
Legal fees ..................................................... 136
Printing & mailing fees ........................................ 217
Trustees' fees ................................................. 61
Other fees ..................................................... 78
--------
Total expenses .................................................... 13,852
Less custodian expense reduction offset by
commission recapture arrangement (Note C) ................... (51)
--------
Net expenses ...................................................... 13,801
--------
Net investment income ............................................. 18,856
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................. (25,916)
Financial futures contracts ................................. 1,225
Change in unrealized appreciation on:
Investments ................................................. 429,847
--------
Net realized and unrealized gain .................................. 405,156
--------
Net increase in net assets resulting from operations .............. $424,012
========
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income..................................... $ 18,856 $ 15,255
Net realized loss......................................... (24,691) (269,774)
Change in net unrealized appreciation (depreciation)...... 429,847 (277,602)
---------- ----------
Net increase (decrease) in net assets resulting from
operations.......................................... 424,012 (532,121)
Distributions to shareholders from:
Net investment income..................................... (18,865) (15,248)
Realized gains............................................ (10,107)
---------- ----------
Decrease in net assets resulting from distributions.... (28,972) (15,248)
From fund share transactions:
Proceeds from shares sold................................. 104,683 122,967
Shares issued in reorganization .......................... 66,546
Distributions reinvested.................................. 28,972 15,248
Payment for shares redeemed............................... (229,423) (304,962)
---------- ----------
Decrease in net assets from fund share transactions.... (29,222) (166,747)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS........................ 365,818 (714,116)
NET ASSETS
Beginning of Period....................................... 1,762,203 2,476,319
---------- ----------
End of Period............................................. $2,128,021 $1,762,203
========== ==========
Analysis of fund share transactions:
Sold...................................................... 10,526 11,661
Issued in reorganization ................................. 7,117
Reinvested................................................ 2,786 1,471
Redeemed.................................................. (23,196) (29,468)
---------- ----------
Net decrease in fund shares outstanding...................... (2,767) (16,336)
========== ==========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Growth & Income Fund
-----------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------------
2003(f) 2002 2001 2000(c) 1999
---------- ---------- ----------- ---------- ----------
Net Assets Value at Beginning of Period......... $ 9.22 $ 11.93 $ 14.18 $ 20.01 $ 19.49
Income from Investment Operations:
Net Investment Income........................ 0.10 0.08 0.06 0.17 0.20
Net Realized and Unrealized Gain (Loss) on
Investments(a)............................ 2.12 (2.71) (2.25) (2.77) 2.88
---------- ---------- ----------- ---------- ----------
Total From Investment Operations............. 2.22 (2.63) (2.19) (2.60) 3.08
Less Distributions:
Distribution from Net Investment Income ..... (0.10) (0.08) (0.06) (0.17) (0.20)
Distribution from Net Realized Gains on
Investments............................... (0.05) (2.69) (2.36)
Distribution from Excess of Net Investment
Income/Gains ............................. (0.14)
Distribution from Capital Paid-in ........... (0.23)
---------- ---------- ----------- ---------- ----------
Total Distributions.......................... (0.15) (0.08) (0.06) (3.23) (2.56)
---------- ---------- ----------- ---------- ----------
Net Assets Value at End of Period............... $ 11.29 $ 9.22 $ 11.93 $ 14.18 $ 20.01
========== ========== =========== ========== ==========
Total Investment Return(b)...................... 24.35% (22.18)% (15.44)% (13.10)% 16.23%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net
Assets.................................... 0.73%(e) 0.75% 0.72% 0.40% 0.28%
Ratio of Net Investment Income to Average
Net Assets................................ 1.00% 0.73% 0.49% 0.84% 0.98%
Portfolio Turnover Rate...................... 91.53%(d) 73.60% 104.47%(d) 112.94% 70.16%
Net Assets End of Period (000s Omitted)......... $2,128,021 $1,762,203 $ 2,476,319 $3,324,988 $4,218,841
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Excludes merger activity.
(e) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
(f) The Fund entered into a new Sub-Advisory Agreement with T. Rowe during the
period shown.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
-------------- --------- --------
(000's)
COMMON STOCK
Aerospace & Defense - 0.7%
Boeing Co. * ......................................... 223,000 $ 9,397
Precision Castparts Corp. ............................ 47,500 2,157
Rockwell Collins, Inc. * ............................. 82,579 2,480
--------
14,034
Air Freight & Couriers - 0.8%
Fedex Corp. .......................................... 180,800 12,204
United Parcel Service, Inc. - Cl. B .................. 67,600 5,040
--------
17,244
Automobiles - 2.0%
Borg-Warner Automotive, Inc. ......................... 20,900 1,778
Ford Motor Co. ....................................... 935,900 14,974
General Motors Corp. * ............................... 284,900 15,214
Harley-Davidson, Inc. * .............................. 223,200 10,609
--------
42,575
Banks - 5.2%
Bank of America Corp. * .............................. 416,500 33,499
Bank of New York Co., Inc. ........................... 96,400 3,193
Bank One Corp. * ..................................... 487,400 22,221
First Tennessee National Corp. ....................... 47,400 2,090
FleetBoston Financial Corp. .......................... 148,500 6,482
JP Morgan Chase & Co. ................................ 625,300 22,967
M & T Bank Corp. * ................................... 24,600 2,418
Suntrust Banks, Inc. * ............................... 29,100 2,081
US Bancorp * ......................................... 407,900 12,147
Wachovia Corp. * ..................................... 63,300 2,949
--------
110,047
Beverages - 0.9%
Anheuser-Busch Cos., Inc. ............................ 162,800 8,576
PepsiCo, Inc. * ...................................... 219,200 10,219
--------
18,795
Biotechnology - 1.9%
Amgen, Inc. * ........................................ 311,800 19,269
Genetech, Inc. * ..................................... 105,300 9,853
Gilead Sciences, Inc. * .............................. 115,300 6,704
MedImmune, Inc. * .................................... 165,400 4,201
--------
40,027
Chemicals - 1.4%
Dow Chemical Co. * ................................... 352,200 14,641
Praxair, Inc. * ...................................... 201,200 7,686
Rohm & Haas Co. ...................................... 172,400 7,363
--------
29,690
Commercial Services & Supplies - 0.7%
Apollo Group, Inc. - Cl. A * ......................... 113,800 7,739
First Data Corp. * ................................... 152,600 6,270
--------
14,009
Communications Equipment - 1.7%
Cisco Systems, Inc. * ................................ 1,372,200 33,331
Comverse Technology, Inc. * .......................... 114,200 $ 2,009
--------
35,340
Computers & Peripherals - 4.7%
Dell, Inc. * ......................................... 852,700 28,958
EMC Corp. * .......................................... 1,849,400 23,894
Intel Corp. .......................................... 838,900 27,013
International Business Machines Corp. ................ 206,900 19,175
--------
99,040
Construction Materials - 0.4%
Nucor Corp. .......................................... 49,200 2,755
United States Steel Corp. * .......................... 137,100 4,801
--------
7,556
Containers & Packaging - 0.4%
Smurfit-Stone Container Corp. * ...................... 405,400 7,528
Credit Card - 0.6%
American Express Co. * ............................... 114,000 5,498
MBNA Corp. * ......................................... 300,000 7,455
--------
12,953
Diversified Financials - 10.1%
Capital One Financial Corp. .......................... 147,300 9,028
Charles Schwab Corp. * ............................... 554,200 6,562
Citigroup, Inc. * .................................... 1,563,125 75,874
Goldman Sachs Group, Inc. ............................ 128,500 12,687
Merrill Lynch & Co., Inc. * .......................... 531,900 31,196
Morgan Stanley, Dean Witter, Discover
& Co. ............................................. 500,300 28,952
SLM Corp. * .......................................... 141,100 5,317
State Street Corp. ................................... 245,500 12,785
Wells Fargo & Co. * .................................. 542,300 31,936
--------
214,337
Diversified Telecommunication Services - 3.1%
BellSouth Corp. ...................................... 454,800 12,871
CenturyTel, Inc. ..................................... 225,500 7,356
Nextel Communications, Inc. - Cl. A * ................ 376,100 10,553
SBC Communications, Inc. * ........................... 72,100 1,880
Verizon Communications * ............................. 671,500 23,556
Vodafone Group Plc * ................................. 370,900 9,287
--------
65,503
Electric Utilities - 1.9%
Constellation Energy Group, Inc. * ................... 308,100 12,065
Entergy Corp. * ...................................... 284,400 16,248
Exelon Corp. * ....................................... 31,200 2,071
FPL Group, Inc. ...................................... 110,900 7,255
PG & E Corp. * ....................................... 124,100 3,446
--------
41,085
Electric/Gas - 0.9%
Dominion Resources, Inc. ............................. 305,800 19,519
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
-------------- --------- --------
(000's)
COMMON STOCK - Continued
Electrical Equipment - 1.6%
Rockwell International Corp. * ....................... 343,600 $ 12,232
United Technologies Corp. * .......................... 223,400 21,172
--------
33,404
Electronic Equipment & Instruments - 0.5%
Sanmina Corp. * ...................................... 706,200 8,905
Vishay Intertechnology, Inc. * ....................... 105,200 2,409
--------
11,314
Energy Equipment & Services - 0.4%
Transocean Sedco Forex, Inc. * ....................... 355,900 8,545
Food & Drug Retailing - 0.4%
Sysco Corp. * ........................................ 159,800 5,950
Walgreen Co. * ....................................... 101,600 3,696
--------
9,646
Food Products - 0.6%
Archer Daniels Midland Co. * ......................... 401,000 6,103
General Mills, Inc. * ................................ 156,900 7,108
--------
13,211
Gas Utilities - 0.2%
Sempra Energy * ...................................... 156,200 4,695
Health Care Equipment & Supplies - 2.1%
Baxter International, Inc. ........................... 60,000 1,831
Boston Scientific Corp. * ............................ 362,700 13,333
Guidant Corp. ........................................ 121,400 7,308
Medtronic, Inc. * .................................... 109,100 5,304
St. Jude Medical, Inc. * ............................. 112,600 6,908
Stryker Corp. * ...................................... 22,200 1,887
Zimmer Holdings, Inc. * .............................. 104,400 7,350
--------
43,921
Health Care Providers & Services - 2.3%
Anthem, Inc. * ....................................... 195,700 14,677
DaVita, Inc. * ....................................... 150,000 5,850
PacifiCare Health Systems, Inc. * .................... 84,900 5,739
UnitedHealth Group, Inc. * ........................... 383,700 22,324
--------
48,590
Hotels Restaurants & Leisure - 1.3%
Carnival Corp. ....................................... 125,000 4,966
International Game Technology * ...................... 240,400 8,582
McDonald's Corp. * ................................... 609,500 15,134
--------
28,682
Household Products - 1.9%
Clorox Co. * ......................................... 101,100 4,910
Procter & Gamble Co. * ............................... 355,900 35,547
--------
40,457
Industrial Conglomerates - 3.7%
3M Co. ............................................... 225,400 19,166
General Electric Co. * ............................... 1,595,600 49,432
Tyco International, Ltd. * ........................... 348,200 $ 9,227
--------
77,825
Insurance - 5.8%
AFLAC, Inc. * ........................................ 300,600 10,876
American International Group, Inc. * ................. 548,800 36,374
Chubb Corp. * ........................................ 130,600 8,894
Everest Re Group, Ltd. ............................... 53,700 4,543
Hartford Financial Services Group,
Inc. * ............................................ 392,000 23,140
Metlife, Inc. * ...................................... 257,700 8,677
Old Republic International Corp. ..................... 101,100 2,564
Protective Life Corp. ................................ 39,100 1,323
Prudential Financial, Inc. * ......................... 470,600 19,657
The PMI Group, Inc. .................................. 207,300 7,718
Travelers Property Casualty Corp. -
Cl. B ............................................. 36,500 619
--------
124,385
Internet & Catalog Retail - 0.3%
eBay, Inc. * ......................................... 105,300 6,801
Internet Software & Services - 0.6%
Yahoo, Inc. * ........................................ 281,400 12,711
IT Consulting & Services - 2.1%
Accenture, Ltd. - Cl. A * ............................ 794,900 20,922
Affiliated Computer Services, Inc. -
Cl. A * ........................................... 256,200 13,953
Computer Sciences Corp. * ............................ 174,100 7,700
Electronic Data Systems Corp. * ...................... 82,400 2,022
--------
44,597
Leisure Equipment & Products - 0.2%
Hasbro, Inc. * ....................................... 252,400 5,371
Machinery - 1.7%
Danaher Corp. * ...................................... 236,100 21,662
Eaton Corp. * ........................................ 121,200 13,087
ITT Industries, Inc. * ............................... 28,500 2,115
--------
36,864
Media - 6.2%
Clear Channel Communications, Inc. ................... 345,100 16,161
Comcast Corp. - Cl. A ................................ 839,875 27,607
Comcast Corp. - Cl. A ................................ 131,800 4,123
E.W. Scripps Co. - Cl. A ............................. 65,600 6,175
EchoStar Communications Corp. -
Cl. A * ........................................... 247,000 8,398
Interactive Corp. .................................... 147,100 4,991
Omnicom Group, Inc.................................... 77,300 6,751
The Walt Disney Co. * ................................ 1,031,900 24,074
Time Warner, Inc. * .................................. 1,033,800 18,598
Tribune Co. * ........................................ 80,400 4,149
Univision Communications, Inc. -
Cl. A * ........................................... 138,200 5,485
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Market
Name of Issuer Shares Value
-------------- --------- ----------
(000's)
COMMON STOCK - Continued
Media - Continued
Viacom, Inc. - Cl. B * ............................ 143,000 $ 6,346
----------
132,858
Metals & Mining - 0.5%
Alcan Aluminum, Ltd. * ............................ 217,100 10,193
Multi-Utilities - 0.1%
Duke Energy Co..................................... 97,400 1,992
Multiline Retail - 1.4%
BJ's Wholesale Club, Inc. * ....................... 76,600 1,759
Federated Department Stores, Inc. * ............... 205,400 9,680
Nordstrom, Inc..................................... 110,200 3,780
Target Corp. * .................................... 129,800 4,984
Wal-Mart Stores, Inc. * ........................... 166,500 8,833
----------
29,036
Oil & Gas - 5.4%
Apache Corp........................................ 40,500 3,285
BP Amoco plc - ADR ................................ 78,400 3,869
ChevronTexaco Corp. * ............................. 21,500 1,857
Conoco Phillips ................................... 368,500 24,163
Exxon Mobil Corp. * ............................... 1,532,200 62,820
Murphy Oil Corp. .................................. 108,100 7,060
Newfield Exploration Co. * ........................ 59,000 2,628
Occidental Petroleum Corp. * ...................... 84,900 3,586
Unocal Corp. * .................................... 130,000 4,788
----------
114,056
Paper & Forest Products - 0.5%
International Paper Co. * ......................... 257,400 11,097
Personal Products - 0.9%
Estee Lauder Cos., Inc. - Cl. A ................... 257,500 10,109
Gillette Co........................................ 261,200 9,594
----------
19,703
Pharmaceuticals - 5.6%
Abbott Laboratories * ............................. 181,500 8,458
Eli Lilly & Co. * ................................. 47,600 3,348
Forest Laboratories, Inc. * ....................... 138,200 8,541
Johnson & Johnson ................................. 253,400 13,091
Merck & Co., Inc. * ............................... 112,100 5,179
Pfizer, Inc. * .................................... 1,631,760 57,650
Watson Pharmaceuticals, Inc. * .................... 169,200 7,783
Wyeth * ........................................... 382,100 16,220
----------
120,270
Real Estate Operations - 0.2%
Hilton Hotels Corp. * ............................. 299,300 5,127
Semiconductor Equipment & Products - 3.9%
Analog Devices, Inc. * ............................ 485,000 22,140
Applied Materials, Inc. * ......................... 457,000 10,260
ASML Holdings * ................................... 159,600 3,200
Maxim Integrated Products, Inc. * ................. 125,100 6,230
Novellus Systems, Inc. * .......................... 296,170 12,454
QLogic Corp. * .................................... 57,800 $ 2,983
Texas Instruments, Inc. * ......................... 780,300 22,925
Xilinx, Inc. * .................................... 59,200 2,293
----------
82,485
Software - 4.7%
Electronic Arts, Inc. * ........................... 175,200 8,371
Intuit, Inc. * .................................... 113,700 6,016
Mercury Interactive Corp. * ....................... 131,400 6,391
Microsoft Corp. * ................................. 1,888,300 52,004
Red Hat, Inc. * ................................... 92,700 1,740
Research in Motion, Ltd. * ........................ 29,100 1,945
Siebel Systems, Inc. * ............................ 252,800 3,506
Symantec Corp. * .................................. 120,000 4,158
Veritas Software Corp. * .......................... 404,900 15,046
----------
99,177
Specialty Retail - 3.1%
AutoZone, Inc. * .................................. 98,500 8,393
Best Buy Co., Inc. * .............................. 199,100 10,401
Home Depot, Inc. * ................................ 668,400 23,722
Kohl's Corp. * .................................... 161,200 7,244
Lowe's Cos., Inc. * ............................... 143,100 7,926
Staples, Inc. * ................................... 343,500 9,378
----------
67,064
Textiles & Apparel - 0.6%
Nike, Inc. - Cl. B ................................ 176,500 12,083
Tobacco - 1.4%
Altria Group, Inc. ................................ 556,300 30,274
Trading Companies & Distributors - 0.5%
CDW Corp .......................................... 201,900 11,662
U.S. Government Agencies - 1.3%
Federal Home Loan Mortgage Corp. .................. 145,000 8,456
Federal National Mortgage Assoc. * ................ 253,000 18,990
----------
27,447
----------
TOTAL COMMON STOCK- ............................ 99.4% 2,114,824
Par
Value
---------
(000's)
INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED
SECURITIES - 4.1%
State Street Navigator Securities
Lending Portfolio .............................. $ 87,940 87,940
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
GROWTH & INCOME FUND
Par Market
Name of Issuer Value Value
-------------- ------- ----------
(000's) (000's)
SHORT-TERM INVESTMENTS - 0.9%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ............................ $19,398 $ 19,398
------- ----------
TOTAL INVESTMENTS- .......................... 104.4% 2,222,162
Payables, less cash and receivables- ........... (4.4)% (94,141)
------- ----------
NET ASSETS- .............................. 100.0% $2,128,021
======= ==========
* Non-income producing security.
ADR-American Depository Receipts.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Growth & Income Fund (the "Fund") is a diversified series of
John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 $ 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$699 1.57% $--
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$85,919 $87,940
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $158, $101, $1,207, $12,541, $487,252, $232,197 and $54,591 which
expire in 2005, 2006, 2007, 2008, 2009, 2010 and 2011, respectively.
Certain of the above losses may be limited under sections 382-384 of the
Internal Revenue Code, as amended.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $49. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
Fund's Net Assets:
Between
$150 Million and Excess Over
First $150 Million $300 Million $300 Million
- ------------------ ---------------- ------------
0.71% 0.69% 0.67%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, there were no reimbursements paid to the
Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $51.
John Hancock has entered into Sub-Advisory Agreements with Independence
Investment LLC, John Hancock Advisers and, as of December 15, 2003, T. Rowe
Price, with respect to the Fund. Each is an affiliate of John Hancock, and under
its supervision, is responsible for the day-to-day investment management of the
Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- ---------- --------------------
$1,713,509 $1,752,690
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$1,971,792 $273,125 $(22,756) $250,369
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed
Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ---------------------- -------------- ------------- --------------
$-- $-- $788,047 $250,369
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $17,207 $-- $11,765
2002 15,248 -- --
NOTE E--COMBINATION
On April 25, 2003, the shareholders of the Fund (acquiring fund) approved
the combination of the funds in the following table:
Acquiring Fund Target Fund
- ------------------- ----------------------
VST Growth & Income VA Relative Value
VST Growth & Income VA Sovereign Investors
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE E--COMBINATION--Continued
This combination provides for the transfer of substantially all of the
assets and liabilities of the target fund to the acquiring fund in exchange
solely for the fund shares of the acquiring fund. The acquisition was accounted
for as tax-free exchange as follows:
Target Fund
Trust Shares Unrealized Acquiring Fund Acquiring Fund
Acquiring Fund Issued by Target Fund Appreciation/ Net Assets Prior Aggregate Net Assets
vs. Target Fund Acquiring Fund Net Assets (Depreciation) to Combination After Combination
- ----------------- -------------- ----------- -------------- ---------------- --------------------
VST Growth &
Income vs.
VA Relative Value 3,079 $28,786 $ 845 $1,744,162 $1,772,947
VST Growth &
Income vs.
VA Sovereign
Investors 4,038 37,760 (415) 1,772,947 1,810,708
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Growth & Income Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Growth & Income Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 2001
- --------------------------------------------------------------------------------
Health Sciences Fund
Wellington Management Company, LLP Ann C. Gallo
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 31.74% outperforming its benchmark, the Goldman
Sachs Health Care Index.
.. On May 1st, the Fund's sub-adviser was changed, with the Fund continuing to
focus on investing in the health sciences sector. Since that date, the Fund
has outperformed its benchmark.
.. Since May 1st, the Fund's exposure to the pharmaceutical and biotechnology
industries has been the largest contributor to absolute performance.
.. On an individual security basis, the Fund's investments in Guidant (health
care equipment), Aventis (pharmaceuticals) and Medco Health Solutions
(health care providers) were the top drivers of absolute returns. The most
significant detractors from absolute returns were Schering-Plough
(pharmaceuticals) and Exelixis (biotechnology). Schering-Plough experienced
competitive pressures across several key drug franchises during the year.
.. The manager employs bottom-up fundamental analysis, with a focus on
in-depth understanding of medical science, regulatory developments,
reimbursement policy trends, and individual company business franchises, to
identify attractive industries and stocks using the firm's global
healthcare analysts' best ideas. The Fund's sub-sector allocations are
broadly diversified but are primarily driven by stock selection.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/01
(Fund Inception Date)
Goldman Sachs
Health Sciences Fund Health Care Index (2) S&P 500(R) Index (1)
--------------------- ---------------------- --------------------
5/01/2001 $10,241.38 $10,000.00 $10,000.00
6/30/2001 10,198.99 9,748.00 9,757.00
7/31/2001 10,189.03 10,015.10 9,661.38
8/31/2001 9,836.32 9,758.71 9,056.58
9/30/2001 9,632.71 9,682.59 8,324.81
10/31/2001 9,591.92 9,696.15 8,483.81
11/30/2001 9,927.60 10,214.89 9,134.52
12/31/2001 9,815.39 10,021.83 9,214.90
1/31/2002 9,565.04 9,753.24 9,080.37
2/28/2002 9,549.04 9,704.48 8,905.11
3/31/2002 9,637.74 9,825.78 9,239.95
4/30/2002 9,276.63 9,211.67 8,680.01
5/31/2002 9,044.42 9,032.04 8,615.77
6/30/2002 8,365.85 8,173.10 8,002.33
7/30/2002 8,034.29 7,994.11 7,378.15
8/31/2002 7,998.98 8,051.66 7,426.84
9/30/2002 7,649.39 7,621.70 6,619.55
10/31/2002 7,951.76 7,975.35 7,202.07
11/30/2002 8,038.33 8,197.86 7,626.27
12/31/2002 7,853.00 7,914.22 7,177.84
1/31/2003 7,824.41 7,918.97 6,989.78
2/28/2003 7,659.65 7,781.97 6,884.94
3/31/2003 7,912.71 8,018.54 6,951.72
4/30/2003 8,274.48 8,388.20 7,524.54
5/31/2003 8,998.32 8,779.09 7,921.09
6/30/2003 9,223.62 9,155.71 8,022.48
7/31/2003 9,267.67 9,191.42 8,163.67
8/31/2003 9,180.66 8,990.12 8,322.86
9/31/2003 9,385.25 9,008.10 8,234.64
10/31/2003 9,612.28 9,096.38 8,700.72
11/30/2003 9,859.87 9,261.03 8,777.29
12/31/2003 10,345.18 9,755.57 9,237.22
Value on 12/31/03:
- ------------------
$10,345 Health Sciences Fund
$ 9,756 Goldman Sachs Health Care Index (2)
$ 9,237 S&P 500 (R) Index (1)
MORNINGSTAR
CATEGORY+:
.. Specialty-Health
MORNINGSTAR
RISK+:
.. N/A (VL/VUL)
.. N/A (VA)
MORNINGSTAR
RATING+:
.. N/A (VL/VUL)
.. N/A (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
AstraZeneca Group Plc 6.7%
Schering-Plough Corp. 6.5%
Abbott Laboratories 5.8%
Eli Lilly & Co. 4.3%
AVENTIS 4.3%
Novartis AG 4.1%
Genzyme Corp. 4.1%
Medco Health Solutions, Inc. 3.7%
Wyeth 3.7%
Guidant Corp. 3.1%
AVERAGE ANNUAL TOTAL RETURNS*
Health Goldman Sachs
Sciences S&P 500(R) Health Care
Fund Index(1) Index(2)
-------- ---------- -------------
1 Year 31.74% 28.69% 23.27%
Since Inception (5/1/01) 1.28 -3.02 -0.95
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Drugs & Pharmaceuticals 60.98%
Biotechnology Research & Production 14.87%
Medical & Dental Instruments & Supplies 9.88%
Health Care Services 9.33%
Electronics: Medical Systems 1.71%
Health Care Management Services 1.38%
Health Care Facilities 0.94%
Chemicals 0.92%
(1) "S&P 500(R)" 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 December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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. There are
additional risks associated with a nondiversified fund, as outlined in the
current prospectus. Performance would be lower if expenses and charges of
the separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03 this fund is not yet rated.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ...................................... $28,729
Net unrealized appreciation of investments ......................... 5,229
Short-term investments at value .................................... 1,300
-------
Total investments ............................................ 35,258
Receivable for:
Investments sold ................................................ 104
Fund shares sold ................................................ 34
Dividends ....................................................... 30
Other assets .................................................... 4
-------
Total assets .................................................... 35,430
-------
LIABILITIES
Payables for:
Investments purchased ........................................... 611
Other liabilities ............................................... 1
-------
Total liabilities .................................................. 612
-------
Net assets ......................................................... $34,818
=======
Shares of beneficial interest outstanding .......................... 3,456
-------
Net asset value per share .......................................... $ 10.07
=======
Composition of net assets:
Capital paid-in ................................................. $34,486
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (4,895)
Undistributed net investment loss ............................... (2)
Net unrealized appreciation of:
Investments .................................................. 5,229
-------
Net assets ......................................................... $34,818
=======
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest .......................................................... $ 9
Dividends ......................................................... 258
Securities lending ................................................ 3
------
Total investment income .............................................. 270
------
EXPENSES
Investment advisory fee ........................................... 275
Auditors fees ..................................................... 4
Custodian fees .................................................... 55
Legal fees ........................................................ 2
Printing & mailing fees ........................................... 4
Trustees' fees .................................................... 1
Other fees ........................................................ 3
------
Total expenses ....................................................... 344
Less expenses reimbursed .......................................... (41)
------
Net expenses ......................................................... 303
------
Net investment loss .................................................. (33)
------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments .................................................... (23)
Foreign currency transactions .................................. 106
Change in unrealized appreciation (depreciation) on:
Investments .................................................... 7,571
Translation of assets and liabilities in foreign
currencies .................................................. (57)
------
Net realized and unrealized gain ..................................... 7,597
------
Net increase in net assets resulting from
operations ........................................................ $7,564
======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income (loss) ......................................... $ (33) $ 27
Net realized gain (loss) ............................................. 83 (4,562)
Change in net unrealized appreciation (depreciation) ................. 7,514 (2,116)
------- --------
Net increase (decrease) in net assets resulting from operations ... 7,564 (6,651)
Distributions to shareholders from:
Net investment income ................................................ (72) (56)
Realized gains ....................................................... (719)
------- --------
Decrease in net assets resulting from distributions ............... (791) (56)
From fund share transactions:
Proceeds from shares sold ............................................ 11,971 9,884
Distributions reinvested ............................................. 791 56
Payment for shares redeemed .......................................... (7,387) (10,436)
------- --------
Increase (decrease) in net assets from fund share transactions .... 5,375 (496)
NET INCREASE (DECREASE) IN NET ASSETS ................................... 12,148 (7,203)
NET ASSETS
Beginning of Period .................................................. 22,670 29,873
------- --------
End of Period ........................................................ $34,818 $ 22,670
======= ========
Analysis of fund share transactions:
Sold ................................................................. 1,372 1,133
Reinvested ........................................................... 79 7
Redeemed ............................................................. (893) (1,288)
------- --------
Net increase (decrease) in fund shares outstanding ...................... 558 (148)
======= ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Health Sciences Fund
--------------------------------------
Year Ended December 31,
--------------------------------------
Period from
May 1, to
December 31,
2003(f) 2002 2001(g)
------- ------- ------------
Net Assets Value at Beginning of Period .......................... $ 7.82 $ 9.81 $ 10.00
Income from Investment Operations:
Net Investment Income ......................................... (h) 0.01 (h)
Net Realized and Unrealized Gain (Loss) on Investments(a) ..... 2.48 (1.98) (0.18)
------- ------- -------
Total From Investment Operations .............................. 2.48 (1.97) (0.18)
Less Distributions:
Distribution from Net Investment Income ....................... (0.02) (0.02)
Distribution from Net Realized Gains on Investments ........... (0.21)
Distribution from Capital Paid-in ............................. (0.01)
------- ------- -------
Total Distributions ........................................... (0.23) (0.02) (0.01)
------- ------- -------
Net Assets Value at End of Period ................................ $ 10.07 $ 7.82 $ 9.81
======= ======= =======
Total Investment Return(b) ....................................... 31.74% (19.99)% (1.85)%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ............. 1.10%(e) 1.07%(e) 1.10%(d)(e)
Ratio of Net Investment Income (Loss) to Average Net Assets ... (0.12)% 0.10% (0.16)%(d)
Portfolio Turnover Rate ....................................... 115.75% 98.91% 37.76%(c)
Net Assets End of Period (000s Omitted) .......................... $34,818 $22,670 $29,873
(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 fluctuating
market values of the portfolio.
(b) The performance 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 expense ratio would have been 1.25%, 1.35%, and 1.19% for
the years ended December 31, 2003, 2002, and 2001, respectively.
(f) The fund entered into a new sub-advisory agreement with Wellington
Management Company during the period shown.
(g) Commencement of investment operations.
(h) Amount is less than $0.01.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
HEALTH SCIENCES FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Biotechnology - 17.9%
Abgenix, Inc. * ....................................... 20,900 $ 260
Applera Corp. - Celera Genomics Group * ............... 53,400 743
Cephalon, Inc. * ...................................... 9,300 450
Connetics Corp. * ..................................... 7,372 134
CV Therapeutics, Inc. * ............................... 19,200 281
Exelixis, Inc. * ...................................... 42,500 301
Genzyme Corp. * ....................................... 27,998 1,381
Gilead Sciences, Inc. * ............................... 10,400 605
Human Genome Sciences, Inc. * ......................... 18,700 248
ILEX Oncology, Inc. * ................................. 9,300 198
Millennium Pharmaceuticals, Inc. * .................... 25,300 472
Regeneron Pharmaceuticals * ........................... 13,200 194
Serono SA ............................................. 1,137 811
Vertex Pharmaceuticals, Inc. * ........................ 11,800 121
Zymogenetics, Inc. * .................................. 1,500 23
-------
6,222
Chemicals - 1.0%
Takeda Chemical Industries * .......................... 8,500 337
Health Care Equipment & Supplies - 13.7%
Baxter International, Inc ............................. 24,580 750
Bayer AG * ............................................ 10,100 296
Beckman Coulter, Inc .................................. 11,200 569
Becton, Dickinson & Co. * ............................. 17,900 736
CTI Molecular Imaging, Inc ............................ 10,700 181
Edwards Lifesciences Corp. * .......................... 15,100 454
Guidant Corp .......................................... 17,313 1,042
Nobel Biocare * ....................................... 100 7
Olympus Optical Co. * ................................. 17,000 369
Viasys Healthcare, Inc. * ............................. 17,900 369
-------
4,773
Health Care Providers & Services - 10.0%
Aetna US Healthcare, Inc. * ........................... 4,700 318
Anthem, Inc. * ........................................ 11,917 894
Cardinal Health, Inc. * ............................... 12,122 741
Gambro - Ser. A * ..................................... 49,360 408
Laboratory Corporation of America
Holdings * .......................................... 8,140 301
McKesson HBOC, Inc .................................... 26,100 839
-------
3,501
Pharmaceuticals - 54.6%
Abbott Laboratories * ................................. 42,434 1,977
Amylin Pharmaceuticals, Inc. * ........................ 12,900 287
Ariad Pharmaceuticals, Inc. * ......................... 2,800 21
AstraZeneca Group plc * ............................... 10,779 516
AstraZeneca Group plc - ADR ........................... 36,434 1,763
Atherogenics, Inc. * .................................. 14,100 211
AVENTIS - ADR ......................................... 21,900 1,451
Chugai Pharmaceutical Co., Ltd. * ..................... 23,200 334
Eisai Co. Ltd. * ...................................... 25,300 682
Elan Corp. plc - ADR * ................................ 47,600 328
Eli Lilly & Co. * ..................................... 20,827 $ 1,465
Forest Laboratories, Inc. * ........................... 11,200 692
Fujisawa Pharmeceutical Co., Ltd. * ................... 26,000 555
King Pharmaceuticals, Inc. * .......................... 30,100 459
Medco Health Solutions, Inc. * ........................ 37,300 1,268
Medicinesco ........................................... 17,300 510
Novartis AG ........................................... 30,615 1,389
OSI Pharmaceuticals, Inc. * ........................... 4,100 132
Schering AG * ......................................... 9,900 501
Schering-Plough Corp. * ............................... 126,300 2,196
Shionogi & Co., Ltd. * ................................ 35,000 652
Watson Pharmaceuticals, Inc. * ........................ 7,900 363
Wyeth * ............................................... 29,395 1,248
-------
19,000
Software - 0.3%
Cerner Corp. * ........................................ 3,300 125
-------
TOTAL COMMON STOCK- ............................. 97.5% 33,958
Par
Value
-------
(000's)
SHORT-TERM INVESTMENTS - 3.8%
Investment in joint trading account (Note B)
1.061% due 01/02/04 ............................... $ 1,300 1,300
------- --------
TOTAL INVESTMENTS- .................... 101.3% 35,258
Payables, less cash and receivables- ........ (1.3)% (440)
------- --------
NET ASSETS- ........................ 100.0% $ 34,818
======= ========
* Non-income producing security.
ADR-American Depository Receipts.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Health Sciences Fund (the "Fund") is a diversified series of
John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Mortgage Int. Networking, 0.98%, due 01/02/04 $ 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$387 1.76% $--
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's securities or prevent loss if the price of such securities should
decline. The U.S. dollar value of a forward foreign
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES-Continued
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. At December 31,
2003, the Fund had no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $184, $3,104 and $900 which expire in 2009, 2010 and 2011,
respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred approximately $107 in net realized capital losses. As
permitted by tax regulations, the Fund intends to elect to defer these losses
and treat them as arising in the fiscal year ending on December 31, 2004.
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 Fund is shown net of foreign taxes withheld of $11. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Excess Over
First $250 Million $250 Million
- ------------------ ------------
1.00% 0.95%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $41 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Wellington
Management Company, LPP, with respect to the Fund. Wellington Management
Company, LPP is an affiliate of John Hancock, and under its supervision,
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
is responsible for the day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$35,298 $30,881
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$30,629 $4,837 $(208) $4,629
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to certain
securities sold at a loss. Additionally, as a result, net investment income
(loss) and net realized gain (loss) on investment transactions for a reporting
period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $4,188 $4,629
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $72 $-- $719
2002 56 -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- --------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ---------------------------- -----------------------------------
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary,
First Variable Life Insurance
Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Health Sciences Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, 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. 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Health Sciences Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, 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 6, 2004
Inception: May 1, 1998
- --------------------------------------------------------------------------------
High Yield Bond Fund
Wellington Management Company, LLP Earl E. McEvoy
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 16.51%, underperforming its benchmarks, the
Lehman Brothers High Yield Index and the Lehman Brothers High Yield B/BB
Bond Index.
.. The Fund's benchmark is being modified to the Lehman Brothers High Yield
B/BB Bond Index since it represents a better match with the Fund's strategy
that emphasizes the upper tier portion of the high yield market. This
benchmark change will not result in any change in the manager's approach
but will provide a more appropriate index for tracking relative
performance.
.. The Fund underperformed both benchmarks primarily due to unfavorable sector
allocation decisions, with security selection also detracting.
.. Sector allocation decisions detracted from relative performance most
significantly within the utility, health care and wireline sectors. The
Fund's modest exposure to cash exposure also detracted.
.. The Fund's exposure to the Consumer Discretionary sector contributed the
most to absolute performance. On an individual name basis, investments in
AES (Utilities) and Nextel Communications (Telecommunications Services)
were top drivers of absolute returns. Healthsouth (Health Care) and Air
Canada (Transportation) detracted the most from absolute Fund returns.
.. The manager employs rigorous bottom-up fundamental research, 100% of which
is conducted in-house. The manager continues to focus on capturing the
attractive yields currently available in the high yield market, while
minimizing credit losses, and focuses on the upper tier of the high yield
market.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/98
(Fund Inception Date)
Lehman Brothers
Lehman Brothers High Yield
High Yield Bond Fund High Yield Bond Index B/BB Bond Index (1)
-------------------- --------------------- -------------------
4/30/1998 10,000.00 10,000.00 10,000.00
5/31/1998 9,987.31 10,035.00 10,049.00
6/30/1998 10,027.82 10,071.13 10,098.24
7/31/1998 10,075.24 10,128.53 10,147.72
8/31/1998 9,309.43 9,569.44 9,684.99
9/30/1998 9,280.19 9,612.50 9,789.56
10/31/1998 9,120.03 9,415.44 9,619.24
11/30/1998 9,801.83 9,806.18 9,962.65
12/31/1998 9,702.20 9,816.97 10,002.50
1/31/1999 9,818.61 9,962.26 10,139.64
2/28/1999 9,884.14 9,903.48 10,067.55
3/31/1999 10,061.52 9,997.57 10,150.10
4/30/1999 10,214.22 10,191.52 10,303.37
5/31/1999 9,992.19 10,053.93 10,152.94
6/30/1999 9,989.47 10,032.82 10,125.53
7/31/1999 9,993.43 10,072.95 10,153.88
8/31/1999 9,924.64 9,961.14 10,058.43
9/30/1999 9,874.20 9,889.42 10,043.34
10/31/1999 9,806.38 9,824.15 9,996.14
11/30/1999 10,089.82 9,940.08 10,121.09
12/31/1999 10,199.91 10,051.41 10,231.41
1/31/2000 10,132.31 10,008.19 10,167.97
2/29/2000 10,123.13 10,027.20 10,182.21
3/31/2000 9,876.13 9,816.63 9,995.88
4/30/2000 9,945.34 9,832.34 10,009.87
5/31/2000 9,777.19 9,731.06 9,957.82
6/30/2000 10,006.87 9,929.58 10,183.86
7/31/2000 10,121.22 10,005.04 10,280.61
8/31/2000 10,203.41 10,073.08 10,387.53
9/30/2000 9,974.55 9,985.44 10,302.35
10/31/2000 9,577.98 9,665.91 10,036.55
11/30/2000 9,016.41 9,283.14 9,729.43
12/31/2000 9,096.94 9,462.30 9,952.23
1/31/2001 9,829.10 10,171.03 10,601.12
2/28/2001 10,014.56 10,306.30 10,732.57
3/31/2001 9,866.19 10,063.07 10,556.56
4/30/2001 9,755.62 9,938.29 10,495.33
5/31/2001 9,951.58 10,117.18 10,663.26
6/30/2001 9,581.92 9,833.90 10,429.73
7/31/2001 9,725.16 9,978.46 10,579.92
8/31/2001 9,796.45 10,096.20 10,694.18
9/30/2001 8,865.46 9,417.74 10,064.29
10/31/2001 9,025.98 9,650.36 10,375.28
11/30/2001 9,357.65 10,002.59 10,730.12
12/31/2001 9,291.13 9,961.58 10,679.68
1/31/2002 9,363.70 10,031.31 10,754.44
2/28/2002 9,264.91 9,890.88 10,658.73
3/31/2002 9,532.73 10,129.25 10,880.43
4/30/2002 9,707.19 10,291.31 11,007.73
5/31/2002 9,631.01 10,237.80 10,989.02
6/30/2002 8,874.13 9,483.27 10,221.98
7/31/2002 8,388.51 9,068.85 9,814.13
8/31/2002 8,491.61 9,327.32 10,171.36
9/30/2002 8,214.41 9,205.13 10,040.15
10/31/2002 8,224.28 9,125.04 9,939.75
11/30/2002 8,825.18 9,689.88 10,534.15
12/31/2002 8,871.56 9,825.54 10,644.75
1/31/2003 9,005.59 10,152.73 10,915.13
2/28/2003 9,108.56 10,277.61 11,023.19
3/31/2003 9,244.00 10,573.61 11,291.05
4/30/2003 9,587.87 11,200.62 11,827.38
5/31/2003 9,575.93 11,315.99 11,906.62
6/30/2003 9,761.58 11,641.89 12,198.33
7/31/2003 9,599.92 11,513.83 12,054.39
8/31/2003 9,656.72 11,646.24 12,161.68
9/30/2003 9,874.49 11,964.18 12,469.37
10/31/2003 10,030.44 12,205.86 12,691.32
11/30/2003 10,127.51 12,391.39 12,871.54
12/31/2003 10,335.85 12,671.43 13,119.96
Value on 12/31/03:
- ------------------
$10,336 High Yield Bond Fund
$12,671 Lehman Brothers High Yield Bond Index
$13,120 Lehman Brothers High Yield B/BB Bond Index (1)
MORNINGSTAR
CATEGORY+:
.. High Yield Bond
MORNINGSTAR
RISK+:
.. High (VL/VUL)
.. High (VA)
MORNINGSTAR
RATING+:
.. **(VL/VUL)
.. *(VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Tyco International Group SA 1.7%
Nextel Communications, Inc. 1.7%
Rogers Wireless, Inc. 1.6%
CSC Holdings, Inc. 1.6%
Allied Waste North America, Inc. 1.6%
Host Marriott LP 1.5%
Xerox Corp. 1.4%
HCA, Inc. 1.4%
Lyondell Chemical Co. 1.3%
Georgia Pacific Corp. 1.3%
AVERAGE ANNUAL TOTAL RETURNS*
Lehman Brothers Lehman Brothers
High Yield High Yield High Yield B/BB
Bond Fund Bond Index Bond Index(1)
---------- --------------- ---------------
1 Year 16.51% 28.96% 23.25%
3 Years 4.35 10.22 9.65
5 Years 1.27 5.24 5.58
Since Inception (5/1/98) 0.58 4.27 4.91
FUND COMPOSITION (as of December 31, 2003)(2)
% of
Credit Quality Assets
- ---------------------- ------
BBB 1.00%
BB 42.80%
B 56.30%
Weighted Average Yield 6.60%
(1) Lehman Brothers High Yield B/BB Bond Index: represents a 50% Lehman
Brothers B Index and 50% Lehman Brothers BB Index which is equivalent to
the upper tier portions of the Lehman Brothers High Yield Bond Index.
(2) Statistics are based on bond assets only, excluding cash.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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 investing in high yield bonds, as outlined in
the current prospectus. Performance would be lower if expenses and charges
of the separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts. VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 288 VL/VUL subaccounts and 467 VA subaccounts in the
Morningstar High Yield Bond category. This represents the Morningstar 3
year rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ...................................... $ 87,623
Net unrealized appreciation of investments ......................... 5,315
Short-term investments at value .................................... 2,294
--------
Total investments ............................................ 95,232
Cash ............................................................... 204
Receivable for:
Investments sold ................................................ 15
Fund shares sold ................................................ 62
Interest ........................................................ 2,006
--------
Total assets ....................................................... 97,519
LIABILITIES
Payables for:
Investments purchased ........................................... 486
Other liabilities ............................................... 17
--------
Total liabilities .................................................. 503
--------
Net assets ......................................................... $ 97,016
========
Shares of beneficial interest outstanding .......................... 15,115
--------
Net asset value per share .......................................... $ 6.42
========
Composition of net assets:
Capital paid-in ................................................. $108,741
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (17,040)
Net unrealized appreciation of investments ...................... 5,315
--------
Net assets ......................................................... $ 97,016
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ......................................................... $ 6,106
EXPENSES
Investment advisory fee .......................................... 633
Auditors fees .................................................... 10
Custodian fees ................................................... 89
Legal fees ....................................................... 5
Printing & mailing fees .......................................... 6
Trustees' fees ................................................... 2
Other fees ....................................................... 5
-------
Total expenses ...................................................... 750
Less expenses reimbursed ......................................... (38)
-------
Net expenses ........................................................ 712
-------
Net investment income ............................................... 5,394
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments ................................. (724)
Change in unrealized appreciation on investments ................. 7,272
-------
Net realized and unrealized gain .................................... 6,548
-------
Net increase in net assets resulting from operations ................ $11,942
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ...................................... $ 5,394 $ 5,710
Net realized loss .......................................... (724) (13,393)
Change in net unrealized appreciation ...................... 7,272 5,078
-------- --------
Net increase (decrease) in net assets resulting from
operations ........................................... 11,942 (2,605)
Distributions to shareholders from:
Net investment income ...................................... (5,404) (5,697)
Realized gains ............................................. (249)
-------- --------
Decrease in net assets resulting from distributions ..... (5,653) (5,697)
From fund share transactions:
Proceeds from shares sold .................................. 109,079 68,950
Distributions reinvested ................................... 5,653 5,697
Payment for shares redeemed ................................ (84,786) (56,838)
-------- --------
Increase in net assets from fund share transactions ..... 29,946 17,809
-------- --------
NET INCREASE IN NET ASSETS .................................... 36,235 9,507
NET ASSETS
Beginning of Period ........................................ 60,781 51,274
-------- --------
End of Period .............................................. $ 97,016 $ 60,781
======== ========
Analysis of fund share transactions:
Sold ....................................................... 17,586 11,198
Reinvested ................................................. 909 919
Redeemed ................................................... (13,667) (9,337)
-------- --------
Net increase in fund shares outstanding ....................... 4,828 2,780
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
High Yield Bond Fund
--------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------
2003 2002 2001 2000 1999
------- ------- ------- -------- -------
Net Assets Value at Beginning of Period .................. $ 5.91 $ 6.83 $ 7.33 $ 8.99 $ 9.23
Income from Investment Operations:
Net Investment Income ................................. 0.42 0.57 0.73 0.73 0.72
Net Realized and Unrealized Gain (Loss) on
Investments(a) ..................................... 0.53 (0.87) (0.55) (1.65) (0.26)
------- ------- ------- -------- -------
Total From Investment Operations ...................... 0.95 (0.30) 0.18 (0.92) 0.46
Less Distributions:
Distribution from Net Investment Income ............... (0.42) (0.62) (0.68) (0.74) (0.70)
Distribution from Net Realized Gains on Investments ... (0.02)
------- ------- ------- -------- -------
Total Distributions ................................... (0.44) (0.62) (0.68) (0.74) (0.70)
------- ------- ------- -------- -------
Net Assets Value at End of Period ........................ $ 6.42 $ 5.91 $ 6.83 $ 7.33 $ 8.99
======= ======= ======= ======== =======
Total Investment Return(b) ............................... 16.51% (4.51)% 2.13% (10.81)% 5.13%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ..... 0.90%(c) 0.90%(c) 0.80%(c) 0.75%(c) 0.80%(c)
Ratio of Net Investment Income to Average Net Assets .. 6.81% 9.84% 10.39%(d) 8.88% 7.94%
Portfolio Turnover Rate ............................... 47.82% 89.30% 32.50% 21.94% 38.62%
Net Assets End of Period (000s Omitted) .................. $97,016 $60,781 $51,274 $ 25,978 $19,921
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been .95%, .96%, .90%, .87%, and
1.04%, for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
(d) Had the Fund not amortized premiums and accreted discounts on debt
securities, the annual ratio of net investment income to average net assets
would have been 9.35% for the years ended December 31, 2001.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.4%
Alliant Techsystems, Inc. - Sr. Sub. Notes
8.5% due 05/15/11 .................................. $ 95 $ 105
K & F Industries, Inc. - Sr. Notes Ser. B
9.625% due 12/15/10 ................................ 435 487
Sequa Corp.
9.0% due 08/01/09 .................................. 275 302
Sequa Corp. - Sr. Notes
8.875% due 04/01/08 ................................ 460 499
------
1,393
Airlines - 0.9%
American Airlines, Inc. - Certs.
7.024% due 04/15/11 ................................ 130 130
Continental Airlines - Ser. 1997-4 Cl. 4A
6.9% due 01/02/18 .................................. 97 95
Continental Airlines, Inc. - Ser. 1999-2 Cl. A2
7.056% due 09/15/09 ................................ 170 173
Delta Air Lines, Inc. - Notes
7.9% due 12/15/09 .................................. 435 357
Northwest Airlines - Ser. 2001 Cl. 1A2
6.841% due 10/01/12 ................................ 70 69
------
824
Auto Components - 3.2%
CSK Auto, Inc. - Sr. Notes
12.0% due 06/15/06 ................................. 190 218
Dana Corp. - Notes
9.0% due 08/15/11 .................................. 715 862
Delco Remy International, Inc. - Sr. Notes
8.625% due 12/15/07 ................................ 30 30
Dura Operating Corp. - Sr. Sub. Notes
9.0% due 05/01/09 .................................. 425 425
Goodyear Tire & Rubber Co. - Notes
7.857% due 08/15/11 ................................ 205 179
8.5% due 03/15/07 .................................. 95 91
Lear Corp. - Ser. B
8.11% due 05/15/09 ................................. 515 606
TRW, Inc. - Sr. Notes
9.375% due 02/15/13 ................................ 365 418
Visteon Corp.
8.25% due 08/01/10 ................................. 215 241
------
3,070
Automobiles - 0.5%
Navistar International - Sr. Sub Notes Ser. B
8.0% due 02/01/08 .................................. 155 160
Navistar International Corp., Inc. - Sr. Notes
Ser. B
9.375% due 06/01/06 ................................ 100 110
United Rentals North America, Inc. - Sr. Notes
10.75% due 04/15/08 ................................ 195 219
------
489
Banks - 0.6%
Chevy Chase Bank - Sub. Debs.
6.875% due 12/01/13 ................................ $170 $ 174
Chevy Chase Savings Bank - Debs.
9.25% due 12/01/08 ................................. 135 138
Western Financial Bank - Sub. Debs.
9.625% due 05/15/12 ................................ 255 284
------
596
Beverages - 0.7%
Constellation Brands, Inc. - Sr. Sub. Notes
8.125% due 01/15/12 ................................ 595 659
Building Products - 0.2%
Koppers Inc., Pennsylvania
9.875% due 10/15/13 ................................ 170 188
Nortek, Inc. - Sr. Sub. Notes Ser. B
9.875% due 06/15/11 ................................ 25 27
------
215
Chemicals - 4.8%
Acetex Corp. - Sr. Notes
10.875% due 08/01/09 ............................... 75 83
Airgas, Inc. - Sr. Sub. Notes
9.125% due 10/01/11 ................................ 335 377
FMC Corp. - Sr. Sec. Notes
10.25% due 11/01/09 ................................ 50 58
Hercules, Inc. - Sr. Notes
11.125% due 11/15/07 ............................... 200 240
IMC Global, Inc. - Debs.
6.875% due 07/15/07 ................................ 290 281
IMC Global, Inc. - Sr. Notes 144A (a)
10.875% due 08/01/13 ............................... 470 515
Kraton Polymers LLC - Sr. Sub. Notes 144A (a)
8.125% due 01/15/14 ................................ 55 57
Lyondell Chemical Co.
9.875% due 05/01/07 ................................ 330 348
Lyondell Chemical Co. - Notes Ser. A
9.625% due 05/01/07 ................................ 800 844
METHANEX Corp. - Sr. Notes
8.75% due 08/15/12 ................................. 255 283
Millenium America, Inc. - Sr. Notes
9.25% due 06/15/08 ................................. 95 104
NALCO Co. - Sr. Notes 144A (a)
7.75% due 11/15/11 ................................. 180 193
NOVA Chemicals Corp. - Notes
7.0% due 05/15/06 .................................. 210 222
Noveon, Inc. - Sr. Sub. Notes Ser. B
11.0% due 02/28/11 ................................. 490 568
Omnova Solutions, Inc. - Sr. Notes 144A (a)
11.25% due 06/01/10 ................................ 205 227
Union Carbide Chemicals & Plastics
7.875% due 04/01/23 ................................ 55 50
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Chemicals - Continued
Union Carbide Corp. - Debs.
6.79% due 06/01/25 .................................. $ 180 $ 175
------
4,625
Commercial Services & Supplies - 6.6%
Allied Waste North America, Inc. - Sr. Notes
8.5% due 12/01/08 ................................... 965 1,071
8.875% due 04/01/08 ................................. 355 396
Armkel LLC - Sr. Sub. Notes
9.5% due 08/15/09 ................................... 230 253
Horton, Inc. - Sr. Sub. Notes
9.375% due 03/15/11 ................................. 370 420
Iron Mountain, Inc. - Sr. Sub. Notes
8.625% due 04/01/13 ................................. 130 141
Iron Mountain, Inc. Delaware - Sr. Sub. Notes
8.25% due 07/01/11 .................................. 205 213
Iron Mountain, Inc. Pennsylvania - Sr. Sub.
Notes
7.75% due 01/15/15 .................................. 600 632
Kinetic Concepts, Inc. - Sr. Sub Notes 144A (a)
7.375% due 05/15/13 ................................. 60 63
Magnum Hunter Resources, Inc. - Sr. Notes
9.6% due 03/15/12 ................................... 75 85
Mail Welli Corp. - Sr. Notes
9.625% due 03/15/12 ................................. 145 161
R.H. Donnelly Financial Corp. - Sr. Notes
8.875% due 12/15/10 ................................. 90 101
Ryland Group, Inc. - Sr. Sub. Notes
9.125% due 06/15/11 ................................. 345 397
Service Corp. International - Notes
7.7% due 04/15/09 ................................... 200 213
Tyco International Group SA - Notes
6.125% due 01/15/09 ................................. 225 241
6.375% due 02/15/06 ................................. 110 117
6.75% due 02/15/11 .................................. 405 442
Tyco International Group SA - Sr. Notes
6.375% due 10/15/11 ................................. 740 790
United Rentals North America, Inc. - Sr. Sub.
Notes 144A (a)
7.75% due 11/15/13 .................................. 175 180
Westinghouse Air Brake Co. - Sr. Notes
144A (a)
6.875% due 07/31/13 ................................. 435 450
------
6,366
Communications Equipment - 1.5%
Avaya, Inc. - Sr. Sec. Notes
11.125% due 04/01/09 ................................ 550 638
L3 Communications Corp. - Sr. Sub. Notes
6.125% due 07/15/13 ................................. 270 271
Nortel Networks, Ltd. - Notes
6.125% due 02/15/06 ................................. 200 203
Radiologix, Inc. - Sr. Notes
10.5% due 12/15/08 .................................. $ 370 $ 370
------
1,482
Computers & Peripherals - 1.1%
Unisys Corp. - Sr. Notes
6.875% due 03/15/10 ................................. 1,015 1,091
Construction & Engineering - 2.0%
American Standard Cos., Inc.
7.375% due 02/01/08 ................................. 660 729
7.625% due 02/15/10 ................................. 305 345
Beazer Homes USA, Inc. - Sr. Notes
8.375% due 04/15/12 ................................. 140 154
8.625% due 05/15/11 ................................. 505 556
Standard Pacific Corp. - Sr. Notes
6.875% due 05/15/11 ................................. 110 113
------
1,897
Construction Materials - 0.6%
Toll Brothers, Inc.
8.25% due 02/01/11 .................................. 450 495
Toll Corp. - Sr. Sub. Notes
8.25% due 12/01/11 .................................. 65 72
------
567
Consumer Staples - 0.0%
Bombadier Recreational Products - Sr. Sub.
Notes 144A (a)
8.375% due 12/15/13 ................................. 25 26
Containers & Packaging - 3.0%
Anchor Glass Container Corp. - Sr. Notes Ser. B
11.0% due 02/15/13 .................................. 90 104
Ball Corp. - Sr. Notes
7.75% due 08/01/06 .................................. 360 389
Graphic Packaging International, Inc. - Sr. Notes
144A (a)
8.5% due 08/15/11 ................................... 75 83
Greif Bros. Corp. - Sr. Sub. Notes
8.875% due 08/01/12 ................................. 25 28
Owens Brockway Glass Container - Sr. Notes
144A (a)
8.75% due 11/15/12 .................................. 160 178
Owens Brockway Glass Container - Sr. Sec.
Notes
7.75% due 05/15/11 .................................. 415 445
Owens Illinois, Inc.
7.15% due 05/15/05 .................................. 480 494
Owens Illinois, Inc. - Debs.
7.5% due 05/15/10 ................................... 290 296
Stone Container Corp. - Sr. Notes
9.25% due 02/01/08 .................................. 200 220
9.75% due 02/01/11 .................................. 525 580
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Containers & Packaging - Continued
Tekni Plex, Inc. - Sr. Sec. Notes 144A (a)
8.75% due 11/15/13 ................................. $ 60 $ 62
------
2,879
Diversified Financials - 1.4%
Accident Escrow Corp. - Sr. Notes 144A (a)
10.0% due 08/01/11 ................................. 380 422
Bowater Canada Finance Corp. - Notes
7.95% due 11/15/11 ................................. 210 222
CBRE Escrow, Inc. - Sr. Notes 144A (a)
9.75% due 05/15/10 ................................. 320 355
Fairfax Financial Holdings, Ltd.
6.875% due 04/15/08 ................................ 15 15
Fairfax Financial Holdings, Ltd. - Notes
7.375% due 03/15/06 ................................ 150 151
MDP Acquisitions plc - Sr. Notes
9.625% due 10/01/12 ................................ 115 129
NMHG Holding Co. - Sr. Notes
10.0% due 05/15/09 ................................. 65 72
Von Hoffmann Corp. - Sr. Notes
10.25% due 03/15/09 ................................ 15 16
------
1,382
Diversified Telecommunication Services - 5.8%
Alaska Communications Systems - Sr. Notes
144A (a)
9.875% due 08/15/11 ................................ 400 420
Fairpoint Communications, Inc. - Sr. Notes
11.875% due 03/01/10 ............................... 180 211
GCI, Inc. - Sr. Notes
9.75% due 08/01/07 ................................. 390 401
Insight Midwest LP Capital, Inc. - Sr. Notes
10.5% due 11/01/10 ................................. 845 917
MasTec, Inc. - Sr. Sub. Notes
7.75% due 02/01/08 ................................. 410 416
Nextel Communications, Inc. - Sr. Notes
6.875% due 10/31/13 ................................ 115 121
9.375% due 11/15/09 ................................ 195 212
Nextel Communications, Inc. - Sr. Sec. Notes
9.5% due 02/01/11 .................................. 1,065 1,206
Qwest Corp. - Notes 144A (a)
8.875% due 03/15/12 ................................ 940 1,076
Triton PCS, Inc. - Sr. Notes
8.5% due 06/01/13 .................................. 400 430
Triton PCS, Inc. - Sr. Sub. Notes
8.75% due 11/15/11 ................................. 55 54
9.375% due 02/01/11 ................................ 125 127
------
5,591
Electric Utilities - 2.8%
AES Corp. - Sr. Notes
8.875% due 02/15/11 ................................ 435 474
AES Corp. Sr. Sec. Notes 144A (a)
9.0% due 05/15/15 .................................. 130 147
Avista Corp. - Sr. Notes
9.75% due 06/01/08 ................................. $1,015 $1,183
CMS Energy Corp. - Notes
8.9% due 07/15/08 .................................. 210 228
CMS Energy Corp. - Sr. Notes
7.5% due 01/15/09 .................................. 65 68
8.5% due 04/15/11 .................................. 535 578
CMS Energy Corp. - Sub. Notes
7.625% due 11/15/04 ................................ 40 41
------
2,719
Electric/Gas - 1.3%
Nevada Power Co. - Notes Ser. E
10.875% due 10/15/09 ............................... 55 63
Nevada Power Co. - Notes Ser. G 144A (a)
9.0% due 08/15/13 .................................. 340 376
TNP Enterprises, Inc. - Sr. Sub. Notes
10.25% due 04/01/10 ................................ 10 11
Western Resources, Inc.
7.125% due 08/01/09 ................................ 535 573
Western Resources, Inc. - Sr. Notes
9.75% due 05/01/07 ................................. 230 265
------
1,288
Electrical Equipment - 0.1%
Thomas & Betts Corp. - Notes
7.25% due 06/01/13 ................................. 65 67
Wesco Distribution, Inc. - Ser. B
9.125% due 06/01/08 ................................ 50 51
------
118
Electronic Equipment & Instruments - 2.1%
Fisher Scientific International, Inc. - Sr. Sub.
Notes
8.125% due 05/01/12 ................................ 578 620
Sanmina SCI Corp. - Sr. Sec. Notes
10.375% due 01/15/10 ............................... 560 655
Solectron Corp. - Sr. Notes
9.625% due 02/15/09 ................................ 605 675
SPX Corp. - Sr. Notes
7.5% due 01/01/13 .................................. 85 92
------
2,042
Energy Equipment & Services - 0.9%
ANR Pipeline Co. - Sr. Notes
8.875% due 03/15/10 ................................ 400 450
Dynegy, Inc. - Sr. Sec. Notes 144A (a)
10.125% due 07/15/13 ............................... 270 311
Massey Energy Corp. - Notes
6.95% due 03/01/07 ................................. 120 122
------
883
Finance - 1.3%
Arch Western Finance LLC - Sr. Notes 144A (a)
6.75% due 07/01/13 ................................. 230 236
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Finance - Continued
Couche Tard U.S. - Sr. Sub. Notes 144A (a)
7.5% due 12/15/13 .................................. $ 50 $ 53
Crown European Holdings SA - Sr. Sec. Notes
9.5% due 03/01/11 .................................. 195 220
Hampshire Donnelly Finance Corp. - Sr. Sub.
Notes 144A (a)
10.875% due 12/15/12 ............................... 125 148
Moore North America Finance, Inc. - Sr. Notes
144A (a)
7.875% due 01/15/11 ................................ 340 384
RH Donnelley Finance - Sr. Notes 144A (a)
8.875% due 12/15/10 ................................ 60 68
Ucar Finance, Inc. - Sr. Notes
10.25% due 02/15/12 ................................ 170 191
------
1,300
Food & Drug Retailing - 1.6%
Pathmark Stores, Inc. - Sr. Sub. Notes
8.75% due 02/01/12 ................................. 60 62
Rite Aid Corp. - Sr. Sec. Notes
8.125% due 05/01/10 ................................ 180 194
Rite Aid Corp. Sr. Notes
9.5% due 02/15/11 .................................. 440 496
Winn Dixie Stores, Inc. - Sr. Notes
8.875% due 04/01/08 ................................ 775 785
------
1,537
Food Products - 0.8%
Dole Food, Inc. - Sr. Notes
8.875% due 03/15/11 ................................ 600 656
United Agricultural Products, Inc. - Sr. Notes
144A (a)
8.25% due 12/15/11 ................................. 85 87
------
743
Gas Utilities - 1.6%
Semco Energy, Inc. - Sr. Notes
7.125% due 05/15/08 ................................ 165 172
7.75% due 05/15/13 ................................. 40 42
Semco Energy, Inc. - Sr. Notes 144A (a)
7.75% due 05/15/13 ................................. 20 21
Southern Natural Gas Co. - Sr. Notes
8.875% due 03/15/10 ................................ 370 415
Williams Cos, Inc. - Notes
7.125% due 09/01/11 ................................ 285 303
8.125% due 03/15/12 ................................ 115 129
Williams Cos, Inc. - Sr. Notes
8.625% due 06/01/10 ................................ 430 487
------
1,569
Health Care Equipment & Supplies - 2.5%
Advanced Medium Optics, Inc. - Sr. Sub. Notes
9.25% due 07/15/10 ................................. 28 31
Alaris Medical Systems, Inc. - Sr. Notes
7.25% due 07/01/11 ................................. $ 260 $ 268
AmeriSource Bergen Corp. - Sr. Notes
7.25% due 11/15/12 ................................. 430 462
8.125% due 09/01/08 ................................ 140 158
Apogent Technologies, Inc. - Sr. Sub. Notes
6.5% due 05/15/13 .................................. 610 635
Bio Rad Laboratories, Inc. - Sr. Sub. Notes
7.5% due 08/15/13 .................................. 80 88
Neighborcare, Inc. - Sr. Sub. Notes 144A (a)
6.875% due 11/15/13 ................................ 230 233
Owens & Minor
8.5% due 07/15/11 .................................. 445 488
Sybron Dental Specialties, Inc. - Sr. Sub. Notes
8.125% due 06/15/12 ................................ 75 82
------
2,445
Health Care Providers & Services - 4.4%
Beverly Enterprises, Inc. - Sr. Notes
9.625% due 04/15/09 ................................ 715 790
Coventry Health Care, Inc. - Sr. Notes
8.125% due 02/15/12 ................................ 395 439
Genesis Healthcare Corp. - Sr. Sub. Notes
144A (a)
8.0% due 10/15/13 .................................. 110 114
HCA, Inc. - Notes
6.3% due 10/01/12 .................................. 1,290 1,330
NCD Healthcorp - Sr. Sub Notes
10.5% due 12/01/12 ................................. 150 170
Omnicare, Inc. - Sr. Sub Notes
6.125% due 06/01/13 ................................ 20 20
Omnicare, Inc. - Sr. Sub. Notes Ser. B
8.125% due 03/15/11 ................................ 740 810
Tenet Healthcare Corp. - Sr. Notes
6.375% due 12/01/11 ................................ 85 82
7.375% due 02/01/13 ................................ 545 548
------
4,303
Hotels Restaurants & Leisure - 7.8%
Argosy Gaming Co. - Sr. Sub. Notes
9.0% due 09/01/11 .................................. 40 44
AZTAR Corp. - Sr. Sub. Notes
9.0% due 08/15/11 .................................. 585 644
Boyd Gaming Corp. - Sr. Sub. Notes
7.75% due 12/15/12 ................................. 165 176
Corus Entertainment, Inc. - Sr. Sub. Notes
8.75% due 03/01/12 ................................. 510 558
Harrahs Operating Co., Inc. - Notes
7.875% due 12/15/05 ................................ 730 796
ITT Corp. - Debs.
7.375% due 11/15/15 ................................ 30 32
Mandalay Resort Group - Sr. Sub. Notes
9.375% due 02/15/10 ................................ 380 442
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Hotels Restaurants & Leisure - Continued
Mandalay Resort Group - Sr. Sub. Notes Ser. B
10.25% due 08/01/07 ................................ $ 305 $ 352
MGM Mirage, Inc.
8.5% due 09/15/10 .................................. 130 149
MGM Mirage, Inc. - Sr. Sub. Notes
8.375% due 02/01/11 ................................ 810 919
Park Place Entertainment Corp. - Notes
8.5% due 11/15/06 .................................. 25 28
Park Place Entertainment Corp. - Sr. Notes
7.0% due 04/15/13 .................................. 320 342
Park Place Entertainment Corp. - Sr. Sub. Notes
8.875% due 09/15/08 ................................ 215 243
Six Flags, Inc. - Sr. Notes
8.875% due 02/01/10 ................................ 235 241
Six Flags, Inc. - Sr. Notes 144A (a)
9.625% due 06/01/14 ................................ 60 63
Starwood Hotels & Resorts Worldwide, Inc. -
Sr. Notes
7.875% due 05/01/12 ................................ 620 694
Station Casinos, Inc. - Sr. Sub. Notes
9.875% due 07/01/10 ................................ 445 490
Tricon Global Restaurants, Inc. - Sr. Notes
8.875% due 04/15/11 ................................ 795 956
Yum Brands, Inc. - Sr. Notes
7.7% due 07/01/12 .................................. 340 391
------
7,560
Household Durables - 0.5%
KB Home - Sr. Sub. Notes
8.625% due 12/15/08 ................................ 200 221
Meritage Corp. - Sr. Notes
9.75% due 06/01/11 ................................. 25 28
Resolution Performance Products - Sr. Notes
9.5% due 04/15/10 .................................. 250 256
------
505
Industrial Conglomerates - 0.0%
Pioneer Americas LLC
4.79% due 12/31/06 ................................. 10 9
Leisure Equipment & Products - 0.3%
Hasbro, Inc. - Notes
6.15% due 07/15/08 ................................. 185 196
Remington Arms, Inc. - Sr. Notes
10.5% due 02/01/11 ................................. 25 27
Speedway Motorsports, Inc. - Sr. Sub. Notes
6.75% due 06/01/13 ................................. 100 103
------
326
Machinery - 1.0%
Case New Holland, Inc. - Sr. Notes 144A (a)
9.25% due 08/01/11 ................................. 410 459
9.25% due 08/01/11 ................................. 265 297
Cummins, Inc. - Sr. Notes 144A (a)
9.5% due 12/01/10 .................................. 45 52
Kennametal, Inc. - Sr. Notes
7.2% due 06/15/12 .................................. $ 75 $ 80
Manitowoc Co., Inc. - Sr. notes
7.125% due 11/01/13 ................................ 55 57
------
945
Media - 10.4%
American Media Operations, Inc. - Sr. Sub.
Notes
8.875% due 01/15/11 ................................ 50 55
British Sky Broadcasting - Notes
8.2% due 07/15/09 .................................. 350 417
Canwest Media, Inc. - Sr. Sub. Notes
10.625% due 05/15/11 ............................... 245 279
CSC Holdings, Inc. - Sr. Notes
7.625% due 04/01/11 ................................ 1,410 1,480
Dex Media East LLC - Sr. Notes
9.875% due 11/15/09 ................................ 170 194
Dex Media East LLC - Sr. Sub Notes
12.125% due 11/15/12 ............................... 225 278
Dex Media West LLC - Sr. Notes 144A (a)
8.5% due 08/15/10 .................................. 200 223
Dex Media West LLC - Sr. Sub Notes 144A (a)
9.875% due 08/15/13 ................................ 185 215
Direct TV Holdings LLC - Sr. Notes
8.375% due 03/15/13 ................................ 370 429
Echostar DBS Corp. - Notes 144A (a)
6.375% due 10/01/11 ................................ 525 539
EchoStar DBS Corp. - Sr. Notes
9.125% due 01/15/09 ................................ 179 200
9.375% due 02/01/09 ................................ 400 421
General Cable Corp. - Sr. Notes 144A (a)
9.5% due 11/15/10 .................................. 40 43
Houghton Mifflin Co. - Sr. Notes
8.25% due 02/01/11 ................................. 370 396
Lamar Media Corp. - Sr. Sub. Notes
7.25% due 01/01/13 ................................. 110 118
LBI Media, Inc. - Sr. Sub. Notes
10.125% due 07/15/12 ............................... 5 6
Lin Television Corp. - Sr. Sub. Notes 144A (a)
6.5% due 05/15/13 .................................. 315 315
Lodgenet Entertainment Corp. - Sr. Sub. Notes
9.5% due 06/15/13 .................................. 85 93
Media Newsgroup, Inc. - Sr. Sub. Notes
144A (a)
6.875% due 10/01/13 ................................ 220 223
Mediacom Broadband LLC - Sr. Notes
11.0% due 07/15/13 ................................. 465 521
Mediacom LLC - Sr. Notes
9.5% due 01/15/13 .................................. 425 454
Panamsat Corp. - Sr. Notes
8.5% due 02/01/12 .................................. 210 232
Quebecor Media, Inc. - Sr. Notes
11.125% due 07/15/11 ............................... 795 920
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Media - Continued
Rogers Cable, Inc. - Sr. Sec. Notes
7.875% due 05/01/12 ................................ $ 35 $ 39
Rogers Cable, Inc. Sr. Notes
6.25% due 06/15/13 ................................. 265 267
Shaw Communications, Inc.
7.25% due 04/06/11 ................................. 15 16
Shaw Communications, Inc. - Sr. Notes
8.25% due 04/11/10 ................................. 260 292
Sinclair Broadcast Group, Inc. - Sr. Sub. Notes
8.0% due 03/15/12 .................................. 105 113
8.75% due 12/15/11 ................................. 135 150
Videotron Ltee - Sr. Notes 144A (a)
6.875% due 01/15/14 ................................ 250 258
Vivendi Universal SA - Sr. Notes 144A (a)
9.25% due 04/15/10 ................................. 770 909
-------
10,095
Metals & Mining - 3.3%
AK Steel Corp.
7.875% due 02/15/09 ................................ 605 526
Century Aluminum Co.
11.75% due 04/15/08 ................................ 320 357
Compass Minerals Group, Inc. - Sr. Sub. Notes
10.0% due 08/15/11 ................................. 275 308
Consol Energy, Inc. - Notes
7.875% due 03/01/12 ................................ 200 211
Massey Energy Co. - Sr. Notes 144A (a)
6.625% due 11/15/10 ................................ 110 113
Newfield Exploration Co. - Sr. Sub. Notes
8.375% due 08/15/12 ................................ 215 241
Peabody Energy Corp. - Sr. Notes
6.875% due 03/15/13 ................................ 300 317
Steel Dynamics, Inc. - Sr. Notes
9.5% due 03/15/09 .................................. 45 50
9.5% due 03/15/09 .................................. 155 173
Texas Industries, Inc. - Sr. Notes
10.0% due 06/01/11 ................................. 195 220
Timken Co. - Notes
5.75% due 02/15/10 ................................. 205 204
United States Steel Corp. - Sr. Notes
10.75% due 08/01/08 ................................ 375 443
-------
3,163
Multi-Utilities - 0.5%
Centerpoint Energy Resources Corp. - Sr. Notes
144A (a)
7.875% due 04/01/13 ................................ 390 443
Multiline Retail - 0.7%
Dillard's, Inc. - Notes
7.13% due 08/01/18 ................................. 35 35
J.C. Penney Co., Inc.
7.6% due 04/01/07 .................................. 50 55
J.C. Penney Co., Inc. - Notes
7.375% due 08/15/08 ................................ 320 352
8.0% due 03/01/10 .................................. $225 $ 257
-------
699
Office Electronics - 1.4%
Xerox Corp. - Sr. Notes
7.125% due 06/15/10 ................................ 545 582
9.75% due 01/15/09 ................................. 645 756
-------
1,338
Oil & Gas - 4.4%
Chesapeake Energy Corp.
7.5% due 09/15/13 .................................. 180 195
Chesapeake Energy Corp. - Sr. Notes
8.125% due 04/01/11 ................................ 330 367
El Paso Natural Gas Co. - Sr. Notes
7.625% due 08/01/10 ................................ 10 10
EL Paso Production Holding Co. - Sr. Notes
144A (a)
7.75% due 06/01/13 ................................. 525 522
Forest Oil Corp. - Sr. Notes
8.0% due 06/15/08 .................................. 102 111
8.0% due 12/15/11 .................................. 95 103
Frontier Oil Corp. - Sr. Notes
11.75% due 11/15/09 ................................ 40 45
Giant Industries, Inc. - Sr. Sub. Notes
11.0% due 05/15/12 ................................. 185 199
Key Energy Services, Inc. - Sr. Notes
6.375% due 05/01/13 ................................ 50 51
NRG Energy, Inc. - Sr. Sec. Notes 144A (a)
8.0% due 12/15/13 .................................. 310 326
Parker Drilling Co. - Notes 144A (a)
9.625% due 10/01/13 ................................ 210 218
Pioneer Natural Resources Co.
9.625% due 04/01/10 ................................ 480 597
Pioneer Natural Resources Co. - Sr. Notes
7.5% due 04/15/12 .................................. 25 29
Premcor Refining Group, Inc. - Sr. Notes
6.75% due 02/01/11 ................................. 290 293
9.5% due 02/01/13 .................................. 240 273
Pride International, Inc. - Sr. Notes
10.0% due 06/01/09 ................................. 365 392
Tesoro Petroleum Corp. - Sr. Sec. Notes
8.0% due 04/15/08 .................................. 235 252
Tesoro Petroleum Corp. - Sr. Sub. Notes
9.625% due 11/01/08 ................................ 165 176
Tom Brown, Inc. - Sub. Notes
7.25% due 09/15/13 ................................. 40 42
Westport Resources Corp. - Sr. Notes 144A (a)
8.25% due 11/01/11 ................................. 10 11
Westport Resources Corp. - Sr. Sub. Notes
8.25% due 11/01/11 ................................. 70 77
XTO Energy, Inc. - Sr. Notes
6.25% due 04/15/13 ................................. 20 21
-------
4,310
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Paper & Forest Products - 4.6%
Abitibi-Consolidated, Inc. - Notes
8.55% due 08/01/10 ................................. $ 515 $ 572
Blue Ridge Paper Products - Sr. Sec. Notes
144A (a)
9.5% due 12/15/08 .................................. 225 227
Boise Cascade Corp. - Sr. Notes
6.5% due 11/01/10 .................................. 220 230
Caraustar Industries, Inc. - Sr. Sub. Notes
9.875% due 04/01/11 ................................ 605 653
Georgia Pacific Corp. - Sr. Notes
8.875% due 02/01/10 ................................ 590 676
9.375% due 02/01/13 ................................ 440 506
Jefferson Smurfit Corp. - Sr. Notes
8.25% due 10/01/12 ................................. 115 124
Longview Fibre Co. - Sr. Sub. Notes
10.0% due 01/15/09 ................................. 245 270
Pacifica Papers, Inc. - Sr. Notes
10.0% due 03/15/09 ................................. 335 355
Scotts Co. - Sr. Sub. Notes 144A (a)
6.625% due 11/15/13 ................................ 40 41
Tembec Industries, Inc. - Sr. Notes
7.75% due 03/15/12 ................................. 80 79
8.5% due 02/01/11 .................................. 660 683
-------
4,416
Personal Products - 0.2%
Johnson Diversey, Inc. - Sr. Sub. Notes Ser. B
9.625% due 05/15/12 ................................ 215 238
Pharmaceuticals - 0.3%
Biovail Corp. - Sr. Sub. Notes
7.875% due 04/01/10 ................................ 15 15
Valeant Pharmaceuticals International -
Sr. Notes 144A (a)
7.0% due 12/15/11 .................................. 230 236
-------
251
Real Estate Investment Trust - 2.4%
FelCor Lodging, Ltd. - Sr. Notes
8.5% due 06/01/11 .................................. 400 436
Host Marriott LP - Sr. Notes Ser. I
9.5% due 01/15/07 .................................. 1,170 1,307
Host Marriott LP - Sr. Notes Ser. J 144A (a)
7.125% due 11/01/13 ................................ 95 98
iStar Financial, Inc. - Sr. Notes
6.0% due 12/15/10 .................................. 95 97
8.75% due 08/15/08 ................................. 120 138
Thornburg Mortgage, Inc. - Sr. Notes
8.0% due 05/15/13 .................................. 145 152
Thornburg Mortgage, Inc. - Sr. Notes 144A (a)
8.0% due 05/15/13 .................................. 55 58
-------
2,286
Road & Rail - 0.4%
Kansas City Southern Railway Co.
9.5% due 10/01/08 .................................. $ 340 $ 381
Kansas City Southern Railway Co. - Sr. Notes
7.5% due 06/15/09 .................................. 25 26
-------
407
Semiconductor Equipment & Products - 0.9%
Amkor Technology, Inc.
9.25% due 02/15/08 ................................. 410 463
Amkor Technology, Inc. - Sr. Notes
7.75% due 05/15/13 ................................. 345 369
-------
832
Specialty Retail - 1.0%
Gap, Inc. - Notes
10.55% due 12/15/08 ................................ 760 939
Suburban Propane Partners - Sr. Notes 144A (a)
6.875% due 12/15/13 ................................ 30 30
-------
969
Textiles & Apparel - 0.1%
Oxford Industries, Inc. - Sr. Notes 144A (a)
8.875% due 06/01/11 ................................ 123 133
Water Utilities - 0.4%
National Waterworks, Inc. - Sr. Sub Notes -
Ser. B
10.5% due 12/01/12 ................................. 385 430
Wireless Telecommunications Services - 1.5%
Rogers Wireless, Inc. - Sr. Sec. Notes
9.625% due 05/01/11 ................................ 1,250 1,484
-------
TOTAL PUBLICLY-TRADED BONDS- .................... 95.8% 92,938
SHORT-TERM INVESTMENTS - 2.4%
Investment in joint trading account (Note B)
1.061% due 01/02/04 ................................... 2,294 2,294
------ ------
TOTAL INVESTMENTS- .............................. 98.2% 95,232
Cash and Receivables, less payables- ............... 1.8% 1,784
------ -------
NET ASSETS- .................................. 100.0% $97,016
====== =======
See notes to financial statements.
(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, 2003, securities aggregated
$12,240 or 12.6% of net assets of the Portfolio.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock High Yield Bond (the "Fund") is a diversified series of John
Hancock Variable Series Trust I (the "Trust"), an open-end investment management
company registered under the Investment Company Act of 1940. The Trust is
organized as a Massachusetts business trust and consists of thirty different
funds as of December 31, 2003. The results of this Fund are included in this
report. The results of the other Funds in the Trust are presented under separate
cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Mortgage Int. Networking, 0.98%, due 01/02/04 $ 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Discount and premium on debt securities: The Fund accretes discount and
amortizes 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 the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended December
31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$738 1.53% $1
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $275, $513, $2,223, $8,179 and $5,903 which expire in 2007, 2008, 2009,
2010 and 2011, respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Excess Over
First $100 Million $100 Million
- ------------------ ------------
0.80% 0.70%
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Han-cock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the period ended December 31, 2003, the reimbursements paid from John
Hancock and JHVLICO were $38 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Wellington
Management Company, LLP, with respect to the Fund. Wellington Management
Company, LLP is an affiliate of John Hancock, and under its supervision, is
responsible for the day-to-day investment management of the Fund.
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,
JHV-LAS, 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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$66,673 $36,085
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$89,864 $5,481 $(113) $5,368
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss and premium amortization and market
discount accretion on debt securities. Additionally, as a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $17,093 $5,368
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $5,469 $-- $184
2002 5,697 -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Total Return Bond Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statements of operations, of
changes in net assets and the financial highlights for the period from May 1,
2003 (commencement of operations) to December 31, 2003. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Total Return Bond Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations the changes in its net assets and the
financial highlights for the period from May 1, 2003 (commencement of
operations) to December 31, 2003, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 2, 1988
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
INDEPENDENCE INVESTMENT LLC D. Nolan
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 41.99%, underperforming its customized
benchmark.
.. On November 1st, the Fund's benchmark was changed from a primarily GDP
weighted benchmark to a market capitalization weighted benchmark (the MSCI
All Country World Free ex-US Index). This index provides broad exposure to
both developed and emerging market equities.
.. The Fund's investment objective is to track the long-term performance of
broad-based equity indices of foreign companies in developed and emerging
markets as measured by the MSCI All Country World Free ex-US Index.
.. The manager seeks to track the performance of its benchmark by investing in
a representative sample of issues selected through proprietary quantitative
techniques. Issues are selected to best match the risk characteristics of
the index, including country and sector exposures.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 12/31/93
(10-Year Period)
International
Equity Index International Equity
Fund Index Benchmark(1)
------------- ----------------------
12/31/1993 10,000.00 10,000.00
1/31/1994 13,320.64 14,421.38
2/28/1994 13,165.42 14,383.89
3/31/1994 12,478.86 13,766.82
4/29/1994 12,713.92 14,354.66
5/31/1994 12,862.54 14,275.71
6/30/1994 12,530.95 14,481.28
7/29/1994 12,819.11 14,623.20
8/31/1994 13,412.54 14,972.69
9/30/1994 13,133.71 14,504.05
10/31/1994 13,396.96 14,989.93
11/30/1994 12,520.14 14,273.41
12/30/1994 12,401.68 14,366.19
1/31/1995 11,708.88 13,817.40
2/28/1995 11,908.32 13,781.48
3/31/1995 12,340.79 14,645.58
4/28/1995 12,712.55 15,200.64
5/31/1995 12,972.79 15,022.80
6/30/1995 12,847.88 14,762.90
7/31/1995 13,561.39 15,685.58
8/31/1995 13,175.93 15,091.10
9/29/1995 13,362.66 15,389.90
10/31/1995 13,130.99 14,980.53
11/30/1995 13,191.91 15,401.48
12/29/1995 13,395.71 16,025.24
1/31/1996 13,606.81 16,094.15
2/29/1996 13,761.02 16,152.09
3/29/1996 13,892.48 16,499.36
4/30/1996 14,407.05 16,982.79
5/31/1996 14,260.73 16,673.71
6/28/1996 14,292.36 16,772.08
7/31/1996 13,686.10 16,285.69
8/30/1996 13,793.59 16,324.78
9/30/1996 14,051.46 16,762.28
10/31/1996 13,964.56 16,594.66
11/29/1996 14,589.37 17,258.44
12/31/1996 14,626.33 17,040.99
1/31/1997 14,373.63 16,447.96
2/28/1997 14,427.57 16,721.00
3/31/1997 14,159.30 16,786.21
4/30/1997 14,260.03 16,878.53
5/30/1997 15,461.21 17,980.70
6/30/1997 16,261.79 18,976.83
7/31/1997 16,773.41 19,288.05
8/29/1997 14,945.68 17,851.09
9/30/1997 16,026.08 18,854.32
10/31/1997 13,854.46 17,410.08
11/28/1997 13,849.83 17,235.98
12/31/1997 13,891.23 17,391.11
1/31/1998 13,901.32 18,191.10
2/27/1998 14,968.54 19,362.60
3/31/1998 15,575.41 19,962.84
4/30/1998 15,991.94 20,124.54
5/29/1998 16,086.96 20,414.34
6/30/1998 16,281.99 20,610.31
7/31/1998 16,414.69 20,884.43
8/31/1998 14,326.78 18,138.13
9/30/1998 13,881.02 17,637.52
10/30/1998 15,383.40 19,605.86
11/30/1998 16,129.04 20,627.33
12/31/1998 16,783.26 21,462.74
1/29/1999 16,820.14 21,490.64
2/26/1999 16,250.77 20,820.13
3/31/1999 17,103.05 21,921.51
4/30/1999 17,757.57 22,807.14
5/28/1999 16,897.58 21,616.61
6/30/1999 17,768.81 22,708.25
7/30/1999 18,185.56 23,273.68
8/31/1999 18,351.79 23,436.60
9/30/1999 18,481.01 23,724.87
10/29/1999 19,100.24 24,514.91
11/30/1999 19,943.20 25,529.83
12/31/1999 21,964.24 28,090.47
1/31/2000 20,675.58 26,714.03
2/29/2000 21,380.17 27,641.01
3/31/2000 21,956.62 28,398.37
4/28/2000 20,545.20 26,566.68
5/31/2000 20,148.57 25,929.08
6/30/2000 20,856.49 27,041.44
7/31/2000 19,865.47 25,683.96
8/31/2000 20,057.16 25,956.21
9/29/2000 19,086.01 24,648.01
10/31/2000 18,456.28 23,839.56
11/30/2000 17,652.71 22,776.31
12/31/2000 18,138.35 23,336.61
1/31/2001 18,503.20 23,852.35
2/28/2001 17,218.76 22,230.39
3/30/2001 16,015.75 20,729.84
4/30/2001 17,113.36 22,068.99
5/31/2001 16,571.05 21,395.88
6/30/2001 16,002.68 20,636.33
7/31/2001 15,594.05 20,097.72
8/31/2001 15,226.40 19,599.30
9/28/2001 13,458.20 17,345.38
10/31/2001 13,786.89 17,815.44
11/30/2001 14,416.76 18,597.54
12/31/2001 14,456.93 18,664.49
1/31/2002 13,771.57 17,796.59
2/28/2002 13,950.25 17,983.45
3/29/2002 14,793.86 18,994.12
4/30/2002 14,910.47 19,233.45
5/31/2002 15,106.58 19,562.34
6/28/2002 14,514.59 18,773.98
7/31/2002 13,088.04 16,894.70
8/31/2002 13,076.08 16,909.91
9/28/2002 11,585.10 14,970.34
10/31/2002 12,027.79 15,627.54
11/30/2002 12,663.02 16,460.49
12/31/2002 12,261.97 15,937.04
1/31/2003 8,991.13 11,630.86
2/28/2003 8,818.76 11,404.06
3/29/2003 8,574.05 11,074.48
4/30/2003 9,388.30 12,148.71
5/31/2003 9,962.63 12,948.09
6/28/2003 10,329.08 13,427.17
7/31/2003 10,636.48 13,872.95
8/31/2003 11,017.53 14,357.12
9/28/2003 11,316.09 14,767.73
10/31/2003 12,005.35 15,758.65
11/30/2003 12,268.41 16,102.18
12/31/2003 13,181.59 17,330.78
Value on 12/31/03:
- ------------------
$13,182 International Equity Index Fund
$17,331 International Equity Index Benchmark(1)
MORNINGSTAR
CATEGORY+:
.. Foreign Large Blend
MORNINGSTAR
RISK+:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR
RATING+:
.. *****(VL/VUL)
.. *****(VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
BP Amoco plc 2.1%
Vodafone AirTouch plc 1.9%
HSBC Holdings plc 1.9%
GlaxoSmithKline plc 1.5%
Total Fina SA 1.5%
Royal Dutch Petroleum Co. 1.4%
Novartis AG 1.2%
Nestle SA 1.1%
Toyota Motor Corp. 1.0%
Nokia Oyj 1.0%
AVERAGE ANNUAL TOTAL RETURNS*
International International Equity
Equity Index Fund Index Benchmark(1)
----------------- --------------------
1 Year 41.99% 44.57%
3 Years -1.36 -0.43
5 Years 0.74 1.43
10 Years 2.80 5.65
DIVERSIFICATION BY REGION AND COUNTRY (3)
(as of December 31, 2003)
% of
Assets
------
Europe (excluding U.K.) 38.4%
United Kingdom (U.K.) 22.3%
Japan 18.5%
Pacific Basin (excluding Japan) 6.8%
Emerging Markets 6.4%
Canada 5.0%
United States 2.7%
DIVERSIFICATION BY REGION(4)
Developed Markets 91%
Emerging Markets 9%
(1) The International Equity Benchmark represents the MSCI EAFE from May 1988
to April 1998 and then MSCI EAFE GDP weighted from May 1998 to June 1999
and then 90% MSCI EAFE GDP/10% MSCI Emerging Markets Free from July 1999 to
October 2003 and now the MSCI All Country World Free excluding U.S. from
November 2003 to present.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions, and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 367 VL/VUL subaccounts and 570 VA subaccounts in the
Morningstar Foreign Large Blend category. This represents the Morningstar 3
year rating.
(3) Calculations based upon country in which security is traded (listed).
(4) Calculations based upon country in which security is domiciled.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $8,172 of
securities loaned (Note B)) .................................... $142,128
Net unrealized appreciation on investments ........................ 13,002
Short-term investments at value ................................... 12,050
--------
Total investments ........................................... 167,180
Foreign currency at value (cost $47) .............................. 47
Receivable for:
Investments sold ............................................... 1
Fund shares sold ............................................... 80
Interest ....................................................... 5
Dividends ...................................................... 237
Futures contracts variation margin ............................. 9
Forward foreign currency exchange contracts
sold ........................................................ 74
Other assets ................................................... 6
--------
Total assets ...................................................... 167,639
--------
LIABILITIES
Payables for:
Collateral for securities on loan .............................. 8,571
Forward foreign currency exchange contracts
purchased ................................................... 12
Other liabilities .............................................. 20
--------
Total liabilities ................................................. 8,603
--------
Net assets ........................................................ $159,036
========
Shares of beneficial interest outstanding ......................... 11,508
--------
Net asset value per share ......................................... $ 13.82
========
Composition of net assets:
Capital paid-in ................................................ $169,313
Accumulated net realized loss on investments,
futures and foreign currency transactions ................... (22,996)
Net investment loss ............................................ (421)
Net unrealized appreciation of:
Investments ................................................. 13,002
Futures ..................................................... 79
Translation of assets and liabilities in foreign
currencies ............................................... 59
--------
Net assets ........................................................ $159,036
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 57
Dividends ..................................................... 2,738
Securities lending ............................................ 146
-------
Total investment income ............................................. 2,941
-------
EXPENSES
Investment advisory fee ....................................... 214
Auditors fees ................................................. 16
Custodian fees ................................................ 253
Legal fees .................................................... 9
Printing & mailing fees ....................................... 10
Trustees' fees ................................................ 4
Other fees .................................................... 10
-------
Total expenses ...................................................... 516
Less expenses reimbursed ...................................... (189)
-------
Net expenses ........................................................ 327
-------
Net investment income ............................................... 2,614
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................... (7,135)
Financial futures contracts ................................... 282
Foreign currency transactions ................................. 516
Change in unrealized appreciation
(depreciation) on:
Investments ................................................... 50,873
Futures ....................................................... 171
Translation of assets and liabilities in
foreign currencies ......................................... (4)
-------
Net realized and unrealized gain .................................... 44,703
-------
Net increase in net assets resulting from
operations ....................................................... $47,317
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ............................................ $ 2,614 $ 2,058
Net realized loss ................................................ (6,337) (8,662)
Change in net unrealized appreciation (depreciation) ............. 51,040 (10,666)
-------- --------
Net increase (decrease) in net assets resulting from operations 47,317 (17,270)
Distributions to shareholders from:
Net investment income ............................................ (3,183) (2,052)
Realized gains ................................................... (981)
-------- --------
Decrease in net assets resulting from distributions ........... (4,164) (2,052)
From fund share transactions:
Proceeds from shares sold ........................................ 97,542 92,695
Distributions reinvested ......................................... 4,164 2,052
Payment for shares redeemed ...................................... (84,740) (98,528)
-------- --------
Increase (decrease) in net assets from fund share transactions 16,966 (3,781)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS ............................... 60,119 (23,103)
NET ASSETS
Beginning of Period .............................................. 98,917 122,020
-------- --------
End of Period .................................................... $159,036 $ 98,917
======== ========
Analysis of fund share transactions:
Sold ............................................................. 9,143 8,608
Reinvested ....................................................... 358 183
Redeemed ......................................................... (7,833) (9,057)
-------- --------
Net increase (decrease) in fund shares outstanding .................. 1,668 (266)
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
International Equity Index Fund
---------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------
2003 2002 2001 2000 1999
-------- ------- -------- -------- --------
Net Assets Value at Beginning of Period .................. $ 10.05 $ 12.07 $ 15.39 $ 19.64 $ 15.56
Income from Investment Operations:
Net Investment Income ................................. 0.24 0.21 0.22 0.23 0.21
Net Realized and Unrealized Gain (Loss) on
Investments(a) ..................................... 3.91 (2.02) (3.32) (3.64) 4.51
-------- ------- -------- -------- --------
Total From Investment Operations ...................... 4.15 (1.81) (3.10) (3.41) 4.72
Less Distributions:
Distribution from Net Investment Income ............... (0.29) (0.21) (0.17) (0.18) (0.21)
Distribution from Net Realized Gains on Investments ... (0.09) (0.59) (0.38)
Distribution from Excess of Net Investment Income/
Gains .............................................. (0.05)
Distribution from Capital Paid-in ..................... (0.05) (0.07)
-------- ------- -------- -------- --------
Total Distributions ................................... (0.38) (0.21) (0.22) (0.84) (0.64)
-------- ------- -------- -------- --------
Net Assets Value at End of Period ........................ $ 13.82 $ 10.05 $ 12.07 $ 15.39 $ 19.64
======== ======= ======== ======== ========
Total Investment Return(b) ............................... 41.99% (15.18)% (20.30)% (17.42)% 30.87%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ..... 0.27%(c) 0.28%(c) 0.27%(c) 0.28%(c) 0.31%(c)
Ratio of Net Investment Income to Average Net
Assets ............................................. 2.13% 1.85% 1.66% 1.40% 1.26%
Portfolio Turnover Rate ............................... 37.90% 17.55% 8.31% 14.86% 19.01%
Net Assets End of Period (000s Omitted) .................. $159,036 $98,917 $122,020 $195,012 $244,017
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been .42%, .46%, .40%, .37%, and
.38% for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Australia - 3.8%
AMP, Ltd. (JR) ......................................... 50,472 $ 190
BHP Steel * (BF) ....................................... 33,357 141
Broken Hill Proprietary Co., Ltd. * (BF) ............... 78,691 722
Coles Myer, Ltd. * (JF) ................................ 23,600 134
Commonwealth Bank of Australia (JP) .................... 27,670 614
CSL, Ltd. * (JO) ....................................... 2,600 35
CSR, Ltd. (BD) ......................................... 65,000 91
Foster's Brewing Group, Ltd. * (JG) .................... 39,000 132
General Property Trust (JS) ............................ 168,892 380
HHG plc * (JR) ......................................... 50,472 36
Lend Lease Corp. (JS) .................................. 10,600 80
National Australia Bank, Ltd. (JP) ..................... 31,556 712
News Corp., Ltd. (JA) .................................. 31,113 281
Onesteel. Ltd. (BF) .................................... 37,275 57
Orica, Ltd. (BC) ....................................... 8,400 88
Pacific Dunlop, Ltd. (BL) .............................. 11,800 57
QBE Insurance Group, Ltd. * (JR) ....................... 30,618 244
Rinker Group (JR) ...................................... 18,000 89
Rio Tinto, Ltd. (BF) ................................... 5,600 157
Santos, Ltd. * (BB) .................................... 39,200 203
Stockland (JS) ......................................... 56,157 221
Tabcorp Holdings, Ltd. (BZ) ............................ 16,400 139
Telstra Corp., Ltd. * (J1) ............................. 43,000 156
Westfield Trust (JS) ................................... 142,560 382
Westpac Banking Corp., Ltd. (JP) ....................... 31,200 376
WMC Resources, Ltd. * (BB) ............................. 19,300 82
WMC, Ltd. (BF) ......................................... 19,300 95
Woolworth's, Ltd. * (JF) ............................... 16,300 145
------
6,039
Austria - 0.3%
Bank Austria Credit * (JP) ............................. 2,049 105
Bohler-Uddeholm AG (BF) ................................ 1,600 108
BWT AG (BO) ............................................ 2,000 37
Erste Bank * (JP) ...................................... 658 81
Flughafen Wien AG (BT) ................................. 2,178 102
------
433
Belgium - 1.1%
Bekaert NV (BK) ........................................ 890 57
Colruyt NV (JF) ........................................ 970 93
Compagnie Maritime Belge SA (BR) ....................... 521 42
D' Ieteren SA (JB) ..................................... 390 80
Delhaize SA (JF) ....................................... 2,855 147
DEXIA * (JP) ........................................... 7,205 124
Electrabel SA (J3) ..................................... 254 80
Exmar SA * (BO) ........................................ 521 22
Fortis * (JR) .......................................... 13,470 271
GPE Bruxelles LAM (JQ) ................................. 2,388 134
Interbew (JG) .......................................... 5,301 141
KBC Bancassurance Holding NV (JP) ...................... 2,540 119
NV Union Miniere SA (BF) ............................... 1,461 102
Solvay SA (BC) ......................................... 1,215 105
UCB SA * (JO) .......................................... 3,900 $ 147
------
1,664
Brazil - 0.0%
Aracruz Celulose SA - ADR * (BG) ....................... 1,500 55
Canada - 4.9%
Abitibi Consolidated, Inc. * (BG) ...................... 9,699 78
Alcan Aluminum, Ltd. (BF) .............................. 5,575 261
ATI Technologies, Inc. (EP) ............................ 5,104 77
Bank Nova Scotia Halifax * (JP) ........................ 8,445 430
Bank of Montreal (JP) .................................. 8,151 337
Barrick Gold Corp. (BF) ................................ 9,441 214
BCE, Inc. (J1) ......................................... 5,282 118
Biovail Corp. * (JO) ................................... 2,999 65
Bombardier, Inc. - Cl. B * (BH) ........................ 27,549 117
Brascan Corp. - Cl. A (BL) ............................. 3,244 100
Brookfield Properties Corp. * (JS) ..................... 3,034 88
Canadian Imperial Bank of Commerce (JP) ................ 6,082 301
Canadian National Railway Co. (BS) ..................... 3,587 228
Canadian Natural Resources, Ltd. (BB) .................. 2,759 140
Canadian Pacific Railway (BS) .......................... 4,175 118
Canadian Tire, Ltd. - Cl. A * (JD) ..................... 2,230 68
Celestica, Inc. * (JY) ................................. 4,634 70
Cognos, Inc. * (JV) .................................... 1,996 61
CP Ships, Ltd. Common (BR) ............................. 3,706 77
Dofasco, Inc. (BF) ..................................... 2,944 82
Enbridge, Inc. (J4) .................................... 2,600 108
Encana Corp. (BB) ...................................... 8,422 332
Fairmont Hotels Resorts, Inc. (BZ) ..................... 2,964 81
Goldcorp, Inc. (BF) .................................... 4,202 67
Great West Lifeco, Inc. (JR) ........................... 2,299 81
Husky Energy, Inc. (BB) ................................ 4,971 90
Imperial Oil, Ltd. (BB) ................................ 2,992 133
Inco, Ltd. * (BF) ...................................... 3,788 151
Investors Group, Inc. * (JQ) ........................... 3,075 74
Loblaw Co., Ltd. (JF) .................................. 2,200 114
Magna International, Inc. (BU) ......................... 1,687 136
MDS, Inc. * (JM) ....................................... 4,378 68
Molson Cos., Ltd. (JG) ................................. 2,729 76
National Bank of Canada (JP) ........................... 3,571 119
Nexen, Inc. (BB) ....................................... 3,127 113
Noranda, Inc. (BF) ..................................... 6,028 96
Nortel Networks Corp. (JW) ............................. 70,287 299
Petro Canada (BB) ...................................... 4,246 210
Placer Dome, Inc. (BF) ................................. 7,841 141
Potash Corp. of Saskatchewan, Inc. * (JS) .............. 1,128 98
Power Corp. Canada (JQ) ................................ 3,014 113
Power Financial Corp. (JQ) ............................. 2,532 97
Royal Bank of Canada (JP) .............................. 10,639 509
Shaw Communications, Inc. (JA) ......................... 5,140 80
Shell Canada, Ltd. (BB) ................................ 2,271 108
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Canada - Continued
Sun Life Financial, Inc. * (JR) ........................ 10,490 $ 262
Suncor Energy , Inc. (BB) .............................. 8,607 216
Talisman Energy, Inc. (BB) ............................. 2,702 154
Teck Cominco, Ltd. - Cl. B (BF) ........................ 5,191 88
Thomson Corp. (BZ) ..................................... 4,493 164
Transalta Corp. (J5) ................................... 4,891 70
TransCanada Corp. (J4) ................................. 8,180 176
Weston George, Ltd. (JF) ............................... 1,156 93
------
7,747
Czech Republic - 0.1%
Ceske Energeticke Zavody AS (J3) ....................... 21,600 123
Komercni Banka AS * (JP) ............................... 900 85
------
208
Denmark - 0.6%
AS Dampskibsselskabet Svendborg -
Cl. B (BR) .......................................... 16 115
Danisco AS (JH) ........................................ 3,050 136
Danske Bank (JP) ....................................... 8,587 201
ISS AS (BO) ............................................ 1,650 81
Novo Nordisk AS (JO) ................................... 3,148 128
Novozymes AS - Ser. B (BC) ............................. 4,450 162
Tele Danmark AS (J1) ................................... 4,150 150
Vestas Wind Systems AS (BK) ............................ 2,500 41
------
1,014
Finland - 1.2%
Nokia Oyj * (JW) ....................................... 91,721 1,584
Sampo Insurance Co. plc (JR) ........................... 4,700 49
Stora Enso Oyj * (BG) .................................. 7,903 106
Tietoenator Oyj (JU) ................................... 1,338 37
UPM-Kymmene Corp. * (BG) ............................... 7,900 150
------
1,926
France - 8.0%
Accor SA (BZ) .......................................... 4,483 203
Air Liquide * (BC) ..................................... 1,412 249
Alcatel * (JW) ......................................... 23,577 303
Altran Technologies SA * (JU) .......................... 6,277 81
Arcelor (BF) ........................................... 7,731 135
AXA * (JR) ............................................. 27,474 587
BNP Paribas * (JP) ..................................... 13,566 853
Bouygues SA * (J2) ..................................... 3,607 126
Business Objects (JV) .................................. 1,259 44
Cap Gemini SA * (JU) ................................... 1,627 72
Carrefour SA * (JF) .................................... 11,330 621
Casino Guichard-Perrachon SA (JF) ...................... 1,045 102
CIE De St. Gobain * (BI) ............................... 6,517 319
Club Mediterranee SA (BZ) .............................. 838 31
Dassault Systemes SA * (JV) ............................ 1,995 91
EADS, Inc. (BH) ........................................ 5,569 132
Essilor International (JL) ............................. 2,365 122
France Telecom * (J1) .................................. 20,955 598
Groupe Danone * (JH) ................................... 1,748 $ 285
L'Oreal SA * (JK) ...................................... 6,925 567
Lafarge SA * (BD) ...................................... 2,579 229
Lagardere SCA (JA) ..................................... 3,125 180
LVMH * (Louis Vuitton Moet
Hennessy) (BY) ...................................... 4,273 311
Michelin (BU) .......................................... 3,462 159
Pernod Ricard (JG) ..................................... 1,045 116
Peugoet SA (BV) ........................................ 1,567 80
Pinault-Printemps-Redoute SA * (JD) .................... 1,465 141
Publicis Groupe SA * (JA) .............................. 2,645 86
Renault (BV) ........................................... 3,207 221
Rhone-Poulenc SA * (JO) ................................ 12,657 836
Sagem SA (JW) .......................................... 731 78
Sanofi-Synthelabo SA * (JO) ............................ 7,657 576
Schneider SA * (BK) .................................... 4,580 300
Societe BIC SA (BO) .................................... 1,234 57
Societe Generale - Cl. A * (JP) ........................ 5,636 497
Societe Television Francaise (JA) ...................... 4,028 140
STMicroelectronics * (J0) .............................. 10,712 290
SUEZ (J5) .............................................. 15,282 307
Thomson CFS (BH) ....................................... 1,747 59
Thomson Multimedia * (JY) .............................. 2,834 60
Total Fina SA - Cl. B * (BB) ........................... 12,377 2,299
Unibail SA (JS) ........................................ 1,797 168
Valeo SA (BU) .......................................... 1,489 60
-------
12,771
Germany - 5.7%
Adidas-Salomon AG (BY) ................................. 1,005 114
Allianz AG * (JR) ...................................... 4,706 593
Altana AG (JO) ......................................... 1,460 88
BASF AG (BC) ........................................... 12,086 679
Bayer AG * (JL) ........................................ 11,401 333
Bayerische Vereinsbank AG * (JP) ....................... 6,678 154
Commerzbank AG (JP) .................................... 8,364 164
Continental AG (A2) .................................... 2,656 101
DaimlerChrysler AG * (BV) .............................. 15,055 702
Deutsche Bank AG * (JP) ................................ 9,067 750
Deutsche Boerse AG (JQ) ................................ 2,010 110
Deutsche Post AG (BP) .................................. 7,129 147
Deutsche Telekom AG * (J1) ............................. 37,337 683
E.On AG (J3) ........................................... 9,846 642
Fresenius Medical Care AG (JM) ......................... 1,209 86
Hypo Real Estate (JS) .................................. 3,568 89
Infineon Technologies AG * (J0) ........................ 8,538 118
Linde AG (BM) .......................................... 1,694 91
Lufthansa AG (BQ) ...................................... 4,687 78
MAN AG (BM) ............................................ 2,695 82
Metro AG (JD) .......................................... 2,786 123
Muenchener Rueckversicherungs-
Gesellschaft AG * (JR) .............................. 2,643 320
Preussag AG (BZ) ....................................... 3,781 79
Puma AG (BY) ........................................... 463 82
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Germany - Continued
RWE AG (J5) ............................................ 6,823 $ 270
SAP AG * (JV) .......................................... 3,683 618
Schering AG * (JO) ..................................... 3,162 160
Siemens AG * (BL) ...................................... 16,196 1,296
Thyssen Krupp AG * (BF) ................................ 6,252 123
Volkswagen AG (BV) ..................................... 3,711 206
------
9,081
Greece - 0.4%
Bank of Piraeus (JP) ................................... 8,434 101
Commercial Bank of Greece (JP) ......................... 3,706 93
EFG Eurobank (JP) ...................................... 8,088 156
Hellenic Bottling Co. SA (JG) .......................... 5,160 107
Intracom SA (JW) ....................................... 5,252 36
Panafon Hellenic Telecom SA (J2) ....................... 15,869 124
Titan Cement Co. SA (BD) ............................... 2,217 91
------
708
Hong Kong - 1.5%
Beijing Datang Power Generation Co.,
Ltd. (J3) ........................................... 263,000 188
Cathay Pacific Airways (BQ) ............................ 20,000 38
China Southern Airlines Co. Ltd *
(BQ) ................................................ 207,000 89
China Telecom, Ltd. * (J2) ............................. 16,199 50
CLP Holdings, Ltd. (J3) ................................ 42,100 200
Guangshen Railway Co., Ltd. * (BS) ..................... 499,000 141
Hang Seng Bank, Ltd. * (JP) ............................ 25,000 328
Henderson Land Development Co.,
Ltd. * (JS) ......................................... 22,000 97
HSBC Holdings plc (JP) ................................. 4,900 77
Hutchison Whampoa, Ltd. * (BL) ......................... 41,500 305
Island Cable Communications * (JA) ..................... 6,200 1
Johnson Electric Holdings, Ltd. * (BK) ................. 33,000 42
Legend Holdings * (JX) ................................. 122,000 52
Li & Fung, Ltd. * (BO) ................................. 36,000 62
New World Development Co., Ltd. (JS) ................... 48,000 39
PCCW, Ltd. (FB) ........................................ 31,876 21
Sun Hung Kai Properties, Ltd. * (JS) ................... 46,000 379
Swire Pacific, Ltd. - Cl. A * (JQ) ..................... 23,500 145
Wharf Holdings, Ltd. (JQ) .............................. 62,000 172
------
2,426
Hungary - 0.2%
Gedeon Richter * (JO) .................................. 900 106
Mol Magyar Olaj-es Gazipari (BB) ....................... 3,600 109
OTP Bank (JP) .......................................... 10,900 140
------
355
Ireland - 0.5%
Allied Irish Banks plc * (JP) .......................... 8,467 135
Bank of Ireland (JP) ................................... 17,060 233
CRH plc * (BD) ......................................... 9,000 185
Elan Corp. (JO) ........................................ 5,813 $ 40
Irish Life & Permanent plc (JR) ........................ 4,553 73
Kerry Group plc (JH) ................................... 5,800 109
Ryanair Holdings (BQ) .................................. 4,845 40
------
815
Israel - 0.4%
Bank Hapoalim (JP) ..................................... 43,700 108
Bezeq Israeli Telecommunication
Corp., Ltd. (J1) .................................... 23,600 27
IDB Holding Corp., Ltd. (JQ) ........................... 5,100 100
Koor Industries, Ltd. * (J1) ........................... 83 3
Makteshim-Agan Industries, Ltd. (BC) ................... 26,900 101
Teva pharmaceutical Industries, Ltd. *
(JO) ................................................ 5,200 296
------
635
Italy - 3.2%
Alleanza Assicurazioni * (JR) .......................... 9,339 102
Assicurazioni Generali * (JR) .......................... 15,818 418
Autogrill SpA (BZ) ..................................... 5,723 82
Banca Fideuram (JP) .................................... 15,000 89
Banca Intesa SpA (JP) .................................. 76,966 301
Banca Nazionale del Lavoro (JP) ........................ 41,580 99
Banca Popolare di Milano (JP) .......................... 18,100 118
BCA Di Roma * (JP) ..................................... 31,073 91
BCE Pop Unite (BO) ..................................... 7,459 135
BCP Pop Veron (JP) ..................................... 8,371 142
Enel SpA * (J3) ........................................ 30,057 204
ENI * (BB) ............................................. 52,773 995
Fiat SpA * (BV) ........................................ 13,040 100
Finmeccanica SA (BH) ................................... 145,025 113
Luxottica Group (JL) ................................... 4,176 72
Mediaset SpA * (JA) .................................... 13,210 157
Mediobanca SpA (JP) .................................... 11,141 121
Monte Paschi Siena (JP) ................................ 29,322 93
Riunione Adriatica di Sicorta SpA (JR) ................. 5,255 89
San Paolo-IMI SpA * (JP) ............................... 7,083 92
Seat Pagine Gialle * (JA) .............................. 80,911 77
Telecom Italia (J1) .................................... 266,885 699
Telecom Italia Mobile SpA (J2) ......................... 69,129 375
UniCredito Italiano SpA * (JP) ......................... 64,732 349
------
5,113
Japan - 18.0%
Acom Co., Ltd. * (JQ) .................................. 2,300 104
Advantest (J0) ......................................... 2,000 159
Aiful Corp. * (JQ) ..................................... 1,000 73
Ajinomoto Co., Inc. (JH) ............................... 12,000 138
Alps Electric Co. (JY) ................................. 6,000 88
Asahi Breweries, Ltd. (JG) ............................. 13,000 119
Asahi Chemical Industry Co., Ltd. (BC) ................. 26,000 141
Asahi Glass Co., Ltd. (BI) ............................. 18,000 148
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Japan - Continued
Bank of Yokohama, Ltd. * (JP) ........................... 23,000 $107
Bridgestone Corp. (BU) .................................. 13,000 175
Canon, Inc. * (JZ) ...................................... 13,000 606
Casio Computer Co. (BW) ................................. 9,000 95
Central Japan Railway Co. (BS) .......................... 13 112
Chiba Bank, Ltd. (B0) ................................... 16,000 66
Chubu Electric Power (J3) ............................... 10,100 211
Chugai Pharmaceutical Co., Ltd. * (JO) .................. 7,600 109
Citizen Watch Co., Ltd. (JY) ............................ 10,000 92
Comsys Holdings * (JX) .................................. 5,000 32
Credit Saison Co., Ltd. (JQ) ............................ 3,600 81
CSK Corp. * (JU) ........................................ 2,100 76
Dai-Ichi Pharmaceutical Co., Ltd. *
(JO) ................................................. 7,000 126
Dai-Nippon Printng Co., Ltd. (BO) ....................... 13,000 183
Daido Life Insurance (JR) ............................... 25 74
Daikin Industries, Ltd. (BM) ............................ 5,000 116
Daito Trust Construction Co., Ltd. (BJ) ................. 2,300 68
Daiwa Bank Holdings (JP) ................................ 92,000 116
Daiwa House Industry Co., Ltd. (BW) ..................... 10,000 106
Daiwa Securities Group, Inc. (JQ) ....................... 2,900 20
Denso Corp. (BU) ........................................ 8,400 165
East Japan Railway Co. (BS) ............................. 60 283
Eisai Co. Ltd. * (JO) ................................... 4,900 132
Fanuc, Ltd. * (BM) ...................................... 2,400 144
Fast Retailing Co. (JE) ................................. 1,100 67
Fuji Photo Film * (BX) .................................. 9,000 291
Fujisawa Pharmeceutical Co., Ltd. *
(JO) ................................................. 7,000 149
Fujitsu, Ltd. * (JX) .................................... 33,000 195
Gunze, Ltd. (BY) ........................................ 14,000 63
Hirose Electric Co., Ltd. * (JY) ........................ 1,100 126
Hitachi, Ltd. (JY) ...................................... 54,000 326
Honda Motor Co. * (BV) .................................. 14,300 635
Hoya Corp. * (JY) ....................................... 200 18
Ito-Yokado Co., Ltd. * (JD) ............................. 7,000 220
Itochu Corp. (BN) ....................................... 34,000 112
Japan Tobacco, Inc. (JI) ................................ 21 154
JFE Holdings, Inc. * (BF) ............................... 8,800 240
Joyo Bank, Ltd. (JP) .................................... 29,000 95
JSR Corp. (BC) .......................................... 4,000 89
Jusco Co., Ltd. * (JD) .................................. 4,800 161
Kajima Corp. (BJ) ....................................... 25,000 81
Kansai Electric Power Co., Inc. (J3) .................... 800 14
KAO Corp. (JJ) .......................................... 10,000 203
Kawasaki Kisen (BR) ..................................... 23,000 114
Keihin Electric Express Railway Co.,
Ltd. (BS) ............................................ 17,000 100
Keio Teito Electric Railway (BS) ........................ 14,000 73
Keyence Corp. (JY) ...................................... 700 148
Kinki Nippon Railway (BS) ............................... 33,000 99
Kirin Brewery Co. * (JG) ................................ 14,000 119
Komatsu, Ltd. (BM) ...................................... 28,000 178
Konami Co., Ltd. (JV) ................................... 3,000 $ 87
Konica Corp. (BX) ....................................... 11,000 148
Kubota Corp. * (BM) ..................................... 25,000 103
Kuraray Co., Ltd. (BC) .................................. 10,000 84
Kyocera Corp. * (JY) .................................... 3,300 220
Kyushu Electric Power (J3) .............................. 6,300 108
Lawson (JF) ............................................. 1,600 55
Mabuchi Motor Co. * (JY) ................................ 900 69
Marubeni Corp. (BN) ..................................... 38,000 73
Marui Co., Ltd. * (JD) .................................. 10,000 126
Matsushita Electric Industrial Co. *
(BW) ................................................. 27,000 374
Matsushita Electric Works (BK) .......................... 10,000 90
Millea Holdings, Inc. * (JR) ............................ 23 301
Minebea Co., Ltd. (BM) .................................. 12,000 61
Mitsubishi Chemical Corp. (BC) .......................... 43,000 112
Mitsubishi Corp. (BN) ................................... 3,000 32
Mitsubishi Electric Corp. (BK) .......................... 43,000 179
Mitsubishi Estate Co., Ltd. * (JS) ...................... 19,000 180
Mitsubishi Heavy Industries, Ltd. *
(BM) ................................................. 58,000 161
Mitsubishi Tokyo Finance (JP) ........................... 73 570
Mitsui & Co., Ltd. (BN) ................................. 1,000 8
Mitsui Fudosan Co., Ltd. * (JS) ......................... 15,000 136
Mitsui Marine & Fire Insurance Co.,
Ltd. * (JR) .......................................... 23,000 189
Mitsui Mining & Smelting Co., Ltd. ......................
(BF) ................................................. 17,000 71
Mitsui OSK Lines, Ltd. (BR) ............................. 24,000 117
Mitsui Petrochemical Co. (BC) ........................... 18,000 105
Mitsui Trust Holdings (JP) .............................. 17,000 95
Mizuho Financial GB * (JQ) .............................. 110 334
Murata Manufacturing Co., Ltd. * (JY) ................... 4,600 249
NEC Corp. * (JX) ........................................ 29,000 214
Nidec Corp. * (JY) ...................................... 900 86
Nikko Securities Co., Ltd. * (JQ) ....................... 28,000 156
Nikon Corp. (J0) ........................................ 8,000 121
Nintendo Corp., Ltd. (BW) ............................... 2,100 196
Nippon Building Fund (JS) ............................... 11 71
Nippon Express Co., Ltd. (BS) ........................... 22,000 104
Nippon Mitsubishi Oil Co., Ltd. (BB) .................... 36,000 183
Nippon Steel Co. (BF) ................................... 19,000 41
Nippon Telegraph & Telephone Corp. *
(J1) ................................................. 95 458
Nippon Unipac Holding, Co. (BG) ......................... 27 139
Nippon Yusen Kabushiki Kaisha (BR) ...................... 27,000 122
Nissan Motor Acceptance Corp. (BV) ...................... 45,700 522
Nitto Denko Corp. * (BK) ................................ 3,200 170
Nomura Securities Co., Ltd. * (JQ) ...................... 33,000 562
NTN Corp. (BM) .......................................... 13,000 62
NTT Data Corp. (JU) ..................................... 33 125
NTT Mobile Communications Network, Inc. * (J2) .......... 317 719
Obayashi Corp. (BJ) ..................................... 16,000 72
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Japan - Continued
Oji Paper Co. (BG) ..................................... 17,000 $ 110
Oki Electric Industry Co. * (J1) ....................... 16,000 63
Olympus Optical Co. * (JL) ............................. 6,000 130
Omron Corp. (JY) ....................................... 5,000 102
Oriental Land Co., Ltd. (BZ) ........................... 2,000 123
Orix Corp. * (JQ) ...................................... 2,100 174
Osaka Gas Co. (J4) ..................................... 42,000 114
Pioneer Corp. * (BW) ................................... 5,000 138
Promise Co., Ltd. * (JQ) ............................... 2,600 113
Ricoh Co., Ltd. (JZ) ................................... 13,000 257
Rohm Co., Ltd. * (J0) .................................. 2,100 246
Sankyo Co., Ltd. * (JO) ................................ 7,700 145
Sanyo Electric Co. * (BW) .............................. 32,000 167
Secom Co. * (BO) ....................................... 4,500 168
Sekisui House, Ltd. * (BW) ............................. 13,000 134
Seven-Eleven Japan * (JF) .............................. 8,000 243
Sharp Corp. (BW) ....................................... 18,000 284
Shin-Etsu Chemical Co. * (BC) .......................... 6,600 270
Shionogi & Co., Ltd. * (JO) ............................ 8,000 149
Shiseido Co., Ltd. * (JK) .............................. 8,000 97
Shizuoka Bank, Ltd. (JP) ............................... 13,000 96
SMC Corp. * (BM) ....................................... 1,400 174
Softbank Corp. (JT) .................................... 3,900 119
Sony Corp. * (JY) ...................................... 16,400 568
Stanley Electric (BU) .................................. 3,800 74
Sumitomo Chemical Co. (BC) ............................. 26,000 107
Sumitomo Corp. * (BO) .................................. 20,000 149
Sumitomo Electric Industries (BK) ...................... 15,000 134
Sumitomo Metal Industries (BF) ......................... 102,000 101
Sumitomo Metal Mining Co. (BF) ......................... 17,000 126
Sumitomo Mitsui GR (JP) ................................ 71 378
Sumitomo Realty & Development (JS) ..................... 8,000 70
Sumitomo Trust & Banking (JQ) .......................... 23,000 135
Taisei Corp. (BJ) ...................................... 20,000 73
Taisho Pharmaceutical Co., Ltd. * (JO) ................. 5,000 89
Takashimaya Co. (JD) ................................... 9,000 64
Takeda Chemical Industries * (BC) ...................... 15,100 599
Takefuji Corp. * (JQ) .................................. 2,020 94
TDK Corp. * (JY) ....................................... 2,400 173
Teijin, Ltd. (BC) ...................................... 25,000 74
Terumo Corp. * (JL) .................................... 5,200 99
The Bank of Fukuoka, Ltd. (JP) ......................... 20,000 84
Tobu Railway Co., Ltd. (BS) ............................ 22,000 79
Tohoku Electric Power (J3) ............................. 6,700 111
Tokyo Electric Power (J3) .............................. 19,700 432
Tokyo Electron, Ltd. * (J0) ............................ 3,100 236
Tokyo Gas Co. (J4) ..................................... 47,000 168
Tokyo Style Co. (BY) ................................... 6,000 65
Tokyu Corp. * (BS) ..................................... 26,000 133
Tonengeneral Sekiyu (BB) ............................... 8,000 66
Toppan Printing Co. * (JA) ............................. 16,000 167
Toray Industries, Inc. * (BC) .......................... 33,000 138
Toshiba Corp. * (JX) ................................... 54,000 205
Tostem Corp. (BI) ...................................... 6,000 116
Toto, Ltd. (BI) ........................................ 8,000 $ 68
Toyobo Co. (BY) ........................................ 32,000 70
Toyota Motor Corp. * (BV) .............................. 48,300 1,632
UFJ Holdings, Inc. * (JP) .............................. 67 322
Ushio, Inc. (BK) ....................................... 3,000 50
Wacoal Corp. * (BY) .................................... 8,000 66
West Japan Railway (01) ................................ 25 98
Yamada Denki Co. (JE) .................................. 2,300 77
Yamaha Corp. (BX) ...................................... 3,800 75
Yamanouchi Pharmaceutical Co., Ltd. * (JO) ............. 6,200 193
Yamato Transport Co., Ltd. (BP) ........................ 12,000 141
Yasuda F & M Insurance (JR) ............................ 15,000 123
Yokogawa Electric (JY) ................................. 8,000 116
-------
28,649
Malaysia - 0.6%
Berjaya Sports Toto Berhad (BZ) ........................ 39,000 42
Commerce Asset Holdings * (JP) ......................... 44,000 48
Gamuda Berhad (BJ) ..................................... 22,000 37
IJM Corporation Berhad (BJ) ............................ 19,000 23
IJM Plantations (BO) ................................... 7,600 2
Malayan Banking Berhad * (JP) .......................... 66,000 168
Malaysia International Shipping Berhad (BR) ........... 27,000 82
Public Bank Berhad (JP) ................................ 91,250 74
Resorts World Berhad * (BZ) ............................ 21,000 56
Sime Darby Berhad * (BL) ............................... 68,000 93
Telekom Malaysia Berhad (J1) ........................... 40,000 88
Tenaga Nasional Berhad (J3) ............................ 28,000 70
YTL Corp., Berhad (J3) ................................. 76,460 87
-------
870
Mexico - 0.7%
America Movil SA de CV - Ser L * (J2) .................. 162,000 223
Cemex SA de CV * (BD) .................................. 24,000 125
Cifra SA de CV - Ser. V * (JD) ......................... 30,000 86
Fomento Economico Mexicano SA de CV * (JG) ............. 20,000 74
GF BBVA Bancomer - Ser. B (JP) ......................... 70,000 60
Grupo Carso SA de CV - Ser. A1 * (BL) .................. 16,000 56
Grupo Modelo SA de CV - Ser. C * (JG) .................. 34,000 81
Grupo Televisa SA * (JA) ............................... 54,000 108
Kimberly-Clark de Mexico SA de CV * (BG) ............... 22,000 56
Nuevo Grupo Mexico (BF) ................................ 18,000 46
Telephonos de Mexico SA - Ser. L (J1) .................. 63,031 104
U.S. Commercial Corp. - Ser. B1 (BL) ................... 16,000 7
-------
1,026
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Netherlands - 4.1%
ABN Amro Holding NV * (JP)............................... 27,165 $ 635
Aegon NV * (JR).......................................... 27,787 411
Akzo Nobel NV * (BC) .................................... 5,304 205
ASM Lithography Holding NV (J0) ......................... 5,100 101
Elsevier NV * (JA)....................................... 22,877 284
Heineken NV * (JG)....................................... 2,968 113
ING Groep NV (JQ) ....................................... 31,865 742
Koninklijke * (Royal) Philips Electronics NV (JY)........ 22,807 665
Koninklijke KPN NV * (JY)................................ 36,643 283
Royal Dutch Petroleum Co. * (BB)......................... 40,573 2,137
TNT Post Group NV (BP)................................... 5,610 131
Unilever NV * (JH)....................................... 10,965 716
Wolters Kluwer NV * (JA)................................. 4,000 62
------
6,485
New Zealand - 0.3%
Carter Holt Harvey, Ltd. (BG)............................ 37,800 47
Contact Energy Limited (J3).............................. 40,900 144
Fisher & Paykel AP (BW).................................. 28,996 73
Fisher & Paykel Industries, Inc. (JL).................... 8,443 70
Fletcher Building (BD)................................... 31,200 87
The Warehouse Group, Ltd. (JD)........................... 29,000 97
------
518
Norway - 0.5%
Aker Kvaerner - Notes (BJ)............................... 380 7
Den Norske Bank (JP)..................................... 18,760 125
Elkem ASA (BF)........................................... 700 21
Merkantildata ASA (JU)................................... 9,800 8
Norsk Hydro ASA (BL)..................................... 84 5
Norske Skogindustrier ASA - Cl. A * (BG)................. 5,100 97
Opticom AS (JX).......................................... 160 2
Smedvig * (BA)........................................... 3,600 27
Smedvig ASA * (BA)....................................... 4,600 29
Statoil ASA * (BB)....................................... 8,908 100
Storebrand ASA (JR)...................................... 16,140 105
Tandberg ASA (BJ)........................................ 3,920 29
Telenor AS * (J1)........................................ 22,160 145
Tomra Systems ASA (BM)................................... 10,000 60
------
760
Philippines - 0.1%
Ayala Land, Inc. * (JS) ................................. 410,460 45
Metro Bank & Trust (JP) ................................. 65,450 32
Philippine Long Distance Telephone Co. * (J1) ........... 3,200 56
SM Prime Holdings, Inc. (JS) ............................ 48,000 6
------
139
Portugal - 0.3%
Banco Comercial Portgues SA (JP) ........................ 62,300 139
BPI-SGPS SA (JQ) ........................................ 33,590 123
Part Multimedia SGPS (JA) ............................... 4,439 $ 86
Sonae SGPS SA (BL) ...................................... 87,600 73
------
421
Singapore - 0.7%
Chartered SemiconductorManufacturing (J0) ............... 12,000 12
City Developments, Ltd. (JS) ............................ 15,000 53
Cycle & Carriage, Ltd. (JE) ............................. 8,766 30
DBS Group Holdings, Ltd. * (JP) ......................... 17,000 147
Haw Par Value Corp. , Ltd. (BL) ......................... 26,876 71
Neptune Orient Lines, Ltd. (BR) ......................... 14,000 18
Oversea-Chinese Banking Corp., Ltd. (JP) ................ 39,000 278
Singapore Telecommunications, Ltd. * (J1) ............... 101,000 116
United Overseas Bank, Ltd. * (JP) ....................... 42,448 330
------
1,055
South Africa - 1.4%
Anglo American Platinum Corp., Ltd. * (BF) .............. 1,200 52
Anglo American plc * (BF) ............................... 30,000 641
Anglogold * (BF) ........................................ 3,100 145
Barlow, Ltd. * (BL) ..................................... 7,400 78
Dimension Data Holdings plc (JU) ........................ 79,483 53
FirstRand, Ltd. (JP) .................................... 94,300 126
Foschini, Ltd. (JE) ..................................... 37,100 109
Gold Fields Mining * (BF) ............................... 9,600 137
Impala Platinum Holdings, Ltd. (BF) ..................... 1,000 87
Imperial Holdings, Ltd. (JE) ............................ 10,091 101
Investec Ltd. (JQ) ...................................... 3,051 58
Liberty Life Association of Africa, Ltd. (JR) ........... 10,300 83
M-Cell, Ltd. (J2) ....................................... 8,400 36
Nampak, Ltd. (BE) ....................................... 25,500 50
Nedcor, Ltd. * (JP) ..................................... 4,300 40
Sappi, Ltd. * (BG) ...................................... 5,700 78
Sasol, Ltd. * (BB) ...................................... 11,800 168
South African Breweries plc (JG) ........................ 6,000 61
Standard Bank Investment Corp., Ltd. (JP) ............... 18,000 105
------
2,208
South Korea - 1.5%
Hyundai Motor Co., Ltd. (BV) ............................ 3,560 151
KIA Motors Corp. (BV) ................................... 3,310 30
Kookmin Bank * (JP) ..................................... 6,399 240
Korea Electric Power Corp. * (J3) ....................... 7,430 133
Korea Telecom Corp. (J1) ................................ 1,040 39
Korea Telecom Freetel (J1) .............................. 2,980 48
LG Chemical (BC) ........................................ 2,035 94
LG Electronics, Inc. (JY) ............................... 1,931 95
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
South Korea - Continued
LG Investment & Securities Co., Ltd. * (JQ) ........... 2,460 $ 17
Pohang Iron & Steel Co., Ltd. (BF) .................... 1,323 181
Samsung Corp. (JY) .................................... 6,120 51
Samsung Display Devices Co. (JY) ...................... 1,000 118
Samsung Electro-Mechanics Co. (JY) .................... 1,460 48
Samsung Electronics * (JY) ............................ 2,159 817
Samsung Fire & Marine Insurance (JR) .................. 942 54
Samsung Securities Co., Ltd. (JQ) ..................... 2,470 53
Shinhan Financial (JP) ................................ 6,930 111
SK Telecom Co., Ltd. * (J2) ........................... 820 137
------
2,417
Spain - 3.3%
Acerinox SA (A5) ...................................... 1,752 82
ACS, Actividades de Construccion y
Servicios, SA (BJ) ................................. 4,229 206
Amadeus Global Travel - Ser. A (BO) ................... 5,240 34
Autopistas Concesionaria Espanola SA (BT) ............. 6,287 95
Banco Bilbao Vizcaya SA * (JP) ........................ 49,959 689
Banco Popular Espanol SA (JP) ......................... 3,070 183
Banco Santander Central Hispano SA * (JP) ............. 71,715 848
Endesa SA * (J3) ...................................... 15,465 297
Fomento de Construcciones y Contratas SA (BJ) ......... 1,400 52
Gas Natural SDG SA * (J4) ............................. 6,400 150
Grupo Ferrovial SA * (BJ) ............................. 2,312 81
Iberdrola SA (J3) ..................................... 13,874 274
Inditex (JE) .......................................... 6,292 128
Indra Sistemas SA (JU) ................................ 6,236 80
NH Hoteles SA * (BZ) .................................. 7,422 85
Repsol SA * (BB) ...................................... 17,332 338
Tabacalera SA - Cl. A (JI) ............................ 6,360 180
Telefonica SA * (J1) .................................. 82,822 1,215
Union Electrica Fenosa SA (J3) ........................ 4,900 92
Vallehermoso SA (JS) .................................. 4,915 74
------
5,183
Sweden - 1.7%
Drott AB (JS) ......................................... 5,400 103
Electrolux AB - Ser. B * (BW) ......................... 4,900 108
Hennes & Mauritz AB * (JE) ............................ 14,223 338
NetCom Systems, Inc. - Cl. B (J1) ..................... 1,732 92
Nordic Baltic Holding AB (JP) ......................... 59,137 444
Sandvik AB (BM) ....................................... 4,350 150
Securitas AB * (BO) ................................... 11,000 148
Skand Enskilda Banken - Cl. A (JP) .................... 10,200 150
Skandia Forsakrings AB (JR) ........................... 13,900 51
Skanska AB - Ser. B (BJ) .............................. 11,000 97
Svenska Cellulosa AB - Cl. B (BG) ..................... 3,100 127
Svenska Handelsbanken, Inc. (JP) ...................... 9,300 190
Telefonaktiebolaget LM Ericsson AB (JW) ............... 246,500 $ 442
Telia AB (J1) ......................................... 30,044 157
Volvo AB * (BM) ....................................... 5,750 176
------
2,773
Switzerland - 6.1%
ABB, Ltd. (BK) ........................................ 21,138 107
Adecco SA * (BO) ...................................... 2,733 176
Ciba Specialty Chemicals AG * (BC) .................... 1,667 129
Credit Suisse Group * (JP) ............................ 21,266 778
Givaudan (BC) ......................................... 224 116
Holcim * (BD) ......................................... 3,096 144
Lonza Group AG (BC) ................................... 1,604 92
Nestle SA * (JH) ...................................... 6,988 1,745
Novartis AG (JO) ...................................... 41,256 1,872
Richemont (JQ) ........................................ 10,552 253
Roche Holdings AG (JO) ................................ 746 103
Roche Holdings AG * (JO) .............................. 11,960 1,206
Serono SA (JN) ........................................ 156 111
SGS Holdings (BO) ..................................... 119 75
Swatch Group (BY) ..................................... 1,021 123
Swiss Reinsurance Co. * (JR) .......................... 5,579 377
Swisscom AG * (J1) .................................... 541 178
Syngenta AG (BC) ...................................... 2,037 137
Synthes-Stratec, Inc. (JL) ............................ 109 108
UBS AG * (JP) ......................................... 20,534 1,406
Valora Holding AG (JE) ................................ 321 80
Zurich Finance (JR) ................................... 2,571 370
------
9,686
Taiwan - 1.0%
Acer Communicaton (J1) ................................ 22,800 28
Acer, Inc. * (JX) ..................................... 44,963 67
Advanced Semiconductor Engineering, Inc. (J0) ......... 64,900 67
Arima Computer (JX) ................................... 49,500 18
Asustek Computer * (JX) ............................... 20,250 45
AU Optronics Corp. * (JY) ............................. 55,650 65
China Dev Fin Holding (JP) ............................ 144,203 71
China Trust Finance (JP) .............................. 79,920 80
CMC Magnetics Corp. (JX) .............................. 51,600 40
Compal Electronics, Inc. * (JX) ....................... 44,160 60
Formosa Chemical & Fibre (BC) ......................... 32,054 54
Formosa Plastic * (BC) ................................ 52,956 87
Hon Hai Precision Insustry Co., Ltd. - Cl. G *
(JY) ............................................... 20,700 81
Kinpo Electronics (JZ) ................................ 69,608 40
Lite on Technology (JX) ............................... 48,056 51
Macronix International Co., Ltd. (JX) ................. 59,400 13
Micro Star International (JX) ......................... 9,176 14
Nan Ya Plastic Corp. (BC) ............................. 83,824 121
Quanta Computer, Inc. (JX) ............................ 16,445 40
Realtek Semiconductor Corp. * (J0) .................... 10,920 19
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ---------- --------
(000's)
COMMON STOCK - Continued
Taiwan - Continued
Ritek Corp. (JX) .................................. 45,000 $ 28
Siliconware Precision (J0) ........................ 44,000 45
Taiwan Semiconductor * (J0) ....................... 173,880 325
Tatung (BL) ....................................... 100,000 25
United Microelectronics Corp. * (J0) .............. 83,525 72
Via Technologies Inc. * (JX) ...................... 14,090 18
Winbond Electronic (JY) ........................... 69,000 33
------
1,607
Thailand - 0.3%
Advanced Information Services (J2) ................ 65,700 140
PTT Exploration & Production Public
Co., Ltd. (BB) ................................. 22,200 150
Siam Cement Co. * (BD) ............................ 31,600 220
------
510
Turkey - 0.2%
Arcelik AS (BW) ................................... 6,490,550 36
Turkiye Is Bankasi - Cl. C * (JP) ................. 70,216,241 285
------
321
United Kingdom - 21.7%
3I Group (JQ) ..................................... 11,775 130
Alliance Unichem (JM) ............................. 7,717 71
Amvescap plc * (JQ) ............................... 13,224 96
Association British Ports (BT) .................... 11,901 95
AstraZeneca Group plc * (JO) ...................... 30,224 1,446
Barclays (JP) ..................................... 110,773 985
BG Group plc * (BB) ............................... 64,498 330
Billiton plc (BF) ................................. 44,847 391
BOC Group plc * (BC) .............................. 17,596 268
Boots Group (JF) .................................. 15,100 186
BP Amoco plc (BB) ................................. 410,567 3,320
BPB (BD) .......................................... 12,089 75
Brambles Industries * (BO) ........................ 22,730 83
British Aerospace plc (BH) ........................ 57,462 173
British Airport Authority plc (BT) ................ 21,926 194
British American Tobacco plc * (JI) ............... 29,280 402
British Land Co. plc (JS) ......................... 9,000 94
British Sky Broadcast plc (JA) .................... 23,449 294
BT GROUP (J1) ..................................... 153,664 516
Bunzl (BO) ........................................ 12,430 95
Cable & Wireless plc * (J1) ....................... 48,728 116
Cadbury Schweppes plc * (JH) ...................... 37,586 275
Capita Group plc (FB) ............................. 17,669 77
Carlton Communications plc * (JA) ................. 13,900 57
Carnival plc (BZ) ................................. 3,303 133
Centrica plc (J4) ................................. 76,232 287
CGU plc (JR) ...................................... 37,687 330
Compass Group plc * (BZ) .......................... 39,189 266
Daily Mail & General Trust (JA) ................... 7,508 88
Davis Service (BO) ................................ 11,677 78
Diageo plc * (JG) ................................. 53,890 707
Dixons Group plc (JE) ............................. 42,741 106
Electrocomponents plc * (JY) ...................... 12,098 $ 70
EMAP plc * (JA) ................................... 6,164 94
EMI Group plc (JA) ................................ 9,000 26
Enterprise Inns (BZ) .............................. 5,116 93
Exel * (BP) ....................................... 7,462 98
Firstgroup (BS) ................................... 12,870 63
GKN * (BU) ........................................ 17,633 84
GlaxoSmithKline plc * (JO) ........................ 104,018 2,377
Granada Compass plc * (JA) ........................ 57,831 126
Hammerson plc (JS) ................................ 8,028 93
Hanson Building Materials * (BI) .................. 8,990 66
Hays plc * (BO) ................................... 41,349 89
HBOS * (JP) ....................................... 65,987 852
Hilton Group plc * (BZ) ........................... 27,700 111
HSBC Holdings plc (JP) ............................ 182,550 2,861
IMI (BM) .......................................... 11,248 68
Imperial Chemical Industries plc *
(BC) ............................................ 26,199 93
Imperial Tobacco Group plc (JI) ................... 13,917 273
Intercontinental Hampshire (JQ) ................... 15,693 148
J Sainsbury plc * (JF) ............................ 28,966 162
Johnson Matthey (BC) .............................. 5,434 95
Kelda Group plc (JH) .............................. 10,845 91
Kingfisher * (JE) ................................. 42,693 212
Land Securities SGP (JQ) .......................... 7,350 130
Legal & General Group plc (JR) .................... 105,588 189
Liberty National (JS) ............................. 6,968 85
Lloyds TSB Group plc (JP) ......................... 118,179 945
Logica plc * (JU) ................................. 16,105 74
Manitoba Group (JQ) ............................... 5,609 146
Marks & Spencer * (JD) ............................ 42,777 221
Misys plc (JV) .................................... 13,522 51
Mitchells & Butler (BZ) ........................... 5,981 24
National Grid Group * (JY) ........................ 53,002 379
National Power plc (J3) ........................... 14,200 31
Next Group (JD) ................................... 6,142 123
Nycomed Amersham plc (JL) ......................... 14,138 193
Pearson plc * (JA) ................................ 15,605 173
Peninsular & Oriental Steam
Navigation Co. (BR) ............................ 18,718 77
Provident Financial (JQ) .......................... 6,656 77
Prudential Corp. (JR) ............................. 34,647 292
Rank Group plc * (BZ) ............................. 25,300 126
Reckitt Benckiser * (JJ) .......................... 11,385 257
Reed International plc (JA) ....................... 44,446 371
Rentokil Initial plc (BO) ......................... 39,081 133
Reuters Group plc * (JA) .......................... 29,157 122
Rexam (BE) ........................................ 11,775 90
Rio Tinto plc * (BF) .............................. 18,738 516
RMC Group plc * (BD) .............................. 6,457 80
Rolls Royce Group * (BH) .......................... 30,599 97
Royal & Sun Alliance Insurance Group
* (JR) ......................................... 60,060 95
Royal Bank of Scotland Group * (JP) ............... 48,532 1,426
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- ---------- --------
(000's)
COMMON STOCK - Continued
United Kingdom - Continued
Safeway plc (JF) .................................. 23,118 $ 117
Scottish & Newcastle (JG) ......................... 18,779 127
Scottish and Southern Energy (J3) ................. 16,614 200
Scottish Power plc * (J3) ......................... 34,695 231
Severn Trent (J6) ................................. 8,253 110
Shell Transport & Trading Co. plc *
(BB) ........................................... 189,806 1,408
Signet Group (JE) ................................. 42,561 78
Slough Estates Finance plc (JS) ................... 8,000 63
Smith & Nephew (JL) ............................... 19,151 160
Smiths Group (BL) ................................. 11,076 131
South African Breweries plc * (JG) ................ 15,790 163
Tate & Lyle (JH) .................................. 12,545 70
Taylor Woodrow (BW) ............................... 17,488 83
Tesco plc * (JF) .................................. 127,371 586
The Great Universal Stores plc (JC) ............... 19,002 262
The Sage Group plc (JV) ........................... 15,700 49
Tomkins plc (BL) .................................. 18,702 89
Unilever plc * (JK) ............................... 49,648 462
United Business Media (JA) ........................ 8,630 75
United Utilities plc * (J5) ....................... 10,400 92
Vodafone AirTouch plc (J2) ........................ 1,203,067 2,974
Whitbread * (BZ) .................................. 7,465 96
Wolseley (BN) ..................................... 11,481 162
WPP Group plc * (JA) .............................. 22,552 221
--------
34,541
United States - 2.6%
Bajaj Auto, Ltd. - GDR (BV) ....................... 5,900 143
Banco Bradesco - ADR (JP) ......................... 2,918 77
Banco Itau SA - ADR * (JP) ........................ 3,960 197
Banco Santander Chile - ADR (JP) .................. 2,900 69
Brasil Telecom Participacoes SA (J1) . ............ 2,426 91
Carnival Corp. (BZ) ............................... 180 7
Centrais Electricas Brasileirias SA -
ADR Cl. B * (J3) ............................... 12,874 101
Check Point Software Technologies,
Ltd. * (JT) .................................... 4,200 71
Companhia De Bebidas ADR (JG) ..................... 6,850 175
Companhia Energetica de Minas Gerias
- ADR (J3) ..................................... 7,701 141
Companhia Vale do Rio Doce - ADR
(BF) ........................................... 3,700 189
Compania Cervecerias Unidas SA -
ADR * (JG) ..................................... 900 19
Compania de Telecomunicaciones de
Chile SA * (J1) ................................ 2,500 37
EIH, Ltd. - GDR (BZ) .............................. 6,700 44
Embotelladora Andina SA - ADR *
(JG) ........................................... 6,100 64
Empresa Nacional de Electricidad SA -
ADR * (J3) ..................................... 10,100 118
Enersis SA - ADR * (J3) ........................... 28,447 209
Grasim Industries, Ltd. - GDR (BL) ................ 7,100 156
Great Eastern Shipping Co. - GDR
(BL) ........................................... 9,020 $ 152
Hindalco Industries, Ltd. - GDR (BF) .............. 4,900 151
Huaneng Power International, Inc. -
ADR * (J3) ..................................... 400 28
ITC, Ltd. - GDR (JI) .............................. 5,900 130
Lukoil Holding - ADR * (BB) ....................... 2,700 251
Mahindra & Mahindra, Ltd. * (BL) .................. 16,500 141
Petroleo Brasileiro SA * (BB) ..................... 5,500 160
Petroleo Brasileiro SA - ADR (BB) ................. 6,800 180
Ranbaxy Laboratories, Ltd. - GDR (JO) ............. 6,560 167
Reliance Industries, Ltd. - GDR (BC) .............. 11,000 276
Surgutneftegaz - ADR (BB) ......................... 11,581 337
Tatneft - ADR (BB) ................................ 2,400 55
Unified Energy Systems Russia - ADR
(J3) ........................................... 6,700 187
--------
4,123
--------
TOTAL COMMON STOCK- ......................... 97.0% 154,282
PREFERRED STOCK
Australia - 0.2%
News Corp., Ltd. (JA) ............................. 434 404
Germany - 0.2%
Henkel KGAA (BC) .................................. 68 87
Porsche AG (BV) ................................... 90 116
Volkswagen AG (BV) ................................ 88 89
--------
292
South Korea - 0.1%
Samsung Electronics (JY) .......................... 79 113
--------
TOTAL PREFERRED STOCK- ...................... 0.5% 809
WARRANTS
Mexico - 0.0%
Cemex SA (BI)
expires 12/21/04 (Cost $1) ........................ 2,000 1
--------
TOTAL WARRANTS- ............................. 0.0% 1
RIGHTS
Germany - 0.0%
Muenchener Ruckversag (BO)
expires 11/10/03 (Cost $0) ........................ 4,360 38
Thailand - 0.0%
TelecomAsia (J1)
expires 04/30/08 (Cost $0) ........................ 35,747 0
--------
TOTAL RIGHTS- ............................... 0.0% 38
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY INDEX FUND
Market
Name of Issuer Shares Value
-------------- --------- ---------
(000's)
INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED
SECURITIES - 5.4%
State Street Navigator Securities
Lending Portfolio .............................. $ 8,571 $ 8,571
SHORT-TERM INVESTMENTS
Investment in joint trading account
(Note B) - 1.9%
1.061% due 01/02/04 ............................ 2,955 2,955
U.S. Treasury - Bills - 0.3%
0.99% due 03/11/04 ............................. 524 524
--------
TOTAL SHORT-TERM
INVESTMENTS- ................................ 2.2% 3,479
------- --------
TOTAL INVESTMENTS- .......................... (105.1)% 167,180
Payables, less cash and receivables- .............. (5.1)% (8,144)
------- --------
NET ASSETS- ....................................... 100.0% $159,036
======= ========
* Non-income producing security.
ADR-American Depository Receipt.
GDR-Global Depository Receipt.
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY (UNAUDITED)
% of
Industry Market Long-Term
Industry Abbreviation Value Investments
-------- ------------ ---------- -----------
(000's)
Banks ............................ JP $ 26,607 17.2%
Oil & Gas ........................ BB 14,366 9.3%
Pharmaceuticals .................. JO 10,740 6.9%
Insurance ........................ JR 6,449 4.2%
Diversified Telecommunication
Services ...................... J1 5,982 3.9%
Metals & Mining .................. BF 5,959 3.8%
Electronic Equipment &
Instruments ................... JY 5,406 3.5%
Chemicals ........................ BC 5,057 3.3%
Wireless Telecommunications
Services ...................... J2 4,904 3.2%
Diversified Financials ........... JQ 4,767 3.1%
Electric Utilities ............... J3 4,657 3.0%
Automobiles ...................... BV 4,628 3.0%
Media ............................ JA 3,668 2.4%
Food Products .................... JH 3,404 2.2%
Industrial Conglomerates ......... BL 2,834 1.8%
Food & Drug Retailing ............ JF 2,797 1.8%
Communications Equipment ......... JW 2,742 1.8%
Beverages ........................ JG 2,557 1.6%
Real Estate Investment Trust ..... JS 2,380 1.5%
Hotels Restaurants & Leisure ..... BZ 2,077 1.3%
Commercial Services &
Supplies ...................... BO 1,843 1.2%
Semiconductor Equipment &
Products ...................... J0 1,810 1.2%
Household Durables ............... BW $ 1,795 1.2%
Road & Rail ...................... BS 1,631 1.0%
Machinery ........................ BM 1,625 1.0%
Multiline Retail ................. JD 1,430 0.9%
Construction Materials ........... BD 1,327 0.9%
Specialty Retail ................. JE 1,326 0.9%
Health Care Equipment &
Supplies ...................... JL 1,288 0.8%
Electrical Equipment ............. BK 1,168 0.8%
Tobacco .......................... JI 1,139 0.7%
Personal Products ................ JK 1,126 0.7%
Computers & Peripherals .......... JX 1,095 0.7%
Paper & Forest Products .......... BG 1,043 0.7%
Gas Utilities .................... J4 1,003 0.6%
Software ......................... JV 1,002 0.6%
Auto Components .................. BU 953 0.6%
Office Electronics ............... JZ 902 0.6%
Textiles & Apparel ............... BY 893 0.6%
Construction & Engineering ....... BJ 825 0.5%
Marine ........................... BR 765 0.5%
Multi-Utilities .................. J5 739 0.5%
Building Products ................ BI 717 0.5%
Aerospace & Defense .............. BH 690 0.4%
IT Consulting & Services ......... JU 606 0.4%
Air Freight & Couriers ........... BP 518 0.3%
Leisure Equipment & Products ..... BX 513 0.3%
Transportation Infrastructure .... BT 487 0.3%
Household Products ............... JJ 460 0.3%
Trading Companies &
Distributors .................. BN 387 0.2%
Real Estate Operations ........... JS 336 0.2%
Internet & Catalog Retail ........ JC 262 0.2%
Airlines ......................... BQ 245 0.2%
Health Care Providers &
Services ...................... JM 225 0.1%
Real Estate Development .......... JS 191 0.1%
Internet Software & Services ..... JT 190 0.1%
Containers & Packaging ........... BE 139 0.1%
Biotechnology .................... JN 111 0.1%
Water Utilities .................. J6 110 0.1%
Finance .......................... FB 97 0.1%
Distributors ..................... JB 80 0.0%
Energy Equipment & Services ...... BA 57 0.0%
-------- -----
$155,130 100.0%
======== =====
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock International Equity Index Fund (the "Fund") is a diversified
series of John Hancock Variable Series Trust I (the "Trust"), an open-end
investment management company registered under the Investment Company Act of
1940. The Trust is organized as a Massachusetts business trust and consists of
thirty different funds as of December 31, 2003. The results of this Fund are
included in this report. The results of the other Funds in the Trust are
presented under separate cover. 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 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Fair value pricing, determined in good faith by the Board of Trustees, may
be used by the Fund when current market values are unavailable or when an event
occurs after the close of the exchange on which the Fund's portfolio securities
are principally traded that is likely to have changed the value of the
securities. The use of fair value pricing by the Fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. Securities for which prices are not
available from an independent pricing service, but where an active market
exists, are valued using market quotations obtained from one or more dealers
that make markets in the securities.
Investment security transactions are recorded on the date of purchase or
sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $ 29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 $ 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
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 Fund. 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 Fund does 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.
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Securities lending: The Fund has entered into an agreement with State
Street Bank and Trust Company ("SSBT") to lend its securities to certain
qualified brokers who pay the Fund's negotiated lender fees. This loan is
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, the Fund 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
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
financially. At December 31, 2003, the market value of the securities loaned and
the market value of the collateral for the Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$8,172 $8,571
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, open financial
futures contracts for the Fund were as follows:
Open Expiration Unrealized
Contracts Position Month Appreciation
--------- -------- ---------- ------------
CAC 40 10 Euro Index Futures 10 Long March 04 $ 7
DAX Index Futures 3 Long March 04 14
Nikkei 225 Index Futures 13 Long March 04 29
FTSE 100 Index Futures 16 Long March 04 29
---
$79
===
At December 31, 2003, the Fund had deposited $525 in segregated accounts to
cover initial margin requirements on open financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
As of December 31, 2003, the Fund had open forward foreign currency
contracts which contractually obligate the Fund to deliver or receive currencies
at a specified date, as follows:
Unrealized
Principal Amount Appreciation/
Covered by Contract Expiration Month (Depreciation)
------------------- ---------------- --------------
Currency Purchased
Euro 907 March 04 $ 21
Pound Sterling 1,646 March 04 49
Japanese Yen 914 March 04 4
----
$ 74
====
Currency Sold
Euro 115 March 04 $ (3)
Pound Sterling 441 March 04 (8)
Japanese Yen 248 March 04 $ (1)
----
$(12)
====
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $6,989, $7,680 and $7,444 which expire in 2009, 2010 and 2011,
respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $337. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
On February 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$100 Million and Excess Over
First $100 Million $200 Million $200 Million
- ------------------ ---------------- ------------
0.18% 0.15% 0.11%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $188 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Independence
Investment LLC, with respect to the Fund. Independence Investment LLC is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$61,005 $44,067
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$155,390 $23,775 $(11,984) $11,791
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to investments
in passive foreign investment companies and to certain securities sold at a
loss. Additionally, as a result, net investment income (loss) and net realized
gain (loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $22,113 $11,791
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $3,685 $-- $479
2002 2,052 -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------------- ---------------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, 02117 Massachusetts
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, 02117 Massachusetts
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------------- ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------------- ---------------------------- -----------------------------------
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the International Equity Index Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
International Equity Index Fund of John Hancock Variable Series Trust I at
December 31, 2003, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1996
- --------------------------------------------------------------------------------
International Opportunities Fund
T. Rowe Price International, Inc. Warren/Ford/Seddon/Bickford-Smith
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 32.36%, underperforming its benchmark, the MSCI
All Country World Ex US Free Index.
.. Performance relative to benchmark was driven by both unfavorable stock
selection and sector allocation weightings, while country allocation
exposures were modestly positive. Stock selection in Japan was the largest
performance detractor.
.. On an absolute basis, Financial stocks, representing 24% of assets, climbed
over 47% during the period, while the Consumer Discretionary sector,
representing 17% of the assets, was also a significant contributor, gaining
over 31% for the year.
.. The top contributing stocks to absolute returns included Vodafone Group and
Total, while the key detractors included Sony and Nedcor.
.. The portfolio remains underweight in Japan. In addition, the portfolio
continues to overweight Consumer Discretionary, while underweighting
Financials and Utilities.
.. The manager employs a bottom-up, fundamental research approach to identify
companies that are capable of achieving and sustaining above-average,
long-term earnings growth and that are reasonably priced. Country
allocation decisions are driven by stock selection
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
International
Opportunities MCSI All Country World
Fund Free Ex. US Index
------------- ----------------------
5/01/1996 $10,000.00 $10,000.00
5/31/1996 10,024.34 9,850.00
6/30/1996 10,129.22 9,900.24
7/31/1996 9,819.73 9,571.55
8/31/1996 9,971.07 9,628.02
9/30/1996 10,190.88 9,866.79
10/31/1996 10,150.25 9,768.13
11/30/1996 10,608.68 10,145.18
12/31/1996 10,672.04 10,027.49
1/31/1997 10,544.32 9,842.99
2/28/1997 10,671.97 10,023.11
3/31/1997 10,659.18 10,002.06
4/30/1997 10,701.19 10,086.08
5/31/1997 11,332.27 10,709.40
6/30/1997 11,796.26 11,300.56
7/31/1997 12,113.19 11,528.83
8/31/1997 10,992.06 10,621.51
9/30/1997 11,718.58 11,196.14
10/31/1997 10,863.43 10,243.35
11/30/1997 10,858.72 10,115.30
12/31/1997 10,880.04 10,231.63
1/31/1998 11,254.02 10,537.56
2/28/1998 11,932.03 11,240.41
3/31/1998 12,345.90 11,629.33
4/30/1998 12,435.38 11,713.06
5/31/1998 12,390.74 11,501.05
6/30/1998 12,416.32 11,457.35
7/31/1998 12,560.24 11,566.19
8/31/1998 10,980.00 9,935.36
9/30/1998 10,715.43 9,725.72
10/31/1998 11,680.61 10,744.01
11/30/1998 12,199.09 11,320.96
12/31/1998 12,611.66 11,711.53
1/31/1999 12,484.38 11,698.65
2/28/1999 12,268.43 11,436.60
3/31/1999 12,769.42 11,988.99
4/30/1999 13,241.38 12,588.44
5/31/1999 12,623.31 11,996.78
6/30/1999 13,112.65 12,548.63
7/31/1999 13,358.88 12,843.53
8/31/1999 13,495.21 12,888.48
9/30/1999 13,581.86 12,976.12
10/31/1999 14,038.51 13,458.83
11/30/1999 15,021.61 13,997.19
12/31/1999 16,900.78 15,332.52
1/31/2000 15,834.00 14,499.96
2/29/2000 16,711.59 14,891.46
3/31/2000 16,885.48 15,451.38
4/30/2000 15,946.30 14,589.19
5/31/2000 15,446.42 14,215.71
6/30/2000 16,250.95 14,821.30
7/31/2000 15,693.05 14,235.86
8/31/2000 16,033.54 14,412.38
9/30/2000 15,020.47 13,612.49
10/31/2000 14,413.93 13,179.62
11/30/2000 13,655.62 12,587.85
12/31/2000 14,136.02 13,018.36
1/31/2001 14,305.54 13,213.63
2/28/2001 13,024.07 12,167.11
3/31/2001 12,015.17 11,306.90
4/30/2001 12,974.65 12,075.77
5/31/2001 12,412.32 11,742.48
6/30/2001 11,876.69 11,291.56
7/31/2001 11,594.56 11,040.89
8/31/2001 11,302.99 10,767.08
9/30/2001 10,116.79 9,624.69
10/31/2001 10,444.29 9,894.18
11/30/2001 10,925.81 10,346.35
12/31/2001 11,177.39 10,479.81
1/31/2002 10,698.55 10,031.28
2/28/2002 10,793.70 10,103.50
3/31/2002 11,351.81 10,652.12
4/30/2002 11,270.56 10,721.36
5/31/2002 11,299.90 10,838.23
6/30/2002 10,772.68 10,370.01
7/31/2002 9,595.66 9,358.94
8/31/2002 9,534.13 9,359.87
9/30/2002 8,394.93 8,367.73
10/31/2002 8,984.13 8,816.24
11/30/2002 9,469.99 9,240.30
12/31/2002 9,140.13 8,941.84
1/31/2003 8,707.55 8,627.98
2/28/2003 8,469.81 8,452.83
3/31/2003 8,249.90 8,288.85
4/30/2003 9,099.74 9,087.89
5/31/2003 9,610.54 9,666.79
6/30/2003 9,800.31 9,934.56
7/31/2003 10,002.89 10,198.82
8/31/2003 10,262.31 10,502.74
9/30/2003 10,496.53 10,796.82
10/31/2003 11,045.19 11,496.45
11/30/2003 11,268.61 11,747.08
12/31/2003 12,097.96 12,643.38
Value on 12/31/03:
- ------------------
$12,098 International Opportunities Fund
$12,643 MSCI All Country World Free Ex. US Index
MORNINGSTAR
CATEGORY+:
.. Foreign Large Blend
MORNINGSTAR
RISK+:
.. Average (VL/VUL)
.. Above Average (VA)
MORNINGSTAR
RATING+:
.. ***(VL/VUL)
.. ***(VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
GlaxoSmithKline PLC 3.0%
Vodafone AirTouch PLC 2.7%
Total Fina SA 2.6%
Royal Bank of Scotland Group 2.1%
Nestle SA 2.0%
Koninklijke 1.8%
BNP Paribas 1.5%
Compass Group plc 1.4%
Adecco SA 1.3%
Inco, Ltd. 1.3%
AVERAGE ANNUAL TOTAL RETURNS*
MSCI All Country
Intl. Opportunities World Free Ex.
Fund US Index
------------------- -----------------
1 Year 32.36% 41.40%
3 Years -5.06 -0.97
5 Years -0.83 1.54
Since Inception (5/1/96) 2.51 3.11
DIVERSIFICATION BY REGION AND COUNTRY(3)
(as of December 31, 2003)
% of
Assets
------
Europe (excluding U.K.) 38.5%
United Kingdom (U.K.) 21.1%
Japan 16.0%
Emerging Markets 12.2%
United States 5.6%
Pacific Basin (excluding Japan) 3.7%
Other 3.0%
DIVERSIFICATION BY REGION(4)
Developed Markets 83%
Emerging Markets 17%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 367 VL/VUL subaccounts and 570 VA subaccounts in the
Morningstar Foreign Large Blend category. This represents the Morningstar 3
year rating.
(3) Calculations based upon country in which security is traded (listed).
(4) Calculations based upon country in which security is domiciled.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $16,314 of
securities loaned (Note B)) ..................................... $103,565
Net unrealized appreciation on investments ......................... 20,261
Short-term investments at value .................................... 18,586
--------
Total investments ............................................ 142,412
Cash ............................................................... 38
Foreign currency at value (cost $989) .............................. 987
Receivable for:
Dividends ....................................................... 199
Other assets .................................................... 7
--------
Total assets ....................................................... 143,643
--------
LIABILITIES
Payables for:
Fund shares purchased ........................................... 504
Collateral for securities on loan ............................... 16,998
Other liabilities ............................................... 176
--------
Total liabilities .................................................. 17,678
--------
Net assets ......................................................... $125,965
========
Shares of beneficial interest outstanding .......................... 12,787
--------
Net asset value per share .......................................... $ 9.85
========
Composition of net assets:
Capital paid-in ................................................. $154,114
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (48,243)
Net unrealized appreciation (depreciation) of:
Investments .................................................. 20,261
Translation of assets and liabilities in foreign
currencies ................................................ (167)
--------
Net assets ......................................................... $125,965
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ......................................................... $ 25
Dividends ........................................................ 2,093
Securities lending ............................................... 78
-------
Total investment income ............................................. 2,196
-------
EXPENSES
Investment advisory fee .......................................... 1,136
Auditors fees .................................................... 13
Custodian fees ................................................... 265
Legal fees ....................................................... 6
Printing & mailing fees .......................................... 9
Trustees' fees ................................................... 3
Other fees ....................................................... 12
-------
Total expenses ...................................................... 1,444
Less expenses reimbursed ......................................... (207)
-------
Net expenses ........................................................ 1,237
-------
Net investment income ............................................... 959
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................... (5,347)
Foreign currency transactions ................................. 258
Change in unrealized appreciation (depreciation) on:
Investments ................................................... 35,626
Translation of assets and liabilities in foreign
currencies ................................................. (170)
-------
Net realized and unrealized gain .................................... 30,367
-------
Net increase in net assets resulting from operations ................ $31,326
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income .................................... $ 959 $ 598
Net realized loss ........................................ (5,089) (24,371)
Change in net unrealized appreciation .................... 35,456 3,191
-------- --------
Net increase (decrease) in net assets resulting
from operations .................................... 31,326 (20,582)
Distributions to shareholders from:
Net investment income .................................... (1,556) (592)
-------- --------
Decrease in net assets resulting from distributions ... (1,556) (592)
From fund share transactions:
Proceeds from shares sold ................................ 131,885 219,231
Shares issued in reorganization .......................... 24,706
Distributions reinvested ................................. 1,556 592
Payment for shares redeemed .............................. (124,524) (219,668)
-------- --------
Increase in net assets from fund share transactions ... 8,917 155
-------- --------
NET INCREASE IN NET ASSETS .................................. 38,687 3,687
NET ASSETS
Beginning of Period ...................................... 87,278 83,591
-------- --------
End of Period ............................................ $125,965 $ 87,278
======== ========
Analysis of fund share transactions:
Sold ..................................................... 16,865 28,860
Reinvested ............................................... 188 69
Redeemed ................................................. (15,816) (26,366)
-------- --------
Net increase in fund shares outstanding ..................... 1,237 2,563
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
International Opportunities Fund
-------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------
2003 2002 2001 2000(c) 1999
-------- ------- ------- -------- -------
Net Assets Value at Beginning of Period ........ $ 7.56 $ 9.30 $ 11.85 $ 15.17 $ 12.21
Income from Investment Operations:
Net Investment Income ....................... 0.08 0.07 0.06 0.07 0.10
Net Realized and Unrealized Gain (Loss) on
Investments(a) ........................... 2.34 (1.75) (2.53) (2.57) 3.95
-------- ------- ------- -------- -------
Total From Investment Operations ............ 2.42 (1.68) (2.47) (2.50) 4.05
Less Distributions:
Distribution from Net Investment Income ..... (0.13) (0.06) (0.05) (0.06) (0.11)
Distribution from Net Realized Gains on
Investments .............................. (0.62) (0.94)
Distribution from Excess of Net Investment
Income/Gains ............................. (0.05) (0.04)
Distribution from Capital Paid-in ........... (0.03) (0.09)
-------- ------- ------- -------- -------
Total Distributions ......................... (0.13) (0.06) (0.08) (0.82) (1.09)
-------- ------- ------- -------- -------
Net Assets Value at End of Period .............. $ 9.85 $ 7.56 $ 9.30 $ 11.85 $ 15.17
======== ======= ======= ======== =======
Total Investment Return(b) ..................... 32.36% (18.22)% (20.93)% (16.36)%(d) 34.01%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net
Assets ................................... 1.23%(e) 1.24%(e) 1.00%(e) 0.93%(e) 1.02%(e)
Ratio of Net Investment Income to Average
Net Assets................................ 0.95% 0.69% 0.64% 0.47% 0.77%
Portfolio Turnover Rate ..................... 40.85% 78.14%(d) 33.31% 37.92%(d) 34.02%
Net Assets End of Period (000s Omitted) ........ $125,965 $87,278 $83,591 $120,034 $79,794
(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 fluctuating
market values of the portfolio.
(b) The performance 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 T. Rowe Price
Associates, Inc. during the period shown.
(d) Excludes merger activity.
(e) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been 1.44%, 1.55%, 1.16%, 1.09%, and
1.15%, for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK
Australia - 0.8%
Broken Hill Proprietary Co., Ltd. * (BF) ............... 82,482 $ 757
Coles Myer, Ltd. * (JF) ................................ 38,000 216
-------
973
Belgium - 0.6%
DEXIA * (JP) ........................................... 29,450 507
Fortis * (JR) .......................................... 5,110 103
UCB SA * (JO) .......................................... 3,008 113
-------
723
Canada - 2.9%
Alcan Aluminum, Ltd. (BF) .............................. 18,632 873
Bank Nova Scotia Halifax - Bills * (FD) ................ 9,800 499
Inco, Ltd. * (BF) ...................................... 39,100 1,563
Royal Bank of Canada (JP) .............................. 16,280 778
-------
3,713
Denmark - 0.5%
Novo Nordisk AS (JO) ................................... 16,980 691
Finland - 1.2%
Nokia Oyj * (JW) ....................................... 86,112 1,487
France - 13.3%
AXA * (JR) ............................................. 29,300 626
BNP Paribas * (JP) ..................................... 28,802 1,812
Caisse National Credit Agricole (JP) ................... 34,309 818
CIE De St. Gobain * (BI) ............................... 11,972 585
France Telecom * (J1) .................................. 37,300 1,065
Groupe Danone * (JH) ................................... 950 155
Hermes International * (BY) ............................ 4,125 797
L'Oreal SA * (JK) ...................................... 6,364 521
Lafarge SA * (BD) ...................................... 970 86
LVMH * (Louis Vuitton Moet Hennessy)(BY) ............... 10,612 772
Pinault-Printemps-Redoute SA * (JD) . .................. 1,733 167
Renault (BV) ........................................... 2,331 161
Rhone-Poulenc SA * (JO) ................................ 13,081 864
Sanofi-Synthelabo SA * (JO) ............................ 20,009 1,505
Schneider SA * (BK) .................................... 10,780 705
Societe Generale - Cl. A * (JP) ........................ 4,102 362
Societe Television Francaise (JA) ...................... 35,756 1,247
Sodexho Alliance SA * (BZ) ............................. 19,034 573
STMicroelectronics * (JO) .............................. 11,756 318
Thomson Multimedia * (JY) .............................. 12,500 266
Total Fina SA - Cl. B * (BB) ........................... 17,353 3,223
Vivendi Universal SA * (JA) ............................ 6,713 163
-------
16,791
Germany - 2.0%
Allianz AG * (JR) ...................................... 2,728 344
Bayer AG * (JL) ........................................ 3,915 115
Bayerische Vereinsbank AG * (JP) ....................... 8,572 198
Deutsche Bank AG * (JP) ................................ 8,835 731
E.On AG (J3) ........................................... 3,545 231
Gehe AG * (JM) ......................................... 4,373 $ 212
Hypo Real Estate (JP) .................................. 2,143 53
Rhoen-Klinikum AG * (JM) ............................... 2,759 155
SAP AG * (JV) .......................................... 1,660 279
Siemens AG * (BL) ...................................... 1,952 156
-------
2,474
Hong Kong - 1.7%
Cheung Kong Holdings, Ltd. * (JS) ...................... 37,000 293
China Life Insurance Co., Ltd. * (JR) .................. 311,000 254
China Telecom, Ltd. * (J2) ............................. 223,000 684
Hong Kong & China Gas Co., Ltd. (J4) ................... 126,000 192
HSBC Holdings plc (JP) ................................. 14,800 234
Sun Hung Kai Properties, Ltd. * (JS) ................... 52,000 429
-------
2,086
Hungary - 0.5%
Gedeon Richter * (JO) .................................. 5,680 668
India - 2.6%
HDFC Bank Ltd. * (JP) .................................. 68,000 548
Hindustan Lever Ltd. (JJ) .............................. 168,940 760
Infosys Technologies, Ltd. * (JU) ...................... 3,954 484
Maruti Udyog (BO) ...................................... 96,000 794
Zee Telefilms Ltd. (JA) ................................ 212,600 701
-------
3,287
Italy - 4.3%
Alleanza Assicurazioni * (JR) .......................... 49,920 546
Banca Intesa SpA (JP) .................................. 60,327 236
BCP Pop Veron (JP) ..................................... 13,000 220
ENI * (BB) ............................................. 71,172 1,342
Mediaset SpA * (JA) .................................... 17,601 209
Mediolanum SpA * (JQ) .................................. 22,795 179
Telecom Italia (J1) .................................... 316,563 772
Telecom Italia Mobile SpA (J2) ......................... 115,070 625
UniCredito Italiano SpA * (JP) ......................... 233,893 1,261
-------
5,390
Japan - 15.7%
Canon, Inc. * (JZ) ..................................... 13,000 605
Credit Saison Co., Ltd. (JQ) ........................... 14,900 337
Dai-Nippon Printng Co., Ltd. (BO) ...................... 17,000 239
Daito Trust Construction Co., Ltd. (BJ) ................ 11,100 329
Daiwa House Industry Co., Ltd. (BW) .................... 36,000 383
Daiwa Securities Group, Inc. (JQ) ...................... 70,000 476
Denso Corp. (BU) ....................................... 13,200 260
Fanuc, Ltd. * (BM) ..................................... 3,500 210
Fuji Television Network, Inc. (JA) ..................... 44 238
Fujisawa Pharmeceutical Co., Ltd. * (JO) ............... 18,100 386
Funai Electric Co. (JY) ................................ 2,700 371
Honda Motor Co. * (BV) ................................. 14,900 662
Hoya Corp. * (JY) ...................................... 2,500 230
Japan Telecom Co. * (J1) ............................... 264 707
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Japan - Continued
Keyence Corp. (JY) ..................................... 1,300 $ 274
Kirin Brewery Co. * (JG) ............................... 25,000 213
Kyocera Corp. * (JY) ................................... 2,600 173
Marui Co., Ltd. * (JD) ................................. 29,500 372
Mitsubishi Corp. (BN) .................................. 34,000 360
Mitsubishi Estate Co., Ltd. * (JS) ..................... 49,000 465
Mitsubishi Heavy Industries, Ltd. * (BM) ............... 54,000 150
Mitsui Fudosan Co., Ltd. * (JS) ........................ 95,000 858
Mitsui Trust Holdings (JP) ............................. 53,000 296
NEC Corp. * (JX) ....................................... 13,000 96
Nippon Telegraph & Telephone Corp. * (J1) .............. 66 318
Nissan Motor Acceptance Corp. (BV) . ................... 23,300 266
Nomura Securities Co., Ltd. * (JQ) ..................... 78,000 1,329
NTT Mobile Communications Network, Inc. * (J2)......... 328 744
Oji Paper Co. (BG) ..................................... 36,000 233
Oki Electric Industry Co. * (J1) ....................... 39,000 153
Orix Corp. * (JQ) ...................................... 1,700 141
Rohm Co., Ltd. * (J0) .................................. 4,900 574
Secom Co. * (BO) ....................................... 26,500 989
Sekisui House, Ltd. * (BW) ............................. 32,000 331
Seven-Eleven Japan * (JF) .............................. 26,000 789
Shin-Etsu Chemical Co. * (BC) .......................... 7,900 323
SMC Corp. * (BM) ....................................... 2,900 361
Sony Corp. * (JY) ...................................... 6,600 229
Sumitomo Corp. * (BO) .................................. 16,000 119
Sumitomo Metal Industries (BF) ......................... 270,000 267
Sumitomo Mitsui GR (JP) ................................ 127 677
Suzuki Motor Corp. * (BV) .............................. 22,000 326
Takeda Chemical Industries * (BC) ...................... 3,900 155
Teijin, Ltd. (BC) ...................................... 71,000 209
Toyoda Gosei (BU) ...................................... 7,100 205
Toyota Motor Corp. * (BV) .............................. 16,200 547
UFJ Holdings, Inc. * (JP) .............................. 157 755
Uniden Corp. * (JW) .................................... 16,000 294
Yamanouchi Pharmaceutical Co., Ltd. * (JO)............. 18,400 572
Yamato Transport Co., Ltd. (BP) ........................ 17,000 200
-------
19,796
Luxembourg - 0.0%
Society Europeenne des Satellites (JA).................. 3,830 39
Malaysia - 1.2%
Astro All Asia Net * (JA) .............................. 269,000 313
Magnum Corp. Berhad * (BZ) ............................. 848,700 621
Resorts World Berhad * (BZ) ............................ 218,800 581
-------
1,515
Mexico - 1.2%
Cifra SA de CV - Ser. V * (JD) ......................... 195,100 556
Fomento Economico Mexicano SA de CV * (JG) ............ 91,500 338
GF BBVA Bancomer - Ser. B (JP) ......................... 708,000 $ 605
-------
1,499
Netherlands - 4.4%
Akzo Nobel NV * (BC) ................................... 1,250 48
ASM Lithography Holding NV (J0) ........................ 31,890 632
Elsevier NV * (JA) ..................................... 19,940 248
Fortis * (JR) .......................................... 8,410 169
ING Groep NV (JQ) ...................................... 51,650 1,203
Koninklijke * (Royal) Philips
Electronics NV (JY) .................................. 37,381 1,090
Koninklijke KPN NV * (JY) .............................. 82,400 635
Koninklijke Numica NV * (JY) ........................... 19,315 533
Royal Dutch Petroleum Co. * (BB) ....................... 7,020 370
VNU NV * (JA) .......................................... 10,457 330
Wolters Kluwer NV * (JA) ............................... 15,295 239
-------
5,497
Norway - 0.3%
Orkla ASA * (JH) ....................................... 16,850 377
Singapore - 0.7%
Mobile One * (J1) ...................................... 197,000 174
United Overseas Bank, Ltd. * (JP) ...................... 96,072 747
-------
921
South Africa - 1.0%
Anglo American plc * (BF) .............................. 28,900 618
Impala Platinum Holdings, Ltd. (BF) .................... 3,220 279
Sanlam, Ltd. (JR) ...................................... 245,170 322
-------
1,219
South Korea - 1.6%
Samsung Electronics * (JY) ............................. 2,960 1,121
SK Telecom Co., Ltd. * (J2) ............................ 5,600 935
-------
2,056
Spain - 3.1%
Antena 3 TV * (JA) ..................................... 138 6
Banco Bilbao Vizcaya SA * (JP) ......................... 61,710 852
Banco Santander Central Hispano SA * (JP) ............. 66,720 789
Endesa SA * (J3) ....................................... 27,112 521
Gas Natural SDG SA * (J4) .............................. 18,110 423
Inditex (JE) ........................................... 22,500 457
Repsol SA * (BB) ....................................... 10,841 211
Telefonica SA * (J1) ................................... 40,912 600
-------
3,859
Sweden - 2.5%
Electrolux AB - Ser. B * (BW) .......................... 20,910 459
Hennes & Mauritz AB * (JE) ............................. 28,920 688
Nordic Baltic Holding AB (JP) .......................... 50,920 382
Sandvik AB (BM) ........................................ 3,220 111
Securitas AB * (BO) .................................... 96,328 1,299
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Market
Name of Issuer Shares Value
-------------- ---------- -------
(000's)
COMMON STOCK - Continued
Sweden - Continued
Telefonaktiebolaget LM Ericsson AB (JW) ............ 120,435 $ 216
--------
3,155
Switzerland - 5.7%
Adecco SA * (BO) ................................... 25,900 1,664
Credit Suisse Group * (JP) ......................... 23,500 860
Nestle SA * (JH) ................................... 9,715 2,426
Roche Holdings AG * (JO) ........................... 6,300 635
UBS AG * (JP) ...................................... 22,566 1,545
--------
7,130
Taiwan - 1.8%
Advantech Co., Ltd. (JY) ........................... 363,361 626
China Trust Finance (JP) ........................... 622,680 626
Media Tekin Corp. (J0) ............................. 52,150 490
Taiwan Semiconductor * (J0) ........................ 300,700 562
--------
2,304
Thailand - 1.9%
Bangkok Bank * (JP) ................................ 378,400 1,041
Siam Commercial Bank * (JP) ........................ 129,000 179
Siam Commercial Bank Public Co. * (JP) ............. 857,000 1,200
--------
2,420
United Kingdom - 20.8%
Abbey National First Capital BV (JP) ............... 20,668 196
AstraZeneca Group plc * (JO) ....................... 25,738 1,231
Autonomy Corp. plc * (JV) .......................... 7,832 33
BG Group plc * (BB) ................................ 41,973 215
BP Amoco plc (BB) .................................. 75,367 609
British Sky Broadcast plc (JA) ..................... 18,063 227
Cadbury Schweppes plc * (JH) ....................... 38,846 284
Capita Group plc (FB) .............................. 24,100 105
Carnival plc (BZ) .................................. 4,948 199
Celltech Group plc * (JN) .......................... 21,612 146
Centrica plc (J4) .................................. 102,400 386
Compass Group plc * (BZ) ........................... 255,530 1,733
David S. Smith Holdings PLC (BE) ................... 20,240 59
Diageo plc * (JG) .................................. 54,307 713
Electrocomponents plc * (JY) ....................... 82,780 480
Friends Provident plc * (BL) ....................... 24,490 58
Gazprom Oao * (BB) ................................. 1,000 26
GKN * (BU) ......................................... 6,800 32
GlaxoSmithKline plc * (JO) ......................... 162,381 3,710
Granada Compass plc * (JA) ......................... 31,250 68
Hays plc * (BO) .................................... 149,431 320
Hilton Group plc * (BZ) ............................ 22,000 88
Kesa Electricals (JE) .............................. 28,166 129
Kingfisher * (JE) .................................. 276,453 1,374
Reckitt Benckiser * (JJ) ........................... 7,616 172
Reed International plc (JA) ........................ 111,935 934
Rio Tinto plc * (BF) ............................... 56,255 1,549
Royal Bank of Scotland Group * (JP) ................ 89,256 $ 2,623
Shell Transport & Trading Co. plc * (BB) ........... 161,736 1,200
Standard Chartered plc * (JP) ...................... 20,800 343
Tesco plc * (JF) ................................... 234,930 1,081
Tomkins plc (BL) ................................... 101,626 485
Unilever plc * (JK) ................................ 83,368 775
United Business Media (JA) ......................... 16,593 145
Vodafone AirTouch plc (J2) ......................... 1,347,214 3,331
Woolworths Group * (BL) ............................ 59,828 47
WPP Group plc * (JA) ............................... 106,830 1,046
--------
26,152
United States - 5.5%
America Movil SA de CV - ADR Ser. L (J2) ........... 18,600 508
Check Point Software Technologies, Ltd. * (JT)... .. 11,675 196
Companhia De Bebidas ADR (JG) ...................... 27,300 696
Companhia Vale do Rio Doce - ADR (BF) .............. 11,469 591
Compania Brasileira de Distribuicao
Grupo Pao de Acucar - ADR (JF) .................. 11,200 282
Embraer - Empresa Brasileira de
Aeronautica SA * (BH) ........................... 18,394 644
Lukoil Holding - ADR * (BB) ........................ 7,110 661
Mobile Systems - ADR * (J2) ........................ 5,600 464
Petroleo Brasileiro SA - ADR (BB) .................. 31,592 837
POSCO - ADR (BF) ................................... 15,799 537
Telefonica SA * (J1) ............................... 6,725 297
Teva Pharmaceutical Industries, Ltd. -
ADR * (JO) ...................................... 3,490 198
Turkcell Iletisim Hizmetleri AS - ADR (J2) ......... 23,200 616
Yukos Corp. - ADR * (BB) ........................... 10,283 432
--------
6,959
--------
TOTAL COMMON STOCK- .......................... 97.8% 123,181
PREFERRED STOCK
Australia - 0.5%
News Corp., Ltd. (JA) .............................. 85,749 645
--------
TOTAL PREFERRED STOCK- ....................... 0.5% 645
INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED
SECURITIES - 13.5%
State Street Navigator Securities
Lending Portfolio ............................... $ 16,998 $ 16,998
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND
Par Market
Name of Issuer Value Value
-------------- ------- --------
(000's) (000's)
SHORT-TERM INVESTMENTS
Investment in joint trading account
(Note B) - 1.1%
1.061% due 01/02/04 ............................... $1,336 $ 1,336
Euro Time Deposit - 0.2%
1.75% due 01/02/04 ................................ 200 252
--------
TOTAL SHORT-TERM INVESTMENTS- ............... 1.3% 1,588
------ --------
TOTAL INVESTMENTS- .......................... 113.1% 142,412
Payables, less cash and receivables- ........... (13.1)% (16,447)
------ --------
NET ASSETS- ................................. 100.0% $125,965
====== ========
* Non-income producing security.
ADR-American Depository Receipt
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY (UNAUDITED)
% of
Industry Market Long-Term
Industry Abbreviation Value Investments
-------- ------------ ------- -----------
(000's)
Banks .................................. JP $ 21,971 17.7%
Pharmaceuticals ........................ JO 10,574 8.5%
Oil & Gas .............................. BB 9,125 7.4%
Wireless Telecommunications Services ... J2 7,907 6.4%
Metals & Mining ........................ BF 7,034 5.7%
Media .................................. JA 6,797 5.5%
Electronic Equipment & Instruments ..... JY 6,028 4.9%
Commercial Services & Supplies ......... BO 5,425 4.4%
Diversified Telecommunication Services . J1 4,087 3.3%
Hotels Restaurants & Leisure ........... BZ 3,796 3.1%
Diversified Financials ................. JQ 3,665 3.0%
Food Products .......................... JH 3,242 2.6%
Specialty Retail ....................... JE 2,648 2.1%
Semiconductor Equipment & Products ..... J0 2,577 2.1%
Food & Drug Retailing .................. JF 2,368 1.9%
Insurance .............................. JR 2,365 1.9%
Real Estate Investment Trust ........... JS 2,045 1.6%
Communications Equipment ............... JW 1,997 1.6%
Automobiles ............................ BV 1,962 1.6%
Beverages .............................. JG 1,960 1.6%
Textiles & Apparel ..................... BY 1,569 1.3%
Personal Products ...................... JK 1,296 1.0%
Household Durables ..................... BW 1,173 0.9%
Multiline Retail ....................... JD 1,095 0.9%
Gas Utilities .......................... J4 1,001 0.8%
Household Products ..................... JJ 932 0.7%
Machinery .............................. BM 832 0.7%
Electric Utilities ..................... J3 752 0.6%
Industrial Conglomerates ............... BL 746 0.6%
Chemicals .............................. BC $ 734 0.6%
Electrical Equipment ................... BK 705 0.6%
Aerospace & Defense .................... BH 644 0.5%
Office Electronics ..................... JZ 605 0.5%
Building Products ...................... BI 585 0.5%
Auto Components ........................ BU 497 0.4%
IT Consulting & Services ............... JU 483 0.4%
Health Care Providers & Services ....... JM 367 0.3%
Trading Companies & Distributors ....... BN 360 0.3%
Construction & Engineering ............. BJ 329 0.3%
Software ............................... JV 312 0.2%
Paper & Forest Products ................ BG 233 0.2%
Air Freight & Couriers ................. BP 200 0.2%
Internet Software & Services ........... JT 196 0.1%
Biotechnology .......................... JN 146 0.1%
Health Care Equipment & Supplies ....... JL 115 0.1%
Finance ................................ FB 105 0.1%
Computers & Peripherals ................ JX 96 0.1%
Construction Materials ................. BD $ 86 0.1%
Containers & Packaging ................. BE 59 0.0%
-------- -----
$123,826 100.0%
======== =====
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock International Opportunities Fund (the "Fund") is a diversified
series of John Hancock Variable Series Trust I (the "Trust"), an open-end
investment management company registered under the Investment Company Act of
1940. The Trust is organized as a Massachusetts business trust and consists of
thirty different funds as of December 31, 2003. The results of this Fund are
included in this report. The results of the other Funds in the Trust are
presented under separate cover. 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 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Fair value pricing, determined in good faith by the Board of Trustees, may
be used by the Fund when current market values are unavailable or when an event
occurs after the close of the exchange on which the Fund's portfolio securities
are principally traded that is likely to have changed the value of the
securities. The use of fair value pricing by the Fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. Securities for which prices are not
available from an independent pricing service, but where an active market
exists, are valued using market quotations obtained from one or more dealers
that make markets in the securities.
Investment security transactions are recorded on the date of purchase or
sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Cargill Asia Pacific, 1.06%, due 01/02/04 $ 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
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 Fund. 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 Fund does 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.
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$588 1.66% $1
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$16,314 $16,998
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $266, $2,070, $2,540, $9,656, $12,511 and $11,857 which expire in 2006,
2007, 2008, 2009, 2010 and 2011, respectively.
Certain of the above losses may be limited under sections 382 - 384 of the
Internal Revenue Code, as amended.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $260. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
On February 5, 2003, 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 rate on an annual bais of the
Fund's net assets:
Between
$20 Million and Excess Over
First $20 Million $50 Million $50 Million
- ----------------- --------------- ------------
1.30% 1.15% 1.05%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $207 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with T. Rowe Price
International, Inc., with respect to the Fund. T. Rowe Price International, Inc.
is an affiliate of John Hancock, and under its supervision, is responsible for
the day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$51,216 $39,599
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$131,494 $13,496 $(2,579) $10,917
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. These differences
primarily relate to certain securities sold at a loss and sales of certain
foreign currency denominated debt securities. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $38,900 $10,917
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ----------------- ---------------------- -----------------
2003 $1,514 $-- $42
2002 592 -- --
NOTE E--COMBINATION
On August 20, 2002, the Board of Trustees of the John Hancock Variable
Series Trust I, including all of its independent Trustees, approved an amended
plan to combine the International Opportunities B Fund. ("Acquired Fund") into
the International Opportunities Fund ("Acquiring Fund").
The amended plan does not require a shareholder vote to approve the
combination, in compliance with recent changes to rules of the SEC, because (a)
the fundamental investment restrictions of the Acquiring Fund are substantially
identical to the fundamental investment restrictions of the Acquired Fund, (b)
there are no material differences between the investment management agreements
(and sub-investment management agreements) of the Acquired Fund and the
Acquiring Fund, and (c) the Board of Trustees includes a majority of independent
Trustees who were elected by
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE E--COMBINATION--Continued
shareholders of the Acquired Fund. The combination of the Acquired Fund into the
Acquiring Fund took place at the close of business on September 13, 2002.
This combination provides for the transfer of substantially all of the
assets and liabilities of the target fund to the acquiring fund in exchange
solely for the fund shares of the acquiring fund. This acquisition was accounted
for as tax-free exchange as follows:
Trust Shares Target Fund Acquiring Fund Acquiring Fund
Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets
vs. Target Fund Acquiring Fund Net Assets Depreciation to Combination After Combination
- ---------------------- -------------- ----------- ------------ ---------------- --------------------
VST International
Opportunities vs. VST
International Opportu-
nites B (formerly,
International Equity) 3,278 $24,706 $(5,332) $71,914 $96,620
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the International Opportunities Fund
(a portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
International Opportunities Fund of John Hancock Variable Series Trust I at
December 31, 2003, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: March 29, 1986
- --------------------------------------------------------------------------------
Large Cap Growth Fund
Independence Investment LLC M. Lapman/J. Forelli
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 25.62% underperforming its benchmark, the
Russell 1000 Growth Index.
.. The Fund underperformed its benchmark primarily due to unfavorable stock
selection decisions, with sector allocation decisions modestly adding
value. Stock selection detracted especially within the technology sector.
.. The largest absolute performance contributors were exposures to companies
in the information technology and health care sectors. Within these
sectors, the largest contributors to performance were Intel, Cisco, Texas
Instruments, and Pfizer.
.. Conversely, Telecomm Service was the worst performing sector within the
Fund for the year. Specific stocks that detracted included Kraft, Kohl's
and Textron across various sectors.
.. The manager uses both fundamental equity research and quantitative
portfolio construction to identify stocks having both favorable valuations
and improving earnings growth prospects. The Fund is broadly diversified
across sectors with sector weights similar to the benchmark.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 12/31/93
(10-Year Period)
Large Cap Growth Fund Russell 1000(R) Growth Index
--------------------- ----------------------------
12/31/1993 $10,000 $10,290
1/31/1994 10,303 10,527
2/28/1994 9,984 10,336
3/31/1994 9,661 9,837
4/29/1994 9,851 9,883
5/31/1994 9,819 10,032
6/30/1994 9,672 9,736
7/29/1994 9,914 10,069
8/31/1994 10,261 10,630
9/30/1994 9,953 10,484
10/31/1994 10,048 10,732
11/30/1994 9,755 10,388
12/30/1994 9,901 10,563
1/31/1995 10,087 10,788
2/28/1995 10,469 11,240
3/31/1995 10,706 11,569
4/28/1995 10,970 11,823
5/31/1995 11,344 12,235
6/30/1995 11,534 12,707
7/31/1995 11,908 13,236
8/31/1995 11,999 13,251
9/29/1995 12,486 13,862
10/31/1995 12,343 13,871
11/30/1995 12,855 14,411
12/29/1995 13,034 14,493
1/31/1996 13,340 14,979
2/29/1996 13,497 15,253
3/29/1996 13,668 15,272
4/30/1996 13,898 15,674
5/31/1996 14,205 16,221
6/28/1996 14,189 16,244
7/31/1996 13,246 15,292
8/30/1996 13,669 15,687
9/30/1996 14,506 16,829
10/31/1996 14,613 16,930
11/29/1996 15,673 18,201
12/31/1996 15,416 17,844
1/31/1997 16,298 19,095
2/28/1997 16,419 18,965
3/31/1997 15,646 17,939
4/30/1997 16,473 19,130
5/30/1997 17,422 20,512
6/30/1997 18,112 21,332
7/31/1997 19,860 23,218
8/29/1997 18,871 21,860
9/30/1997 20,047 22,935
10/31/1997 19,239 22,087
11/28/1997 19,954 23,025
12/31/1997 20,178 23,283
1/31/1998 20,718 23,979
2/27/1998 22,678 25,783
3/31/1998 23,961 26,811
4/30/1998 24,143 27,181
5/29/1998 23,622 26,409
6/30/1998 24,795 28,026
7/31/1998 24,675 27,841
8/31/1998 20,811 23,662
9/30/1998 22,028 25,479
10/30/1998 23,688 27,528
11/30/1998 25,570 29,623
12/31/1998 28,151 32,295
1/29/1999 29,718 34,190
2/26/1999 28,287 32,628
3/31/1999 29,478 34,347
4/30/1999 29,913 34,392
5/28/1999 29,047 33,336
6/30/1999 31,211 35,670
7/30/1999 30,178 34,535
8/31/1999 30,350 35,098
9/30/1999 29,655 34,361
10/29/1999 31,393 36,955
11/30/1999 32,452 38,947
12/31/1999 34,927 42,998
1/31/2000 32,837 40,981
2/29/2000 33,874 42,985
3/31/2000 37,487 46,063
4/28/2000 36,214 43,870
5/31/2000 34,903 41,659
6/30/2000 36,922 44,817
7/31/2000 35,722 42,948
8/31/2000 39,208 46,835
9/29/2000 35,101 42,405
10/31/2000 34,057 40,399
11/30/2000 29,522 34,444
12/29/2000 28,680 33,355
1/31/2001 30,341 35,660
2/28/2001 25,487 29,605
3/30/2001 22,643 26,384
4/30/2001 25,757 29,722
5/31/2001 25,452 29,285
6/30/2001 24,921 28,605
7/31/2001 24,163 27,890
8/31/2001 22,415 25,609
9/28/2001 20,280 23,053
10/31/2001 21,509 24,263
11/30/2001 23,573 26,595
12/31/2001 23,650 26,544
1/31/2002 23,403 26,075
2/28/2002 22,453 24,993
3/30/2003 23,230 25,857
4/30/2002 21,775 23,747
5/31/2002 21,279 23,173
6/30/2002 19,445 21,029
7/31/2002 18,099 19,872
8/31/2002 18,162 19,932
9/28/2002 16,261 17,865
10/31/2002 17,627 19,503
11/30/2002 18,256 20,562
12/31/2002 17,070 19,142
1/31/2003 16,475 16,027
2/28/2003 16,473 15,599
3/30/2003 16,753 15,626
4/30/2003 17,857 17,001
5/31/2003 18,573 18,099
6/30/2003 18,670 18,325
7/31/2003 19,007 18,599
8/31/2003 19,572 18,889
9/28/2003 19,475 18,704
10/31/2003 20,690 19,848
11/30/2003 20,857 20,118
12/31/2003 21,444 21,357
Value on 12/31/03:
- ------------------
$21,444 Large Cap Growth Fund
$24,138 Russell 1000(R) Growth Index
MORNINGSTAR
CATEGORY+:
.. Large Growth
MORNINGSTAR
RISK +:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR
RATING+:
.. *** (VL/VUL)
.. *** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
General Electric Co. 6.0%
Pfizer, Inc. 5.6%
Microsoft Corp. 4.7%
Intel Corp. 4.7%
Cisco Systems, Inc. 3.5%
Texas Instruments, Inc. 2.5%
Home Depot, Inc. 2.5%
Dell, Inc. 2.0%
Amgen, Inc. 2.0%
Abbott Laboratories 2.0%
AVERAGE ANNUAL TOTAL RETURNS*
Large Cap Russell 1000(R)
Growth Fund Growth Index
----------- ---------------
1 Year 25.62% 29.76%
3 Years -9.24 -9.36
5 Years -5.30 -5.12
10 Years 7.93 9.21
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Information Technology 33.53%
Health Care 21.36%
Industrials 12.25%
Consumer Discretionary 11.61%
Financials 9.29%
Consumer Staples 8.90%
Energy 1.90%
Telecommunication
Services 0.75%
Materials 0.41%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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
additional risks associated with a nondiversified fund, as outlined in the
current prospectus. Performance would be lower if expenses and charges of
the separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 921 VL/VUL subaccounts and 1,733 VA subaccounts in the
Morningstar Large Growth category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $22,309 of
securities loaned (Note B)) ................................... $ 577,366
Net unrealized appreciation of investments ....................... 42,412
Short-term investments at value .................................. 32,028
---------
Total investments .......................................... 651,806
Receivable for dividends ...................................... 532
---------
Total assets ..................................................... 652,338
---------
LIABILITIES
Payables for:
Investments purchased ......................................... 3,884
Fund shares purchased ......................................... 767
Collateral for securities on loan ............................. 23,022
Other liabilities ............................................. 264
---------
Total liabilities ................................................ 27,937
---------
Net assets ....................................................... $ 624,401
=========
Shares of beneficial interest outstanding ........................ 44,736
---------
Net asset value per share ........................................ $ 13.96
=========
Composition of net assets:
Capital paid-in ............................................... $ 945,639
Accumulated net realized loss on investments,
futures and foreign currency transactions .................. (363,650)
Net unrealized appreciation of investments .................... 42,412
--------
Net assets ....................................................... $ 624,401
=========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31,2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ....................................................... $ 1,789
Dividends ...................................................... 5,698
Securities lending ............................................. 19
---------
Total investment income ........................................... 7,506
---------
EXPENSES
Investment advisory fee ........................................ 4,348
Auditors fees .................................................. 76
Custodian fees ................................................. 125
Fidelity Bond fees ............................................. 1
Legal fees ..................................................... 40
Printing & mailing fees ........................................ 76
Trustees' fees ................................................. 17
Other fees ..................................................... 22
---------
Total expenses .................................................... 4,705
Less custodian expense reduction offset by
commission recapture arrangement
(Note C) .................................................... (9)
---------
Net expenses ...................................................... 4,696
---------
Net investment income ............................................. 2,810
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments ............................... (28,345)
Change in unrealized appreciation on
investments ................................................. 144,822
---------
Net realized and unrealized gain .................................. 116,477
---------
Net increase in net assets resulting from
operations ..................................................... $ 119,287
=========
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- -------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ............................................ $ 2,810 $ 2,023
Net realized loss ................................................ (28,345) (121,609)
Change in net unrealized appreciation (depreciation) ............. 144,822 (90,461)
-------- ---------
Net increase (decrease) in net assets resulting from
operations ................................................. 119,287 (210,047)
Distributions to shareholders from:
Net investment income ............................................ (2,834) (2,023)
Realized gains ................................................... (830)
-------- ---------
Decrease in net assets resulting from distributions ........... (3,664) (2,023)
From fund share transactions:
Proceeds from shares sold ........................................ 78,014 76,521
Shares issued in reorganization .................................. 12,462
Distributions reinvested ......................................... 3,664 2,023
Payment for shares redeemed ...................................... (81,990) (140,761)
-------- ---------
Increase (decrease) in net assets from fund share
transactions. .............................................. 12,150 (62,217)
-------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ............................... 127,773 (274,287)
NET ASSETS
Beginning of Period .............................................. 496,628 770,915
-------- ---------
End of Period .................................................... $624,401 $ 496,628
======== =========
Analysis of fund share transactions:
Sold ............................................................. 5,685 5,775
Issued in reorganization ......................................... 1,083
Reinvested ....................................................... 285 155
Redeemed ......................................................... (6,731) (11,115)
-------- ---------
Net increase (decrease) in fund shares outstanding .................. 322 (5,185)
======== =========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Large Cap Growth Fund
-----------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- ---------- ----------
Net Assets Value at Beginning of Period .................. $ 11.18 $ 15.54 $ 18.89 $ 27.33 $ 26.19
Income from Investment Operations:
Net Investment Income ................................. 0.06 0.04 0.04 0.03 0.09
Net Realized and Unrealized Gain (Loss) on
Investments(a) ..................................... 2.80 (4.36) (3.36) (4.89) 6.03
-------- -------- -------- ---------- ----------
Total From Investment Operations ...................... 2.86 (4.32) (3.32) (4.86) 6.12
Less Distributions:
Distribution from Net Investment Income ............... (0.06) (0.04) (0.03) (0.04) (0.09)
Distribution from Net Realized Gains on
Investments ......................................... (0.02) (2.69) (4.89)
Distribution from Excess of Net Investment Income/Gains (0.78)
Distribution from Capital Paid-in ..................... (0.07)
-------- -------- -------- ---------- ----------
Total Distributions ................................... (0.08) (0.04) (0.03) (3.58) (4.98)
-------- -------- -------- ---------- ----------
Net Assets Value at End of Period ........................ $ 13.96 $ 11.18 $ 15.54 $ 18.89 $ 27.33
======== ======== ======== ========== ==========
Total Investment Return(b) ............................... 25.62% (27.82)% (17.54)% (17.89)% 24.07%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ..... 0.86%(d) 0.55% 0.41% 0.46% 0.39%
Ratio of Net Investment Income to Average Net Assets .. 0.51% 0.33% 0.23% 0.10% 0.33%
Portfolio Turnover Rate ............................... 99.47%(c) 95.04 63.96% 89.30% 37.42%
Net Assets End of Period (000s Omitted) .................. $624,401 $496,628 $770,915 $1,146,787 $1,382,473
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Excludes merger activity.
(d) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
Market
Name of Issuer Shares Value
-------------- --------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 0.8%
Boeing Co. * .......................................... 111,300 $ 4,690
Air Freight & Couriers - 0.4%
United Parcel Service, Inc. - Cl. B ................... 30,000 2,237
Beverages - 2.5%
Anheuser-Busch Cos., Inc. ............................. 100,000 5,268
PepsiCo, Inc. * ....................................... 223,800 10,434
-------
15,702
Biotechnology - 2.0%
Amgen, Inc. * ......................................... 198,900 12,292
Chemicals - 0.4%
Rohm & Haas Co ........................................ 58,900 2,516
Commercial Services & Supplies - 0.4%
Ceridian Corp. * ...................................... 113,400 2,375
Communications Equipment - 3.9%
Cisco Systems, Inc. * ................................. 900,000 21,861
Comverse Technology, Inc. * ........................... 140,600 2,473
-------
24,334
Computers & Peripherals - 9.6%
Dell, Inc. * .......................................... 367,400 12,477
EMC Corp. * ........................................... 767,600 9,917
Intel Corp. ........................................... 900,000 28,980
International Business Machines Corp. ................. 60,700 5,626
Network Appliance, Inc. * ............................. 142,000 2,915
-------
59,915
Diversified Financials - 4.4%
Capital One Financial Corp. ........................... 55,100 3,377
Citigroup, Inc. * ..................................... 136,900 6,645
Goldman Sachs Group, Inc. ............................. 69,000 6,812
Merrill Lynch & Co., Inc. * ........................... 128,500 7,537
Wells Fargo & Co. * ................................... 55,900 3,292
-------
27,663
Diversified Telecommunication Services - 0.7%
Nextel Communications, Inc. - Cl. A * ................. 165,100 4,633
Electrical Equipment - 1.6%
United Technologies Corp. * ........................... 107,900 10,226
Electronic Equipment & Instruments - 0.6%
Sanmina Corp. * ....................................... 273,200 3,445
Energy Equipment & Services - 0.7%
Halliburton Co. * ..................................... 167,700 4,360
Food & Drug Retailing - 0.5%
Whole Foods Market, Inc. * ............................ 42,100 2,826
Health Care Equipment & Supplies - 3.4%
Boston Scientific Corp. * ............................. 135,800 4,992
Guidant Corp .......................................... 86,000 5,177
Medtronic, Inc. * ..................................... 43,000 2,091
St. Jude Medical, Inc. * .............................. 58,600 3,595
Zimmer Holdings, Inc. * ............................... 80,500 $ 5,667
-------
21,522
Health Care Providers & Services - 3.6%
Anthem, Inc. * ........................................ 100,900 7,567
PacifiCare Health Systems, Inc. * ..................... 81,200 5,489
UnitedHealth Group, Inc. * ............................ 55,000 3,200
Wellpoint Health Networks, Inc. * ..................... 61,900 6,004
-------
22,260
Hotels Restaurants & Leisure - 0.4%
International Game Technology * ....................... 77,300 2,760
Household Products - 1.5%
Procter & Gamble Co. * ................................ 96,100 9,598
Industrial Conglomerates - 9.0%
3M Co. ................................................ 140,000 11,904
General Electric Co. * ................................ 1,192,000 36,928
Tyco International, Ltd. * ............................ 278,700 7,386
-------
56,218
Insurance - 3.1%
American International Group, Inc. * .................. 82,400 5,461
Everest Re Group, Ltd ................................. 35,400 2,995
Hartford Financial Services Group,
Inc. * .............................................. 49,400 2,916
Metlife, Inc. * ....................................... 150,000 5,051
Progressive Corp. ..................................... 38,300 3,201
-------
19,624
Internet & Catalog Retail - 0.4%
eBay, Inc. * .......................................... 34,600 2,235
IT Consulting & Services - 2.3%
Accenture, Ltd. - Cl. A * ............................. 301,200 7,928
Computer Sciences Corp. * ............................. 73,000 3,229
Electronic Data Systems Corp. * ....................... 67,200 1,649
SunGard Data Systems, Inc. * .......................... 44,300 1,227
-------
14,033
Machinery - 0.4%
Danaher Corp. * ....................................... 27,700 2,541
Media - 4.7%
Clear Channel Communications, Inc. .................... 52,400 2,454
Comcast Corp. - Cl. A ................................. 269,200 8,849
Interactive Corp ...................................... 113,800 3,861
Omnicom Group, Inc .................................... 51,000 4,454
The Walt Disney Co. * ................................. 186,300 4,346
Time Warner, Inc. * ................................... 296,000 5,325
-------
29,289
Multiline Retail - 2.3%
BJ's Wholesale Club, Inc. * ........................... 138,300 3,175
Wal-Mart Stores, Inc. * ............................... 209,500 11,114
-------
14,289
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
Market
Name of Issuer Shares Value
-------------- --------- --------
(000's)
COMMON STOCK - Continued
Oil & Gas - 1.2%
Murphy Oil Corp ................................... 61,000 $ 3,984
Newfield Exploration Co. * ........................ 77,600 3,456
--------
7,440
Personal Products - 0.9%
Avon Products,Inc ................................. 86,800 5,858
Pharmaceuticals - 12.2%
Abbott Laboratories * ............................. 260,200 12,125
Johnson & Johnson ................................. 218,500 11,288
Merck & Co., Inc. * ............................... 170,100 7,859
Pfizer, Inc. * .................................... 985,800 34,828
Watson Pharmaceuticals, Inc. * .................... 95,700 4,402
Wyeth * ........................................... 137,200 5,824
--------
76,326
Semiconductor Equipment & Products - 6.6%
Analog Devices, Inc. * ............................ 80,300 3,666
Applied Materials, Inc. * ......................... 295,700 6,638
Maxim Integrated Products, Inc. * ................. 56,400 2,809
Novellus Systems, Inc. * .......................... 151,000 6,349
QLogic Corp. * .................................... 124,600 6,429
Texas Instruments, Inc. * ......................... 527,900 15,510
--------
41,401
Software - 8.2%
Electronic Arts, Inc. * ........................... 170,300 8,137
Mercury Interactive Corp. * ....................... 57,100 2,778
Microsoft Corp. * ................................. 1,056,800 29,104
Symantec Corp. * .................................. 79,800 2,765
Veritas Software Corp. * .......................... 218,200 8,108
--------
50,892
Specialty Retail - 5.1%
Best Buy Co., Inc. * .............................. 63,300 3,307
Home Depot, Inc. * ................................ 432,700 15,357
Kohl's Corp. * .................................... 60,000 2,696
Lowe's Cos., Inc. * ............................... 89,400 4,952
Staples, Inc. * ................................... 112,600 3,074
Tiffany & Co. * ................................... 53,700 2,427
--------
31,813
Textiles & Apparel - 0.9%
Coach, Inc. * ..................................... 88,700 3,349
Nike, Inc. - Cl. B ................................ 36,900 2,526
--------
5,875
Tobacco - 1.1%
Altria Group, Inc ................................. 126,300 6,873
Trading Companies & Distributors - 1.8%
CDW Corp .......................................... 197,300 11,396
U.S. Government Agencies - 1.7%
Federal National Mortgage Assoc. * ................ 137,500 10,321
--------
TOTAL COMMON STOCK- ............................ 99.3% 619,778
INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED
SECURITIES - 3.7%
State Street Navigator Securities
Lending Portfolio .............................. $ 23,022 $ 23,022
SHORT-TERM INVESTMENTS - 1.4%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ............................ 9,006 9,006
--------- --------
TOTAL INVESTMENTS- .................... 104.4% 651,806
Payables, less cash and receivables- ........ (4.4)% (27,405)
--------- --------
NET ASSETS- ........................ 100.0% $624,401
========= ========
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Large Cap Growth Fund (the "Fund") is a diversified series of
John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $ 29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Mortgage Int. Networking, 0.98%, due 01/02/04 $ 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$22,309 $23,022
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $197,757, $128,244 and $35,226 which expire in 2009, 2010 and 2011,
respectively.
Certain of the above losses may be limited under sections 382 - 384 of the
Internal Revenue Code, as amended.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $12. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$500 Million and Excess Over
First $500 Million $1 Billion $1 Billion
- ------------------ ---------------- -----------
0.80% 0.75% 0.70%
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. For the year
ended December 31, 2003, there were no reimbursements paid to the Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $9.
John Hancock has entered into a Sub-Advisory Agreement with Independence
Investment LLC, with respect to the Fund. Independence Investment LLC is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$493,924 $482,979
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$611,816 $66,331 $(26,341) $39,990
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
States of America. As a result, net investment income (loss) and net realized
gain (loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $361,227 $39,990
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions
from Ordinary Distributions from
Year Income Long-Term Capital Gain Return of Capital
- ---- ------------- ---------------------- -----------------
2003 $1,489 $-- $2,175
2002 2,023 -- --
NOTE E--COMBINATION
On April 25, 2003, the shareholders of the Fund (acquiring fund) approved
the combination of the funds in the following table:
Acquiring Fund Target Fund
- -------------------- -------------
VST Large Cap Growth VA Technology
These combinations provide for the transfer of substantially all of the
assets and liabilities of the target funds to the acquiring funds in exchange
solely for the fund shares of the acquiring funds. The acquisitions were
accounted for as tax-free exchanges as follows:
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE E--COMBINATION--Continued
Trust Shares Target Fund Acquiring Fund Acquiring Fund
Acquiring Fund Issued by Target Fund Unrealized Net Assets Prior Aggregate Net Assets
vs. Target Fund Acquiring Fund Net Assets Depreciation to Combination After Combination
- --------------- -------------- ----------- ------------ ---------------- --------------------
VST Large Cap
Growth vs.
VA Technology 1,083 $12,462 $(8,081) $504,397 $516,859
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist,
c/o John Hancock Variable Series Dana-Farber Cancer Institute;
Trust I President, The Advertising
John Hancock Place Club of Greater Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director,
c/o John Hancock Variable Series Massachusetts Council of
Trust I Churches
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief Executive
c/o John Hancock Variable Series Officer, East Boston Savings
Trust I Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and
c/o John Hancock Variable Series Graduate Dean, The Graduate
Trust I School of the Wallace G.
John Hancock Place Carroll School of Management,
Boston, Massachusetts 02117 Boston College
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Large Cap Growth Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Large Cap Growth Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: August 31, 1999
- --------------------------------------------------------------------------------
Large Cap Growth B Fund (FORMERLY LARGE CAP AGGRESSIVE GROWTH FUND)
Independence Investment LLC M. Lapman/J. Forelli
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 31.72%, outperforming its benchmark, the Russell
1000 Growth Index.
.. Independence Investment LLC assumed management of the Fund effective
December 15th. Independence implemented an investment strategy for the Fund
that is substantially the same as the investment strategy it now employs
for the Large Cap Growth Fund. Under that strategy, the Fund will invest
primarily in large cap growth stocks.
.. The Fund outperformed its benchmark primarily due to favorable stock
selection and sector allocation decisions. Stock selection was most
favorable in the health care and industrial sectors, while the Fund's
underweight to health care was also a major contributor.
.. The Fund's exposure to information technology was the largest contributor
to absolute performance.
.. The manager uses both fundamental equity research and quantitative
portfolio construction to identify stocks having both favorable valuations
and improving earnings growth prospects. The Fund is broadly diversified
across sectors with sector weights similar to the benchmark.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Large Cap Growth B Fund Russell 1000 (R) Growth Index
----------------------- ------------------------------
8/31/1999 $10,001.40 $10,000.00
9/30/1999 9,947.52 9,790.00
10/31/1999 10,811.20 10,529.15
11/30/1999 11,047.17 11,096.67
12/31/1999 12,017.99 12,250.72
1/31/2000 11,465.11 11,676.16
2/29/2000 11,568.56 12,247.12
3/31/2000 12,833.21 13,124.02
4/30/2000 12,363.75 12,499.32
5/31/2000 11,692.21 11,869.35
6/30/2000 12,284.41 12,769.05
7/31/2000 12,150.59 12,236.58
8/31/2000 12,933.21 13,343.99
9/30/2000 11,513.32 12,081.65
10/31/2000 11,116.10 11,510.18
11/30/2000 9,841.28 9,813.58
12/31/2000 9,761.80 9,503.47
1/31/2001 10,390.26 10,160.16
2/28/2001 8,771.05 8,434.97
3/31/2001 8,017.74 7,517.24
4/30/2001 8,817.90 8,468.18
5/31/2001 8,853.13 8,343.69
6/30/2001 8,515.21 8,150.12
7/31/2001 8,402.89 7,946.37
8/31/2001 7,741.86 7,296.35
9/30/2001 7,248.77 6,568.18
10/31/2001 7,531.95 6,913.01
11/30/2001 8,238.03 7,577.35
12/31/2001 8,327.36 7,562.95
1/31/2002 7,936.86 7,429.09
2/28/2002 7,563.94 7,120.78
3/31/2002 7,929.30 7,367.16
4/31/2002 7,322.94 6,766.00
5/31/2002 7,179.37 6,602.26
6/30/2002 6,687.27 5,991.55
7/31/2002 6,147.79 5,662.02
8/31/2002 6,250.92 5,679.00
9/30/2002 5,663.67 5,090.09
10/31/2002 6,044.57 5,556.85
11/30/2002 6,158.35 5,858.59
12/31/2002 5,715.74 5,453.76
1/31/2003 5,553.20 5,321.23
2/28/2003 5,439.76 5,296.76
3/31/2003 5,649.72 5,395.27
4/31/03 6,138.57 5,793.99
5/31/2003 6,391.43 6,083.11
6/30/2003 6,360.32 6,167.05
7/31/2003 6,591.88 6,320.61
8/31/2003 6,835.05 6,478.00
9/30/2003 6,619.93 6,408.68
10/31/2003 7,167.02 6,768.85
11/30/2003 7,268.73 6,839.92
12/31/2003 7,528.86 7,076.58
Value on 12/31/2003
$7,529 Large Cap Growth B Fund
$7,077 Russell 1000 (R) Growth Index
MORNINGSTAR
CATEGORY+:
.. Large Growth
MORNINGSTAR
RISK+:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR
RATING+:
.. ****(VL/VUL)
.. ****(VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
General Electric Co. 5.7%
Pfizer, Inc. 5.6%
Microsoft Corp. 4.8%
Intel Corp. 4.6%
Cisco Systems, Inc. 3.5%
Home Depot, Inc. 2.7%
Texas Instruments, Inc. 2.4%
Amgen, Inc. 2.0%
Dell, Inc. 2.0%
Abbott Laboratories 1.9%
AVERAGE ANNUAL TOTAL RETURNS*
Large Cap Russell 1000(R)
Growth B Fund Growth Index
------------- ---------------
1 Year 31.72% 29.76%
3 Years -8.29 -9.36
Since Inception (8/31/99) -6.33 -7.67
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Information Technology 33.63%
Health Care 20.88%
Industrials 12.66%
Consumer Discretionary 11.47%
Consumer Staples 8.97%
Financials 9.51%
Energy 1.75%
Telecommunication
Services 0.72%
Materials 0.41%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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 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. There are
additional risks associated with a nondiversified fund, as outlined in the
current prospectus. Performance would be lower if expenses and charges of
the separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 921 VL/VUL subaccounts and 1,733 VA subaccounts in the
Morningstar Large Growth category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ...................................... $ 28,593
Net unrealized appreciation of investments ......................... 1,985
Short-term investments at value .................................... 26
--------
Total investments ............................................ 30,604
Cash ............................................................... 95
Foreign currency at value (cost $386) .............................. 390
Receivable for:
Dividends ....................................................... 26
--------
Total assets ....................................................... 31,115
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 180
Fund shares purchased ........................................... 3
Other liabilities ............................................... 13
--------
Total liabilities .................................................. 196
--------
Net assets ......................................................... $ 30,919
========
Shares of beneficial interest outstanding .......................... 4,863
--------
Net asset value per share .......................................... $ 6.36
========
Composition of net assets:
Capital paid-in ................................................. $ 44,162
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (15,232)
Net unrealized appreciation of:
Investments .................................................. 1,985
Translation of assets and liabilities in foreig
currencies ................................................ 4
--------
Net assets ......................................................... $ 30,919
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 5
Dividends ..................................................... 234
Securities lending ............................................ 1
------
Total investment income ............................................. 240
------
EXPENSES
Investment advisory fee ....................................... 235
Auditors fees ................................................. 4
Custodian fees ................................................ 10
Legal fees .................................................... 2
Printing & mailing fees ....................................... 7
Trustees' fees ................................................ 1
Other fees .................................................... 2
------
Total expenses ...................................................... 261
Less expenses reimbursed ...................................... (1)
------
Net expenses ........................................................ 260
------
Net investment loss ................................................. (20)
------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments .............................. 2,092
Change in unrealized appreciation on:
Investments ................................................... 5,299
Translation of assets and liabilities in foreign
currencies ................................................. 4
------
Net realized and unrealized gain .................................... 7,395
------
Net increase in net assets resulting from
operations ....................................................... $7,375
======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ -------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ................................................ $ (20) $ (46)
Net realized gain (loss) ........................................... 2,092 (10,039)
Change in net unrealized appreciation (depreciation) ............... 5,303 (2,376)
------- --------
Net increase (decrease) in net assets resulting from operations.. 7,375 (12,461)
Distributions to shareholders from:
Realized gains ..................................................... (4,077)
-------
Decrease in net assets resulting from distributions.............. (4,077)
From fund share transactions:
Proceeds from shares sold .......................................... 6,187 7,724
Distributions reinvested ........................................... 4,077
Payment for shares redeemed ........................................ (6,892) (10,752)
------- --------
Increase (decrease) in net assets from fund share transactions... 3,372 (3,028)
------- --------
NET INCREASE (DECREASE) IN NET ASSETS ................................. 6,670 (15,489)
NET ASSETS
Beginning of Period ................................................ 24,249 39,738
------- --------
End of Period ...................................................... $30,919 $ 24,249
======= ========
Analysis of fund share transactions:
Sold ............................................................... 991 1,161
Reinvested ......................................................... 649
Redeemed ........................................................... (1,129) (1,704)
------- --------
Net increase (decrease) in fund shares outstanding .................... 511 (543)
======= ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Large Cap Growth B Fund
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
Period from
August 31, to
December 31,
2003(g) 2002 2001 2000 1999(f)
------- ------- ------- ------- -------------
Net Assets Value at Beginning of Period ................. $ 5.57 $ 8.12 $ 9.52 $ 11.94 $ 10.00
Income from Investment Operations:
Net Investment Income (Loss) ......................... (h) 0.01) 0.01 (0.03) (0.01)
Net Realized and Unrealized Gain (Loss) on
Investments(a) .................................... 1.76 (2.54) (1.41) (2.21) 2.03
------- ------- ------- ------- -------
Total From Investment Operations ..................... 1.76 (2.55) (1.40) (2.24) 2.02
Less Distributions:
Distribution from Net Realized Gains on Investments... (0.97) (0.01) (0.08)
Distribution from Excess of Net Investment Income/
Gains ............................................. (0.06)
Distribution from Capital Paid-in .................... (0.11)
------- ------- -------
Total Distributions .................................. (0.97) (0.18) (0.08)
------- ------- ------- ------- -------
Net Assets Value at End of Period ....................... $ 6.36 $ 5.57 $ 8.12 $ 9.52 $ 11.94
======= ======= ======= ======= =======
Total Investment Return(b) .............................. 31.72% (31.36)% (14.69)% (18.77)% 20.18%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets .... 0.99%(e) 0.97%(e) 0.97%(e) 1.00%(e) 1.08%(d)(e)
Ratio of Net Investment Loss to Average Net Assets ... (0.08)% (0.14)% (0.06)% (0.37)% (0.39)%(d)
Portfolio Turnover Rate .............................. 220.12% 61.67% 87.90% 75.97% 18.97%(c)
Net Assets End of Period (000s Omitted) ................. $30,919 $24,249 $39,738 $26,244 $15,074
(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 fluctuating
market values of the portfolio.
(b) The performance 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 expense ratio would have been .99%, .98%, 1.06%, 1.05%, and
1.17% for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
(f) Commencement of operations.
(g) The Fund entered into a new sub-advisory agreement with Independence during
the period shown.
(h) Amount is less than $0.01.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP GROWTH B FUND
Market
Name of Issuer Shares Value
-------------- ------ ------
(000's)
COMMON STOCK
Aerospace & Defense - 1.2%
Boeing Co. * ............................................. 7,000 $ 295
Rockwell Collins, Inc. * ................................. 2,100 63
------
358
Air Freight & Couriers - 0.3%
United Parcel Service, Inc. - Cl. B ...................... 1,200 89
Banks - 0.5%
Bank of New York Co., Inc ................................ 4,600 152
Beverages - 2.4%
Anheuser-Busch Cos., Inc ................................. 4,600 242
PepsiCo, Inc. * .......................................... 10,800 504
------
746
Biotechnology - 1.9%
Amgen, Inc. * ............................................ 9,700 599
Chemicals - 0.4%
Rohm & Haas Co ........................................... 2,900 124
Commercial Services & Supplies - 0.4%
Ceridian Corp. * ......................................... 5,300 111
Communications Equipment - 3.9%
Cisco Systems, Inc. * .................................... 43,900 1,066
Comverse Technology, Inc. * .............................. 6,900 122
------
1,188
Computers & Peripherals - 9.7%
Dell, Inc. * ............................................. 17,600 598
EMC Corp. * .............................................. 40,600 524
Intel Corp ............................................... 43,900 1,414
International Business Machines Corp ..................... 3,500 324
Network Appliance, Inc. * ................................ 6,900 142
------
3,002
Diversified Financials - 4.6%
Capital One Financial Corp ............................... 2,600 159
Citigroup, Inc. * ........................................ 7,000 340
Goldman Sachs Group, Inc ................................. 4,100 405
Merrill Lynch & Co., Inc. * .............................. 6,100 358
Wells Fargo & Co. * ...................................... 2,700 159
------
1,421
Diversified Telecommunication Services - 0.7%
Nextel Communications, Inc. - Cl. A * .................... 7,900 222
Electrical Equipment - 1.6%
United Technologies Corp. * .............................. 5,200 493
Electronic Equipment & Instruments - 0.6%
Sanmina Corp. * .......................................... 14,000 177
Energy Equipment & Services - 0.5%
Halliburton Co. * ........................................ 6,100 159
Food & Drug Retailing - 0.4%
Whole Foods Market, Inc. * ............................... 2,000 134
Health Care Equipment & Supplies - 3.2%
Boston Scientific Corp. * ................................ 8,100 $ 298
Guidant Corp ............................................. 4,100 247
St. Jude Medical, Inc. * ................................. 2,800 172
Zimmer Holdings, Inc. * .................................. 3,900 274
------
991
Health Care Providers & Services - 3.5%
Anthem, Inc. * ........................................... 4,800 360
DaVita, Inc. * ........................................... 3,700 144
PacifiCare Health Systems, Inc. * ........................ 3,900 263
UnitedHealth Group, Inc. * ............................... 1,800 105
Wellpoint Health Networks, Inc. * ........................ 2,100 204
------
1,076
Hotels Restaurants & Leisure - 0.5%
International Game Technology * .......................... 4,400 157
Household Products - 1.5%
Procter & Gamble Co. * ................................... 4,700 469
Industrial Conglomerates - 8.7%
3M Co .................................................... 7,000 595
General Electric Co. * ................................... 56,200 1,742
Tyco International, Ltd. * ............................... 13,400 355
------
2,692
Insurance - 2.7%
American International Group, Inc. * ..................... 4,200 278
Everest Re Group, Ltd .................................... 1,700 144
Hartford Financial Services Group, Inc. * ................ 2,400 141
Metlife, Inc. * .......................................... 3,500 118
Progressive Corp ......................................... 1,900 159
------
840
IT Consulting & Services - 2.2%
Accenture, Ltd. - Cl. A * ................................ 14,500 381
Computer Sciences Corp. * ................................ 3,500 155
Electronic Data Systems Corp. * .......................... 6,100 150
------
686
Machinery - 0.8%
Danaher Corp. * .......................................... 2,600 239
Media - 4.6%
Clear Channel Communications, Inc ........................ 2,500 117
Comcast Corp. - Cl. A .................................... 12,900 424
Interactive Corp ......................................... 5,500 187
Omnicom Group, Inc ....................................... 1,800 157
The Walt Disney Co. * .................................... 11,900 278
Time Warner, Inc. * ...................................... 14,200 255
------
1,418
Multiline Retail - 2.4%
BJ's Wholesale Club, Inc. * .............................. 8,800 202
Wal-Mart Stores, Inc. * .................................. 10,100 536
------
738
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP GROWTH B FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Oil & Gas - 1.2%
Murphy Oil Corp ......................................... 2,900 $ 189
Newfield Exploration Co. * .............................. 4,200 187
-------
376
Personal Products - 0.9%
Avon Products, Inc ...................................... 4,300 290
Pharmaceuticals - 12.0%
Abbott Laboratories * ................................... 12,800 597
Johnson & Johnson ....................................... 10,400 537
Merck & Co., Inc. * ..................................... 8,300 383
Pfizer, Inc. * .......................................... 48,200 1,703
Watson Pharmaceuticals, Inc. * .......................... 4,700 216
Wyeth * ................................................. 6,600 280
-------
3,716
Semiconductor Equipment & Products - 6.6%
Analog Devices, Inc. * .................................. 3,900 178
Applied Materials, Inc. * ............................... 14,200 319
Maxim Integrated Products, Inc. * ....................... 3,800 189
Novellus Systems, Inc. * ................................ 7,300 307
QLogic Corp. * .......................................... 6,000 310
Texas Instruments, Inc. * ............................... 25,400 746
-------
2,049
Software - 8.3%
Electronic Arts, Inc. * ................................. 8,400 401
Mercury Interactive Corp. * ............................. 3,500 170
Microsoft Corp. * ....................................... 53,000 1,460
Symantec Corp. * ........................................ 3,900 135
Veritas Software Corp. * ................................ 10,400 387
-------
2,553
Specialty Retail - 5.3%
Best Buy Co., Inc. * .................................... 3,000 157
Home Depot, Inc. * ...................................... 23,500 834
Kohl's Corp. * .......................................... 3,500 157
Lowe's Cos., Inc. * ..................................... 4,300 238
Staples, Inc. * ......................................... 5,400 147
Tiffany & Co. * ......................................... 2,600 118
-------
1,651
Textiles & Apparel - 0.9%
Coach, Inc. * ........................................... 4,200 159
Nike, Inc. - Cl. B ...................................... 1,800 123
-------
282
Tobacco - 1.2%
Altria Group, Inc ....................................... 6,700 365
Trading Companies & Distributors - 1.7%
CDW Corp ................................................ 9,000 520
U.S. Government Agencies - 1.6%
Federal National Mortgage Assoc. * ...................... 6,600 495
-------
TOTAL COMMON STOCK- .................................. 98.9% 30,578
SHORT-TERM INVESTMENTS - 0.1%
Investment in joint trading account (Note B)
1.061% due 01/02/04 .................................. $ 26 $ 26
------ -------
TOTAL INVESTMENTS- ................................... 99.0% 30,604
Cash and Receivables, less payables- .............. 1.0% 315
------ -------
NET ASSETS- .................................... 100.0% $30,919
====== =======
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Large Cap Growth B Fund, (formerly Large Cap Aggressive
Growth), (the "Fund") is a diversified series of John Hancock Variable Series
Trust I (the "Trust"), an open-end investment management company registered
under the Investment Company Act of 1940. The Trust is organized as a
Massachusetts business trust and consists of thirty different funds as of
December 31, 2003. The results of this Fund are included in this report. The
results of the other Funds in the Trust are presented under separate cover. 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 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 $ 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund borrowings under the line of credit during the year ended December
31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$90 1.84% $--
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $5,580 and $9,628 which expire in 2009 and 2010, respectively.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $3. Realized gains
and losses from security transactions are determined on the basis of identified
cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$10 Million and Excess Over
First $10 Million $20 Million $20 Million
- ----------------- --------------- -----------
1.00% 0.875% 0.75%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $1 to the Fund.
As of December 15, 2003, John Hancock has entered into a Sub-Advisory
Agreement with Janus Capital Corp., with respect to the Fund. Janus Capital
Corp. is an affiliate of John Hancock, and under its supervision, is responsible
for the day-to-day investment management of the Fund.
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,
JHV-LAS, 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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$56,914 $57,665
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$28,642 $2,005 $(44) $1,961
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term- Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- -------------- ------------- --------------
$-- $-- $15,208 $1,961
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $822 $-- $3,255
2002 -- -- --
Included in the Fund's 2003 distributions from ordinary income is $822 in
excess of investment company taxable income, which in accordance with applicable
US tax law, is taxable to shareholders as ordinary income distributions.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ----------------------------- ------------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Large Cap Growth B Fund (formerly,
Large Cap Aggressive Growth Fund) (a portfolio included in the series of John
Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2003, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Large Cap Growth B Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1996
- --------------------------------------------------------------------------------
Large Cap Value Fund
T. Rowe Price Associates, Inc. Brian C. Rogers
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 25.51% underperforming its benchmark, the
Russell 1000 Value Index.
.. The Fund underperformed its benchmark due to both unfavorable stock
selection and sector allocation decisions. The allocation to cash was the
biggest detractor to relative returns, followed by an overweight to health
care, and an underweight to financials.
.. The Fund's exposure to financials was the largest contributor to absolute
performance followed by consumer discretionary. The only detractor to
absolute returns was the Fund's exposure to the telecommunications services
sector; all other sectors had positive absolute returns.
.. The top and bottom contributors to absolute returns came from a variety of
sectors. FleetBoston Financial was among the top performers, gaining
significantly on fourth-quarter news that it would be taken over by Bank of
America. McDonald's Corp. also contributed strongly, gaining nearly 57% for
the year, as did the cyclically sensitive Cooper Industries Ltd., which
climbed approximately 64%. The main detractors included Schering Plough and
Merck & Co.
.. The portfolio continues to overweight Consumer Discretionary stocks (18% of
the portfolio versus 12% of Index) as well as the Industrials & Business
Services sector (14% versus 8%), while significantly underweighting the
Financials sector (18% versus 35%) as the manager's diversified approach
will prevent such a concentration in any single sector.
.. The Fund employs a bottom-up, value-oriented investment approach, focusing
on companies with an above-average dividend yield and low P/E ratios. The
Fund's sector allocations are broadly diversified but are primarily driven
by stock selection.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Large Cap Value Fund Russell 1000(R) Value Index
-------------------- ---------------------------
5/01/1996 $10,000.00 $10,000.00
5/31/1996 10,190.10 10,125.00
6/30/1996 10,255.44 10,133.10
7/31/1996 9,976.73 9,750.07
8/31/1996 10,186.40 10,028.92
9/30/1996 10,618.31 10,428.07
10/31/1996 10,859.97 10,831.64
11/30/1996 11,451.49 11,616.93
12/31/1996 11,390.49 11,468.24
1/31/1997 11,698.63 12,024.44
2/28/1997 11,978.55 12,201.20
3/31/1997 11,723.70 11,761.96
4/30/1997 12,015.78 12,255.96
5/31/1997 12,581.98 12,941.07
6/30/1997 13,059.33 13,496.24
7/31/1997 13,805.38 14,511.16
8/31/1997 13,446.75 13,994.56
9/30/1997 14,081.22 14,839.84
10/31/1997 13,702.79 14,425.80
11/30/1997 14,220.24 15,063.42
12/31/1997 14,643.15 15,503.28
1/31/1998 14,538.38 15,283.13
2/28/1998 15,249.44 16,311.68
3/31/1998 15,953.52 17,309.96
4/30/1998 15,868.52 17,425.94
5/31/1998 15,597.70 17,168.03
6/30/1998 15,560.91 17,387.78
7/31/1998 15,106.21 17,081.76
8/31/1998 13,634.12 14,539.99
9/30/1998 14,372.95 15,374.59
10/31/1998 15,260.79 16,566.12
11/30/1998 15,883.54 17,338.10
12/31/1998 15,998.55 17,927.60
1/31/1999 15,599.14 18,071.02
2/28/1999 15,469.51 17,816.21
3/31/1999 15,888.98 18,185.01
4/30/1999 17,600.38 19,883.49
5/31/1999 17,468.51 19,664.77
6/30/1999 17,931.74 20,235.05
7/31/1999 17,537.40 19,642.16
8/31/1999 17,002.92 18,913.44
9/30/1999 16,393.18 18,251.47
10/31/1999 16,973.31 19,302.75
11/30/1999 16,677.76 19,152.19
12/31/1999 16,523.23 19,244.12
1/31/2000 15,751.49 18,616.76
2/29/2000 14,460.48 17,233.54
3/31/2000 16,066.35 19,336.03
4/30/2000 16,208.49 19,111.73
5/31/2000 16,986.85 19,312.41
6/30/2000 16,140.25 18,429.83
7/31/2000 16,307.88 18,660.20
8/31/2000 17,099.71 19,697.71
9/30/2000 17,217.75 19,878.93
10/31/2000 18,042.94 20,367.95
11/30/2000 17,844.82 19,612.30
12/31/2000 18,666.73 20,594.87
1/31/2001 18,862.89 20,675.19
2/28/2001 18,596.01 20,100.42
3/31/2001 18,091.65 19,390.88
4/30/2001 18,860.08 20,341.03
5/31/2001 19,493.18 20,798.71
6/30/2001 19,103.75 20,336.97
7/31/2001 19,164.93 20,294.27
8/31/2001 18,812.38 19,480.47
9/30/2001 17,549.96 18,109.04
10/31/2001 17,546.13 17,953.30
11/30/2001 18,572.03 18,996.39
12/31/2001 18,899.46 19,442.81
1/31/2002 18,870.94 19,293.10
2/28/2002 19,144.78 19,323.96
3/31/2002 19,743.81 20,237.99
4/30/2002 19,186.34 19,543.83
5/31/2002 19,398.10 19,641.54
6/30/2002 18,171.39 18,514.12
7/31/2002 16,595.03 16,792.31
8/31/2002 16,777.86 16,919.93
9/30/2002 15,032.73 15,038.43
10/31/2002 15,969.11 16,152.78
11/30/2002 17,101.17 17,170.41
12/31/2002 16,396.69 16,425.21
1/31/2003 15,658.57 16,027.72
2/28/2003 15,364.89 15,599.78
3/31/2003 15,394.86 15,626.30
4/30/2003 16,749.60 17,001.41
5/31/2003 17,810.41 18,099.70
6/30/2003 17,971.17 18,325.95
7/31/2003 18,077.87 18,599.01
8/31/2003 18,396.79 18,889.15
9/30/2003 18,230.43 18,704.04
10/31/2003 19,145.32 19,848.73
11/30/2003 19,235.03 20,118.67
12/31/2003 20,579.04 21,357.98
Value on 12/31/03:
- ------------------
$20,579 Large Cap Value Fund
$21,358 Russell 1000(R) Value Index
MORNINGSTAR
CATEGORY+:
.. Large Value
MORNINGSTAR
RISK+:
.. Below Average (VL/VUL)
.. Below Average (VA)
MORNINGSTAR
RATING +:
.. ***** (VL/VUL)
.. ***** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
ExxonMobil Corp. 2.1%
ChevronTexaco Corp. 1.9%
Merck & Co., Inc. 1.9%
Honeywell International, Inc. 1.8%
Bristol-Myers Squibb Co. 1.7%
General Electric Co. 1.6%
Verizon Communications 1.6%
FleetBoston Financial Corp. 1.5%
Cooper Industries, Ltd. 1.5%
Bank One Corp. 1.5%
AVERAGE ANNUAL TOTAL RETURNS*
Large Cap Russell 1000(R)
Value Fund Value Index
---------- ---------------
1 Year 25.51% 30.03%
3 Years 3.30 1.22
5 Years 5.16 3.56
Since Inception(5/1/96) 9.86 10.40
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Financials 19.20%
Consumer Discretionary 18.34%
Industrials 14.24%
Energy 10.06%
Health Care 9.99%
Consumer Staples 7.01%
Materials 6.57%
Telecommunication Services 5.65%
Utilities 4.54%
Information Technology 4.39%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 538 VL/VUL subaccounts and 1,013 VA subaccounts in the
Morningstar Large Value category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $9,631 of
securities loaned (Note B)) ..................................... $325,767
Net unrealized appreciation of investments ......................... 28,538
Short-term investments at value .................................... 21,768
--------
Total investments ............................................ 376,073
Receivable for:
Investments sold ................................................ 103
Interest ........................................................ 51
Dividends ....................................................... 916
--------
Total assets ....................................................... 377,143
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 1,109
Fund shares purchased ........................................... 454
Collateral for securities on loan ............................... 9,918
Other liabilities ............................................... 99
--------
Total liabilities .................................................. 11,580
--------
Net assets ......................................................... $365,563
========
Shares of beneficial interest outstanding .......................... 25,277
--------
Net asset value per share .......................................... $ 14.46
========
Composition of net assets:
Capital paid-in ................................................. 337,409
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (507)
Undistributed net investment income ............................. 123
Net unrealized appreciation of investments ...................... 28,538
--------
Net assets ......................................................... $365,563
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest .................................................... $ 166
Dividends ................................................... 7,715
Securities lending .......................................... 20
--------
Total investment income ........................................... 7,901
--------
EXPENSES
Investment advisory fee ..................................... 2,242
Auditors fees ............................................... 40
Custodian fees .............................................. 93
Legal fees .................................................. 20
Printing & mailing fees ..................................... 24
Trustees' fees .............................................. 9
Other fees .................................................. 13
--------
Total expenses .................................................... 2,441
Less custodian expense reduction offset by
commission recapture arrangement (Note C)................. (7)
--------
Net expenses ...................................................... 2,434
--------
Net investment income ............................................. 5,467
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................. 5,122
Foreign currency transactions ............................... (7)
Change in unrealized appreciation on investments ............... 61,944
--------
Net realized and unrealized gain .................................. 67,059
--------
Net increase (decrease) in net assets resulting from
operations ..................................................... $ 72,526
========
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ................................................ $ 5,467 $ 4,352
Net realized gain .................................................... 5,115 2,769
Change in net unrealized appreciation (depreciation) ................. 61,944 (45,256)
-------- --------
Net increase (decrease) in net assets resulting from operations ... 72,526 (38,135)
Distributions to shareholders from:
Net investment income ................................................ (5,790) (4,351)
Realized gains ....................................................... (5,006) (3,600)
-------- --------
Decrease in net assets resulting from distributions ............... (10,796) (7,951)
From fund share transactions:
Proceeds from shares sold ............................................ 120,218 110,232
Distributions reinvested ............................................. 10,796 7,951
Payment for shares redeemed .......................................... (87,322) (72,602)
-------- --------
Increase in net assets from fund share transactions ............... 43,692 45,581
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS ................................... 105,422 (505)
NET ASSETS
Beginning of Period .................................................. 260,141 260,646
-------- --------
End of Period ........................................................ $365,563 $260,141
======== ========
Analysis of fund share transactions:
Sold ................................................................. 9,472 8,372
Reinvested ........................................................... 801 637
Redeemed ............................................................. (6,839) (5,580)
-------- --------
Net increase in fund shares outstanding ................................. 3,434 3,429
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Large Cap Value Fund
---------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net Assets Value at Beginning of Period ................ $ 11.91 $ 14.15 $ 14.38 $ 13.49 $ 14.02
Income from Investment Operations:
Net Investment Income ............................... 0.23 0.22 0.22 0.27 0.27
Net Realized and Unrealized Gain (Loss) on
Investments(a) ................................... 2.76 (2.07) (0.05) 1.45 0.18
-------- -------- -------- -------- --------
Total From Investment Operations .................... 2.99 (1.85) 0.17 1.72 0.45
Less Distributions:
Distribution from Net Investment Income ............. (0.24) (0.22) (0.22) (0.28) (0.27)
Distribution from Net Realized Gains on
Investments ...................................... (0.20) (0.17) (0.18) (0.53) (0.71)
Distribution from Excess of Net Investment Income/
Gains ............................................ (0.01)
Distribution from Capital Paid-in ................... (0.01)
-------- -------- -------- -------- --------
Total Distributions ................................. (0.44) (0.39) (0.40) (0.83) (0.98)
-------- -------- -------- -------- --------
Net Assets Value at End of Period ...................... $ 14.46 $ 11.91 $ 14.15 $ 14.38 $ 13.49
======== ======== ======== ======== ========
Total Investment Return(b) ............................. 25.51% (13.24)% 1.25% 12.97% 3.28%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ... 0.82%(c) 0.83% 0.82% 0.78% 0.85%
Ratio of Net Investment Income to Average Net
Assets ........................................... 1.83% 1.67% 1.54% 2.04% 1.88%
Portfolio Turnover Rate ............................. 17.73% 16.04% 18.19% 42.12% 32.62%
Net Assets End of Period (000s Omitted) ................ $365,563 $260,141 $260,646 $204,535 $155,849
(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 fluctuating
market values of the portfolio.
(b) The performance 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 is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 2.9%
Boeing Co. * .......................................... 48,900 $ 2,061
Lockheed Martin Corp. ................................. 33,100 1,701
Raytheon Co. * ........................................ 112,300 3,374
Rockwell Collins, Inc. * .............................. 110,500 3,318
-------
10,454
Automobiles - 0.4%
Ford Motor Co. ........................................ 93,000 1,488
Banks - 7.6%
Bank of America Corp. * ............................... 39,500 3,177
Bank One Corp. * ...................................... 114,800 5,234
FleetBoston Financial Corp. ........................... 124,572 5,437
JP Morgan Chase & Co. ................................. 92,430 3,395
Mellon Financial Corp. * .............................. 107,600 3,455
Mercantile Bankshares Corp. ........................... 51,000 2,325
National City Corp. * ................................. 55,600 1,887
Northern Trust Corp. .................................. 40,800 1,894
Wilmington Trust Corp. * .............................. 27,100 976
-------
27,780
Beverages - 0.2%
Brown-Forman Corp. - Cl. B * .......................... 9,300 869
Chemicals - 3.6%
Dow Chemical Co. * .................................... 92,700 3,854
E.I. du Pont de Nemours & Co. * ....................... 81,100 3,722
Great Lakes Chemical Corp. ............................ 71,700 1,949
Hercules, Inc. * ...................................... 135,500 1,653
International Flavors & Fragrances, Inc. * ............ 59,500 2,078
-------
13,256
Commercial Services & Supplies - 3.2%
Dun & Bradstreet Corp. ................................ 33,700 1,709
Honeywell International, Inc. ......................... 194,300 6,495
Waste Management, Inc. * .............................. 119,590 3,540
-------
11,744
Communications Equipment - 1.6%
Lucent Technologies, Inc. * ........................... 224,200 637
Motorola, Inc. ........................................ 214,900 3,024
Nokia Oyj - ADR ....................................... 119,200 2,026
-------
5,687
Computers & Peripherals - 1.1%
Hewlett-Packard Co. * ................................. 183,288 4,210
Construction Materials - 0.6%
Nucor Corp. ........................................... 39,600 2,218
Credit Card - 1.1%
American Express Co. * ................................ 82,200 3,965
Diversified Financials - 2.3%
Citigroup, Inc. * ..................................... 60,166 2,920
Janus Capgroup, Inc. .................................. 39,900 655
Morgan Stanley, Dean Witter, Discover &
Co. ................................................. 46,400 $ 2,685
Wells Fargo & Co. * ................................... 34,500 2,032
-------
8,292
Diversified Telecommunication Services - 5.4%
Alltel Corp. * ........................................ 61,100 2,846
AT&T Corp. * .......................................... 105,420 2,140
Qwest Communications International, Inc. .............. 638,100 2,757
SBC Communications, Inc. * ............................ 152,755 3,982
Sprint Corp. * ........................................ 158,100 2,596
Verizon Communications * .............................. 158,716 5,568
-------
19,889
Electric Utilities - 2.3%
Constellation Energy Group, Inc. * .................... 80,000 3,133
Firstenergy Corp. * ................................... 66,000 2,323
Teco Energy, Inc. * ................................... 27,100 390
TXU Corp. ............................................. 108,800 2,581
-------
8,427
Electrical Equipment - 3.1%
Cooper Industries, Ltd. - Cl. A * ..................... 91,600 5,306
Emerson Electric Co. .................................. 29,400 1,904
Hubbell, Inc. - Cl. B ................................. 36,700 1,618
Rockwell International Corp. * ........................ 74,600 2,656
-------
11,484
Energy Equipment & Services - 0.9%
Baker Hughes, Inc. * .................................. 28,800 926
Schlumberger, Ltd. * .................................. 41,700 2,282
-------
3,208
Food & Drug Retailing - 0.1%
Winn-Dixie Stores, Inc. * ............................. 26,900 268
Food Products - 2.9%
Campbell Soup Co. * ................................... 119,700 3,208
ConAgra, Inc. ......................................... 52,900 1,396
General Mills, Inc. * ................................. 46,400 2,102
McCormick & Co., Inc. ................................. 10,500 316
Unilever NV * ......................................... 52,800 3,449
-------
10,471
Gas Utilities - 0.3%
El Paso Corp. ......................................... 119,900 982
Health Care Equipment & Supplies - 1.4%
Baxter International, Inc. ............................ 118,500 3,617
Becton, Dickinson & Co. * ............................. 33,200 1,366
-------
4,983
Hotels Restaurants & Leisure - 1.1%
McDonald's Corp. * .................................... 165,300 4,104
Household Durables - 2.4%
Black & Decker Corp. * ................................ 27,400 1,352
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Household Durables - Continued
Fortune Brands, Inc. * ................................ 51,900 $ 3,710
Newell Rubbermaid, Inc. ............................... 158,800 3,616
-------
8,678
Household Products - 1.5%
Clorox Co. * .......................................... 43,000 2,088
Kimberly-Clark Corp. * ................................ 58,300 3,445
-------
5,533
Industrial Conglomerates - 1.6%
General Electric Co. * ................................ 185,300 5,741
Insurance - 7.1%
American International Group, Inc. * .................. 29,346 1,945
Chubb Corp. * ......................................... 42,100 2,867
CIGNA Corp. * ......................................... 56,500 3,249
Lincoln National Corp. * .............................. 75,331 3,041
Marsh & McLennan Cos., Inc. * ......................... 92,200 4,416
Safeco Corp. * ........................................ 92,200 3,589
St. Paul Cos., Inc .................................... 56,652 2,246
Travelers Property Casualty Corp. - Cl. B. ............ 112,500 1,909
UnumProvident Corp. * ................................. 165,800 2,615
-------
25,877
Leisure Equipment & Products - 1.8%
Eastman Kodak Co. * ................................... 158,900 4,079
Hasbro, Inc. * ........................................ 109,600 2,332
-------
6,411
Machinery - 0.9%
Pall Corp. * .......................................... 122,200 3,279
Media - 7.5%
Comcast Corp. - Cl. A ................................. 102,581 3,372
Dow Jones & Co., Inc. * ............................... 82,300 4,103
Knight-Ridder, Inc. * ................................. 46,500 3,598
New York Times Co. - Cl. A * .......................... 85,000 4,062
Readers Digest Association, Inc. - Cl. A * ............ 29,300 429
The Walt Disney Co. * ................................. 189,800 4,428
Time Warner, Inc. * ................................... 283,400 5,098
Viacom, Inc. - Cl. B * ................................ 53,000 2,352
-------
27,442
Metals & Mining - 0.6%
Alcoa, Inc. * ......................................... 53,900 2,048
Multi-Utilities - 1.8%
Duke Energy Co ........................................ 185,500 3,793
NiSource, Inc. * ...................................... 126,100 2,767
-------
6,560
Multiline Retail - 0.8%
J.C. Penney Co., Inc. * ............................... 21,600 568
May Department Stores Co. * ........................... 76,250 2,216
-------
2,784
Oil & Gas - 8.8%
Amerada Hess Corp. * .................................. 92,200 $ 4,902
Anadarko Petroleum Corp. * ............................ 52,800 2,693
BP Amoco plc - ADR .................................... 83,432 4,117
ChevronTexaco Corp. * ................................. 79,713 6,887
Exxon Mobil Corp. * ................................... 178,634 7,324
Marathon Oil Corp. * .................................. 54,000 1,787
Royal Dutch Petroleum Co. * ........................... 85,700 4,490
-------
32,200
Paper & Forest Products - 1.5%
International Paper Co. * ............................. 106,370 4,586
MeadWestvaco Corp. * .................................. 33,600 999
-------
5,585
Personal Products - 0.7%
Gillette Co. .......................................... 71,500 2,626
Pharmaceuticals - 7.4%
Abbott Laboratories * ................................. 59,400 2,768
Bristol-Myers Squibb Co. * ............................ 211,600 6,052
Johnson & Johnson ..................................... 79,800 4,122
Merck & Co., Inc. * ................................... 148,200 6,847
Schering-Plough Corp. * ............................... 168,400 2,928
Wyeth * ............................................... 99,100 4,207
-------
26,924
Real Estate Investment Trust - 0.5%
Simon Property Group, Inc. ............................ 42,300 1,960
Real Estate Operations - 1.6%
Hilton Hotels Corp. * ................................. 145,900 2,499
Starwood Hotels & Resorts Worldwide,
Inc. * .............................................. 92,700 3,335
-------
5,834
Road & Rail - 2.0%
Norfolk Southern Corp. * .............................. 113,600 2,686
Union Pacific Corp. ................................... 67,900 4,718
-------
7,404
Semiconductor Equipment & Products - 0.7%
Agere Systems, Inc. - Cl. A * ......................... 115,616 352
Texas Instruments, Inc. * ............................. 76,200 2,239
-------
2,591
Software - 0.8%
Microsoft Corp. * ..................................... 107,700 2,966
Specialty Retail - 1.5%
Home Depot, Inc. * .................................... 106,200 3,769
Toys "R" Us, Inc. * ................................... 136,000 1,719
-------
5,488
Tobacco - 1.3%
Altria Group, Inc. .................................... 47,100 2,563
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------ --------
(000's)
COMMON STOCK - Continued
Tobacco - Continued
UST, Inc. * .......................................... 65,700 $ 2,345
--------
4,908
Trading Companies & Distributors - 0.6%
Genuine Parts Co. * .................................. 69,000 2,291
U.S. Government Agencies - 0.8%
Federal National Mortgage Assoc. * ................... 39,200 2,942
--------
TOTAL COMMON STOCK- ................... 96.3% 351,851
PREFERRED STOCK
Diversified Financials - 0.2%
Ford Motor Co. Capital Trust II ...................... 810
--------
TOTAL PREFERRED STOCK- ...................... 0.2% 810
Par
Value
-------
(000's)
PUBLICLY-TRADED BONDS
Communications Equipment - 0.5%
Lucent Technologies, Inc. - Sub. Debs ................
8.0% due 08/01/31 .................................... $ 1,535 1,644
--------
TOTAL PUBLICLY-TRADED BONDS- 0.5% 1,644
INVESTMENT COMPANIES HELD AS COLLATERAL ON
LOANED SECURITIES - 2.7%
State Street Navigator Securities Lending
Portfolio ......................................... 9,918 9,918
SHORT-TERM INVESTMENTS - 3.2%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ............................... 11,850 11,850
------- -------
TOTAL INVESTMENTS- .................... 102.9% 376,073
Payables, less cash and
receivables- ................................ (2.9)% (10,510)
------- --------
NET ASSETS- ........................ 100.0% $365,563
======= ========
* Non-income producing security.
ADR-American Depository Receipts.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Large Cap Value Fund (the "Fund") is a diversified series of
John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximate market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 49,996
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 $ 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
Joint Trading Account Totals --------
$385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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. For the year ended December 31,
2003, the market value of the securities loaned and the market value of the
collateral for the Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$9,631 $9,918
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
As of December 31, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $37. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate of 0.75% on an annual basis of the
Fund's net assets.
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. For the year
ended December 31, 2003, there were no reimbursements paid to the Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $7.
John Hancock has entered into a Sub-Advisory Agreement with T. Rowe Price
Associates, Inc., with respect to the Fund. T. Rowe Price Associates, Inc. is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$87,928 $51,184
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$349,030 $46,828 $(19,785) $27,043
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to certain
securities sold at a loss and to certain distributions received from investments
in Real Estate Investment Trusts. Additionally, as a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
ordinary net long-term Capital Loss Net Unrealized
Income capital gain carryforwards Appreciation
- ------------- ------------- ------------- --------------
$733 $467 $-- $27,043
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $8,294 $2,502 $--
2002 4,351 3,600 --
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ------------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ---------------------------- ------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Large Cap Value Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five year in the
period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Large Cap Value Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five year in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: August 31, 1999
- --------------------------------------------------------------------------------
Large Cap Value Core(SM) Fund
Goldman Sachs Asset Management, L.P. Brown/Jones/Pinter
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 28.86%, underperforming its benchmark, the
Russell 1000 Value Index.
.. The Fund underperformed its benchmark due to sector allocation exposures
and modestly unfavorable stock selection. Stock selection detracted
especially within the industrial, information technology and financial
sectors among others.
.. The CORE themes (Momentum, Valuation, Profitability, Earnings Quality,
Analyst Sentiment and Management Impact) had mixed results for the year,
but contributed positively overall. Valuation was the biggest positive
contributor to excess returns for the year, as inexpensive companies
outperformed their more richly valued counterparts. Profitability also
helped boost relative returns, while Momentum detracted.
.. Positive absolute performance was driven mainly by strong returns in the
top-weighted Financials sector.
.. The Fund seeks to maintain size and sector weightings similar to its
benchmark. The manager seeks to add value versus the Russell 1000 Value
Index by overweighting stocks that are more likely to beat the benchmark,
while underweighting stocks that are believed to lag the Index.
.. The manager employs a CORE approach -- computer optimized, research
enhanced -- using quantitative techniques to identify cheap stocks with
good momentum, companies about which fundamental research analysts are
becoming more positive, and that have strong profit margins and sustainable
earnings that employ their capital to enhance shareholder value.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Large Cap Value CORE(SM) Fund Russell 1000(R) Value Index
----------------------------- ---------------------------
8/31/1999 $10,000.00 $10,000.00
9/30/1999 9,710.99 9,650.00
10/31/1999 10,331.58 10,205.84
11/30/1999 10,222.01 10,126.23
12/31/1999 10,357.99 10,174.84
1/31/2000 9,966.70 9,843.14
2/29/2000 9,306.14 9,111.80
3/31/2000 10,353.69 10,223.43
4/30/2000 10,235.53 10,104.84
5/31/2000 10,315.02 10,210.94
6/30/2000 9,925.40 9,744.30
7/31/2000 10,094.18 9,866.11
8/31/2000 10,735.04 10,414.66
9/30/2000 10,780.50 10,510.48
10/31/2000 10,929.67 10,769.04
11/30/2000 10,420.97 10,369.50
12/31/2000 10,888.02 10,889.02
1/31/2001 10,869.92 10,931.48
2/28/2001 10,559.13 10,627.59
3/31/2001 10,161.18 10,252.43
4/30/2001 10,769.26 10,754.80
5/31/2001 11,024.65 10,996.79
6/30/2001 10,815.74 10,752.66
7/31/2001 10,813.92 10,730.08
8/31/2001 10,328.29 10,299.80
9/30/2001 9,640.82 9,574.70
10/31/2001 9,619.47 9,492.35
11/30/2001 10,113.73 10,043.86
12/31/2001 10,370.41 10,279.89
1/31/2002 10,224.94 10,200.73
2/28/2002 10,176.05 10,217.06
3/31/2002 10,651.28 10,700.32
4/30/2002 10,357.76 10,333.30
5/31/2002 10,304.85 10,384.97
6/30/2002 9,615.15 9,788.87
7/31/2002 8,672.71 8,878.51
8/31/2002 8,841.46 8,945.98
9/30/2002 7,947.30 7,951.19
10/31/2002 8,451.42 8,540.37
11/30/2002 8,804.20 9,078.42
12/31/2002 8,482.15 8,684.41
1/31/2003 8,251.25 8,474.25
2/28/2003 8,045.22 8,247.99
3/31/2003 8,091.91 8,262.01
4/30/2003 8,680.27 8,989.07
5/31/2003 9,190.37 9,569.76
6/30/2003 9,305.10 9,689.38
7/31/2003 9,467.35 9,833.75
8/31/2003 9,688.33 9,987.16
9/30/2003 9,596.38 9,889.28
10/31/2003 10,144.78 10,494.51
11/30/2003 10,330.15 10,637.23
12/31/2003 10,930.14 11,292.49
Value on 12/31/03:
- ------------------
$10,930 Large Cap Value CORE(SM) Fund
$11,292 Russell 1000(R) Value Index
MORNINGSTAR
CATEGORY+:
.. Large Value
MORNINGSTAR
RISK+:
.. Below Average (VL/VUL)
.. Below Average (VA)
MORNINGSTAR
RATING+:
.. **** (VL/VUL)
.. *** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
assets
------
Exxon Mobil Corp. 4.2%
Citigroup, Inc. 3.7%
Bank of America Corp. 3.1%
JP Morgan Chase & Co. 2.4%
Time Warner, Inc. 2.2%
Wachovia Corp. 2.0%
BellSouth Corp. 1.9%
Viacom, Inc. 1.8%
General Motors Corp. 1.5%
Prudential Financial, Inc. 1.4%
AVERAGE ANNUAL TOTAL RETURNS*
Large Cap Russell 1000(R)
Value CORE(SM) Fund Value Index
------------------- -----------------
1 Year 28.86% 30.03%
3 Years 0.13 1.22
Since Inception (8/31/99) 2.07 2.84
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
assets
------
Financials 35.56%
Consumer Discretionary 15.37%
Energy 11.55%
Information Technology 7.40%
Consumer Staples 7.15%
Telecommunication Services 6.81%
Healthcare 5.07%
Utilities 4.53%
Materials 3.35%
Industrials 3.22%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 538 VL/VUL subaccounts and 1,013 VA subaccounts in the
Morningstar Large Value category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ....................................... $46,628
Net unrealized appreciation of investments .......................... 6,036
Short-term investments at value ..................................... 300
-------
Total investments ............................................. 52,964
Cash ................................................................ 12
Receivable for:
Dividends ........................................................ 66
Futures contracts variation margin ............................... 1
-------
Total assets ........................................................ 53,043
-------
LIABILITIES
Payables for:
Fund shares purchased ............................................ 6
Other liabilities ................................................ 3
-------
Total liabilities ................................................... 9
-------
Net assets .......................................................... $53,034
=======
Shares of beneficial interest outstanding ........................... 5,435
-------
Net asset value per share ........................................... $ 9.76
=======
Composition of net assets:
Capital paid-in .................................................. $53,788
Accumulated net realized loss on investments,
futures and foreign currency transactions ..................... (6,791)
Net unrealized appreciation of:
Investments ................................................... 6,036
Futures 1
-------
Net assets .......................................................... $53,034
=======
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 18
Dividends ..................................................... 968
-------
Total investment income 986
-------
EXPENSES
Investment advisory fee ............................................. 332
Auditors fees ................................................. 6
Custodian fees ................................................ 71
Legal fees .................................................... 3
Printing & mailing fees ....................................... 4
Trustees' fees ................................................ 1
Other fees .................................................... 1
-------
Total expenses ...................................................... 418
Less expenses reimbursed ...................................... (42)
-------
Net expenses ........................................................ 376
-------
Net investment income ............................................... 610
-------
REALIZED AND UNREALIZED GAIN
Net realized gain on:
Investments ................................................... 460
Financial futures contracts ................................... 63
Change in unrealized appreciation on:
Investments ................................................... 10,555
Futures ....................................................... 1
-------
Net realized and unrealized gain .................................... 11,079
-------
Net increase in net assets resulting from
operations ....................................................... $11,689
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income .................................... $ 610 $ 581
Net realized gain (loss) ................................. 523 (6,253)
Change in net unrealized appreciation (depreciation) ..... 10,556 (3,791)
------- -------
Net increase (decrease) in net assets resulting from
operations ......................................... 11,689 (9,463)
Distributions to shareholders from:
Net investment income .................................... (610) (581)
Realized gains ........................................... (1,764)
------- -------
Decrease in net assets resulting from distributions ... (2,374) (581)
From fund share transactions:
Proceeds from shares sold ................................ 10,099 13,044
Distributions reinvested ................................. 2,374 581
Payment for shares redeemed .............................. (9,519) (23,648)
------- -------
Increase (decrease) in net assets from fund share
transactions ....................................... 2,954 (10,023)
------- -------
NET INCREASE (DECREASE) IN NET ASSETS ....................... 12,269 (20,067)
NET ASSETS
Beginning of Period ...................................... 40,765 60,832
------- -------
End of Period ............................................ $53,034 $40,765
======= =======
Analysis of fund share transactions:
Sold ..................................................... 1,163 1,462
Reinvested ............................................... 254 67
Redeemed ................................................. (1,112) (2,585)
------- -------
Net increase (decrease) in fund shares outstanding .......... 305 (1,056)
======= =======
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Large Cap Value CORE Fund
--------------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------------
Period from
August 31, to
December 31,
2003 2002 2001 2000 1999(e)
------- ------- ------- ------- -------------
Net Assets Value at Beginning of Period ........... $ 7.95 $ 9.83 $ 10.42 $ 10.16 $10.00
Income from Investment Operations:
Net Investment Income .......................... 0.12 0.11 0.09 0.15 0.04
Net Realized and Unrealized Gain (Loss) on
Investments(a) .............................. 2.15 (1.88) (0.59) 0.36 0.31
------- ------- ------- ------- ------
Total From Investment Operations ............... 2.27 (1.77) (0.50) 0.51 0.35
Less Distributions:
Distribution from Net Investment Income ........ (0.12) (0.11) (0.09) (0.15) (0.03)
Distribution from Net Realized Gains on
Investments ................................. (0.34) (0.06) (0.14)
Distribution from Excess of Net Investment
Income/Gains ................................ (0.03) (0.01)
Distribution from Capital Paid-in .............. (0.01) (0.01)
------- ------- ------- ------- ------
Total Distributions ............................ (0.46) (0.11) (0.09) (0.25) (0.19)
------- ------- ------- ------- ------
Net Assets Value at End of Period ................. $ 9.76 $ 7.95 $ 9.83 $ 10.42 $10.16
======= ======= ======= ======= ======
Total Investment Return(b) ........................ 28.86% (18.21)% (4.75)% 5.12% 3.58%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net
Assets ...................................... 0.85%(f) 0.84%(f) 0.85%(f) 0.85%(f) 0.85%(d)(f)
Ratio of Net Investment Income to Average Net
Assets ...................................... 1.38% 1.18% 0.98% 1.54% 1.13%(d)
Portfolio Turnover Rate ........................ 105.62% 89.43% 74.91%(g) 59.15% 30.90%(c)
Net Assets End of Period (000s Omitted) ........... $53,034 $40,765 $60,832 $18,164 $6,371
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Commencement of operations.
(f) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been .94%, .97%, .88%, 1.09% and
1.17% for the years ended December 31, 2003, 2002, 2001, 2000 and 1999,
respectively.
(g) Excludes merger activity.
SCHEDULE OF INVESTMENTS
(JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK
Aerospace & Defense - 0.4%
Boeing Co. * ............................................ 2,900 $ 122
Northrop Grumman Corp. .................................. 1,100 105
------
227
Airlines - 0.1%
Southwest Airlines Co. .................................. 2,600 42
Auto Components - 0.3%
Delphi Automotive Systems Corp. * ....................... 17,600 180
Automobiles - 2.8%
Ford Motor Co. .......................................... 46,200 739
General Motors Corp. * .................................. 14,400 769
------
1,508
Banks - 14.6%
Bank Hawaii Corp. ....................................... 3,100 131
Bank of America Corp. * ................................. 20,210 1,625
Bank One Corp. * ........................................ 6,000 274
Charter One Financial, Inc. ............................. 6,100 211
Comerica, Inc. .......................................... 4,300 241
FleetBoston Financial Corp. ............................. 5,900 258
JP Morgan Chase & Co. ................................... 34,000 1,249
National City Corp. * ................................... 16,100 546
Popular, Inc. ........................................... 1,100 49
Regions Financial Corp. ................................. 12,200 454
Silicon Valley Bancshares * ............................. 6,600 238
SouthTrust Corp. * ...................................... 14,800 484
Suntrust Banks, Inc. * .................................. 4,800 343
UnionBanCal Corp. ....................................... 2,600 150
US Bancorp * ............................................ 13,900 414
Wachovia Corp. * ........................................ 22,700 1,058
------
7,725
Biotechnology - 1.5%
Amgen, Inc. * ........................................... 6,600 408
Genetech, Inc. * ........................................ 1,600 150
Gilead Sciences, Inc. * ................................. 3,700 215
------
773
Building Products - 0.2%
York International Corp. ................................ 2,700 99
Chemicals - 2.1%
Dow Chemical Co. * ...................................... 12,600 524
Monsanto Co. ............................................ 20,500 590
------
1,114
Commercial Services & Supplies - 1.9%
IMS Health, Inc. * ...................................... 5,500 137
ITT Educational Services, Inc. * ........................ 4,600 216
Republic Services, Inc. - Cl. A * ....................... 4,800 123
Waste Management, Inc. * ................................ 18,500 547
------
1,023
Communications Equipment - 1.3%
Advanced Fibre Communications, Inc. * ................... 9,000 $ 181
Avaya, Inc. * ........................................... 33,900 439
Scientific-Atlanta, Inc. * .............................. 1,800 49
------
669
Computers & Peripherals - 1.8%
Hewlett-Packard Co. * ................................... 7,242 166
Intel Corp. ............................................. 14,800 477
International Business Machines Corp. ................... 2,500 232
SanDisk Corp. * ......................................... 1,200 73
------
948
Containers & Packaging - 0.4%
Owens-Illinois, Inc. * .................................. 7,400 88
Sealed Air Corp. * ...................................... 2,300 125
------
213
Credit Card - 0.4%
MBNA Corp. * ............................................ 7,900 196
Diversified Financials - 11.0%
AmeriCredit Corp. * ..................................... 3,600 57
CIT Group, Inc. * ....................................... 15,800 568
Citigroup, Inc. * ....................................... 40,300 1,956
Doral Financial Corp. ................................... 10,350 334
Friedman Billings Ramsey Group - Cl. A .................. 22,300 515
Lehman Brothers Holdings, Inc. .......................... 4,600 355
Merrill Lynch & Co., Inc. * ............................. 3,300 194
Moody's Corp. * ......................................... 8,500 515
Morgan Stanley, Dean Witter, Discover & Co. ............. 900 52
Nationwide Financial Services - Cl. A ................... 2,200 73
Nuveen Investments, Inc. - Cl. A ........................ 3,800 101
Washington Mutual, Inc. * ............................... 13,700 550
Wells Fargo & Co. * ..................................... 9,500 559
------
5,829
Diversified Telecommunication Services - 5.5%
BellSouth Corp. ......................................... 34,800 985
CenturyTel, Inc. ........................................ 5,000 163
SBC Communications, Inc. * .............................. 26,400 688
Sprint Corp. * .......................................... 41,300 678
Verizon Communications * ................................ 12,000 421
------
2,935
Electric Utilities - 4.1%
Constellation Energy Group, Inc. * ...................... 6,700 263
Edison International * .................................. 26,600 583
Entergy Corp. * ......................................... 10,500 600
Exelon Corp. * .......................................... 8,900 591
FPL Group, Inc. ......................................... 800 52
PPL Corp. ............................................... 1,400 61
------
2,150
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Electric/Gas - 0.4%
Northeast Utilities ..................................... 11,600 $ 234
Electronic Equipment & Instruments - 1.5%
Agilent Technologies, Inc. * ............................ 2,400 70
Avnet, Inc. ............................................. 11,400 247
Harman International Industries, Inc. * ................. 800 59
Ingram Micro, Inc. - Cl. A * ............................ 5,000 80
Sanmina Corp. * ......................................... 26,800 338
------
794
Energy Equipment & Services - 1.2%
Halliburton Co. * ....................................... 5,500 143
Transocean Sedco Forex, Inc. * .......................... 21,100 507
------
650
Finance - 0.2%
A.G. Edwards, Inc. * .................................... 2,400 87
Food & Drug Retailing - 0.5%
CVS Corp ................................................ 2,000 72
Sysco Corp. * ........................................... 4,700 175
------
247
Food Products - 3.2%
Archer Daniels Midland Co. * ............................ 38,800 590
Kraft Foods, Inc. - Cl. A ............................... 18,500 596
Tyson Foods, Inc. - Cl. A ............................... 36,900 489
------
1,675
Health Care Equipment & Supplies - 1.5%
Guidant Corp ............................................ 4,400 265
Zimmer Holdings, Inc. * ................................. 7,400 521
------
786
Health Care Providers & Services - 0.4%
Humana, Inc. * .......................................... 8,900 203
Household Products - 0.8%
Procter & Gamble Co. * .................................. 4,300 430
Insurance - 6.5%
American International Group, Inc. * .................... 3,115 207
American National Insurance Co .......................... 1,100 93
Chubb Corp. * ........................................... 4,500 307
Loews Corp. * ........................................... 5,100 252
MBIA, Inc. * ............................................ 9,900 586
Metlife, Inc. * ......................................... 16,700 562
Principal Financial Group. * ............................ 17,600 582
Prudential Financial, Inc. * ............................ 17,700 739
Travelers Property Casualty Corp. - Cl. B ............... 8,428 143
------
3,471
IT Consulting & Services - 1.3%
Accenture, Ltd. - Cl. A * ............................... 19,600 516
Computer Sciences Corp. * ............................... 4,000 177
------
693
Machinery - 0.3%
AGCO Corp ............................................... 3,200 $ 65
Caterpillar, Inc. * ..................................... 1,000 83
------
148
Marine - 0.1%
Overseas Shipholding Group, Inc ......................... 1,700 58
Media - 7.5%
Comcast Corp. - Cl. A ................................... 11,763 386
Cox Radio, Inc. - Cl. A * ............................... 11,300 285
Fox Entertainment Group, Inc. - Cl. A * ................. 18,800 548
Hearst-Argyle Television, Inc. * ........................ 15,100 416
Panamsat Corp. * ........................................ 5,700 123
The Walt Disney Co. * ................................... 5,000 117
Time Warner, Inc. * ..................................... 63,300 1,139
Viacom, Inc. - Cl. B * .................................. 21,200 941
------
3,955
Metals & Mining - 0.4%
Carpenter Technology Corp. * ............................ 3,000 89
Freeport-McMoran Copper & Gold, Inc. - Cl. B ............ 3,000 126
------
215
Multiline Retail - 1.6%
Federated Department Stores, Inc. * ..................... 3,500 165
Saks, Inc. * ............................................ 26,900 404
Sears, Roebuck & Co. * .................................. 6,700 305
------
874
Oil & Gas - 10.1%
Anadarko Petroleum Corp. * .............................. 4,100 209
Burlington Resources, Inc. * ............................ 1,500 83
ChevronTexaco Corp. * ................................... 4,435 383
Devon Energy Corp. * .................................... 6,100 349
Exxon Mobil Corp. * ..................................... 54,200 2,222
Marathon Oil Corp. * .................................... 18,900 625
Occidental Petroleum Corp. * ............................ 8,900 376
Sunoco, Inc. * .......................................... 10,800 553
Valero Energy Corp ...................................... 12,400 575
------
5,375
Paper & Forest Products - 1.3%
Boise Cascade Corp. * ................................... 13,700 450
Georgia-Pacific Corp. * ................................. 7,300 224
------
674
Personal Products - 1.7%
Avon Products, Inc ...................................... 6,100 412
Gillette Co ............................................. 13,600 499
------
911
Pharmaceuticals - 1.5%
American Pharmaceutical Partners, Inc * ................. 8,600 289
Endo Pharmaceuticals Holdings * ......................... 11,200 216
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Pharmaceuticals - Continued
Johnson & Johnson ....................................... 3,900 $ 201
Medco Health Solutions, Inc. * .......................... 470 16
Merck & Co., Inc. * ..................................... 1,100 51
-------
773
Real Estate Investment Trust - 2.0%
Equity Office Properties Trust * ........................ 22,000 630
HRPT Properties Trust ................................... 16,000 161
Mack-Cali Realty LP * ................................... 6,500 271
-------
1,062
Real Estate Operations - 0.5%
LNR Property Corp ....................................... 5,400 267
Road & Rail - 0.5%
Union Pacific Corp ...................................... 4,200 292
Semiconductor Equipment & Products - 0.2%
LSI Logic Corp. * ....................................... 9,500 84
Software - 1.4%
Adobe Systems, Inc ...................................... 12,200 480
BMC Software, Inc. * .................................... 8,800 164
Computer Associates International, Inc .................. 2,600 71
Jack Henry & Associates, Inc ............................ 2,500 51
-------
766
Specialty Retail - 1.4%
AutoNation, Inc. * ...................................... 25,200 463
Blockbuster, Inc. - Cl. A ............................... 3,100 56
Staples, Inc. * ......................................... 8,300 226
-------
745
Textiles & Apparel - 0.6%
Coach, Inc. * ........................................... 8,600 325
Tobacco - 0.9%
Altria Group, Inc ....................................... 5,700 310
R.J. Reynolds Tobacco Holdings, Inc ..................... 3,300 192
-------
502
U.S. Government Agencies - 0.2%
Federal Home Loan Mortgage Corp ......................... 1,500 88
Wireless Telecommunications Services - 1.2%
AT&T Wireless Group * ................................... 36,400 291
United States Cellular Corp. * .......................... 10,100 358
-------
649
-------
TOTAL COMMON STOCK- .................................. 99.3% 52,664
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
SHORT-TERM INVESTMENTS - 0.6%
Investment in joint repurchase agreement
with Goldman Sachs % Co., 0.995% due
01/02/04 ............................................ $ 300 $ 300
------ -------
TOTAL INVESTMENTS- ............................... 99.9% 52,964
Cash and Receivables, less payables- ................ 0.1% 70
------ -------
NET ASSETS- ................................... 100.0% $53,034
====== =======
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Large Cap Value CORE Fund (the "Fund") is a diversified series
of John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint repurchase agreements: The Fund, along with other registered
investment companies having a management contract with Goldman Sachs Asset
Management (GSAM), 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 Fund's custodian bank receives delivery of the underlying
securities for the joint repurchase agreement on the Fund's behalf. GSAM is
responsible for ensuring that the agreement is fully collateralized at all
times.
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Trust's record keeper and custodian and the Bank of New York. These agreements
enable the Fund to participate in an unsecured line of credit, which permits
borrowings up to $125 and $75 million, respectively. Interest is charged to the
Fund, based on its borrowing. In addition, a commitment fee is charged to the
Fund based on the average daily unused portion of the line of credit and is
allocated among the participating Funds in the Trust. Interest expense paid
under the line of credit is included under the caption "Other fees" in the
Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$63 1.76% $--
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, open financial
futures contracts for the Fund were as follows:
Open Unrealized
Contracts Position Expiration Month Gain
--------- -------- ---------------- ----------
S&P Mini 500 Index Futures 6 Long March 04 $1
--
$1
==
At December 31, 2003, the Fund had deposited $40 in segregated accounts to
cover initial margin requirements on open financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $491, $5,508 and $616 which expire in 2009, 2010 and 2011,
respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$50 Million and Excess Over
First $50 Million $200 Million $200 Million
- ----------------- --------------- ------------
0.75% 0.65% 0.60%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $42 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Goldman Sachs
Asset Management, with respect to the Fund. Goldman Sachs Asset Management is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the
principal underwriter and transfer agent
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$47,523 $46,518
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$47,104 $6,662 $(802) $5,860
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) or investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $6,615 $5,860
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $593 $-- $1,781
2002 581 -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, Senior Vice President, Signator
John Hancock Place President and Brokerage, John Hancock Life
Boston, Massachusetts 02117 Trustee Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Compliance Specialist, John
John Hancock Place Officer Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------------- ------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Large Cap Value CORE Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, 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 audit.
We conducted our audit 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, by correspondence with the custodian. 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 audit provides 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 the
Large Cap Value CORE Fund of John Hancock Variable Series Trust I at December
31, 2003, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, 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 6, 2004
Inception: March 29, 1986
- --------------------------------------------------------------------------------
Managed Fund
Independence Investment LLC J. Forelli/J. Shallcross
Capital Guardian Trust Company Management Team
- --------------------------------------------------------------------------------
.. The Fund employs a multi-manager approach with two sub-advisers
independently managing a portion of the Fund and each using distinct
investment strategies.
.. At quarter-end, Independence managed 81% and Capital Guardian managed 19%
of the Fund's assets.
.. The two managers employ distinct investment strategies. 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 targets a mix of 60% stocks and 40% in bonds. For stocks the
manager uses a combination of fundamental equity research and quantitative
portfolio construction tools. Stocks are purchased that combine cheapness
and improving fundamentals with favorable valuations and earnings growth
prospects. Within the bond portion, the manager uses proprietary research
and quantitative tools in a risk controlled, benchmark-relative approach
with an emphasis on higher quality U.S. investment grade sectors.
.. Capital Guardian targets a mix of 70% stocks and 30% in bonds. The manager
employs a multiple-manager approach, with the Fund managed by several
portfolio managers. Each portfolio manager and the research analysts as a
team each manage a separate portion of the Fund to capture the highest
conviction ideas of the team. The managers select securities using
proprietary fundamental research and economic analysis to identify
attractive markets and currencies and undervalued sectors and securities.
Fund Commentary
.. In 2003, the Fund returned 19.00%, outperforming its custom benchmark.
Independence
. This portion of the Fund underperformed its benchmark (60% S&P
500 / 40% Lehman Aggregate Bond) primarily due to unfavorable
stock selection. An overweight to equities boosted performance as
stocks outperformed bonds.
. Within equities, stock selection was unfavorable broadly across
sectors, while sector exposures contributed modestly to
performance. The top contributors to absolute equity returns were
within the Information Technology and Financial sectors and
included Intel, Texas Instruments and Citigroup. Conversely, top
detractors came from a variety of sectors and included AT&T,
Textron, and Kraft Foods.
. Within bonds, security selection and sector allocation decisions
boosted performance. Exposure to corporate and mortgage backed
sectors contributed the most to absolute bond returns.
Capital Guardian
. This portion of the Fund outperformed its benchmark, (70% S&P500
and 30% Lehman Aggregate Bond) primarily due to favorable stock
selection. An overweight to equities boosted performance as
stocks outperformed bonds.
. Within equities, favorable stock selection, especially within
healthcare and utilities, was the primary contributor to
performance. Exposure to information technology and consumer
discretionary had the biggest positive effect on absolute equity
returns. Stocks that contributed the most to absolute returns
included Astrazeneca and Williams Company, while AT&T was the
largest detractor.
. Within bonds, exposure to lower quality corporate bonds,
especially within high yield, and security selection were the
primary contributors to relative performance. Exposure to
corporate bonds such as American Tower, Sprint, Six Flags, and
Time Warner were the largest contributors to absolute returns.
There were no significant negative contributors.
Inception: March 29, 1986
- --------------------------------------------------------------------------------
Managed Fund
Independence Investment LLC J. Forelli/J. Shallcross
Capital Guardian Trust Company Management Team
- --------------------------------------------------------------------------------
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 12/31/93
(10-year period)
Managed Fund Managed Benchmark (1)
------------ ---------------------
12/31/1993 10,000.00 10,000.00
01/31/1994 10,233.51 11,251.44
02/28/1994 9,962.63 11,001.66
03/31/1994 9,670.24 10,626.51
04/30/1994 9,720.06 10,653.07
05/31/1994 9,721.40 10,739.36
06/30/1994 9,625.06 10,595.45
07/31/1994 9,841.79 10,876.23
08/31/1994 9,994.67 11,104.63
09/30/1994 9,783.70 10,889.21
10/31/1994 9,826.45 11,008.99
11/30/1994 9,674.60 10,794.31
12/31/2994 9,776.87 10,909.81
01/31/1995 9,960.53 11,159.64
02/28/1995 10,258.87 11,508.94
03/31/1995 10,392.62 11,713.80
04/30/1995 10,623.64 11,966.82
05/31/1995 11,030.92 12,434.72
06/30/1995 11,192.68 12,626.22
07/31/1995 11,370.47 12,823.19
08/31/1995 11,506.71 12,918.08
09/30/1995 11,847.67 13,251.36
10/31/1995 11,870.99 13,313.64
11/30/1995 12,252.32 13,706.40
12/31/1995 12,425.81 13,928.44
01/31/1996 12,617.26 14,213.97
02/29/1996 12,564.77 14,158.54
03/31/1996 12,578.80 14,176.95
04/30/1996 12,604.24 14,242.16
05/31/1996 12,755.37 14,411.64
06/30/1996 12,877.16 14,538.46
07/31/1996 12,594.95 14,234.61
08/31/1996 12,702.80 14,374.11
09/30/1996 13,101.45 14,903.08
10/31/1996 13,420.72 15,272.67
11/30/1996 13,935.57 15,982.85
12/31/1996 13,757.37 15,752.70
01/31/1997 14,083.40 16,266.24
02/28/1997 14,132.25 16,352.45
03/31/1997 13,802.64 15,920.74
04/30/1997 14,176.07 16,516.18
05/31/1997 14,587.11 17,102.50
06/30/1997 14,982.01 17,586.50
07/31/1997 15,829.31 18,522.11
08/31/1997 15,381.29 17,929.40
09/30/1997 15,897.76 18,553.34
10/31/1997 15,739.52 18,378.94
11/30/1997 16,116.40 18,845.77
12/31/1997 16,332.31 19,102.07
01/31/1998 16,513.47 19,327.47
02/28/1998 17,263.06 20,158.55
03/31/1998 17,901.40 20,805.64
04/30/1998 18,022.80 20,974.17
05/31/1998 17,964.12 20,837.84
06/30/1998 18,469.15 21,417.13
07/31/1998 18,278.38 21,297.19
08/31/1998 16,566.64 19,589.16
09/30/1998 17,135.89 20,525.52
10/31/1998 18,047.66 21,484.06
11/30/1998 18,801.32 22,313.35
12/31/1998 19,666.89 23,112.16
01/31/1999 19,965.52 23,756.99
02/28/1999 19,421.85 23,148.81
03/31/1999 19,835.64 23,755.31
04/30/1999 20,406.81 24,337.32
05/31/1999 20,084.35 23,906.55
06/30/1999 20,797.48 24,671.56
07/31/1999 20,361.25 24,168.26
08/31/1999 20,233.77 24,090.92
09/30/1999 19,977.20 23,806.65
10/31/1999 20,749.91 24,744.63
11/30/1999 20,882.96 25,046.51
12/31/1999 21,456.81 25,883.07
01/31/2000 20,654.23 25,067.75
02/29/2000 20,373.49 24,904.81
03/31/2000 21,840.84 26,498.72
04/30/2000 21,517.34 25,989.94
05/31/2000 21,330.87 25,665.07
06/30/2000 21,717.37 26,257.93
07/31/2000 21,600.42 26,108.26
08/31/2000 22,588.74 27,233.53
09/30/2000 21,891.09 26,438.31
10/31/2000 22,005.04 26,440.95
11/30/2000 21,076.00 25,364.80
12/31/2000 21,462.30 25,628.60
01/31/2001 22,001.11 26,341.07
02/28/2001 20,960.92 24,992.41
03/31/2001 20,157.50 24,092.68
04/30/2001 21,284.03 25,174.44
05/31/2001 21,425.18 25,335.56
06/30/2001 21,090.73 25,003.67
07/31/2001 21,081.87 25,081.18
08/31/2001 20,347.35 24,253.50
09/30/2001 19,343.87 23,191.19
10/31/2001 19,805.89 23,650.38
11/30/2001 20,731.79 24,608.22
12/31/2001 20,852.34 24,674.66
01/31/2002 20,696.21 24,538.95
02/28/2002 20,402.42 24,350.00
03/31/2002 20,857.78 24,737.17
04/30/2002 20,251.85 24,029.68
05/31/2002 20,165.50 24,005.65
06/30/2002 19,229.70 23,062.23
07/31/2002 18,178.85 22,095.93
08/31/2002 18,334.82 22,332.35
09/30/2002 17,131.71 21,021.44
10/31/2002 18,007.55 22,093.54
11/30/2002 18,692.68 22,871.23
12/31/2002 18,093.17 22,253.71
01/31/2003 17,759.48 19,931.58
02/28/2003 17,725.18 19,861.82
03/31/2003 17,853.85 19,971.06
04/30/2003 18,810.60 21,025.53
05/30/2003 19,508.87 21,847.63
06/30/2003 19,605.52 21,998.38
07/31/2003 19,633.33 21,934.58
08/31/2003 19,977.80 22,248.25
09/30/2003 20,060.34 22,341.69
10/31/2003 20,721.92 23,016.41
11/30/2003 20,819.31 23,159.11
12/31/2003 21,531.09 23,981.26
Value on 12/31/03:
- ------------------
$21,531 Managed Fund
$23,981 Managed Benchmark (1)
MORNINGSTAR CATEGORY+:
.. Moderate Allocation
MORNINGSTAR RISK+:
.. Above Average (VL/VUL)
.. Above Average (VA)
MORNINGSTAR RATING +:
.. *** (VL/VUL)
.. *** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Federal National Mortgage Assoc. 11.2%
General Electric Co. 2.4%
U.S. Treasury 2.3%
Exxon Mobil Corp. 2.1%
Citigroup, Inc. 2.1%
Microsoft Corp. 1.9%
Pfizer, Inc. 1.8%
J.P. Morgan Chase & Co. 1.3%
Government National Mortgage Assoc. 1.3%
Procter & Gamble Co. 1.4%
AVERAGE ANNUAL TOTAL RETURNS*
Managed Managed
Fund Benchmark(1)
------- ------------
1 Year 19.00% 18.47%
3 Years 0.11 0.95
5 Years 1.83 2.67
10 Years 7.97 9.14
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Financials 19.91%
Information Technology 19.37%
Health Care 13.88%
Consumer Discretionary 12.40%
Industrials 10.45%
Consumer Staples 8.61%
Energy 6.39%
Materials 3.24%
Utilities 3.07%
Telecommunication Services 2.69%
(1) The Managed Benchmark represents 50% S&P 500/50% Lehman Brothers Aggregate
Bond from April 1986 to December 1997, then 60% S&P 500/40% Lehman Brothers
Aggregate Bond from 1998 to present.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 432 VL/VUL subaccounts and 709 VA subaccounts in the
Morningstar Moderate Allocation category. This represents the Morningstar 3
year rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $79,131 of
securities loaned (Note B)) ................................... $1,854,867
Net unrealized appreciation of investments ....................... 208,462
Short-term investments at value .................................. 290,330
----------
Total investments .......................................... 2,353,659
Receivable for:
Investments sold .............................................. 2,177
Interest ...................................................... 6,148
Dividends ..................................................... 1,493
Other assets .................................................. 2
----------
Total assets ..................................................... 2,363,479
----------
LIABILITIES
Payables for:
Investments purchased ......................................... 211,097
Fund shares purchased ......................................... 388
Collateral for securities on loan ............................. 80,720
Other liabilities ............................................. 529
----------
Total liabilities ................................................ 292,734
----------
Net assets ....................................................... $2,070,745
==========
Shares of beneficial interest outstanding ........................ 161,822
----------
Net asset value per share ........................................ $ 12.80
==========
Composition of net assets:
Capital paid-in ............................................... $2,076,206
Accumulated net realized loss on investments,
futures and foreign currency transactions .................. (213,923)
Net unrealized appreciation of investments ................. 208,462
----------
Net assets ....................................................... $2,070,745
==========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ................................................... $ 27,655
Dividends .................................................. 20,909
Securities lending ......................................... 154
----------
Total investment income .......................................... 48,718
----------
EXPENSES
Investment advisory fee .................................... 13,323
Auditors fees .............................................. 282
Custodian fees ............................................. 419
Fidelity Bond fees ......................................... 4
Legal fees ................................................. 142
Printing & mailing fees .................................... 165
Trustees' fees ............................................. 64
Other fees ................................................. 90
----------
Total expenses ................................................... 14,489
Less custodian expense reduction offset by
commission recapture arrangement (Note C) ............... (45)
----------
Net expenses ..................................................... 14,444
----------
Net investment income ............................................ 34,274
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments .............................. (6,738)
Change in unrealized appreciation on investments .............. 314,071
----------
Net realized and unrealized gain ................................. 307,333
----------
Net increase in net assets resulting from operations ............. $ 341,607
==========
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ............................. $ 34,274 $ 39,260
Net realized loss ................................. (6,738) (108,571)
Change in net unrealized appreciation
(depreciation) ................................. 314,071 (256,985)
---------- ----------
Net increase (decrease) in net assets
resulting from operations ................... 341,607 (326,296)
Distributions to shareholders from:
Net investment income ............................. (63,465) (39,246)
Realized gains .................................... (8,662)
---------- ----------
Decrease in net assets resulting from
distributions ................................ (72,127) (39,246)
From fund share transactions:
Proceeds from shares sold ......................... 80,229 141,803
Distributions reinvested .......................... 72,127 39,246
Payment for shares redeemed ....................... (287,955) (405,346)
---------- ----------
Decrease in net assets from fund share
transactions ................................. (135,599) (224,297)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS ................ 133,881 (589,839)
NET ASSETS
Beginning of Period ............................... 1,936,864 2,526,703
---------- ----------
End of Period ..................................... $2,070,745 $1,936,864
========== ==========
Analysis of fund share transactions:
Sold .............................................. 6,753 11,521
Reinvested ........................................ 5,842 3,304
Redeemed .......................................... (24,528) (34,237)
---------- ----------
Decrease in fund shares outstanding .................. (11,933) (19,412)
========== ==========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Managed Fund
--------------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------------
2003 2002 2001 2000(c) 1999
---------- ---------- ---------- ---------- ----------
Net Assets Value at Beginning of Period .............. $ 11.15 $ 13.08 $ 13.82 $ 15.45 $ 15.64
Income from Investment Operations:
Net Investment Income ............................. 0.21 0.21 0.28 0.44 0.44
Net Realized and Unrealized Gain (Loss) on
Investments(a) ................................. 1.89 (1.93) (0.67) (0.45) 0.94
---------- ---------- ---------- ---------- ----------
Total From Investment Operations .................. 2.10 (1.72) (0.39) (0.01) 1.38
Less Distributions:
Distribution from Net Investment Income ........... (0.39) (0.21) (0.28) (0.44) (0.43)
Distribution from Net Realized Gain on
Investments .................................... (0.06) -- (0.07) (1.18) (1.14)
---------- ---------- ---------- ---------- ----------
Total Distributions ............................... (0.45) (0.21) (0.35) (1.62) (1.57)
---------- ---------- ---------- ---------- ----------
Net Assets Value at End of Period .................... $ 12.80 $ 11.15 $ 13.08 $ 13.82 $ 15.45
========== ========== ========== ========== ==========
Total Investment Return(b) ........................... 19.00% (13.23)% (2.84)% 0.03% 9.10%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net
Assets ......................................... 0.74%(f) 0.76% 0.73% 0.46% 0.36%
Ratio of Net Investment Income to Average
Net Assets ..................................... 1.75% 1.77% 2.10%(d) 2.86% 2.75%
Portfolio Turnover Rate ........................... 216.32% 234.62% 190.73%(e) 210.35% 203.86%
Net Assets End of Period (000s Omitted) .............. $2,070,745 $1,936,864 $2,526,703 $2,995,794 $3,430,919
(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 fluctuating
market values of the portfolio.
(b) The performance 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 Capital Guardian
Trust Company during the period shown.
(d) Had the Fund not amortized premiums and accreted discounts on debt
securities, the annual ratio of net investment income to average net assets
would have been 2.29% for the years ended December 31, 2001.
(e) Excludes merger activity.
(f) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
-------------- -------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 0.7%
Boeing Co. (US) ................................... $299,000 $12,600
Northrop Grumman Corp. (US) ....................... 14,800 1,415
Raytheon Co. (US) ................................. 25,100 754
-------
14,769
Air Freight & Couriers - 0.7%
Fedex Corp. (US) .................................. 112,600 7,600
United Parcel Service, Inc. - Cl. B
(US) ............................................ 80,000 5,964
-------
13,564
Auto Components - 0.2%
Ingersoll-Rand Co. - Cl. A (US) ................... 69,500 4,718
Automobiles - 1.0%
Ford Motor Co. (US) ............................... 552,900 8,846
General Motors Corp. (US) ......................... 166,700 8,902
Harley-Davidson, Inc. (US) ........................ 78,200 3,717
-------
21,465
Banks - 2.7%
Bank of America Corp. (US) ........................ 179,200 14,413
Bank One Corp. (US) ............................... 467,000 21,291
FleetBoston Financial Corp. (US) .................. 31,000 1,353
JP Morgan Chase & Co. (US) ........................ 325,100 11,941
US Bancorp (US) ................................... 212,100 6,316
-------
55,314
Beverages - 1.2%
Anheuser-Busch Cos., Inc. (US) .................... 152,700 8,044
Pepsi Bottling Group, Inc. (US) ................... 53,000 1,282
PepsiCo, Inc. (US) ................................ 331,600 15,459
-------
24,785
Biotechnology - 0.9%
Amgen, Inc. (US) .................................. 225,900 13,960
Biogen IDEC, Inc. (US) ............................ 18,515 681
Genetech, Inc. (US) ............................... 34,100 3,191
-------
17,832
Chemicals - 1.1%
Air Products & Chemicals, Inc. (US) ............... 75,600 3,994
Dow Chemical Co. (US) ............................. 235,400 9,786
E.I. du Pont de Nemours & Co. (US) ................ 76,700 3,520
Rohm & Haas Co. (US) .............................. 122,700 5,240
-------
22,540
Commercial Services & Supplies - 0.2%
Checkfree Corp. (US) .............................. 36,200 1,001
Monster Worldwide, Inc. (US) ...................... 16,200 356
Robert Half International, Inc. (US) .............. 31,400 733
Sabre Group Holdings, Inc. (US) ................... 87,800 1,895
-------
3,985
Communications Equipment - 1.4%
Cisco Systems, Inc. (US) .......................... $1,016,400 $ 24,688
JDS Uniphase Corp. (US) ........................... 294,000 1,073
Polycom, Inc. (US) ................................ 65,700 1,283
Qualcomm, Inc. (US) ............................... 47,400 2,556
--------
29,600
Computers & Peripherals - 3.6%
Apple Computer, Inc. (US) ......................... 14,900 318
Dell, Inc. (US) ................................... 579,500 19,680
EMC Corp. (US) .................................... 1,163,700 15,035
Intel Corp. (US) .................................. 760,400 24,485
International Business Machines
Corp. (US) ...................................... 145,500 13,485
Lexmark International Group, Inc. -
Cl. A (US) ...................................... 13,500 1,062
Seagate Technology (US) ........................... 22,400 423
Sun Microsystems, Inc. (US) ....................... 184,500 828
--------
75,316
Construction & Engineering - 0.4%
American Standard Cos., Inc. (US) ................. 50,000 5,035
Fluor Corp. (US) .................................. 81,300 3,223
--------
8,258
Construction Materials - 0.2%
United States Steel Corp. (US) .................... 113,200 3,964
Containers & Packaging - 0.2%
Smurfit-Stone Container Corp. (US) ................ 185,000 3,435
Credit Card - 0.3%
MBNA Corp. (US) ................................... 248,600 6,178
Diversified Financials - 6.1%
AmeriCredit Corp. (US) ............................ 63,900 1,018
Capital One Financial Corp. (US) .................. 79,300 4,860
Citigroup, Inc. (US) .............................. 743,400 36,085
Goldman Sachs Group, Inc. (US) .................... 86,800 8,570
Merrill Lynch & Co., Inc. (US) .................... 311,700 18,281
Morgan Stanley, Dean Witter,
Discover & Co. (US) ............................. 183,200 10,602
SLM Corp. (US) .................................... 401,900 15,144
State Street Corp. (US) ........................... 66,400 3,458
Washington Mutual, Inc. (US) ...................... 229,900 9,223
Wells Fargo & Co. (US) ............................ 343,300 20,217
--------
127,458
Diversified Telecommunication Services - 1.9%
AT&T Corp. (US) ................................... 65,440 1,328
BellSouth Corp. (US) .............................. 368,400 10,426
CenturyTel, Inc. (US) ............................. 133,300 4,348
Cox Communications, Inc. - Cl. A (US) ............. 44,000 1,516
Nextel Communications, Inc. - Cl. A (US) .......... 118,800 3,334
Sprint Corp. (US) ................................. 195,700 3,213
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
-------------- ---------- -------
(000's)
COMMON STOCK - Continued
Diversified Telecommunication Services - Continued
Sprint PCS (US) ................................... $ 534,100 $ 3,002
Verizon Communications (US) ....................... 352,200 12,355
-------
39,522
Electric Utilities - 1.2%
AES Corp. (US) .................................... 347,700 3,282
American Electric Power Co. (US) .................. 43,500 1,327
Constellation Energy Group, Inc.
(US) ........................................... 75,000 2,937
Entergy Corp. (US) ................................ 173,200 9,895
Firstenergy Corp. (US) ............................ 19,300 679
FPL Group, Inc. (US) .............................. 50,700 3,317
PG & E Corp. (US) ................................. 104,500 2,902
-------
24,339
Electric/Gas - 0.1%
Dominion Resources, Inc. (US) ..................... 50,000 3,191
Electrical Equipment - 1.0%
Emerson Electric Co. (US) ......................... 36,200 2,344
Rockwell International Corp. (US) ................. 247,000 8,793
United Technologies Corp. (US) .................... 111,400 10,558
-------
21,695
Electronic Equipment & Instruments - 0.4%
Agilent Technologies, Inc. (US) ................... 33,000 965
Avnet, Inc. (US) .................................. 91,200 1,975
Sanmina Corp. (US) ................................ 390,600 4,926
-------
7,866
Energy Equipment & Services - 0.5%
Baker Hughes, Inc. (US) ........................... 73,200 2,354
Schlumberger, Ltd. (US) ........................... 78,000 4,268
Transocean Sedco Forex, Inc. (US) ................. 39,200 941
Weatherford Bermuda (US) .......................... 52,300 1,883
-------
9,446
Food & Drug Retailing - 0.1%
Williams-Sonoma, Inc. (US) ........................ 58,000 2,017
Food Products - 0.7%
Archer Daniels Midland Co. (US) ................... 345,000 5,251
Campbell Soup Co. (US) ............................ 159,300 4,269
General Mills, Inc. (US) .......................... 107,700 4,879
Kraft Foods, Inc. - Cl. A (US) .................... 37,800 1,218
-------
15,617
Gas Utilities - 0.6%
Kinder Morgan Management LLC
(US) ........................................... 95,348 4,096
Kinder Morgan, Inc. (US) .......................... 70 4
Sempra Energy (US) ................................ 238,000 7,154
Williams Cos., Inc. (US) .......................... 229,100 2,250
-------
13,504
Health Care Equipment & Supplies - 1.5%
Applera Corporation - Applied
Biosystems Group (US) .......................... $ 170,700 $ 3,535
Becton, Dickinson & Co. (US) ...................... 23,900 983
Boston Scientific Corp. (US) ...................... 242,900 8,929
Guidant Corp. (US) ................................ 105,200 6,333
St. Jude Medical, Inc. (US) ....................... 77,300 4,743
Zimmer Holdings, Inc. (US) ........................ 90,500 6,371
-------
30,894
Health Care Providers & Services - 1.4%
Anthem, Inc. (US) ................................. 120,600 9,045
DaVita, Inc. (US) ................................. 71,800 2,800
HCA-The Healthcare Corp. (US) ..................... 34,400 1,478
Lincare Holdings, Inc. (US) ....................... 76,200 2,288
PacifiCare Health Systems, Inc. (US) .............. 75,400 5,097
Triad Hospitals, Inc. (US) ........................ 23,600 785
UnitedHealth Group, Inc. (US) ..................... 126,500 7,360
-------
28,853
Hotels Restaurants & Leisure - 0.5%
Carnival Corp. (US) ............................... 25,600 1,017
McDonald's Corp. (US) ............................. 382,300 9,493
-------
10,510
Household Products - 1.5%
Clorox Co. (US) ................................... 90,400 4,390
Kimberly-Clark Corp. (US) ......................... 21,400 1,264
Procter & Gamble Co. (US) ......................... 259,100 25,879
-------
31,533
Industrial Conglomerates - 3.3%
3M Co. (US) ....................................... 151,000 12,840
General Electric Co. (US) ......................... 1,336,800 41,414
Siemens AG - ADR (US) ............................. 22,700 1,815
Tyco International, Ltd. (US) ..................... 439,300 11,641
-------
67,710
Insurance - 3.5%
American International Group, Inc.
(US) ........................................... 301,600 19,990
Chubb Corp. (US) .................................. 84,300 5,741
CIGNA Corp. (US) .................................. 15,100 868
Cincinnati Financial Corp. (US) ................... 21,700 909
Everest Re Group, Ltd. (US) ....................... 47,900 4,052
Hartford Financial Services Group,
Inc. (US) ...................................... 266,800 15,749
Metlife, Inc. (US) ................................ 183,800 6,189
Prudential Financial, Inc. (US) ................... 279,300 11,666
The PMI Group, Inc. (US) .......................... 152,200 5,666
XL Capital, Ltd. - Cl. A (US) ..................... 34,500 2,676
-------
73,506
Internet & Catalog Retail - 0.0%
Amazon.com, Inc. (US) ............................. 16,900 890
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
-------------- ---------- --------
(000's)
COMMON STOCK - Continued
Internet Software & Services - 0.3%
Yahoo, Inc. (US) .................................. $ 120,300 $ 5,434
IT Consulting & Services - 1.2%
Accenture, Ltd. - Cl. A (US) ...................... 419,200 11,034
Affiliated Computer Services, Inc. -
Cl. A (US) ..................................... 253,200 13,789
--------
24,823
Leisure Equipment & Products - 0.2%
Hasbro, Inc. (US) ................................. 205,700 4,377
Machinery - 0.7%
Danaher Corp. (US) ................................ 80,200 7,358
Eaton Corp. (US) .................................. 51,000 5,507
Navistar International Corp., Inc. -
Cl. B (US) ..................................... 35,500 1,700
--------
14,565
Media - 3.3%
Cablevision Systems Corp. - Cl. A
(US) ........................................... 145,361 3,400
Clear Channel Communications, Inc.
(US) ........................................... 94,000 4,402
Comcast Corp. - Cl. A (US) ........................ 510,000 16,764
Entercom Communications Corp.
(US) ........................................... 5,200 275
Fox Entertainment Group, Inc. - Cl. A
(US) ........................................... 55,000 1,603
Hughes Electronics Corp. (US) ..................... 150,072 2,484
Interactive Corp. (US) ............................ 200,100 6,789
Interpublic Group Cos., Inc. (US) ................. 78,200 1,220
Knight-Ridder, Inc. (US) .......................... 13,600 1,052
Omnicom Group, Inc. (US) .......................... 60,800 5,310
Radio One, Inc. - Cl. D (US) ...................... 54,500 1,052
The News Corp., Ltd. - ADR (AU) ................... 16,785 508
The Walt Disney Co. (US) .......................... 251,300 5,863
Time Warner, Inc. (US) ............................ 721,376 12,978
Tribune Co. (US) .................................. 78,900 4,071
Vivendi Universal - ADR (US) ...................... 15,900 386
--------
68,157
Metals & Mining - 0.4%
Alcan Aluminum, Ltd. (US) ......................... 150,000 7,043
Newmont Mining Corp. (US) ......................... 20,800 1,011
--------
8,054
Multi-Utilities - 0.1%
NiSource, Inc. (US) ............................... 61,400 1,347
Multiline Retail - 1.2%
Costco Wholesale Corp. (US) ....................... 63,000 2,342
Federated Department Stores, Inc.
(US) ........................................... 78,400 3,695
Wal-Mart Stores, Inc. (US) ........................ 341,100 18,096
--------
24,133
Oil & Gas - 3.9%
BJ Services Co. (US) .............................. $ 55,300 $ 1,985
ChevronTexaco Corp. (US) .......................... 96,300 8,320
Conoco Phillips (US) .............................. 206,400 13,534
Devon Energy Corp. (US) ........................... 5,800 332
Equitable Resources, Inc. (US) .................... 22,700 974
Exxon Mobil Corp. (US) ............................ 1,061,800 43,534
Murphy Oil Corp. (US) ............................. 57,800 3,775
Newfield Exploration Co. (US) ..................... 44,500 1,982
Royal Dutch Petroleum Co. (US) .................... 58,500 3,065
Unocal Corp. (US) ................................. 116,300 4,283
--------
81,784
Paper & Forest Products - 0.4%
Boise Cascade Corp. (US) .......................... 14,300 470
International Paper Co. (US) ...................... 181,100 7,807
--------
8,277
Personal Products - 0.4%
Estee Lauder Cos., Inc. - Cl. A (US) .............. 84,900 3,333
Gillette Co. (US) ................................. 113,600 4,173
--------
7,506
Pharmaceuticals - 5.7%
Abbott Laboratories (US) .......................... 157,300 7,330
Allergan, Inc. (US) ............................... 124,600 9,571
AstraZeneca Group plc - ADR (US) .................. 359,700 17,402
Eli Lilly & Co. (US) .............................. 60,900 4,283
Forest Laboratories, Inc. (US) .................... 226,700 14,010
Johnson & Johnson (US) ............................ 204,700 10,575
Merck & Co., Inc. (US) ............................ 56,800 2,624
Pfizer, Inc. (US) ................................. 1,067,900 37,729
Watson Pharmaceuticals, Inc. (US) ................. 67,900 3,123
Wyeth (US) ........................................ 260,600 11,063
--------
117,710
Real Estate Investment Trust - 0.1%
General Growth Properties (US) .................... 60,300 1,673
Real Estate Operations - 0.2%
Hilton Hotels Corp. (US) .......................... 201,700 3,455
Starwood Hotels & Resorts
Worldwide, Inc. (US) ........................... 30,200 1,086
--------
4,541
Road & Rail - 0.1%
Union Pacific Corp. (US) .......................... 18,000 1,251
Semiconductor Equipment & Products - 2.2%
Altera Corp. (US) ................................. 42,600 967
Analog Devices, Inc. (US) ......................... 155,700 7,108
Applied Materials, Inc. (US) ...................... 386,300 8,672
KLA-Tencor Corp. (US) ............................. 24,500 1,437
Lam Research Corp. (US) ........................... 40,200 1,298
Novellus Systems, Inc. (US) ....................... 137,900 5,799
Teradyne, Inc. (US) ............................... 29,900 761
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Market
Name of Issuer Shares Value
-------------- ---------- ----------
(000's)
COMMON STOCK - Continued
Semiconductor Equipment & Products - Continued
Texas Instruments, Inc. (US) ...................... $ 649,000 $ 19,068
----------
45,110
Software - 3.5%
Cadence Design Systems, Inc. (US) ................. 71,900 1,293
Electronic Arts, Inc. (US) ........................ 153,200 7,320
Mercury Interactive Corp. (US) .................... 100,300 4,879
Microsoft Corp. (US) .............................. 1,452,800 40,010
Network Associates, Inc. (US) ..................... 39,700 597
Peoplesoft, Inc. (US) ............................. 119,800 2,731
Sap Aktiengesellschaft - ADR (US) ................. 65,500 2,722
Symantec Corp. (US) ............................... 100,000 3,465
Veritas Software Corp. (US) ....................... 256,600 9,535
----------
72,552
Specialty Retail - 2.4%
AutoNation, Inc. (US) ............................. 119,500 2,195
AutoZone, Inc. (US) ............................... 84,200 7,175
Best Buy Co., Inc. (US) ........................... 85,400 4,461
Home Depot, Inc. (US) ............................. 416,800 14,792
Kohl's Corp. (US) ................................. 96,400 4,332
Lowe's Cos., Inc. (US) ............................ 184,400 10,214
RadioShack Corp. (US) ............................. 73,600 2,258
Staples, Inc. (US) ................................ 185,000 5,051
----------
50,478
Textiles & Apparel - 0.4%
Nike, Inc. - Cl. B (US) ........................... 111,300 7,620
Tobacco - 1.1%
Altria Group, Inc. (US) ........................... 401,800 21,866
Trading Companies & Distributors - 0.5%
CDW Corp. (US) .................................... 175,000 10,108
U.S. Government Agencies - 0.9%
Federal Home Loan Mortgage Corp.
(US) ........................................... 76,600 4,467
Federal National Mortgage Assoc.
(US) ........................................... 181,000 13,586
----------
18,053
----------
TOTAL COMMON STOCK- ......................... 68.3% 1,413,693
Par
Value
----------
(000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 0.2%
Boeing Capital Corp. - Sr. Notes (US)
6.5% due 02/15/12 .............................. $ 1,797 1,965
Bombardier, Inc. - 144A (a) (US)
6.75% due 05/01/12 ............................. 883 965
Raytheon Co. - Debs. (US)
6.0% due 03/25/07 .............................. 125 133
Systems 2001 LLC - Cl. G 144A (a)
(US)
6.664% due 09/15/13 ............................ $ 259 $ 286
Systems 2001 LLC - CTF Cl. B
144A (a) (US)
7.156% due 12/15/11 ............................ 316 345
----------
3,694
Airlines - 0.1%
Popular North America, Inc. (US)
6.125% due 10/15/06 ............................ 1,439 1,564
Auto Components - 0.0%
Delphi Corp. - Notes (US)
6.5% due 08/15/13 .............................. 70 74
Lear Corp. - Ser. B (US)
8.11% due 05/15/09 ............................. 105 123
----------
197
Auto Loan - 0.6%
Ford Motor Credit Co. - Notes (US)
6.875% due 02/01/06 ............................ 953 1,017
7.0% due 10/01/13 .............................. 3,090 3,259
7.375% due 10/28/09 ............................ 50 55
Ford Motor Credit Co. (US)
7.25% due 10/25/11 ............................. 732 794
7.875% due 06/15/10 ............................ 300 335
Ford Motor Credit Co. - Bonds (US)
7.375% due 02/01/11 ............................ 75 82
General Motors Acceptance Corp. (US)
6.875% due 08/28/12 ............................ 1,000 1,076
7.5% due 07/15/05 .............................. 1,743 1,873
General Motors Acceptance Corp. -
Sr. Notes (US)
7.0% due 02/01/12 .............................. 900 968
General Motors Acceptance Corp. -
Bonds (US)
7.25% due 03/02/11 ............................. 15 16
General Motors Acceptance Corp. -
Notes (US)
8.0% due 11/01/31 .............................. 265 297
6.875% due 09/15/11 ............................ 550 592
GMAC Commercial Mortgage
Securities, Inc. - CTF Cl. H
144A (a)(US)
5.31% due 05/10/36 ............................. 3,000 2,870
----------
13,234
Automobiles - 0.6%
Daimler Chrysler NA Holding Corp. -
Sr. Notes (US)
6.5% due 11/15/13 .............................. 1,040 1,096
DaimlerChrysler NA - Notes (US)
3.75% due 06/04/08 ............................. 175 174
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Automobiles - Continued
DaimlerChrysler NA Holding Corp. -
Notes (US)
8.5% due 01/18/31 ................................... $ 725 $ 866
Equus Cayman Finance, Ltd. - Sr.........................
Notes 144A (a) (US)
5.5% due 09/12/08 ................................... 1,240 1,257
First Invs Auto Owner Trust - Notes
Cl. A (US)
3.46% due 12/15/08 .................................. 36 36
Ford Motor Co. - Bonds (US)
6.625% due 10/01/28 ................................. 2,134 1,963
7.45% due 07/16/31 .................................. 2,535 2,562
General Motors Corp. - Sr. Debs. .......................
(US)
8.375% due 07/15/33 ................................. 3,325 3,860
Hertz Corp. (US)
7.625% due 08/15/07 ................................. 100 110
-------
11,924
Banks - 2.4%
Banc America Commercial Mortgage,
Inc. - CTF 144A (a) (US)
5.276% due 03/11/41 ................................. 2,000 1,937
Bank of America Corp. - Sr. Notes
(US)
7.125% due 09/15/06 ................................. 250 279
Bank One Corp. - Sub. Notes (US)
4.9% due 04/30/15 ................................... 90 88
Bank One Corp. - Notes (US)
6.5% due 02/01/06 ................................... 1,238 1,344
Barclays Bank plc - Notes 144A (a)
(US)
6.86% due 06/15/32 .................................. 30 32
BNP Paribas - 144A (a) (US)
5.125% due 01/15/15 ................................. 60 60
Capital One Bank (US)
5.75% due 09/15/10 .................................. 120 127
Central American Bank - 144A (a)
(US)
6.75% due 04/15/13 .................................. 1,350 1,455
Corporacion Andina De Fomento -
Notes (US)
5.2% due 05/21/13 ................................... 1,330 1,324
6.875% due 03/15/12 ................................. 160 177
Credit Suisse First Boston - Ser. 2003
(US)
3.727% due 03/25/35 ................................. 3,795 3,758
Credit Suisse First Boston - Ser
2003-C3 Cl. F 144A (a) (US)
4.518% due 05/15/38 ................................. 2,000 1,880
Credit Suisse First Boston - Sr. Notes
(US)
4.625% due 01/15/08 ................................. 536 558
Credit Suisse First Boston - Notes
(US)
5.75% due 04/15/07 .................................. $ 739 $ 801
Credit Suisse First Boston (US)
6.5% due 01/15/12 ................................... 125 139
Credit Suisse First Boston - Ser.
2003-29 Cl. VA1 (US)
7.0% due 12/25/33 ................................... 8,000 8,402
Credit Suisse First Boston Mortgage -
CTF Cl. II A2 (US)
4.375% due 04/25/33 ................................. 102 102
Credit Suisse First Boston Mortgage -
Cl. A2 (US)
5.935% due 01/15/06 ................................. 250 265
Credit Suisse First Boston Mortgage -
CF2 Cl. A3 (US)
6.238% due 02/15/34 ................................. 250 274
Credit Suisse First Boston Mortgage
Securities Corp. - Cl. A1 (US)
3.801% due 06/15/06 ................................. 780 785
Credit Suisse First Boston Mortgage
Securities Corp. (US)
7.545% due 04/15/10 ................................. 2,533 2,953
Credit Suisse First Boston Mortgage
Securities Corp. - Cl. A1 (US)
6.91% due 01/15/08 .................................. 4,554 4,957
Dresdner Bank AG - Sub. Notes (US)
7.25% due 09/15/15 .................................. 1,395 1,602
First Union Lehman Brothers Bank -
Ser. 1998 C2 CTF Cl. E (US)
6.778% due 05/18/13 ................................. 2,000 2,187
First Union National Bank
Commercial & Mortgage Trust -
CTF Cl. A1 (US)
5.585% due 08/12/10 ................................. 430 459
FleetBoston Financial Corp. -
Sr. Notes (US)
7.25% due 09/15/05 .................................. 1,248 1,357
HBOS plc - 144A (a) (US)
3.125% due 01/12/07 ................................. 250 252
5.375% due 11/29/49 ................................. 190 189
JP Morgan Chase & Co. - Notes (US)
5.25% due 05/30/07 .................................. 2,739 2,924
5.35% due 03/01/07 .................................. 2,200 2,355
JP Morgan Chase & Co. - Sub. Notes
(US)
6.75% due 02/01/11 .................................. 3,000 3,383
Union Bancal Corp. - Sub. Notes (US)
5.25% due 12/16/13 .................................. 100 101
Wachovia Bank Commercial Trust -
Ser. 2003-C8 Cl. F 144A (a) (US)
5.031% due 11/15/35 ................................. 1,400 1,400
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Banks - Continued
WAMU Mortgage Pass Through
Certs. - CTF Cl. A1 (US)
4.39% due 06/25/33 .................................. $ 705 $ 711
Zions Bancorp - Sub. Notes (US)
6.0% due 09/15/15 ................................... 315 330
-------
48,947
Beverages - 0.1%
Anheuser Busch Cos., Inc. - Debs
(US)
6.5% due 02/01/43 ................................... 1,232 1,338
Chemicals - 0.0%
ICI Wilmington, Inc. - Notes (US)
4.375% due 12/01/08 ................................. 235 234
5.625% due 12/01/13 ................................. 690 693
-------
927
Commercial Services & Supplies - 0.4%
Cendant Corp. - Sr. Notes (US)
6.25% due 01/15/08 .................................. 125 136
6.25% due 03/15/10 .................................. 710 772
Cendant Corp. - Notes (US)
6.875% due 08/15/06 ................................. 150 165
Cendant Corp. - Sr. Notes (US)
7.125% due 03/15/15 ................................. 734 829
7.375% due 01/15/13 ................................. 1,377 1,579
Falconbridge, Ltd. - Notes (US)
5.375% due 06/01/15 ................................. 1,395 1,359
MDC Holdings, Inc. - Sr. Notes (US)
5.5% due 05/15/13 ................................... 90 90
PHH Corp. - Notes (US)
7.125% due 03/01/13 ................................. 70 78
Teppco Partners - Sr. Notes (US)
6.125% due 02/01/13 ................................. 1,308 1,386
Tyco International Group - Notes
144A (a) (US)
6.0% due 11/15/13 ................................... 125 129
Tyco International Group SA - Notes
(US)
6.125% due 01/15/09 ................................. 140 150
6.75% due 02/15/11 .................................. 280 305
Tyco International Group SA - Sr
Notes (US)
6.375% due 10/15/11 ................................. 1,450 1,547
USA Education , Inc. (US)
5.625% due 04/10/07 ................................. 125 135
Waste Management, Inc. - Sr. Notes
(US)
6.375% due 11/15/12 ................................. 125 136
-------
8,796
Communications Equipment - 0.3%
American Tower Corp. - Sr. Notes
(US)
9.375% due 02/01/09 ................................. $ 900 $ 959
Deutsche Telekom International (US)
8.5% due 06/15/10 ................................... 721 872
Deutsche Telekom International
Finance (US)
8.75% due 06/15/30 .................................. 1,006 1,285
Deutsche Telekom International
Finance BV - Notes (US)
9.25% due 06/01/32 .................................. 100 137
Intelsat, Ltd. - Sr. Notes 144A (a)
(US)
5.25% due 11/01/08 .................................. 1,048 1,078
Motorola, Inc. - Notes (US)
6.75% due 02/01/06 .................................. 1,500 1,616
Motorola, Inc. - Debs. (US)
7.5% due 05/15/25 ................................... 20 22
Motorola, Inc. (US)
8.0% due 11/01/11 ................................... 30 35
-------
6,004
Construction & Engineering - 0.0%
Pulte Homes, Inc. - Sr. Notes (US)
6.25% due 02/15/13 .................................. 100 106
7.875% due 08/01/11 ................................. 90 106
8.125% due 03/01/11 ................................. 25 30
-------
242
Containers & Packaging - 0.0%
Packaging Corp. of America - Sr
Notes (US)
5.75% due 08/01/13 .................................. 190 192
Credit Card - 0.2%
Citibank Credit Card Issuance Trust -
Cl. A1 Notes (US)
4.95% due 02/09/09 .................................. 2,000 2,125
MBNA Corp. (US)
6.125% due 03/01/13 ................................. 90 97
MBNA Credit Card Master Note
Trust - Notes Cl. C (US)
6.8% due 07/15/14 ................................... 500 544
Nordstrom Credit Card Master Note
Trust - Notes Cl. B 144A (a) (US)
2.039% due 10/13/10 ................................. 150 152
Pass Through Amortizing Credit Card
Trust - CTF Cl. A3 144A (a) (US)
6.298% due 06/18/12 ................................. 106 108
Sears Credit Account Master Trust -
Ser. 1998-2 Cl. A (US)
5.25% due 10/16/08 .................................. 365 371
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Credit Card - Continued
Structured Assets Securities Corp.
(US)
8.517% due 07/15/27 ................................. $ 82 $ 90
-------
3,487
Diversified Financials - 2.6%
Associates Corp. of North America -
Sr. Notes (US)
6.25% due 11/01/08 .................................. 250 278
AXA Financial, Inc. - Sr. Notes (US)
7.75% due 08/01/10 .................................. 1,068 1,265
Bear Stearns ARM Trust - CTF Cl. II
A2 (US)
4.25% due 04/25/33 .................................. 100 100
Bear Stearns Trust - Ser. 2003-2
Cl. A3 144A (a) (US)
3.703% due 01/25/33 ................................. 152 153
Bear Stearns, Inc. - Ser. 2002 CTF
Cl. A2 (US)
4.72% due 11/11/35 .................................. 2,000 2,012
Capital One Financial Corp. -
Sr. Notes (US)
6.25% due 11/15/13 .................................. 60 61
Chase Commercial Mortgage
Securities Corp. - Ser. 1997-1
Cl. A2 (US)
7.37% due 02/19/07 .................................. 4,658 5,096
Chase Commercial Mortgage
Securities Corp. - Cl. C (US)
7.928% due 07/15/32 ................................. 1,000 1,184
Chase Funding Loan Acquisition
Trust - Cl. 1A3 (US)
4.541% due 02/25/23 ................................. 573 573
CIT Group, Inc - Sr. Notes (US)
5.75% due 09/25/07 .................................. 1,420 1,532
CIT Group, Inc. - Sr. Notes (US)
4.0% due 05/08/08 ................................... 934 945
Citigroup, Inc. - Sr. Notes (US)
5.0% due 03/06/07 ................................... 3,000 3,185
Citigroup, Inc. - Notes (US)
5.5% due 08/09/06 ................................... 2,000 2,145
Citigroup, Inc. - Sub. Notes (US)
5.625% due 08/27/12 ................................. 1,340 1,415
Duke Capital Corp. - Sr. Notes (US)
6.25% due 02/15/13 .................................. 825 870
6.75% due 02/15/32 .................................. 1,394 1,408
Fund American Cos, Inc. - GTD Sr
Notes (US)
5.875% due 05/15/13 ................................. 1,480 1,498
GE Commercial Mortgage Corp. -
2003 C1 144A (a) (US)
5.948% due 01/10/38 ................................. 3,000 3,047
General Electric Capital Corp. (US)
5.875% due 02/15/12 ................................. 2,950 3,170
6.0% due 06/15/12 ................................... $ 70 $ 76
Goldman Sachs Group, Inc. -
Sr. Notes (US)
4.125% due 01/15/08 ................................. 1,050 1,077
5.25% due 04/01/13 .................................. 455 461
Goldman Sachs Group, Inc. (US)
6.875% due 01/15/11 ................................. 3,405 3,867
Greater Connecticut Consumer Loan
Trust - Notes Cl. A 144A (a) (US)
6.25% due 02/15/20 .................................. 498 510
Green Tree Financial Corp. -
Ser. 1996-8 Cl. A6 (US)
7.6% due 10/15/27 ................................... 3,427 3,628
International Lease Finance Corp.
(US)
4.55% due 10/15/09 .................................. 100 100
International Lease Finance Corp. -
Notes (US)
5.875% due 05/01/13 ................................. 1,317 1,388
Monumental Global Funding -
Sr. Sec. Notes Ser. A 144A (a) (US)
5.2% due 01/30/07 ................................... 250 267
Morgan Stanley Capital, Inc. - Ser.
2003 Cl. A 144A (a) (US)
1.0% due 07/14/08 ................................... 99 99
Morgan Stanley Group, Inc. (US)
6.75% due 04/15/11 .................................. 2,880 3,258
Nationwide Life Global Funding (US)
5.35% due 02/15/07 .................................. 60 65
Pemex Project Funding Master Trust -
Notes (US)
6.125% due 08/15/08 ................................. 1,500 1,575
7.375% due 12/15/14 ................................. 1,700 1,815
Salomon Brothers Commercial and
Mortgage Trust - CTF 2001-C1
Cl. A3 (US)
6.428% due 12/18/35 ................................. 925 1,028
SLM Corp. (US)
5.0% due 04/15/15 ................................... 375 370
5.375% due 01/15/13 ................................. 90 92
USAA Capital Corp. - 144A (a) (US)
4.0% due 12/10/07 ................................... 150 153
Washington Mutual Mortgage
Securities Corp. - Cl. A6 (US)
4.56% due 03/25/33 .................................. 60 60
Washington Mutual, Inc. (US)
5.625% due 01/15/07 ................................. 3,050 3,287
Wells Fargo & Co. - Notes (US)
3.5% due 04/04/08 ................................... 250 251
-------
53,364
Diversified Telecommunication Services - 0.7%
AT&T Corp. - Sr. Notes (US)
7.8% due 11/15/11 .................................... 80 92
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Diversified Telecommunication Services - Continued
8.5% due 11/15/31 ................................... $ 125 $ 146
Crown Castle International Corp. -
Sr. Notes (US)
10.75% due 08/01/11 ................................. 250 281
France Telecom SA - Notes (US)
9.25% due 03/01/11 .................................. 955 1,147
10.0% due 03/01/31 .................................. 1,150 1,528
Nextel Communications, Inc. - Sr.
Notes (US)
7.375% due 08/01/15 ................................. 375 403
SBC Communications, Inc. - Notes
(US)
5.875% due 02/01/12 ................................. 50 53
Singapore Telecommunications -
Notes 144A (a) (US)
6.375% due 12/01/11 ................................. 75 83
Sprint Capital Corp. - Notes (US)
6.125% due 11/15/08 ................................. 1,323 1,410
7.125% due 01/30/06 ................................. 100 108
8.375% due 03/15/12 ................................. 852 995
8.75% due 03/15/32 .................................. 865 1,022
Telecom Italia Capital Corp. - Sr.
Notes Ser. A 144A (a) (US)
4.0% due 11/15/08 ................................... 1,250 1,258
Telecom Italia Capital Corp. - Sr.
Notes Ser. B 144A (a) (US)
5.25% due 11/15/13 .................................. 200 200
Telefonos de Mexico - Sr. Notes
144A (a) (US)
4.5% due 11/19/08 ................................... 105 105
Tellus Corp. - Notes (US)
8.0% due 06/01/11 ................................... 80 94
Telstra, Ltd. - Notes (US)
6.375% due 04/01/12 ................................. 125 138
Tritel PCS, Inc. - Sr. Sub. Notes (US)
10.375% due 01/15/11 ................................ 325 389
Verizon Global Funding Corp. - Notes
(US)
6.75% due 12/25/32 .................................. 2,169 2,354
7.25% due 12/01/10 .................................. 90 104
Verizon Global Funding Corp. -
Global Notes (US)
7.375% due 09/01/12 ................................. 927 1,074
Verizon New York, Inc. - Debs. Ser. A
(US)
6.875% due 04/01/12 ................................. 963 1,066
Vodafone Group plc - Notes (US)
5.375% due 01/30/15 ................................. 110 111
-------
14,161
Electric Utilities - 1.0%
American Electric Power , Inc. -
Sr. Notes Ser. D (US)
5.25% due 06/01/15 .................................. 1,395 1,370
Black Hills Corp. - Notes (US)
6.5% due 05/15/13 ................................... $1,025 $ 1,039
Cilcorp, Inc. - Sr. Notes (US)
8.7% due 10/15/09 ................................... 185 223
Empresa Nacional De Electricid -
Notes (US)
8.35% due 08/01/13 .................................. 2,850 3,204
8.5% due 04/01/09 ................................... 40 45
Enersis SA - Notes 144A (a) (US)
7.375% due 01/15/14 ................................. 2,000 2,066
FirstEnergy Corp. - Notes Ser. B (US)
6.45% due 11/15/11 .................................. 1,054 1,093
FirstEnergy Corp. - Notes Ser. C (US)
7.375% due 11/15/31 ................................. 1,750 1,790
Oncor Electric Delivery Co. - Sr. Sec.
Notes (US)
6.375% due 01/15/15 ................................. 1,695 1,843
7.0% due 05/01/32 ................................... 125 138
Progress Energy, Inc. - Sr. Notes (US)
6.75% due 03/01/06 .................................. 1,560 1,691
7.0% due 10/30/31 ................................... 693 742
7.1% due 03/01/11 ................................... 250 282
Public Service Co. New Mexico -
Sr. Unsec. Notes (US)
4.4% due 09/15/08 ................................... 1,453 1,471
SP Power Assets, Ltd. - 144A (a)
(US)
5.0% due 10/22/13 ................................... 150 151
Tampa Electric Co. - Notes (US)
6.375% due 08/15/12 ................................. 100 107
TXU Australia Holdings, Ltd. - GTD
Sr. Notes 144A (a) (US)
6.15% due 11/15/13 .................................. 1,750 1,784
TXU Energy Co. LLC - Sr. Notes
(US)
7.0% due 03/15/13 ................................... 1,399 1,547
United Energy Distribution, Ltd. -
Sr. Notes 144A (a) (US)
4.7% due 04/15/11 ................................... 90 91
-------
20,677
Electric/Gas - 0.1%
Cilcorp, Inc. - Sr. Bond (US)
9.375% due 10/15/29 ................................. 25 33
Dominion Resources, Inc. - Notes
(US)
5.7% due 09/17/12 ................................... 200 211
Peco Energy Transport Trust -
Ser. 1999A Cl. A7 (US)
6.13% due 03/01/09 .................................. 315 348
PSEG Power LLC - Sr. Notes (US)
6.875% due 04/15/06 ................................. 1,760 1,919
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Electric/Gas - Continued
Virginia Electric Power Co. - Sr.
Notes (US)
4.75% due 03/01/13 .................................. $ 90 $ 89
-------
2,600
Electronic Equipment & Instruments - 0.0%
Solectron Corp. - Sr. Notes (US)
9.625% due 02/15/09 ................................. 500 558
Energy Equipment & Services - 0.1%
Enbridge Energy Partners LP - Notes
(US)
4.75% due 06/01/13 .................................. 1,710 1,652
Finance - 0.6%
Bear Stearns & Co., Inc. - Notes (US)
5.7% due 11/15/14 ................................... 2,468 2,573
Cadbury Schweppes U.S. Finance -
Sr. Notes 144A (a) (US)
5.125% due 10/01/13 ................................. 100 99
California Infrastructure &
Ecomomic - Ser. 1997-1 CTF
Cl. A6 (US)
6.38% due 09/25/08 .................................. 453 482
California Infrastructure
Development - Ser. 1997-1 CTF
Cl. A7 (US)
6.42% due 09/25/08 .................................. 439 467
Conseco Finance Securitizations Co. -
Ser. 2000-F Cl. AF 4 (US)
7.67% due 03/15/06 .................................. 39 39
FUJI JGB Investments - Ser. A
144A (a) (US)
9.87% due 12/31/49 .................................. 140 155
Household Finance Corp. - Notes
(US)
6.0% due 05/01/04 ................................... 125 127
6.375% due 11/27/12 ................................. 150 164
Household Financial Corp. - Global
Notes (US)
4.625% due 01/15/08 ................................. 1,432 1,489
Household Financial Corp. (US)
5.75% due 01/30/07 .................................. 285 308
HVB Funding Trust III - CTF
144A (a) (US)
9.0% due 10/22/31 ................................... 40 48
Mangrove Bay Trust - 144A (a) (US)
6.102% due 07/15/33 ................................. 100 97
Monumental Global Funding II - Sr.
Notes 144A (a) (US)
3.85% due 03/03/08 .................................. 360 363
NiSource Finance Corp. - Sr. Notes
(US)
6.15% due 03/01/13 .................................. 912 980
NiSource Finance Corp. (US)
7.875% due 11/15/10 ................................. $1,350 $ 1,606
PCCW Hkt Capital, Ltd. (US)
8.0% due 11/15/11 ................................... 80 94
Reliastar Financial Corp. - Notes (US)
6.5% due 11/15/08 ................................... 160 177
UFJ Finance Aruba - GTD Notes
(US)
6.75% due 07/15/13 .................................. 1,800 1,920
Vanderbilt Acquisition Loan Trust -
Sr. Sub. Notes Cl. A3 (US)
5.7% due 09/07/23 ................................... 250 258
-------
11,446
Food & Drug Retailing - 0.0%
Albertson's, Inc. - Sr. Notes (US)
7.5% due 02/15/11 ................................... 80 92
Delhaize America, Inc. - Notes (US)
8.125% due 04/15/11 ................................. 130 149
-------
241
Food Products - 0.3%
Kellogg Co. - Notes Ser. B (US)
6.6% due 04/01/11 ................................... 200 224
Kraft Foods, Inc. - Notes (US)
5.25% due 06/01/07 .................................. 4,757 5,061
Nabisco, Inc. - Notes (US)
7.05% due 07/15/07 .................................. 90 101
Nabisco, Inc. - Debs. (US)
7.55% due 06/15/15 .................................. 500 599
-------
5,985
Foreign Governmental - 0.2%
Quebec Province Canada (US)
5.5% due 04/11/06 ................................... 2,790 3,000
Republic of Chile - Bonds (US)
5.5% due 01/15/13 ................................... 70 72
United Mexican States (US)
4.625% due 10/08/08 ................................. 80 81
6.375% due 01/16/13 ................................. 1,700 1,764
8.375% due 01/14/11 ................................. 40 47
United Mexican States (XU)
9.875% due 02/01/10 ................................. 125 158
United Mexican States - Bonds (US)
11.375% due 09/15/16 ................................ 50 71
-------
5,193
Gas Utilities - 0.2%
Kinder Morgan Energy Partners -
Sr. Notes (US)
7.3% due 08/15/33 ................................... 1,480 1,682
Michigan Consolidated Gas Co. -
Sr. Notes (US)
5.7% due 03/15/33 ................................... 1,480 1,423
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Gas Utilities - Continued
National Rural Utilities Cooperative
Finance - Bonds (US)
3.875% due 02/15/08 ................................. $1,698 $ 1,719
-------
4,824
Health Care Providers & Services - 0.1%
HCA, Inc. - Notes (US)
6.25% due 02/15/13 .................................. 650 668
6.75% due 07/15/13 .................................. 1,291 1,369
6.95% due 05/01/12 .................................. 150 161
HCA-The Healthcare Corp. - Sr.
Notes (US)
7.875% due 02/01/11 ................................. 85 96
HCA-The Healthcare Corp. - Notes
(US)
8.75% due 09/01/10 .................................. 60 71
Health Net, Inc. - Sr. Notes (US)
8.375% due 04/15/11 ................................. 80 96
Humana, Inc. - Sr. Notes (US)
7.25% due 08/01/06 .................................. 135 147
-------
2,608
Home Equity Loan - 1.2%
Centex Home Equity Loan Trust -
CTF Cl. A5 (US)
6.83% due 07/25/32 .................................. 2,635 2,801
Countrywide Home Loan Corp. (US)
5.5% due 08/01/06 ................................... 2,821 3,013
Residential Asset Mortgage Products,
Inc. - Cl. AI2 (US)
3.38% due 03/25/29 .................................. 5,000 5,010
Residential Funding and Mortgage
Securities - Ser. 2002-HI2 (US)
5.64% due 10/25/14 .................................. 5,000 5,055
Residential Funding and Mortgage
Securities - Notes Cl. A7 (US)
6.9% due 01/25/33 ................................... 9,000 9,812
Residential Funding and Mortgage
Securities Trust II - Ser. 2001-HS2
Cl. A4 (US)
6.43% due 04/25/16 .................................. 70 71
-------
25,762
Hotels Restaurants & Leisure - 0.5%
Boyd Gaming Corp. - Sr. Notes (US)
9.25% due 08/01/09 .................................. 250 280
Hilton Hotels Corp. - Notes (US)
7.625% due 12/01/12 ................................. 2,900 3,259
Mandalay Resort Group - Sr. Notes
144A (a) (US)
6.375% due 12/15/11 ................................. 1,000 1,028
MGM Mirage, Inc. - Ser. B (US)
6.0% due 10/01/09 ................................... 1,820 1,870
Six Flags, Inc. - Sr. Notes (US)
8.875% due 02/01/10 ................................. $ 375 $ 384
9.5% due 02/01/09 ................................... 400 418
Starwood Hotels & Resorts
Worldwide, Inc. - Sr. Notes (US)
7.875% due 05/01/12 ................................. 2,300 2,587
-------
9,826
Household Durables - 0.1%
Centex Corp. - Sr. Notes (US)
4.75% due 01/15/08 .................................. 40 41
Lennar Corp. - Sr. Notes (US)
5.95% due 03/01/13 .................................. 30 31
9.95% due 05/01/10 .................................. 30 35
Mohawk Industries, Inc. - Notes (US)
6.5% due 04/15/07 ................................... 1,580 1,735
-------
1,842
Household Products - 0.1%
Enterprise Products Operating LP -
Sr. Notes (US)
6.875% due 03/01/33 ................................. 1,384 1,383
Industrial Conglomerates - 0.1%
General Electric Co. - Notes (US)
5.0% due 02/01/13 ................................... 1,980 2,002
Norske Skogindustrier - Notes
144A (a) (US)
6.125% due 10/15/15 ................................. 130 132
-------
2,134
Insurance - 0.4%
Aetna Inc. - Sr. Notes (US)
7.375% due 03/01/06 ................................. 100 110
Metlife, Inc. - Debs. (US)
3.911% due 05/15/05 ................................. 190 196
Nationwide Mutual Insurance Co. -
Notes 144A (a) (US)
7.875% due 04/01/33 ................................. 30 35
Odyssey Re Holdings Corp. -
Sr. Notes (US)
7.65% due 11/01/13 .................................. 4,000 4,179
Principl Life Global Funding (US)
4.4% due 10/01/10 ................................... 180 181
Prudential Insurance Co. - Sr. Notes
144A (a) (US)
6.375% due 07/23/06 ................................. 350 381
W.R. Berkley Corp. - Notes (US)
5.875% due 02/15/13 ................................. 2,310 2,359
-------
7,441
Leisure Equipment & Products - 0.0%
Eastman Kodak Co. - Sr. Notes (US)
7.25% due 11/15/13 .................................. 780 818
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Machinery - 0.1%
Caterpillar, Inc. - Sr. Debs. (US)
7.25% due 09/15/09 ................................... $1,050 $ 1,228
Media - 0.6%
Time Warner, Inc. (US)
6.15% due 05/01/07 ................................... 1,904 2,072
Time Warner, Inc. - Notes (US)
6.875% due 05/01/12 .................................. 90 101
8.18% due 08/15/07 ................................... 650 753
Time Warner, Inc. - Debs. (US)
7.7% due 05/01/32 .................................... 715 834
Chancellor Media Corp. - Notes (US)
8.0% due 11/01/08 .................................... 750 876
Clear Channel Communications, Inc. (US)
7.65% due 09/15/10 ................................... 125 146
Comcast Corp. - Notes (US)
6.5% due 01/15/15 .................................... 627 680
7.05% due 03/15/33 ................................... 1,616 1,758
Cox Radio, Inc. - Sr. Notes (US)
6.625% due 02/15/06 .................................. 250 270
Liberty Media Corp. - Sr. Notes (US)
2.64% due 09/17/06 ................................... 160 162
5.7% due 05/15/13 .................................... 2,540 2,569
Liberty Media Corp. - Bonds (US)
7.875% due 07/15/09 .................................. 250 290
Liberty Media Corp. - Sr. Debs (US)
8.25% due 02/01/30 ................................... 690 826
News America, Inc. - Sr. Notes (US)
6.75% due 01/09/38 ................................... 30 33
Time Warner Entertainment Co. - Sr. Debs (US)
8.375% due 03/15/23 .................................. 20 25
Univision Communications, Inc. - Sr. Notes (US)
3.875% due 10/15/08 .................................. 125 124
7.85% due 07/15/11 ................................... 320 378
Viacom, Inc. (US)
7.875% due 07/30/30 .................................. 1,054 1,311
Young Broadcasting, Inc. (US)
8.75% due 06/15/07 ................................... 85 87
Young Broadcasting, Inc. - Sr. Sub.
Notes (US)
10.0% due 03/01/11 ................................... 153 164
-------
13,459
Metals & Mining - 0.1%
Alcan Aluminum, Ltd. - Notes (US)
5.2% due 01/15/14 .................................... 100 101
Codelco, Inc. - Notes 144A (a)(US)
5.5% due 10/15/13 .................................... 1,104 1,120
-------
1,221
Multi-Utilities - 0.3%
CenterPoint Energy - Bonds Ser. K
144A (a)(US)
6.95% due 03/15/33 ................................... $1,000 $ 1,108
Centerpoint Energy Resources Corp. - Sr. Notes 144A
(a)(US)
7.875% due 04/01/13 .................................. 2,290 2,602
CenterPoint Energy, Inc. - Sr. Notes 144A (a)(US)
6.85% due 06/01/15 ................................... 1,250 1,279
7.25% due 09/01/10 ................................... 1,250 1,353
Duke Energy Co. - Bonds (US)
3.75% due 03/05/08 ................................... 665 670
-------
7,012
Oil & Gas - 0.6%
Amerada Hess Corp. - Notes (US)
6.65% due 08/15/11 ................................... 1,380 1,496
Amerada Hess Corp. Notes (US)
7.3% due 08/15/31 .................................... 2,100 2,168
Conoco Phillips - Notes (US)
5.9% due 10/15/32 .................................... --
Devon Energy Corp. - Sr. Debs. (US)
7.95% due 04/15/32 ................................... 1,480 1,785
Marathon Oil Corp. - Notes (US)
6.8% due 03/15/32 .................................... 1,494 1,600
Mid American Energy Holdings Co. - Sr. Notes (US)
5.125% due 01/15/13 .................................. 25 25
Occidental Petroleum Corp. - Notes (US)
6.75% due 01/15/12 ................................... 1,913 2,158
Peco Energy Co. (US)
5.95% due 11/01/11 ................................... 50 54
Pogo Producing Co. - Sr. Sub. Notes (US)
10.375% due 02/15/09 ................................. 250 266
Texas Gas Transmission LLC - Notes (US)
4.6% due 06/01/15 .................................... 1,860 1,753
Union Oil Co. of California (US)
7.5% due 02/15/29 .................................... 80 94
Union Pacific Resources Group, Inc. - Ser. 2002-1
(US)
6.061% due 01/17/23 .................................. 50 54
XTO Energy, Inc. - Sr. Notes (US)
6.25% due 04/15/13 ................................... 1,000 1,055
-------
12,508
Other Asset Backed - 0.3%
Chase Mortgage Funding - Ser. 2003-
2 Cl. IA 3 (US)
2.864% due 03/25/07 .................................. 100 100
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Other Asset Backed - Continued
Chase Mortgage Funding Ser. 2003-1 CTF CL. IA-3
(US)
3.14% due 07/25/23 .................................. $ 100 $ 101
CWABS, Inc. Ser. 2003-5 Cl. AF 2 (US)
3.042% due 04/25/25 ................................. 3,570 3,595
Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3 (US)
3.531% due 12/25/33 ................................. 1,990 2,004
------
5,800
Other Mortgage - 0.4%
LB UBS Commercial Mortgage Trust
- Ser. 2003-C3 Cl. K 144A (a) (US)
5.18% due 02/17/37 .................................. 1,363 1,285
LB UBS Commercial Mortgage Trust
- Ser. 2003-C5 Cl. K 144A (a) (US)
5.25% due 04/15/37 .................................. 1,000 951
LB-UBS Commercial Mortgage Trust
- Ser. 2000-C4 Cl. A2 (US)
7.37% due 06/15/10 .................................. 5,318 6,189
------
8,425
Paper & Forest Products - 0.3%
Abitibi-Consolidated, Inc. - Debs. (CA)
8.85% due 08/01/30 .................................. 1,350 1,432
International Paper Co. - Notes (US)
5.5% due 01/15/14 ................................... 70 70
6.75% due 09/01/11 .................................. 1,410 1,568
Weyerhaeuser Co. - Notes (US)
6.75% due 03/15/12 .................................. 175 191
Weyerhaueser Co. - Debs (US)
7.375% due 03/15/32 ................................. 1,974 2,146
------
5,407
Pharmaceuticals - 0.0%
Schering Plough Corp. - Sr. Notes (US)
5.3% due 12/01/13 ................................... 255 259
Real Estate Development - 0.0%
Developers Diversified Realty Co. - Notes (US)
4.625% due 08/01/10 ................................. 125 125
Rouse Co. - Notes (US)
5.375% due 11/26/13 ................................. 140 139
7.2% due 09/15/12 ................................... 70 79
------
343
Real Estate Investment Trust - 0.3%
Boston Properties, Ltd. Partnership - Sr. Notes
(US)
6.25% due 01/15/13 .................................. 1,763 1,892
Real Estate Investment Trust - Continued
EOP Operations LP - Notes (US)
6.75% due 02/15/12 .................................. $ 110 $ 121
Health Care Property Investments, Inc. - Sr. Notes
(US)
6.45% due 06/25/12 .................................. 973 1,055
Health Care Reit, Inc. - Notes (US)
6.0% due 11/15/13 ................................... 700 707
Hospitality Properties Trust - Sr. Notes (US)
6.75% due 02/15/13 .................................. 100 105
iStar Financial, Inc. - Sr. Notes (US)
7.0% due 03/15/08 ................................... 1,900 2,052
Price Reit, Inc. (US)
7.5% due 11/05/06 ................................... 125 142
Socgen Real Estate Co. LLC - Ser. A
144A (a) (US)
7.64% due 12/29/49 .................................. 110 124
------
6,198
Specialty Retail - 0.0%
Toys "R" Us, Inc. - Notes (US)
7.375% due 10/15/18 ................................ 115 115
Tobacco - 0.0%
Altria Group, Inc. - Notes (US)
7.0% due 11/04/13 ................................... 700 747
Badger Tobacco (US)
6.125% due 06/01/27 ................................. 130 127
------
874
U.S. Government Agencies - 12.8%
Federal Home Loan Bank - Disc. Notes (US)
5.25% due 02/13/04 .................................. 1,750 1,758
Federal Home Loan Bank - Sr. Notes (US)
5.8% due 09/02/08 ................................... 1,000 1,101
Federal Home Loan Mortgage Corp. - Debs. (US)
3.625% due 09/15/08 ................................. 2,335 2,350
5.5% due 07/15/06 ................................... 480 517
6.25% due 07/15/32 .................................. 2,000 2,175
Federal Home Loan Mortgage Corp. (US)
5.0% due 12/31/99 ................................... 4,000 3,948
Federal Home Loan Mortgage Corp. -
Bonds Ser. 2590 (US)
5.5% due 08/31/15 ................................... 4,000 1,179
Federal Home Loan Mortgage Corp. -
Bonds (US)
5.5% due 12/25/32 ................................... 850 860
6.0% due 08/01/16 ................................... 358 375
6.0% due 08/01/17 ................................... 414 435
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
U.S. Government Agencies - xx%Continued
Federal Home Loan Mortgage Corp. - Bonds (US)
6.5% due 03/01/17 ................................... $ 223 $ 236
6.5% due 01/15/33 ................................... 5,000 5,236
Federal National Mortgage Assoc. - Notes (US)
2.5% due 06/15/08 ................................... 3,000 2,899
4.25% due 07/15/07 .................................. 5,000 5,222
4.375% due 03/15/13 ................................. 1,250 1,228
6.0% due 12/15/05 ................................... 555 598
6.0% due 05/15/08 ................................... 775 859
6.625% due 11/15/10 ................................. 2,700 3,102
Federal National Mortgage Assoc. - Bonds (US)
1.0% due 09/01/33 ................................... 736 740
3.875% due 07/01/33 ................................. 205 206
7.5% due 01/25/28 ................................... 139 152
4.5% due 01/25/18 ................................... 3,000 3,003
5.0% due 12/25/17 ................................... 14,000 14,276
5.0% due 05/01/18 ................................... 410 419
5.0% due 01/25/33 ................................... 10,800 10,685
5.5% due 09/01/17 ................................... 291 302
5.5% due 12/25/17 ................................... 8,000 8,288
5.5% due 12/25/32 ................................... 44,750 45,323
5.5% due 06/01/33 ................................... 3,705 3,755
6.0% due 07/01/16 ................................... 278 292
6.0% due 03/01/17 ................................... 3,127 3,287
6.0% due 01/25/18 ................................... 11,500 12,057
6.0% due 01/25/32 ................................... 34,787 35,950
6.0% due 01/01/33 ................................... 5,701 5,895
6.0% due 03/01/33 ................................... 3,876 4,008
6.5% due 01/25/17 ................................... 7,244 7,676
6.5% due 01/25/32 ................................... 27,643 28,904
6.5% due 04/01/32 ................................... 1,176 1,230
6.5% due 06/01/32 ................................... 613 641
7.0% due 09/01/16 ................................... 344 368
7.0% due 11/01/30 ................................... 83 88
7.0% due 09/01/31 ................................... 163 172
7.0% due 12/01/31 ................................... 470 497
7.0% due 03/01/32 ................................... 199 210
7.0% due 04/01/32 ................................... 122 129
7.0% due 1/25/33 .................................... 7,080 7,496
7.5% due 11/01/30 ................................... 87 93
7.5% due 06/01/31 ................................... 341 365
7.5% due 09/01/32 ................................... 3,945 4,245
8.0% due 12/01/29 ................................... 239 259
Federal National Mortgage Assoc. - Debs. (US)
6.625% due 11/15/30 ................................. 1,462 1,662
Federal National Mortgage Assoc. - Bonds Ser.
2001-50 Cl. BA (US)
7.0% due 10/25/41 ................................... 161 174
U.S. Government Agencies - xx%Continued
Government National Mortgage Assoc. - Bonds (US)
5.0% due 01/15/33 ................................... $ 4,190 $ 4,151
5.5% due 01/15/33 ................................... 1,125 1,140
6.5% due 05/15/31 ................................... 403 426
6.5% due 11/15/32 ................................... 5,444 5,774
6.5% due 12/15/99 ................................... 5,000 5,269
7.0% due 12/15/99 ................................... 10,000 10,653
8.0% due 11/15/30 ................................... 190 207
-------
264,545
U.S. Governmental - 2.3%
U.S. Treasury - Notes (US)
1.625% due 04/30/05 ................................. 1,460 1,464
1.625% due 09/30/05 ................................. 1,800 1,799
1.75% due 12/31/04 .................................. 4,450 4,472
1.875% due 09/30/04 ................................. 6,625 6,662
2.0% due 11/30/04 ................................... 2,000 2,014
2.125% due 10/31/04 ................................. 600 605
2.25% due 07/31/04 .................................. 2,900 2,920
3.25% due 08/15/07 .................................. 1,125 1,148
3.375% due 11/15/08 ................................. 2,336 2,355
3.875% due 02/15/13 ................................. 1,020 998
4.25% due 11/15/13 .................................. 2,000 1,998
5.0% due 02/15/11 ................................... 2,050 2,202
5.25% due 05/15/04 .................................. 2,670 2,712
5.625% due 05/15/08 ................................. 435 482
5.75% due 08/15/10 .................................. 2,225 2,495
6.75% due 05/15/05 .................................. 3,465 3,715
U.S. Treasury - Bonds (US)
5.25% due 02/15/29 .................................. 3,445 3,475
5.375% due 02/15/31 ................................. 3,248 3,387
6.5% due 11/15/26 ................................... 332 391
8.0% due 11/15/21 ................................... 140 189
8.875% due 08/15/17 ................................. 1,550 2,195
-------
47,678
Whole Loan CMOs - 0.0%
Banc America Mortgage Securities, Inc. - Ser.
2003-F Cl. 2A1 (US)
3.734% due 07/25/33 ................................. 314 317
Wireless Telecommunications Services - 0.1% AT&T
Wireless, Inc. - Notes (US)
7.875% due 03/01/11 ................................. 250 289
AT&T Wireless, Inc. - Sr. Notes (US)
8.75% due 03/01/31 .................................. 727 897
-------
1,186
-------
TOTAL PUBLICLY-TRADED BONDS- ..................... 31.4% 649,636
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MANAGED FUND
Par Market
Name of Issuer Value Value
-------------- -------- ----------
(000's) (000's)
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 3.9%
State Street Navigator Securities
Lending Portfolio ............................... $ 80,720 $ 80,720
SHORT-TERM INVESTMENTS - 10.1%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ................................ 209,610 209,610
-------- ----------
TOTAL INVESTMENTS- ........................ 113.7% 2,353,659
Payables, less cash and receivables- ............ (13.7)% (282,914)
-------- ----------
NET ASSETS- ............................ 100.0% $2,070,745
======== ==========
(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, 2003, securities aggregated
$34,980 or 1.69% of net assets of the Portfolio.
ADR-American Depository Receipts.
GDR-Global Depository Receipts.
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY COUNTRY (UNAUDITED)
% of
Country Market Long-Term
Abbreviation Value Investments
------------ ---------- -----------
(000's)
United States .... US $2,061,232 99.9%
Canada ........... CA 1,431 0.1%
Australia ........ AU 508 0.0%
Supra National ... XU 158 0.0%
---------- -----
$2,063,329 100.0%
========== =====
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Managed Fund (the "Fund") is a diversified series of John
Hancock Variable Series Trust I (the "Trust"), an open-end investment management
company registered under the Investment Company Act of 1940. The Trust is
organized as a Massachusetts business trust and consists of thirty different
funds as of December 31, 2003. The results of this Fund are included in this
report. The results of the other Funds in the Trust are presented under separate
cover. 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
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 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: 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.
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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Cargill Asia Pacific, 1.05%, due 01/02/04 $ 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Discount and premium on debt securities: The Fund accretes discount and
amortizes 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 the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$79,131 $80,720
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
commodities exchange. Daily adjustments, called variation margin, arising from
this "mark to market", are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts. At December 31, 2003, the Fund had
no open forward foreign currecny contracts. At December 31, 2003, the Fund had
no open forward foreign currency contracts
Federal income taxes: The Fund 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, 2003, the the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $2,001, $90,271, $87,450 and $23,686 which expire in 2008, 2009, 2010
and 2011, respectively.
Certain of the above losses may be limited under sections 382-384 of the
Internal Revenue Code, as amended.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $91. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
On February 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$500 Million and Excess Over
First $500 Million $1 Billion $1 Billion
- ------------------ ---------------- -----------
0.74% 0.68% 0.65%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, there were no reimbursements paid the
Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $45.
John Hancock has entered into Sub-Advisory Agreements with Independence
Investment LLC, John Hancock Advisers, and Capital Guardian Trust Company, with
respect to the Fund. Each is an affiliate of John Hancock, and under its
supervision, is responsible for the day-to-day investment management of the
Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- ---------- --------------------
$4,200,496 $4,314,724
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral held for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$2,155,706 $224,195 $(26,248) $197,947
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to certain
securities sold at a loss and premium amortization and market discount accretion
on debt securities. Additionally, as a result, net investment income (loss) and
net realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $203,408 $197,947
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions
from
Ordinary Distributions from
Year Income Long-Term Capital Gain Return of Capital
- ---- ------------- ---------------------- -----------------
2003 $63,276 $-- $8,852
2002 39,246 -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ------------------------ ----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ---------------------------- ------------------------------------
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Managed Fund (a portfolio included
in the series of John Hancock Variable Series Trust I {the "Trust"}) as of
December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Managed Fund of John Hancock Variable Series Trust I at December 31, 2003, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 2003
- --------------------------------------------------------------------------------
Mid Cap Value Fund
T. Rowe Price Associates, Inc. David J. Wallack
- --------------------------------------------------------------------------------
.. Since its inception in May, 2003, the Fund returned 36.77% outperforming
its benchmark, the Russell Mid Cap Value Index.
.. The Fund outperformed its benchmark due to both favorable stock selection
with modestly favorable sector allocation decisions. Stock selection in the
materials sector was the biggest contributor, followed by the
telecommunication services sector. The underweight to financials was the
biggest sector allocation contributor.
.. The Fund's exposure to consumer discretionary was the largest contributor
to absolute performance, followed by financials. No sector detracted from
absolute returns, as all sectors had positive absolute returns.
.. The top and bottom contributors to absolute returns came from a variety of
sectors. The biggest contributors to performance were Reuters group,
Newmont Mining Corp., and Agilent Technologies. The main detractors
included Bisys Group Inc and Lincare Hldgs.
.. The portfolio is currently overweight the energy sector, while underweight
in the financials sector.
.. The Fund employs a bottom-up, value-oriented investment approach, focusing
on companies with attractive valuations, strong cash flow generation and
sound balance sheets. The Fund's sector allocations are broadly diversified
but are primarily driven by stock selection.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/03
(Fund Inception Date)
Mid Cap Value Russell Mid Cap(R) Value
Equity Fund Value Benchmark (1)
------------- ------------------------
5/1/2003 10,000.00 10,000.00
5/30/2003 11,069.40 10,880.00
6/30/2003 11,242.39 10,956.16
7/31/2003 11,563.36 11,296.90
8/29/2003 11,951.02 11,697.94
9/30/2003 11,723.37 11,606.69
10/31/2003 12,618.96 12,458.62
11/30/2003 12,909.25 12,819.92
12/31/2003 13,677.10 13,373.74
Value on 12/31/03:
- ------------------
$13,677 Mid Cap Value Fund
$13,374 Russell Mid Cap(R) Value Benchmark (1)
MORNINGSTAR CATEGORY+:
.. Mid Cap Value
MORNINGSTAR RISK+:
.. (VL/VUL)NA
.. (VA) NA
MORNINGSTAR RATING+:
.. (VL/VUL) N/A
.. (VA) N/A
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Diamond Offshore Drilling, Inc. 2.3%
Molex, Inc. 1.8%
Firstenergy Corp. 1.7%
BMC Software, Inc. 1.5%
Amerada Hess Corp. 1.5%
Safeco Corp. 1.4%
Giant Prideco 1.4%
Scholastic Corp. 1.4%
Cablevision System Corp. 1.4%
Loews Corp. 1.4%
AVERAGE ANNUAL TOTAL RETURNS*
Russell
Mid Cap Mid Cap(R) Value
Value Fund Index(1)
---------- ----------------
Since Inception (5/1/03) 36.77% 33.74%
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Financials 18.59%
Consumer 15.33%
Discretionary
Information 11.91%
Technology
Utilities 10.62%
Energy 9.59%
Materials 8.18%
Industrials 7.65%
Health Care 7.64%
Consumer Staples 5.99%
Telecommunication
Services 4.50%
(1) The Russell Midcap(R)Valve Index measures the performance of those Russell
Midcap companies with lower price-to-book nation and lower forecasted
growth values. The stocks are also members of the Russell 1000(R)Value
Index.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03 this fund is not yet rated.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ....................................... $20,418
Net unrealized appreciation of investments .......................... 2,918
Short-term investments at value ..................................... 1,081
-------
Total investments ............................................. 24,417
Receivable for:
Investments sold ................................................. 86
Fund shares sold ................................................. 18
Dividends ........................................................ 29
-------
Total assets ........................................................ 24,550
-------
LIABILITIES
Payables for:
Investments purchased ............................................ 58
Other liabilities ................................................ 2
-------
Total liabilities ................................................... 60
-------
Net assets .......................................................... $24,490
=======
Shares of beneficial interest outstanding ........................... 1,854
-------
Net asset value per share ........................................... $ 13.21
=======
Composition of net assets:
Capital paid-in .................................................. $21,513
Accumulated net realized gain on investments, futures and
foreign currency transactions ................................. 56
Undistributed net investment income .............................. 3
Net unrealized appreciation of investments ....................... 2,918
-------
Net assets .......................................................... $24,490
=======
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Period from May 1, 2003 (Commencement of
Operations) to December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 8
Dividends ..................................................... 131
------
Total investment income ............................................. 139
------
EXPENSES
Investment advisory fee ....................................... 87
Auditors fees ................................................. 1
Custodian fees ................................................ 28
Printing & mailing fees ....................................... 1
------
Total expenses ...................................................... 117
Less expenses reimbursed ...................................... (22)
Less custodian expense reduction offset by commission
recapture arrangement (Note C) ............................. (1)
------
Net expenses ........................................................ 94
------
Net investment income ............................................... 45
------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments ................................. 816
Change in unrealized appreciation on investments ................. 2,918
------
Net realized and unrealized gain .................................... 3,734
------
Net increase in net assets resulting from
operations ....................................................... $3,779
======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Period from
May 1, 2003(*)
to December 31,
2003
--------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ..................................... $ 45
Net realized gain ......................................... 816
Change in net unrealized appreciation ..................... 2,918
-------
Net increase in net assets resulting from operations ... 3,779
Distributions to shareholders from:
Net investment income ..................................... (42)
Realized gains ............................................ (760)
-------
Decrease in net assets resulting from distributions .... (802)
From fund share transactions:
Proceeds from shares sold ................................. 23,951
Distributions reinvested .................................. 802
Payment for shares redeemed ............................... (3,240)
-------
Increase in net assets from fund share transactions .... 21,513
-------
NET INCREASE IN NET ASSETS ................................... 24,490
NET ASSETS
Beginning of Period .......................................
-------
End of Period ............................................. $24,490
=======
Analysis of fund share transactions:
Sold ...................................................... 2,073
Reinvested ................................................ 62
Redeemed .................................................. (281)
-------
Net increase in fund shares outstanding ...................... 1,854
=======
See notes to financial statements.
*Commencement of Operations.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Mid Cap Value
--------------
Period from
May 1, to
December 31,
2003(e)
--------------
Net Assets Value at Beginning of Period .................. $ 10.00
Income from Investment Operations:
Net Investment Income ................................. 0.04
Net Realized and Unrealized Gain on Investments(a)..... 3.64
-------
Total From Investment Operations ...................... 3.68
Less Distributions:
Distribution from Net Investment Income ............... (0.04)
Distribution from Net Realized Gains on Investments ... (0.43)
-------
Total Distributions ................................... (0.47)
-------
Net Assets Value at End of Period ........................ $ 13.21
=======
Total Investment Return(b) ............................... 36.77%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ..... 1.20%(d)(f)(g)
Ratio of Net Investment Income to Average Net Assets... 0.58%(d)
Portfolio Turnover Rate ............................... 56.93%(c)
Net Assets End of Period (000s Omitted) .................. $24,490
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Commencement of operations.
(f) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made, the expense ratio would have been 1.47% for the years ended
December 31, 2003.
(g) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MID CAP VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
COMMON STOCK (000's)
Aerospace & Defense - 1.9%
Raytheon Co. * .......................................... 8,600 $ 259
Rockwell Collins, Inc.* ................................. 7,000 210
------
469
Air Freight & Couriers - 1.1%
CNF Transportation, Inc. * .............................. 7,700 261
Banks - 6.1%
Charter One Financial, Inc............................... 4,600 159
Citizens Banking Corp.* ................................. 5,100 167
Commerce Bancshares, Inc ................................ 4,725 232
Huntington Bancshares, Inc.* ............................ 11,000 247
National Commerce Financial Corp. ....................... 4,800 131
Northern Trust Corp. .................................... 5,600 260
Synovus Financial Corp.* ................................ 8,000 231
TCF Financial Corp. ..................................... 1,300 67
------
1,494
Biotechnology - 2.2%
Biogen IDEC, Inc.* ...................................... 2,500 92
MedImmune, Inc.* ........................................ 10,200 259
Protein Design Labs, Inc.* .............................. 4,900 88
Vertex Pharmaceuticals, Inc.* ........................... 9,500 97
------
536
Chemicals - 1.7%
Great Lakes Chemical Corp................................ 10,700 291
IMC Global, Inc. ........................................ 13,600 135
------
426
Commercial Services & Supplies - 4.2%
Ceridian Corp. * ........................................ 9,600 201
Equifax, Inc. * ......................................... 4,800 118
Hewitt Associates, Inc. * ............................... 3,800 114
Manpower, Inc. * ........................................ 3,300 155
The Bisys Group, Inc. * ................................. 17,000 253
Viad Corp. .............................................. 7,400 185
------
1,026
Communications Equipment - 0.6%
Tellabs, Inc. * ......................................... 18,200 153
Construction & Engineering - 1.0%
ServiceMaster Co. ....................................... 20,700 241
Construction Materials - 1.0%
Nucor Corp. ............................................. 4,500 252
Diversified Financials - 1.7%
Janus Capgroup, Inc. .................................... 12,100 199
LaBranche & Co., Inc. * ................................. 18,300 213
------
412
Diversified Telecommunication Services - 3.0%
AT&T Corp. * ............................................ 9,600 195
Commonwealth Telephone Enterprises, Inc. ................ 2,100 79
Crown Castle International Corp. * ...................... 11,400 126
Qwest Communications International, Inc. ................ 53,000 $ 229
Sprint PCS * ............................................ 19,900 112
------
741
Electric Utilities - 7.2%
CMS Energy Corp. * ...................................... 14,200 121
Edison International * .................................. 3,100 68
El Paso Electric Co. * .................................. 14,800 198
Firstenergy Corp. * ..................................... 11,000 387
Pinnacle West Capital Corp. * ........................... 6,500 260
Teco Energy, Inc. * ..................................... 10,200 147
TXU Corp. ............................................... 11,400 270
Unisource Energy Corp. .................................. 7,605 188
Xcel Energy, Inc. ....................................... 7,300 124
------
1,763
Electrical Equipment - 2.2%
Harris Corp. ............................................ 1,800 69
Littelfuse, Inc. * ...................................... 2,300 66
Molex, Inc. - CL A ...................................... 14,100 414
------
549
Electronic Equipment & Instruments - 1.8%
Agilent Technologies, Inc. * ............................ 5,800 170
AVX Corp. ............................................... 16,500 274
------
444
Energy Equipment & Services - 1.7%
Baker Hughes, Inc. * .................................... 9,000 289
Hanover Compressor Co. .................................. 11,000 123
------
412
Food & Drug Retailing - 0.6%
Winn-Dixie Stores, Inc. * ............................... 15,300 152
Food Products - 4.8%
Archer Daniels Midland Co. * ............................ 17,400 265
Campbell Soup Co. * ..................................... 8,000 214
ConAgra, Inc. ........................................... 7,800 206
H.J. Heinz Co. .......................................... 6,700 244
Potash Corp. of Saskatchewan, Inc ....................... 2,700 234
------
1,163
Health Care Equipment & Supplies - 1.7%
Amerisource Bergen Corp. * .............................. 3,100 174
Guidant Corp ............................................ 2,600 156
Neighborcare, Inc. * .................................... 4,200 83
------
413
Health Care Providers & Services - 2.5%
Aetna US Healthcare, Inc. * ............................. 2,000 135
Laboratory Corporation of America Holdings * ............ 2,900 107
Lincare Holdings, Inc. * ................................ 6,300 189
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MID CAP VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Health Care Providers & Services - Continued
Tenet Healthcare Corp. * ............................... 10,800 $ 174
-------
605
Household Durables - 2.2%
Herman Miller, Inc. * .................................. 9,500 231
Newell Rubbermaid, Inc.................................. 13,200 300
-------
531
Insurance - 8.9%
Cincinnati Financial Corp. * ........................... 3,100 130
Conseco, Inc............................................ 9,900 216
Hartford Financial Services Group, Inc. * .............. 2,500 148
Loews Corp. * .......................................... 6,600 326
Ohio Casualty Corp. * .................................. 11,800 205
Protective Life Corp.................................... 5,300 179
Safeco Corp. * ......................................... 8,600 335
St. Paul Cos., Inc...................................... 7,000 277
Travelers Property Casualty Corp. - Cl. A .............. 12,200 205
UnumProvident Corp. * .................................. 10,000 158
-------
2,179
IT Consulting & Services - 0.7%
BearingPoint, Inc. * ................................... 18,100 183
Leisure Equipment & Products - 1.5%
Brunswick Corp. * ...................................... 5,400 172
Eastman Kodak Co. * .................................... 4,100 105
Hasbro, Inc. * ......................................... 4,800 102
-------
379
Machinery - 1.6%
Grant Prideco, Inc. * .................................. 25,200 328
Joy Global, Inc......................................... 2,500 65
-------
393
Media - 9.7%
Cablevision Systems Corp. - Cl. A * .................... 14,000 327
Cox Radio, Inc. - Cl. A * .............................. 5,200 131
Dow Jones & Co., Inc. * ................................ 5,900 294
Lamar Advertising Co. * ................................ 7,000 261
Meredith Corp. * ....................................... 3,400 166
New York Times Co. - Cl. A * ........................... 4,000 191
Pearson plc - ADR ...................................... 16,800 188
Reuters Group plc - ADR ................................ 10,900 277
Scholastic Corp. * ..................................... 9,600 327
Washington Post Co. - Cl. B ............................ 266 211
-------
2,373
Metals & Mining - 1.6%
Meridian Gold, Inc. * .................................. 16,600 243
Noranda, Inc............................................ 9,300 147
-------
390
Multi-Utilities - 2.3%
Duke Energy Co.......................................... 15,500 317
NiSource, Inc. * ....................................... 11,200 $ 246
-------
563
Multiline Retail - 1.8%
Costco Wholesale Corp................................... 6,200 231
Dillard's, Inc. - Cl. A * .............................. 12,600 207
-------
438
Oil & Gas - 6.7%
Amerada Hess Corp. * ................................... 6,400 340
BG plc - ADR ........................................... 5,300 138
Diamond Offshore Drilling, Inc. * ...................... 25,700 527
Kerr-McGee Corp. * ..................................... 5,200 242
Marathon Oil Corp. * ................................... 7,400 245
NRG Energy, Inc. * ..................................... 6,700 147
-------
1,639
Paper & Forest Products - 2.5%
Bowater, Inc............................................ 2,500 116
MeadWestvaco Corp. * ................................... 6,600 196
Potlatch Corp........................................... 8,400 292
-------
604
Pharmaceuticals - 1.3%
Andrx Corp. * .......................................... 3,700 89
King Pharmaceuticals, Inc. * ........................... 14,300 218
-------
307
Real Estate Investment Trust - 1.0%
Apartment Investment & Management Co.................... 5,400 186
Reckson Associates Realty Corp.......................... 2,400 59
-------
245
Road & Rail - 0.2%
Ryder System, Inc....................................... 1,700 58
Software - 3.1%
BMC Software, Inc. * ................................... 18,500 345
Cadence Design Systems, Inc. * ......................... 11,200 201
Network Associates, Inc. * ............................. 14,800 223
-------
769
Specialty Retail - 0.7%
Gap, Inc................................................ 4,900 114
KMart Holding Corp...................................... 2,700 64
-------
178
Textiles & Apparel - 0.5%
Unifi, Inc. * .......................................... 20,500 132
Trading Companies & Distributors - 0.5%
CDW Corp................................................ 1,900 110
Wireless Telecommunications Services - 1.3%
Telephone and Data Systems, Inc......................... 4,900 306
-------
TOTAL COMMON STOCK- ................................. 95.1% 23,289
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MID CAP VALUE FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS
Electric Utilities - 0.0%
Xcel Energy, Inc. - Sr. Notes 144A (a)
7.5% due 11/21/07 ...................................... $ 7 $ 11
Wireless Telecommunications Services - 0.2%
United States Cellular Corp. - Notes
0.0% due 06/15/15 ...................................... 75 36
-------
TOTAL PUBLICLY-TRADED BONDS- ........................ 0.2% 47
SHORT-TERM INVESTMENTS - 4.4%
Investment in joint trading account (Note B)
1.061% due 01/02/04 .................................... 1,081 1,081
------ -------
TOTAL INVESTMENTS- .................................. 99.7% 24,417
Cash and Receivables, less payables- ................ 0.3% 73
------ -------
NET ASSETS- ......................................... 100.0% $24,490
====== =======
* Non-income producing security.
(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, 2002, securities aggregated
$11 or 0.0% of net assets of the Portfolio.
ADR-American Depository Receipts.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Mid Cap Value Fund (the "Fund"), which commenced operations on
May 1, 2003, is a diversified series of John Hancock Variable Series Trust I
(the "Trust"), an open-end investment management company registered under the
Investment Company Act of 1940. The Trust is organized as a Massachusetts
business trust and consists of thirty different funds as of December 31, 2003.
The results of this Fund are included in this report. The results of the other
Funds in the Trust are presented under separate cover. 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 Account UV ("JHV-LAUV"), 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Mortgage Int. Networking, 0.98%, due 01/02/04 $ 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
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 Fund is shown net of foreign taxes withheld of $1. Realized gains
and losses from security transactions are determined on the basis of identified
cost.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$50 Million and Excess Over
First $50 Million $100 Million $100 Million
- ----------------- --------------- ------------
1.10% 1.00% 0.95%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the period ended December 31, 2003, the reimbursements paid from John
Hancock and JHVLICO were $22 to the Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $1.
John Hancock has entered into a Sub-Advisory Agreement with T. Rowe Price
Associates, Inc., with respect to the Fund. T. Rowe Price Associates, Inc. is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
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
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
the U.S. government, for the Fund for the year ended December 31, 2003 were as
follows:
Purchases Sales and Maturities
- --------- --------------------
$24,214 $4,613
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$21,501 $2,949 $(33) $2,916
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$91 $-- $-- $2,916
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $803 $-- $--
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief Executive
c/o John Hancock Variable Series Officer, East Boston Savings Bank
Trust I
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- --------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Mid Cap Value Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations, changes in net
assets and the financial highlights for the period from May 1, 2003
(commencement of operations) to December 31, 2003. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Mid Cap Value Fund of John Hancock Variable Series Trust I at December 31, 2003,
the results of its operations, the changes in its net assets and the financial
highlights for the period from May 1, 2003 (commencement of operations) to
December 31, 2003, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: March 29, 1986
- --------------------------------------------------------------------------------
Money Market Fund
Wellington Management Company, LLP John C. Keogh
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 0.95%.
.. The Fund's performance reflects the overall low level of market interest
rates and the Fund's emphasis on commercial paper and U.S. Treasury and
Agency securities.
.. As of year-end, the Fund held roughly 40% of its assets in commercial
paper. Positions in the GSE's (Government-Sponsored Entities) totaled 35%,
while 17% of the GSE's were invested in floating rate notes.
.. The Fund invests in US dollar denominated money market instrument rated in
one of the two highest short-term credit rating categories. The manager
combines top down analysis with fundamental bottom-up security selection.
The manager employs rigorous bottom-up fundamental research and a stringent
credit review process to identify securities with stable credit quality.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 12/31/93
(10-Year Period)
Money Market Fund
-----------------
12/31/1993 $10,000.00
01/31/1993 10,025.70
02/28/1993 10,049.46
03/31/1993 10,077.00
04/30/1993 10,101.79
05/31/1993 10,124.42
06/30/1993 10,151.65
07/31/1993 10,176.62
08/31/1993 10,203.38
09/30/1993 10,228.38
10/31/1993 10,252.11
11/30/1993 10,278.87
12/31/1993 10,305.49
01/31/1994 10,332.49
02/28/1994 10,356.56
03/31/1994 10,383.90
04/30/1994 10,410.38
05/31/1994 10,442.24
06/30/1994 10,476.80
07/31/1994 10,511.27
08/31/1994 10,552.68
09/30/1994 10,592.67
10/31/1994 10,629.85
11/30/1994 10,672.37
12/31/1994 10,721.25
01/31/1995 10,771.96
02/28/1995 10,819.14
03/31/1995 10,872.48
04/30/1995 10,920.54
05/31/1995 10,977.00
06/30/1995 11,028.37
07/31/1995 11,080.98
08/31/1995 11,132.95
09/30/1995 11,181.71
10/31/1995 11,235.49
11/30/1995 11,286.72
12/31/1995 11,340.44
01/31/1996 11,393.06
02/29/1996 11,440.11
03/31/1996 11,485.87
04/30/1996 11,536.64
05/31/1996 11,586.48
06/30/1996 11,632.02
07/31/1996 11,686.47
08/31/1996 11,736.36
09/30/1996 11,788.20
10/31/1996 11,840.11
11/30/1996 11,884.71
12/31/1996 11,943.94
01/31/1997 11,996.69
02/28/1997 12,044.31
03/31/1997 12,097.03
04/30/1997 12,149.48
05/31/1997 12,202.72
06/30/1997 12,258.30
07/31/1997 12,314.03
08/31/1997 12,366.34
09/30/1997 12,424.49
10/31/1997 12,481.27
11/30/1997 12,532.77
12/31/1997 12,594.41
01/31/1998 12,652.49
02/28/1998 12,702.75
03/31/1998 12,760.47
04/30/1998 12,816.64
05/31/1998 12,874.92
06/30/1998 12,931.46
07/31/1998 12,990.09
08/31/1998 13,049.04
09/30/1998 13,106.28
10/31/1998 13,164.49
11/30/1998 13,219.72
12/31/1998 13,276.46
01/31/1999 13,331.89
02/28/1999 13,380.69
03/31/1999 13,433.69
04/30/1999 13,484.67
05/31/1999 13,537.92
06/30/1999 13,590.16
07/31/1999 13,645.64
08/31/1999 13,702.68
09/30/1999 13,759.53
10/31/1999 13,820.02
11/30/1999 13,880.50
12/31/1999 13,946.71
01/31/2000 14,013.74
02/29/2000 14,075.99
03/31/2000 14,143.19
04/30/2000 14,210.11
05/31/2000 14,283.21
06/30/2000 14,357.24
07/31/2000 14,434.97
08/31/2000 14,513.28
09/30/2000 14,589.24
10/31/2000 14,666.20
11/30/2000 14,743.74
12/31/2000 14,823.85
01/31/2001 14,901.30
02/28/2001 14,965.94
03/31/2001 15,031.55
04/30/2001 15,090.95
05/31/2001 15,146.95
06/30/2001 15,197.53
07/31/2001 15,242.74
08/31/2001 15,285.61
09/30/2001 15,324.11
10/31/2001 15,357.29
11/30/2001 15,383.08
12/31/2001 15,406.38
01/31/2002 15,428.22
02/28/2002 15,446.85
03/31/2002 15,467.35
04/30/2002 15,487.44
05/31/2002 15,507.24
06/30/2002 15,526.13
07/31/2002 15,545.73
08/31/2002 15,564.65
09/30/2002 15,582.73
10/31/2002 15,601.81
11/30/2002 15,619.24
12/31/2002 15,634.60
1/31/2003 15,171.10
2/28/2003 15,185.77
3/31/2003 15,185.77
4/30/2003 15,198.32
5/31/2003 15,198.67
6/30/2003 15,197.04
7/31/2003 15,211.19
8/31/2003 15,211.36
9/30/2003 15,208.15
10/31/2003 15,222.23
11/31/2003 15,221.54
12/31/2003 15,244.69
Value on 12/31/03:
- ------------------
$15,245 Money Market Fund
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Federal Home Loan Mortgage Corp. 15.3%
Federal National Mortgage Assoc. 15.3%
Federal Home Loan Bank 4.6%
CRC Funding LLC 3.9%
Travelers Insurance Co. 2.9%
Metlife, Inc. 2.9%
Allstate Financial Global 2.9%
Toyota Motor Credit Corp. 2.7%
WestDeutsche Landesbank 2.7%
Edison Asset 2.2%
AVERAGE ANNUAL TOTAL RETURNS*
Money Market
Fund(1)
------------
1 Year 0.95%
3 Years 2.11
5 Years 3.52
10 Years 4.36
SECTOR ALLOCATION (as of December 31, 2003)
% of
Assets
------
Commercial Paper 40.53%
U.S. Treasury/Agency Securities 35.19%
CDs, Bank Notes 5.59%
Variable Rate Securities 16.96%
Other 1.73%
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 $1.00/share.
(1) Returns reflect extra-ordinary capital contribution of $284,471 in October
2000.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Short-term investments at value ................................... $679,752
Receivable for:
Fund shares sold ............................................... 932
Interest ....................................................... 1,229
--------
Total assets ...................................................... 681,913
--------
LIABILITIES
Payables for other liabilities .................................... 280
--------
Net assets ........................................................ $681,633
========
Shares of beneficial interest outstanding ......................... 681,633
--------
Net asset value per share ......................................... $ 1.00
========
Composition of net assets:
Capital paid-in ................................................ $681,633
Accumulated net realized loss on investments,
futures and foreign currency transactions ................... (82)
Undistributed net investment income ............................ 82
Net assets ........................................................ $681,633
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ..................................................... $10,479
EXPENSES
Investment advisory fee ...................................... 2,066
Auditors fees ................................................ 119
Custodian fees ............................................... 207
Fidelity Bond fees ........................................... 2
Legal fees ................................................... 59
Printing & mailing fees ...................................... 82
Trustees' fees ............................................... 28
Other fees ................................................... 37
-------
Total expenses ..................................................... 2,600
-------
Net investment income .............................................. 7,879
-------
Net increase in net assets resulting from
operations ...................................................... $ 7,879
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE IN NET ASSETS
From operations
Net investment income ............................................... $ 7,879 $ 11,513
Distributions to shareholders from:
Net investment income ............................................... (7,879) (11,513)
--------- -----------
Decrease in net assets resulting from distributions .............. (7,879) (11,513)
From fund share transactions:
Proceeds from shares sold ........................................... 754,784 1,263,747
Distributions reinvested ............................................ 7,879 11,513
Payment for shares redeemed ......................................... (999,146) (1,102,660)
--------- -----------
Increase (decrease) in net assets from fund share transactions ... (236,483) 172,600
--------- -----------
NET INCREASE (DECREASE) IN NET ASSETS .................................. (236,483) 172,600
NET ASSETS
Beginning of Period ................................................. 918,116 745,516
--------- -----------
End of Period ....................................................... $ 681,633 $ 918,116
========= ===========
Analysis of fund share transactions:
Sold ................................................................ 754,784 1,263,747
Reinvested .......................................................... 7,879 11,513
Redeemed ............................................................ (999,146) (1,102,660)
--------- -----------
Net increase (decrease) in fund shares outstanding ..................... (236,483) 172,600
========= ===========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Money Market Fund
-----------------------------------------------------
Year Ended December 31,
-----------------------------------------------------
2003 2002(d) 2001(c) 2000(c) 1999(c)
-------- -------- -------- -------- --------
Net Assets Value at Beginning of Period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net Investment Income ............................... 0.01 0.01 0.04 0.06 0.04
-------- -------- -------- -------- --------
Total From Investment Operations .................... 0.01 0.01 0.04 0.06 0.04
Less Distributions:
Distribution from Net Investment Income ............. (0.01) (0.01) (0.04) (0.06) (0.04)
-------- -------- -------- -------- --------
Total Distributions ................................. (0.01) (0.01) (0.04) (0.06) (0.04)
-------- -------- -------- -------- --------
Net Assets Value at End of Period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Investment Return(b) ............................. 0.95% 1.48% 3.93% 6.29%(a) 5.05%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ... 0.31% 0.32% 0.32% 0.29% 0.31%
Ratio of Net Investment Income to Average Net
Assets ........................................... 0.95% 1.46% 3.72% 6.05% 4.95%
Net Assets End of Period (000s Omitted) ................ $681,633 $918,116 $745,516 $496,853 $451,235
(a) 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%.
(b) The performance 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) Per share amounts have been restated to reflect a 10-for-1 stock split
effective May 1, 2001.
(d) The fund entered into a new sub-advisory agreement with Wellington
Management Company during the period shown.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Par Market
Name of Issuer Value Value
-------------- ------- --------
(000's) (000's)
PUBLICLY-TRADED BONDS
Banks- 1.5%
United Bank National Association - Notes
1.45% due 01/09/04 .................................... $10,000 $ 10,000
--------
10,000
Beverages- 1.7%
Grand Metropolitan Corp. - Bonds
1.392% due 01/06/04 ................................... 11,750 11,748
Diversified Financials- 2.6%
BP Capital Markets plc - Notes
1.295% due 03/08/04 ................................... 11,000 11,000
General Electric Capital Corp. - Disc. Notes
1.14% due 03/10/17 .................................... 7,000 7,000
--------
18,000
Finance- 1.8%
Nationwide Building Society
1.08% due 07/23/04 .................................... 2,700 2,700
Permanent Financing - Notes
1.07% due 03/10/04 .................................... 9,500 9,500
--------
12,200
Insurance- 0.4%
Monumental Life Insurance - Notes
1.21% due 11/01/03 .................................... 3,000 3,000
U.S. Government Agencies- 35.1%
Federal Home Loan Bank - Bonds
3.75% due 02/13/04 .................................... 10,000 10,028
4.875% due 04/16/04 ................................... 1,600 1,617
5.715% due 05/12/04 ................................... 9,200 9,344
Federal Home Loan Bank - Notes
1.09% due 06/04/04 .................................... 10,505 10,456
Federal Home Loan Mortgage Corp. - Debs.
3.75% due 04/15/04 .................................... 10,000 10,072
5.25% due 02/15/04 .................................... 18,250 18,341
Federal Home Loan Mortgage Corp. - Disc. Notes
1.0% due 03/15/04 ..................................... 6,250 6,237
1.06% due 06/21/04 .................................... 6,520 6,487
1.1% due 04/02/04 ..................................... 2,035 2,029
1.17% due 06/15/04 .................................... 15,000 14,919
1.18% due 08/18/04 .................................... 18,000 17,865
1.26% due 02/26/04 .................................... 25,000 24,952
Federal Home Loan Mortgage Corp. - Notes
1.4% due 08/11/04 ..................................... 3,000 3,002
Federal National Mortgage Assoc. - Disc. Notes
1.075% due 03/17/04 ................................... 9,455 9,434
1.1% due 04/02/04 ..................................... 10,000 9,972
1.11% due 04/30/04 .................................... 3,462 3,449
1.12% due 06/02/04 .................................... 20,000 19,905
1.17% due 03/05/04 .................................... $ 4,731 $ 4,721
1.17% due 05/26/04 .................................... 10,000 9,953
1.2% due 06/25/04 ..................................... 13,000 12,924
1.235% due 02/06/04 ................................... 17,820 17,798
Federal National Mortgage Assoc. - Notes
4.125% due 04/23/04 ................................... 6,000 6,053
5.625% due 05/14/04 ................................... 9,500 9,653
--------
239,211
Whole Loan CMOs- 2.1%
Holmes Financing plc - Notes Ser. 1 Cl. A
1.07% due 04/15/04 .................................... 10,000 10,000
Permanent Financing plc - Notes Ser. 3 Cl. 1A
1.08% due 12/10/04 .................................... 4,110 4,110
--------
14,110
--------
TOTAL PUBLICLY-TRADED BONDS- ....................... 45.2% 308,269
COMMERCIAL PAPER
Auto Loan - 1.4%
Toyota Motor Credit Corp.
1.02% due 02/17/04 .................................... 9,611 9,598
Banks - 2.6%
WestDeutsche Landesbank
1.21% due 06/03/04 .................................... 8,000 8,000
1.35% due 01/27/04 .................................... 10,000 10,000
--------
18,000
Beverages - 1.5%
Coca Cola Enterprises, Inc.
1.0% due 01/29/04 ..................................... 10,000 9,992
Commercial Services & Supplies - 0.8%
Yale University
1.13% due 02/12/04 .................................... 5,500 5,493
Computers & Peripherals - 1.5%
International Business Machines
1.02% due 01/14/04 .................................... 10,000 9,996
Construction & Engineering - 1.6%
PREFCO
1.09% due 01/09/04 .................................... 10,700 10,697
Diversified Financials - 6.8%
Allstate Financial Global
1.21% due 12/22/04 .................................... 20,000 20,000
Cafco LLC
1.08% due 02/10/04 .................................... 8,384 8,374
Morgan Stanley Dean Witter Co.
1.08% due 02/19/04 .................................... 8,000 7,988
Wilmington Trust Co.
1.1% due 01/22/04 ..................................... 10,000 10,000
--------
46,362
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
MONEY MARKET FUND
Par Market
Name of Issuer Value Value
-------------- ------- --------
(000's) (000's)
COMMERCIAL PAPER - Continued
Finance - 30.4%
Bradford & Bingley Building Society
1.15% due 01/07/05 .................................... $ 8,000 $ 8,000
Ciesco LP
1.07% due 01/13/04 .................................... 5,000 4,998
1.08% due 01/13/04 .................................... 8,000 7,997
CRC Funding LLC
1.09% due 01/28/04 .................................... 12,000 11,990
1.1% due 01/05/04 ..................................... 14,341 14,339
Edison Asset
1.09% due 01/02/04 .................................... 15,000 15,000
Eureka Securitization, Inc.
1.08% due 01/21/04 .................................... 15,000 14,992
Montana Blanc Capital Corp.
1.09% due 01/08/04 .................................... 15,000 14,997
Nationwide Building Society
1.116% due 01/20/04 ................................... 3,000 2,998
Nestle Capital Corp.
1.05% due 03/04/04 .................................... 15,000 14,972
New York Life Capital Corp.
1.02% due 02/09/04 .................................... 12,000 11,987
Old Line Funding Corp.
1.08% due 01/08/04 .................................... 12,000 11,997
Park Avenue Reconstruction Corp.
1.06% due 01/26/04 .................................... 3,004 3,002
Toyota Motor Credit Corp.
1.04% due 02/06/04 .................................... 9,000 8,991
UBS Finance Delaware LLC
1.1% due 04/01/04 ..................................... 10,200 10,172
Variable Funding Capital Corp.
1.08% due 01/20/04 .................................... 15,000 14,991
Westpac Capital Corp.
1.15% due 05/05/04 .................................... 14,250 14,193
Windmill Funding Corp.
1.1% due 01/02/04 ..................................... 10,000 10,000
Yorktown Capital LLC
1.08% due 01/20/04 .................................... 12,000 11,993
--------
207,609
Foreign Governmental - 2.0%
Province de Quebec
1.11% due 03/26/04 .................................... 13,772 13,736
Insurance - 5.9%
Metlife, Inc.
1.243% due 05/01/04 ................................... 20,000 20,000
Travelers Insurance Co.
1.242% due 02/28/04 ................................... 20,000 20,000
--------
40,000
--------
TOTAL COMMERCIAL PAPER- ......................... 54.5% 371,483
------- --------
TOTAL INVESTMENTS- ........................... 99.7% 679,752
Cash and Receivables, less payables- ............... 0.3% 1,881
------- --------
NET ASSETS- ............................... 100.0% $681,633
======= ========
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Money Market Fund (the "Fund") is a diversified series of John
Hancock Variable Series Trust I (the "Trust"), an open-end investment management
company registered under the Investment Company Act of 1940. The Trust is
organized as a Massachusetts business trust and consists of thirty different
funds as of December 31, 2003. The results of this Fund are included in this
report. The results of the other Funds in the Trust are presented under separate
cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment security transactions are recorded on the date of purchase or
sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Danske Corp., 1.07%, due 01/05/04 $ 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $4 and $78 which expire in 2007 and 2008, respectively.
Dividends, Interest and Distributions: Interest income is recorded on the
accrual basis. A dividend of its net investment income will be declared and
distributed daily by the Fund.
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 5, 2003, 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 rate of 0.25% on an annual basis of the
Fund's net assets.
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, there
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
were no reimbursements paid to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Wellington
Management Company, LLP, with respect to the Fund. Wellington Managment Company,
LLP is an affiliate of John Hancock, and under its supervision, is responsible
for the day-to-day investment management of the Fund.
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
The identified cost of investment of the Fund at December 31, 2003, was
$679,752, which is the same as its tax cost.
Distribution of Income and Gains: Distributions of net investment income,
if any, are made daily. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually. Earnings and profits distributed to shareholders on redemption of fund
shares may be utilized by the Fund, to the extent permissible, as part of the
Fund's dividends-paid deduction on it's federal income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed Net Unrealized
Ordinary Net Long-Term Capital Loss Appreciation/
Income Capital Gain Carryforwards (Depreciation)
- ------------- ------------- ------------- --------------
$82 $-- $82 $--
In addition, the tax character of distributions paid by the Fund are summarized
as follows:
Distributions
from
Ordinary Distributions from
Year Income Long-Term Capital Gain Return of Capital
- ---- ------------- ---------------------- -----------------
2003 $ 7,879 $-- $--
2002 11,513 -- --
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ------------------- ------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Money Market Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, by correspondence with the custodian. 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 the
Money Market Fund of John Hancock Variable Series Trust I at December 31, 2003,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1996
- --------------------------------------------------------------------------------
Overseas Equity Fund (Formerly Global Balanced Fund)
Capital Guardian Trust Company Management Team
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 39.85% underperforming its custom benchmark.
.. On May 1st, the Fund's name and strategy were changed, with no change in
sub-adviser. The Fund now invests primarily in foreign large and mid sized
equities, while previously, it invested globally in equity and fixed income
securities.
.. Since May 1st, the Fund underperformed its benchmark primarily due to a
modest cash exposure during the year. The Fund's performance did benefit
from both favorable stock selection and country allocation decisions.
.. The Fund's exposures to selected sectors -- financials and information
technology and countries -- Japan, UK and France -- contributed the most to
absolute performance.
.. The top contributing stocks to absolute returns included Tokyo Electron and
Sanofi-Synthelabo, while the key detractors included Yahoo Japan and
Holcim.
.. The manager employs a multiple portfolio manager system, with each
portfolio managed by several portfolio managers and research analysts. The
manager selects securities using proprietary fundamental research
Fundamental research seeks to uncover companies that are undervalued and
asset rich.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Overseas Equity
Overseas Equity Fund Benchmark (1)
-------------------- ---------------
5/01/1996 10,000.00 $10,000.00
5/31/1996 9,992.36 9,892.00
6/30/1996 10,054.88 9,940.47
7/31/1996 9,955.81 9,849.02
8/31/1996 10,007.29 9,898.26
9/30/1996 10,256.56 10,067.52
10/31/1996 10,314.89 10,084.64
11/30/1996 10,677.97 10,397.26
12/31/1996 10,672.71 10,279.77
1/31/1997 10,508.77 9,927.18
2/28/1997 10,623.91 9,985.75
3/31/1997 10,567.65 9,971.77
4/30/1997 10,507.44 9,941.85
5/31/1997 11,089.20 10,497.60
6/30/1997 11,433.44 10,909.11
7/31/1997 11,471.15 10,940.74
8/31/1997 10,985.68 10,435.28
9/30/1997 11,470.48 10,906.96
10/31/1997 11,127.39 10,459.77
11/30/1997 10,966.64 10,291.37
12/31/1997 10,955.08 10,320.18
1/31/1998 11,195.12 10,631.85
2/28/1998 11,630.17 11,135.80
3/31/1998 11,807.71 11,310.64
4/30/1998 11,952.21 11,456.54
5/31/1998 11,952.24 11,413.01
6/30/1998 11,914.86 11,439.26
7/31/1998 11,962.23 11,494.17
8/31/1998 11,270.31 10,651.64
9/30/1998 11,435.01 10,700.64
10/31/1998 12,220.68 11,596.29
11/30/1998 12,442.76 11,897.79
12/31/1998 12,925.42 12,314.21
1/31/1999 12,913.81 12,250.18
2/28/1999 12,390.27 11,901.05
3/31/1999 12,558.03 12,234.28
4/30/1999 12,777.95 12,570.72
5/31/1999 12,313.42 12,071.66
6/30/1999 12,412.46 12,279.29
7/31/1999 12,784.63 12,662.41
8/31/1999 12,771.50 12,715.59
9/30/1999 12,780.73 12,889.79
10/31/1999 12,911.64 13,210.75
11/30/1999 12,991.88 13,449.87
12/31/1999 13,586.49 14,251.48
1/31/2000 12,794.33 13,540.33
2/29/2000 12,820.00 13,717.71
3/31/2000 13,194.62 14,254.07
4/30/2000 12,656.58 13,557.05
5/31/2000 12,722.96 13,394.36
6/30/2000 12,990.79 13,796.19
7/31/2000 12,724.74 13,470.60
8/31/2000 12,891.86 13,694.21
9/30/2000 12,570.54 13,247.78
10/31/2000 12,497.20 13,047.74
11/30/2000 11,946.29 12,677.18
12/31/2000 12,352.52 12,982.70
1/31/2001 12,722.52 13,126.81
2/28/2001 12,056.81 12,459.97
3/31/2001 11,553.80 11,827.00
4/30/2001 12,268.78 12,336.75
5/31/2001 12,111.70 12,229.42
6/30/2001 11,830.12 11,955.48
7/31/2001 11,776.35 11,981.78
8/31/2001 11,572.93 11,818.83
9/30/2001 10,739.32 11,229.07
10/31/2001 11,059.83 11,394.14
11/30/2001 11,559.96 11,735.96
12/31/2001 11,556.31 11,659.68
1/31/2002 11,211.51 11,362.36
2/28/2002 11,159.40 11,328.27
3/31/2002 11,544.13 11,617.14
4/30/2002 11,450.07 11,549.76
5/31/2002 11,571.51 11,696.44
6/30/2002 11,203.91 11,497.60
7/31/2002 10,559.42 10,961.81
8/31/2002 10,512.74 11,051.70
9/30/2002 9,863.12 10,372.02
10/31/2002 10,462.47 10,815.94
11/30/2002 11,085.89 11,172.87
12/31/2002 10,826.48 11,074.55
1/31/2003 10,667.10 10,933.90
2/28/2003 10,631.95 10,882.51
3/31/2003 10,582.62 10,878.16
4/30/2003 11,238.69 11,513.44
5/31/2003 11,827.00 12,221.52
6/30/2003 12,129.88 12,523.39
7/31/2003 12,513.22 12,828.96
8/31/2003 12,866.20 13,140.71
9/30/2003 13,152.75 13,548.07
10/31/2003 14,016.47 14,393.47
11/30/2003 14,219.35 14,715.88
12/31/2003 15,140.71 15,866.66
Value on 12/31/03:
- ------------------
$15,141 Overseas Equity Fund
$15,867 Overseas Equity Benchmark(1)
MORNINGSTAR CATEGORY+:
.. Foreign Large Blend
MORNINGSTAR RISK+:
.. Low (VL/VUL)
.. Low (VA)
MORNINGSTAR RATING+:
.. ***** (VL/VUL)
.. ***** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Vodafone 3.5%
AstraZeneca Group PLC 3.3%
Sanofi-Synthelabo SA 3.3%
Royal Dutch Petroleum Co. 2.8%
Novartis AG 1.8%
BNP Paribas 1.7%
ABN Amro Holding NV 1.5%
Mitsubishi 1.4%
Heineken 1.4%
Koninklijke 1.4%
AVERAGE ANNUAL TOTAL RETURNS*
Overseas
Equity Overseas Equity
Fund Benchmark(1)
-------- ---------------
1 Year 39.85% 43.27%
3 Years 7.02 6.92
5 Years 3.21 5.20
Since Inception (5/1/96) 5.55 6.21
DIVERSIFICATION BY REGION AND COUNTRY(3)
(as of December 31, 2003)
% of
Assets
------
Europe
(excluding U.K.) 44.0%
Japan 21.0%
United Kingdom (U.K.) 15.3%
Pacific Basin
(excluding Japan) 6.3%
United States 6.2%
Other 4.1%
Canada 3.6%
DIVERSIFICATION BY REGION(4)
Developed Markets 97%
Emerging Markets 3%
(1) Overseas Equity Composite Index: 65% MSCI World Index Excluding US, and 35%
Citigroup Non-US Govt. Bond Index, Unhedged, May 1996 to April 2000, then
60% MSCI World / 40% Citigroup World Government Bond, Unhedged, May 2000 to
April 2003 and then MSCI EAFE Index May 2003 to present.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 367 VL/VUL subaccounts and 570 VA subaccounts in the
Morningstar Foreign Large Blend category. This represents the Morningstar 3
year rating.
(3) Calculations based upon country in which security is traded (listed).
(4) Calculations based upon country in which security is domiciled.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ....................................... $37,218
Net unrealized appreciation of investments .......................... 9,647
Short-term investments at value ..................................... 2,977
-------
Total investments ............................................. 49,842
Cash ................................................................ 22
Foreign currency at value (cost $42) ................................ 42
Receivable for:
Investments sold ................................................. 232
Fund shares sold ................................................. 84
Interest ......................................................... 2
Dividends ........................................................ 41
Unrealized appreciation in forward currency
contracts ..................................................... 27
Other assets ..................................................... 6
-------
Total assets ........................................................ 50,298
-------
LIABILITIES
Payables for:
Investments purchased ............................................ 1,058
Unrealized depreciation in forward currency
contracts ..................................................... 61
Other liabilities ................................................ 3
-------
Total liabilities ................................................... 1,122
-------
Net assets .......................................................... $49,176
=======
Shares of beneficial interest outstanding ........................... 4,718
-------
Net asset value per share ........................................... $ 10.42
=======
Composition of net assets:
Capital paid-in .................................................. $43,341
Accumulated net realized loss on investments,
futures and foreign currency transactions ..................... (3,773)
Undistributed net investment loss ................................ (5)
Net unrealized appreciation (depreciation) of:
Investments ................................................... 9,647
Translation of assets and liabilities in foreign
currencies ................................................. (34)
-------
Net assets .......................................................... $49,176
=======
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 157
Dividends ..................................................... 556
-------
Total investment income ............................................. 713
-------
EXPENSES
Investment advisory fee ....................................... 377
Auditors fees ................................................. 5
Custodian fees ................................................ 110
Legal fees .................................................... 2
Printing & mailing fees ....................................... 3
Trustees' fees ................................................ 1
Other fees .................................................... 2
-------
Total expenses ...................................................... 500
Less expenses reimbursed ...................................... (87)
Less custodian expense reduction offset by
commission recapture arrangement (Note C) .................. (1)
-------
Net expenses ........................................................ 412
-------
Net investment income ............................................... 301
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ................................................... (450)
Foreign currency transactions ................................. 941
Change in unrealized appreciation (depreciation) on:
Investments ................................................... 11,946
Translation of assets and liabilities in foreign
currencies ................................................. (73)
-------
Net realized and unrealized gain .................................... 12,364
-------
Net increase in net assets resulting from
operations ....................................................... $12,665
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ............................................... $ 301 $ 372
Net realized gain (loss) ............................................ 491 (2,154)
Change in net unrealized appreciation (depreciation) ................ 11,873 (104)
-------- --------
Net increase (decrease) in net assets resulting from operations .. 12,665 (1,886)
Distributions to shareholders from:
Net investment income ............................................... (1,633) (374)
Realized gains ...................................................... (1,073)
-------- --------
Decrease in net assets resulting from distributions .............. (2,706) (374)
From fund share transactions:
Proceeds from shares sold ........................................... 26,834 14,757
Distributions reinvested ............................................ 2,706 374
Payment for shares redeemed ......................................... (20,259) (14,225)
-------- --------
Increase in net assets from fund share transactions .............. 9,281 906
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS .................................. 19,240 (1,354)
NET ASSETS
Beginning of Period ................................................. 29,936 31,290
-------- --------
End of Period ....................................................... $ 49,176 $ 29,936
======== ========
Analysis of fund share transactions:
Sold ................................................................ 2,962 1,868
Reinvested .......................................................... 270 46
Redeemed ............................................................ (2,292) (1,788)
-------- --------
Net increase in fund shares outstanding ................................ 940 126
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Overseas Equity Fund
--------------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------------
2003 2002 2001 2000(c) 1999
------- ------- ------- ------- -------
Net Assets Value at Beginning of Period ................... $ 7.92 $ 8.57 $ 9.27 $ 10.71 $ 11.12
Income from Investment Operations:
Net Investment Income .................................. 0.09 0.10 0.11 0.23 0.29
Net Realized and Unrealized Gain (Loss) on
Investments(a) ...................................... 3.03 (0.65) (0.70) (1.20) 0.25
------- ------- ------- ------ -------
Total From Investment Operations ....................... 3.12 (0.55) (0.59) (0.97) 0.54
Less Distributions:
Distribution from Net Investment Income ................ (0.37) (0.10) (0.24) (0.29)
Distribution from Net Realized Gains on Investments .... (0.25) (0.01) (0.44)
Distribution from Excess of Net Investment
Income/Gains ........................................ (0.10) (0.16)
Distribution from Capital Paid-in ...................... (0.11) (0.12) (0.06)
------- ------- ------- ------- -------
Total Distributions .................................... (0.62) (0.10) (0.11) (0.47) (0.95)
------- ------- ------- ------- -------
Net Assets Value at End of Period ......................... $ 10.42 $ 7.92 $ 8.57 $ 9.27 $ 10.71
======= ======= ======= ======= =======
Total Investment Return(b) ................................ 39.85% (6.32)% (6.45)% (9.08)% 5.11%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ...... 1.15%(d)(f) 1.15%(d) 1.15%(d) 0.98%(d) 1.00%(d)
Ratio of Net Investment Income to Average Net Assets ... 0.84% 1.28% 1.30%(e) 2.32% 2.73%
Portfolio Turnover Rate ................................ 89.10% 71.20% 53.11% 204.98% 131.21%
Net Assets End of Period (000s Omitted) ................... $49,176 $29,936 $31,290 $28,527 $31,577
(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 fluctuating
market values of the portfolio.
(b) The performance 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 Capital Guardian
Trust Company during the period shown.
(d) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been 1.39%, 1.45%, 1.36%, 1.27%, and
1.31%, for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
(e) Had the Fund not amortized premiums and accreted discounts on debt
securities, the annual ratio of net investment income to average net assets
would have been 1.38% for the years ended December 31, 2001.
(f) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
OVERSEAS EQUITY FUND
Market
Name of Issuer Shares Value
-------------- -------- -------
(000's)
COMMON STOCK
Australia - 3.1%
Amcor, Ltd. (BE) ...................................... $ 3,400 $ 21
Australia & New Zealand Banking Group,
Ltd. (JP) .......................................... 13,127 175
Brambles Industries, Ltd. (BO) ........................ 16,000 64
Foster's Brewing Group, Ltd. (JG) ..................... 55,900 189
National Australia Bank, Ltd. (JP) .................... 8,800 198
News Corp., Ltd. (JA) ................................. 8,719 79
QBE Insurance Group, Ltd. (JR) ........................ 20,400 163
Wesfarmers (BL) ....................................... 7,400 148
Westpac Banking Corp., Ltd. (JP) ...................... 7,000 84
WMC Resources, Ltd. (BB) .............................. 33,000 140
WMC, Ltd. (BF) ........................................ 31,000 153
Woolworth's, Ltd. (JF) ................................ 14,000 124
------
1,538
Austria - 0.1%
Erste Bank (JP) ....................................... 400 49
Canada - 3.4%
Abitibi Consolidated, Inc. (BG) ....................... 17,900 144
Alcan Aluminum, Ltd. (BF) ............................. 2,800 131
BCE, Inc. (J1) ........................................ 10,400 233
Bombardier, Inc. - C1. B (BH) ......................... 69,500 294
Great West Lifeco, Inc. (JR) .......................... 1,900 67
Inco, Ltd. (BF) ....................................... 3,500 140
Manulife Financial Corp. (JR) ......................... 2,200 71
Suncor Energy , Inc. (BB) ............................. 6,400 161
TELUS Corp. (J1) ...................................... 12,800 240
Thomson Corp. (BZ) .................................... 5,500 200
------
1,681
Denmark - 0.4%
Novo Nordisk AS (JO) .................................. 3,600 146
Tele Danmark AS (J1) .................................. 800 29
------
175
Finland - 0.9%
Nokia Oyj (JW) ........................................ 17,900 309
UPM-Kymmene Corp. (BG) ................................ 7,100 136
------
445
France - 11.5%
Accor SA (BZ) ......................................... 4,900 222
Air Liquide (BC) ...................................... 1,900 335
BNP Paribas (JP) ...................................... 12,300 773
Bouygues SA (J2) ...................................... 11,100 388
Carrefour SA (JF) ..................................... 2,500 137
Essilor International (JL) ............................ 3,100 160
France Telecom (J1) ................................... 8,800 251
Groupe Danone (JH) .................................... 2,000 326
L'Oreal SA (JK) ....................................... 2,700 221
Renault (BV) .......................................... 6,600 455
Sanofi-Synthelabo SA (JO) ............................. 20,500 1,542
Schneider SA (BK) ..................................... 3,200 209
Societe Generale - Cl. A (JP) ......................... 1,200 106
STMicroelectronics (J0) ............................... $ 3,100 $ 84
Vivendi Universal SA (JA) ............................. 18,400 447
------
5,656
Germany - 5.1%
Allianz AG (JR) ....................................... 2,700 340
Bayerische Motoren Werke AG (BV) ...................... 3,400 157
DaimlerChrysler AG (BV) ............................... 7,700 359
Deutsche Bank AG (JP) ................................. 3,800 315
Deutsche Boerse AG (JQ) ............................... 1,122 61
Infineon Technologies AG (J0) ......................... 7,300 101
Muenchener Rueckversicherungs-
Gesellschaft AG (JR) ............................... 2,828 343
SAP AG (JV) ........................................... 1,300 218
Siemens AG (BL) ....................................... 6,200 496
Thyssen Krupp AG (BF) ................................. 5,500 109
------
2,499
Hong Kong - 1.8%
Cheung Kong Holdings, Ltd. (JS) ....................... 18,000 142
Hang Lung Properties (JS) ............................. 110,000 141
Hang Seng Bank, Ltd. (JP) ............................. 6,200 81
Hutchison Whampoa, Ltd. (BL) .......................... 10,000 73
Johnson Electric Holdings, Ltd. (BK) .................. 44,000 56
Li & Fung, Ltd. (BO) .................................. 116,000 199
Sun Hung Kai Properties, Ltd. (JS) .................... 11,000 91
Swire Pacific, Ltd. - Cl. A (JQ) ...................... 17,000 105
------
888
Italy - 0.9%
Assicurazioni Generali (JR) ........................... 3,100 82
ENI (BB) .............................................. 14,200 268
UniCredito Italiano SpA (JP) .......................... 17,400 94
------
444
Japan - 20.0%
Advantest (J0) ........................................ 2,000 159
Aiful Corp. (JQ) ...................................... 1,600 117
Canon, Inc. (JZ) ...................................... 4,000 186
Dai-Nippon Printng Co., Ltd. (BO) ..................... 10,000 140
Daiwa House Industry Co., Ltd. (BW) ................... 9,000 96
Daiwa Securities Group, Inc. (JQ) ..................... 12,000 82
Fanuc, Ltd. (BM) ...................................... 3,200 192
Fuji Photo Film (BX) .................................. 3,000 97
Hirose Electric Co., Ltd. (JY) ........................ 2,100 241
Honda Motor Co. (BV) .................................. 2,000 89
Hoya Corp. (JY) ....................................... 2,400 220
Japan Airlines (BQ) ................................... 52,000 137
Jusco Co., Ltd. (JD) .................................. 13,000 436
Kansai Electric Power Co., Inc. (J3) .................. 9,700 170
Millea Holdings, Inc. (JR) ............................ 15 196
Mitsubishi Corp. (BN) ................................. 23,000 244
Mitsubishi Estate Co., Ltd. (JS) ...................... 27,000 256
Mitsubishi Heavy Industries, Ltd. (BM) ................ 33,000 92
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
OVERSEAS EQUITY FUND
Market
Name of Issuer Shares Value
-------------- -------- -------
(000's)
COMMON STOCK - Continued
Japan - Continued
Mitsubishi Motor (BV) ................................. $ 33,000 $ 67
Mitsui Fudosan Co., Ltd. (JS) ......................... 17,000 154
Mitsui Marine & Fire Insurance Co., Ltd. (JR) ......... 33,000 271
Murata Manufacturing Co., Ltd. (JY) ................... 2,700 146
NEC Corp. (JX) ........................................ 73,000 538
Nidec Corp. (JY) ...................................... 900 86
Nikko Securities Co., Ltd. (JQ) ....................... 23,000 128
Nikon Corp. (J0) ...................................... 5,000 75
Nintendo Corp., Ltd. (BW) ............................. 1,300 121
Nippon Steel Co. (BF) ................................. 62,000 133
Nissan Motor Acceptance Corp. (BV) .................... 36,000 411
Nitto Denko Corp. (BK) ................................ 4,900 261
Nomura Securities Co., Ltd. (JQ) ...................... 11,000 187
Orix Corp. (JQ) ....................................... 3,500 289
Ricoh Co., Ltd. (JZ) .................................. 6,000 118
Rohm Co., Ltd. (J0) ................................... 2,600 305
Sankyo Co., Ltd. (JO) ................................. 12,000 226
Sekisui House, Ltd. (BW) .............................. 21,000 217
Shimamura Co., Ltd. (JE) .............................. 1,400 95
Shin-Etsu Chemical Co. (BC) ........................... 2,600 106
Shionogi & Co., Ltd. (JO) ............................. 18,000 335
SMC Corp. (BM) ........................................ 1,500 187
Softbank Corp. (JT) ................................... 1,000 31
Sumitomo Chemical Co. (BC) ............................ 39,000 161
Sumitomo Forestry Co. (BG) ............................ 6,000 51
Suzuki Motor Corp. (BV) ............................... 23,000 340
Taiyo Yuden Co., Ltd. (JY) ............................ 9,000 118
Tokyo Electron, Ltd. (J0) ............................. 7,500 570
Toray Industries, Inc. (BC) ........................... 14,000 59
Tostem Corp. (BI) ..................................... 6,000 116
Toyota Motor Corp. (BV) ............................... 7,300 247
Yahoo Japan Corp. (JT) ................................ 20 269
Yamanouchi Pharmaceutical Co., Ltd. (JO) .............. 3,000 93
Yamato Transport Co., Ltd. (BP) ....................... 7,000 82
Yasuda F & M Insurance (JR) ........................... 12,000 99
------
9,842
Netherlands - 8.8%
ABN Amro Holding NV (JP) .............................. 30,148 705
Aegon NV (JR) ......................................... 13,763 203
ASM Lithography Holding NV (J0) ....................... 4,500 89
Elsevier NV (JA) ...................................... 13,200 164
Heineken Holding (JG) ................................. 900 31
Heineken NV (JG) ...................................... 16,300 620
ING Groep NV (JQ) ..................................... 17,447 406
Koninklijke (Royal) Philips Electronics NV
(JY) ............................................... 3,600 105
Koninklijke KPN NV (JY) ............................... 57,900 446
Koninklijke Numica NV (JY) ............................ 2,900 80
Royal Dutch Petroleum Co. (BB) ........................ 22,800 1,201
TNT Post Group NV (BP) ................................ 3,800 89
VNU NV (JA) ........................................... $ 6,327 $ 200
------
4,339
New Zealand - 0.0%
Telecom Corp. of New Zealand, Ltd. (J1) ............... 436 1
Norway - 1.8%
Den Norske Bank (JP) .................................. 16,000 107
Norsk Hydro ASA (BL) .................................. 7,025 433
Norske Skogindustrier ASA - Cl. A (BG) ................ 2,700 51
Statoil ASA (BB) ...................................... 25,400 285
------
876
Singapore - 1.0%
DBS Group Holdings, Ltd. (JP) ......................... 4,000 35
Hong Kong Land Holdings, Ltd. (JS) .................... 56,000 95
Singapore Technology Engineering, Ltd. ................
(BH) ............................................... 75,000 90
Singapore Telecommunications, Ltd. (J1) ............... 117,000 135
United Overseas Bank, Ltd. (JP) ....................... 6,000 47
Venture Manufacturing, Ltd. (JY) ...................... 9,000 106
------
508
Spain - 2.9%
Banco Bilbao Vizcaya SA (JP) .......................... 39,800 549
Inditex (JE) .......................................... 14,300 290
Repsol SA (BB) ........................................ 6,200 121
Telefonica SA (J1) .................................... 30,853 453
------
1,413
Sweden - 3.3%
Assa Abloy (BI) ....................................... 20,200 240
AstraZeneca Group plc (BO) ............................ 16,200 789
ForeningsSparbanken AB (JP) ........................... 18,100 356
Sandvik AB (BM) ....................................... 2,500 86
Svenska Handelsbanken, Inc. (JP) ...................... 6,000 123
------
1,594
Switzerland - 9.3%
ABB, Ltd. (BK) ........................................ 22,218 112
Credit Suisse Group (JP) .............................. 4,063 149
Holcim (BD) ........................................... 8,391 391
Nestle SA (JH) ........................................ 2,309 577
Novartis AG (JO) ...................................... 18,678 848
Richemont (JQ) ........................................ 20,336 488
Roche Holdings AG (JO) ................................ 3,033 306
Serono SA (JN) ........................................ 134 95
Swiss Reinsurance Co. (JR) ............................ 8,404 567
Swisscom AG (J1) ...................................... 1,581 521
Synthes-Stratec, Inc. (JL) ............................ 126 125
UBS AG (JP) ........................................... 5,628 385
------
4,564
United Kingdom - 14.6%
Anglo American plc (BF) ............................... 4,400 95
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
OVERSEAS EQUITY FUND
Market
Name of Issuer Shares Value
-------------- -------- -------
(000's)
COMMON STOCK - Continued
United Kingdom - Continued
Arm Holdings plc (J0) ................................. $ 14,000 $ 32
AstraZeneca Group plc (JO) ............................ 11,100 531
Barclays (JP) ......................................... 30,200 269
BG Group plc (BB) ..................................... 92,100 471
Billiton plc (BF) ..................................... 62,655 546
British Aerospace plc (BH) ............................ 20,000 60
Centrica plc (J4) ..................................... 39,500 149
CRH (BD) .............................................. 7,900 162
Diageo plc (JG) ....................................... 13,000 170
HBOS (JP) ............................................. 24,800 320
HSBC Holdings plc (JP) ................................ 29,900 469
National Grid Group (JY) .............................. 30,600 219
Pearson plc (JA) ...................................... 29,800 331
Prudential Corp. (JR) ................................. 11,700 99
Reckitt Benckiser (JJ) ................................ 3,800 86
Rio Tinto plc (BF) .................................... 3,400 94
Royal Bank of Scotland Group (JP) ..................... 20,400 599
Smith & Nephew (JL) ................................... 14,600 122
Smiths Group (BL) ..................................... 9,900 117
Standard Chartered plc (JP) ........................... 21,300 351
Unilever plc (JK) ..................................... 50,900 473
Vodafone AirTouch plc (J2) ............................ 485,538 1,200
Wolseley (BN) ......................................... 6,600 93
Xstrata (BF) .......................................... 10,900 122
-------
7,180
United States - 5.9%
America Movil SA de CV - ADR Ser. L (J2) .............. 2,400 66
AstraZeneca Group Plc - ADR (JO) ...................... 5,000 242
Companhia Vale Do Rio Doce - ADR (BF) ................. 1,800 105
DBS Group Holdings, Ltd. - ADR 144A (a)(JP) ........... 2,000 17
Nokia Oyj - ADR (JW) .................................. 4,500 77
Royal Dutch Petroleum Co. (BB) ........................ 2,000 105
Samsung Electronics - 144A (a) (JY) ................... 2,850 536
Sap Aktiengesellschaft - ADR (JV) ..................... 3,200 133
Sony Corp. (JY) ....................................... 3,500 121
STMicroelectronics NV (J0) ............................ 5,200 140
Taiwan Semiconductor Manufacturing Co.,
Ltd. - ADR (J0) .................................... 48,864 500
Telefonos de Mexico SA - ADR (J1) ..................... 1,700 56
The Thomson Corp. (JA) ................................ 10,400 377
Vodafone Group plc (J1) ............................... 17,100 428
Yukos Corp. - ADR (BB) ................................ 300 13
-------
2,916
-------
TOTAL COMMON STOCK- 94.8% 46,608
Par Market
Name of Issuer Value Value
-------------- -------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS
Supra National - 0.5%
SMFG Finance (FB)
2.25% due 07/11/05 ................................. $ 12,000 $ 204
2.25% due 07/11/05 ................................. 6,000 53
-------
TOTAL PUBLICLY-TRADED BONDS- 0.5% 257
SHORT-TERM INVESTMENTS - 6.1%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ................................ 2,977 2,977
-------- -------
TOTAL INVESTMENTS- .............................. 101.4% 49,842
Payables, less cash and receivables- ............ (1.4)% (666)
-------- -------
NET ASSETS- ..................................... 100.0% $49,176
======== =======
(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, 2003, securities aggregated
$553 or 1.1% of net assets of the Portfolio.
ADR-American Depository Receipts.
GDR-Global Depository Receipts.
See notes to financial statements.
SUMMARY OF LONG-TERM SECURITIES BY INDUSTRY (UNAUDITED)
% of
Industry Market Long-Term
Industry Abbreviation Value Investments
-------- ------------ ------ -----------
(000s)
Banks .................................... JP $6,355 13.6%
Pharmaceuticals .......................... JO 4,269 9.1%
Oil & Gas ................................ BB 2,764 5.9%
Insurance ................................ JR 2,501 5.3%
Electronic Equipment & Instruments ....... JY 2,424 5.2%
Diversified Telecommunication Services ... J1 2,347 5.0%
Automobiles .............................. BV 2,126 4.5%
Semiconductor Equipment & Products ....... J0 2,056 4.4%
Diversified Financials ................... JQ 1,864 4.0%
Wireless Telecommunications Services ..... J2 1,654 3.5%
Metals & Mining .......................... BF 1,628 3.5%
Media .................................... JA 1,597 3.4%
Industrial Conglomerates ................. BL 1,267 2.7%
Commercial Services & Supplies ........... BO 1,192 2.5%
Beverages ................................ JG 1,011 2.2%
Food Products ............................ JH 903 1.9%
Real Estate Investment Trust ............. JS 879 1.9%
Personal Products ........................ JK 694 1.5%
Chemicals ................................ BC 661 1.4%
Electrical Equipment ..................... BK 638 1.4%
Machinery ................................ BM 557 1.2%
Construction Materials ................... BD 552 1.2%
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
OVERSEAS EQUITY FUND
% of
Industry Market Long-Term
Industry Abbreviation Value Investments
-------- ------------ ------- -----------
(000s)
Computers & Peripherals ................. JX $ 538 1.1%
Aerospace & Defense ..................... BH 444 0.9%
Multiline Retail ........................ JD 436 0.9%
Household Durables ...................... BW 434 0.9%
Hotels Restaurants & Leisure ............ BZ 422 0.9%
Health Care Equipment & Supplies ........ JL 407 0.9%
Communications Equipment ................ JW 386 0.8%
Specialty Retail ........................ JE 385 0.8%
Paper & Forest Products ................. BG 381 0.8%
Building Products ....................... BI 356 0.8%
Software ................................ JV 351 0.8%
Trading Companies & Distributors ........ BN 337 0.7%
Office Electronics ...................... JZ 305 0.7%
Internet Software & Services ............ JT 299 0.6%
Food & Drug Retailing ................... JF 261 0.6%
Finance ................................. FB 257 0.5%
Air Freight & Couriers .................. BP 171 0.4%
Electric Utilities ...................... J3 170 0.4%
Gas Utilities ........................... J4 149 0.3%
Airlines ................................ BQ 137 0.3%
Leisure Equipment & Products ............ BX 97 0.2%
Biotechnology ........................... JN 96 0.2%
Household Products ...................... JJ 86 0.2%
Containers & Packaging .................. BE 21 0.0%
------- -----
$46,865 100.0%
======= =====
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Overseas Equity Fund, (formerly John Hancock Global Balanced
Fund), (the "Fund") is a diversified series of John Hancock Variable Series
Trust I (the "Trust"), an open-end investment management company registered
under the Investment Company Act of 1940. The Trust is organized as a
Massachusetts business trust and consists of thirty different funds as of
December 31, 2003. The results of this Fund are included in this report. The
results of the other Funds in the Trust are presented under separate cover. 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 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Fair value pricing, determined in good faith by the Board of Trustees, may
be used by the Fund when current market values are unavailable or when an event
occurs after the close of the exchange on which the Fund's portfolio securities
are principally traded that is likely to have changed the value of the
securities. The use of fair value pricing by the Fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. Securities for which prices are not
available from an independent pricing service, but where an active market
exists, are valued using market quotations obtained from one or more dealers
that make markets in the securities.
Investment security transactions are recorded on the date of purchase or
sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Market
Name of Issuer Value
- -------------- --------
Cargill Asia Pacific, 1.06%, due 01/02/04 $ 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
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 Fund. 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 Fund does 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.
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$301 1.66% $--
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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 December 31, 2003, the Fund 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
Covered by Contract Expiration Month Gain (Loss)
------------------- ---------------- -----------
Currency Purchased
- ------------------
Swiss Franc 202 January 04 $ 27
====
Currency Sold
- -------------
Swiss Franc 211 January 04 $(18)
Swiss Franc 301 May 04 (31)
Japanese Yen 140 March 04 (12)
----
$(61)
====
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $478, $2,241 and $1,032 which expire in 2009, 2010 and 2011,
respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred approximately $37 in net realized currency losses. As
permitted by tax regulations, the Fund intends to elect to defer these losses
and treat them as arising in the fiscal year ending on December 31, 2004.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
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 Fund is shown net of foreign taxes withheld of $55. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between Between
$150 Million and $300 Million and Excess Over
First $150 Million $300 Million $500 Million $500 Million
- ------------------ ---------------- ---------------- ------------
1.05% 0.95% 0.80% 0.75%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $87 to the Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $1.
John Hancock has entered into a Sub-Advisory Agreement with Capital
Guardian Trust Company, with respect to the Fund. Capital Guardian Trust Company
is an affiliate of John Hancock, and under its supervision, is responsible for
the day-to-day investment management of the Fund.
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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$36,265 $30,303
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$40,215 $9,900 $(273) $9,627
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences primarily relate to certain
securities sold at a loss, premium amortization and market discount accretion on
debt securities and investments in passive foreign investment companies and
foreign currency denominated investments. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $3,751 $9,627
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE D--INVESTMENT TRANSACTIONS--Continued
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $1,620 $-- $1,086
2002 374 -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ------------------- ------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Overseas Equity Fund (formerly,
Global Balanced Fund) (a portfolio included in the series of John Hancock
Variable Series Trust I {the "Trust"}) as of December 31, 2003, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Overseas Equity Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 16, 1988
- --------------------------------------------------------------------------------
Real Estate Equity Fund
RREEF America LLC K. Knudson/J. Robertson
Van Kampen T. Bigman/D. Funke
- --------------------------------------------------------------------------------
The Fund employs a multi-manager approach with two sub-advisers, each of which
independently manages its portion of the Fund. As of year-end, Van Kampen
managed approximately 52% and RREEF managed approximately 48% of the Fund's
assets.
The two managers employ distinct investment strategies. This multi-manager
approach seeks to produce more consistent investment returns over market cycles
and to reduce the risk of any one manager being out of favor in certain market
environments.
.. Van Kampen uses a combination of top down market overview to identify
undervalued real estate property sectors and geographic regions and
bottom-up fundamental research to select companies that are attractively
priced relative to their underlying real estate assets.
.. RREEF uses both a top-down market overview to identify attractive growth
sectors and bottom-up fundamental research to identify companies that have
sustainable cash flow growth.
Fund Commentary
.. In 2003, the Fund returned 36.89%, outperforming its custom benchmark.
Van Kampen
.. This portion of the Fund outperformed its index. Performance relative to
the index was driven primarily by favorable security selection decisions,
with sector allocation decisions also contributing.
.. While stock selection was positive across most sectors, the most
significant contributions were generated in the office and hotel sectors.
The Fund benefited from investment in selected owners of central business
district (CBD) office properties and within lodging from major urban hotels
with superior balance sheets that are affiliated with a major brand.
.. From a top-down perspective, the Fund benefited from an overweight to the
hotel sector.
.. The sub-sectors which added the most to absolute performance were retail
regional malls and offices, but all sectors had positive absolute returns
for the year.
.. Top contributors to absolute returns included Simon Property Group and
Brookfield Properties Corp. Only three securities had negative returns for
the year (Kilroy Realty Corp., Sun Communities Inc, and Apartment
Investment & Management.
RREEF
.. This portion of the Fund outperformed its index since this sub-adviser
assumed management of the Fund in May, 2003. Performance relative to the
index was driven primarily by favorable security selection decisions
broadly across sub-sectors, with sector allocation decisions detracting.
.. Stock selection was especially beneficial in the office and industrial
sub-sectors. The Fund's modest allocation to cash was the biggest detractor
to relative returns.
.. All sub-sectors had positive absolute returns for the year, with the hotel
and regional malls sub-sectors leading the way.
.. While securities posted positive returns for this period, the top
contributors to absolute returns included General Growth Properties, Simon
Property Group, and Prologis Trust.
Inception: May 16, 1988
- --------------------------------------------------------------------------------
Real Estate Equity Fund
RREEF America LLC K. Knudson/J. Robertson
Van Kampen T. Bigman/D. Funke
- --------------------------------------------------------------------------------
[CHART]
Line Chart
Historical Fund Return
$10,000 Investment made 12/31/93
(10-Year Period)
Real Estate Real Estate
Equity Fund Equity Benchmark (1)
----------- --------------------
12/31/1993 $10,000 $9,283
01/31/1994 10,237 9,561
02/28/1994 10,661 9,952
03/31/1994 10,341 9,491
04/29/1994 10,409 9,598
05/31/1994 10,620 9,797
06/30/1994 10,339 9,604
07/29/1994 10,280 9,626
08/31/1994 10,295 9,620
09/30/1994 10,237 9,459
10/31/1994 9,798 9,113
11/30/1994 9,467 8,756
12/30/1994 10,286 9,435
01/31/1995 9,931 9,130
02/28/1995 10,140 9,416
03/31/1995 10,167 9,471
04/28/1995 10,037 9,403
05/31/1995 10,464 9,714
06/30/1995 10,630 9,883
07/31/1995 10,831 10,042
08/31/1995 10,906 10,165
09/29/1995 11,166 10,352
10/31/1995 10,790 10,031
11/30/1995 10,834 10,135
12/29/1995 11,552 10,723
01/31/1996 11,687 10,871
02/29/1996 11,810 11,086
03/29/1996 11,916 11,176
04/30/1996 11,875 11,226
05/31/1996 12,097 11,476
06/28/1996 12,348 11,706
07/31/1996 12,310 11,602
08/30/1996 12,829 12,095
09/30/1996 13,183 12,397
10/31/1996 13,526 12,733
11/29/1996 13,994 13,262
12/31/1996 15,373 14,677
01/31/1997 15,542 14,887
02/28/1997 15,529 14,896
03/31/1997 15,440 14,946
04/30/1997 14,975 14,464
05/30/1997 15,444 14,895
06/30/1997 16,236 15,633
07/31/1997 16,673 16,148
08/29/1997 16,567 16,028
09/30/1997 18,007 17,609
10/31/1997 17,358 16,860
11/28/1997 17,579 17,199
12/31/1997 18,020 17,583
01/31/1998 17,509 17,335
02/27/1998 17,199 17,113
03/31/1998 17,632 17,450
04/30/1998 17,080 16,900
05/29/1998 16,962 16,738
06/30/1998 16,909 16,649
07/31/1998 15,764 15,491
08/31/1998 14,342 13,881
09/30/1998 15,331 14,658
10/30/1998 14,948 14,458
11/30/1998 15,160 14,729
12/31/1998 15,010 14,519
01/29/1999 14,599 14,204
02/26/1999 14,242 14,091
03/31/1999 14,171 14,015
04/30/1999 15,672 15,509
05/28/1999 16,082 15,772
06/30/1999 15,913 15,503
07/30/1999 15,382 14,910
08/31/1999 15,313 14,686
09/30/1999 14,584 14,024
10/29/1999 14,278 13,763
11/30/1999 14,165 13,547
12/31/1999 14,756 14,056
01/31/2000 14,777 14,114
02/29/2000 14,462 13,844
03/31/2000 15,238 14,451
04/28/2000 16,133 15,481
05/31/2000 16,352 15,667
06/30/2000 16,774 16,195
07/31/2000 18,431 17,649
08/31/2000 17,827 17,014
09/29/2000 18,608 17,567
10/31/2000 17,795 16,804
11/30/2000 18,179 17,182
12/29/2000 19,364 18,376
01/31/2001 19,230 18,560
02/28/2001 18,893 18,174
03/30/2001 18,759 18,189
04/30/2001 19,118 18,622
05/31/2001 19,524 19,143
06/30/2001 20,515 20,179
07/31/2001 20,169 19,775
08/31/2001 20,945 20,465
09/28/2001 19,733 19,252
10/31/2001 19,010 18,532
11/30/2001 20,150 19,732
12/31/2001 20,643 20,305
01/31/2002 20,705 20,392
02/28/2002 21,119 20,859
03/31/2002 22,367 22,142
04/30/2002 22,488 22,279
05/31/2002 22,696 22,504
06/30/2002 23,091 22,966
07/31/2002 21,715 21,544
08/31/2002 21,671 21,553
09/30/2002 20,781 20,600
10/31/2002 19,751 19,574
11/30/2002 20,687 20,543
12/31/2002 20,923 20,843
01/31/2003 20,288 21,795
02/28/2003 20,608 22,115
03/31/2003 21,129 22,677
04/30/2003 22,029 23,631
05/30/2003 23,298 24,969
06/30/2003 23,690 25,508
07/31/2003 25,104 26,865
08/29/2003 25,453 27,088
09/30/2003 26,334 28,042
10/31/2003 26,609 28,457
11/30/2003 27,788 29,712
12/31/2003 28,643 29,801
Value on 12/31/02:
- ------------------
$28,643 Real Estate Equity Fund
$24,801 Real Estate Equity
Benchmark (1)
MORNINGSTAR CATEGORY+:
.. Specialty Real Estate
MORNINGSTAR RISK+:
.. High (VL/VUL)
.. Above Average (VA)
MORNINGSTAR RATING+:
.. *** (VL/VUL)
.. ** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Simon Property Group, Inc. 7.6%
Prologis Trust 5.6%
Archstone Communities Trust 5.0%
Brookfield Properties Corporation 4.8%
Equity Residential Properties Trust 4.7%
General Growth Properties 4.6%
Avalonbay Communities, Inc. 4.0%
Rouse Co. 3.9%
Starwood Hotels & Resorts Worldwide, Ir 3.7%
Host Marriott Corp. 3.7%
AVERAGE ANNUAL TOTAL RETURNS*
Real Estate Real Estate
Equity Fund Equity Benchmark(1)
----------- -------------------
1 Year 36.89% 32.73%
3 Years 13.94 14.61
5 Years 13.80 13.76
10 Years 11.10 11.54
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Real Estate Investment Trust 87.16%
Hotel/Motel 7.06%
Real Estate 5.78%
(1) The Real Estate Equity Benchmark represents the Wilshire Real Estate
Securities Index from June 1988 to April 2003 and then the Wilshire REIT
Index from May 2003 to present. Wilshire Real Estate Securities Index is a
market-capitalization weighted index which measures the performance of real
estate securities. The index contains performance data on five major
categories of property: office, retail, industrial, apartment and
miscellaneous.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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 and a nondiversified
fund 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. Performance would be lower if expenses and charges
of the separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts. VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 102 VL/VUL subaccounts and 177 VA subaccounts in the
Morningstar Specialty-Real Estate category. This represents the Morningstar
3 year rating.
"Van Kampen" is a registered trade name used by Morgan Stanley Investment
Management, Inc. in its role as a subdivision to the Fund.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ...................................... $174,913
Net unrealized appreciation of investments ......................... 53,681
Short-term investments at value .................................... 6,713
--------
Total investments ............................................ 235,307
Receivable for:
Investments sold ................................................ 536
Fund shares sold ................................................ 188
Dividends ....................................................... 1,123
--------
Total assets ....................................................... 237,154
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 143
Other liabilities ............................................... 87
--------
Total liabilities .................................................. 230
--------
Net assets ......................................................... $236,924
========
Shares of beneficial interest outstanding .......................... 14,609
--------
Net asset value per share .......................................... $ 16.22
========
Composition of net assets:
Capital paid-in ................................................. $181,713
Accumulated net realized gain on investments,
futures and foreign currency transactions .................... 1,530
Net unrealized appreciation of investments ...................... 53,681
--------
Net assets ......................................................... $236,924
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 58
Dividends ..................................................... 11,668
-------
Total investment income ............................................. 11,726
-------
EXPENSES
Investment advisory fee ....................................... 1,929
Auditors fees ................................................. 27
Custodian fees ................................................ 108
Legal fees .................................................... 14
Printing & mailing fees ....................................... 22
Trustees' fees ................................................ 6
Other fees .................................................... 10
-------
Total expenses ...................................................... 2,116
-------
Net investment income ............................................... 9,610
-------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments ................................. 6,974
Change in unrealized appreciation on investments ................. 46,768
-------
Net realized and unrealized gain .................................... 53,742
-------
Net increase in net assets resulting from
operations ....................................................... $63,352
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ..................................... $ 9,610 $ 8,407
Net realized gain ......................................... 6,974 3,167
Change in net unrealized appreciation (depreciation) ...... 46,768 (10,761)
-------- --------
Net increase in net assets resulting from operations ... 63,352 813
Distributions to shareholders from:
Net investment income ..................................... (9,525) (8,765)
Realized gains ............................................ (6,666) (4,175)
-------- --------
Decrease in net assets resulting from distributions .... (16,191) (12,940)
From fund share transactions:
Proceeds from shares sold ................................. 52,162 75,035
Distributions reinvested .................................. 16,191 12,940
Payment for shares redeemed ............................... (56,516) (61,575)
-------- --------
Increase in net assets from fund share transactions .... 11,837 26,400
-------- --------
NET INCREASE IN NET ASSETS ................................... 58,998 14,273
NET ASSETS
Beginning of Period ....................................... 177,926 163,653
-------- --------
End of Period ............................................. $236,924 $177,926
======== ========
Analysis of fund share transactions:
Sold ...................................................... 3,726 5,436
Reinvested ................................................ 1,077 969
Redeemed .................................................. (4,106) (4,574)
-------- --------
Net increase in fund shares outstanding ...................... 697 1,831
======== ========
See notes to financial statements
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Real Estate Equity Fund
----------------------------------------------------
Year Ended December 31,
----------------------------------------------------
2003(d) 2002 2001 2000(c) 1999
-------- -------- -------- -------- --------
Net Assets Value at Beginning of Period ............... $ 12.79 $ 13.55 $ 13.67 $ 11.47 $ 12.46
Income from Investment Operations:
Net Investment Income .............................. 0.69 0.62 0.67 0.76 0.78
Net Realized and Unrealized Gain (Loss) on
Investments(a) .................................. 3.90 (0.43) 0.21 2.73 (0.99)
-------- -------- -------- -------- --------
Total From Investment Operations ................... 4.59 0.19 0.88 3.49 (0.21)
Less Distributions:
Distribution from Net Investment Income ............ (0.69) (0.65) (0.58) (0.76) (0.78)
Distribution from Net Realized Gains on
Investments ..................................... (0.47) (0.30) (0.42) (0.06)
Distribution from Excess of Net Investment Income/
Gains ........................................... (0.17)
Distribution from Capital Paid-in .................. (0.30)
-------- -------- -------- -------- --------
Total Distributions ................................ (1.16) (0.95) (1.00) (1.29) (0.78)
-------- -------- -------- -------- --------
Net Assets Value at End of Period ..................... $ 16.22 $ 12.79 $ 13.55 $ 13.67 $ 11.47
======== ======== ======== ======== ========
Total Investment Return(b) ............................ 36.89% 1.36% (6.61)% 31.29% (1.69)%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets .. 1.07% 1.07% 1.07% 0.76% 0.70%
Ratio of Net Investment Income to Average Net
Assets .......................................... 4.84% 4.60% 4.97% 5.99% 6.38%
Portfolio Turnover Rate ............................ 38.11% 22.74% 29.07% 58.81% 12.95%
Net Assets End of Period (000s Omitted) ............... $236,924 $177,926 $163,653 $158,811 $126,214
(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 fluctuating
market values of the portfolio.
(b) The performance 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 Morgan Stanley Dean
Witter Investment Management, Inc. during the period shown.
(d) The Fund entered into a new sub-advisory agreement with RREEF America LLC
during the period shown.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
REAL ESTATE EQUITY FUND
Market
Name of Issuer Shares Value
-------------- -------- --------
(000's)
COMMON STOCK
Real Estate Development - 5.9%
Catellus Development Corp. ........................... 183,300 $ 4,421
Rouse Co. ............................................ 187,900 8,831
The Macerich Co. ..................................... 19,000 846
--------
14,098
Real Estate Investment Trust - 74.7%
AMLI Residential Properties Trust .................... 49,000 1,313
Apartment Investment & Management Co. ................ 103,000 3,554
Archstone Communities Trust .......................... 405,110 11,335
Arden Realty Group, Inc. ............................. 246,200 7,470
Avalonbay Communities, Inc. .......................... 190,722 9,117
Boston Properties, Inc. .............................. 165,250 7,963
BRE Properties, Inc. ................................. 58,100 1,941
Brookfield Homes Corp. ............................... 6,190 160
CarrAmerica Realty Corp. ............................. 39,500 1,176
Centerpoint Properties Corp. ......................... 30,100 2,254
Chelsea Property Group, Inc. ......................... 44,100 2,417
Correctional Properties Trust ........................ 14,100 406
Cousins Properties, Inc. ............................. 32,800 1,004
Equity Office Properties Trust * ..................... 184,425 5,284
Equity Residential Properties Trust * ................ 362,640 10,702
Essex Property Trust, Inc. ........................... 51,400 3,301
Federal Realty Investment Trust ...................... 142,500 5,471
FelCor Lodging Trust, Inc. ........................... 38,000 421
General Growth Properties ............................ 383,100 10,631
Glenborough Realty Trust, Inc. ....................... 25,500 509
Heritage Property Investment Trust, Inc. ............. 4,200 119
Highwoods Properties, Inc. ........................... 98,800 2,510
Home Properties of New York, Inc. .................... 48,200 1,947
Host Marriott Corp. * ................................ 689,600 8,496
Innkeepers USA Trust ................................. 17,000 142
Liberty Property Trust ............................... 40,200 1,564
Mack-Cali Realty LP * ................................ 135,500 5,640
Nationwide Health Properties, Inc. ................... 5,055 99
PAN Pacific Retail Properties, Inc. .................. 101,600 4,841
Pennsylvania Real Estate Investment .................. 50,783 1,843
Post Properties, Inc. ................................ 23,650 660
Prologis Trust ....................................... 400,070 12,838
PS Business Parks, Inc. .............................. 4,050 167
Public Storage, Inc. ................................. 157,700 6,843
Reckson Associates Realty Corp. ...................... 68,200 1,657
Regency Centers Corp. ................................ 146,255 5,828
Shurgard Storage Centers, Inc. ....................... 85,100 3,204
Simon Property Group, Inc. ........................... 373,000 17,285
SL Green Realty Corp. ................................ 75,250 3,089
Summit Properties, Inc. .............................. 44,800 1,076
Sun Communities, Inc. ................................ 11,200 433
Taubman Centers, Inc. ................................ 117,400 2,418
The St. Joe Co. ...................................... 17,700 660
Trizec Properties, Inc. .............................. 24,200 373
United Dominion Realty Trust, Inc. ................... 164,700 3,162
Ventas, Inc. ......................................... 25,900 570
Vornado Realty Trust ................................. 55,150 $ 3,019
--------
176,912
Real Estate Operations - 15.9%
AMB Property Corp. ................................... 117,600 3,867
Boardwalk Equities, Inc. ............................. 37,600 520
Brookfield Properties Corporation .................... 382,900 10,989
Developers Diversified Realty Corp. .................. 93,900 3,152
Forest City Enterprises, Inc. ........................ 18,500 879
Frontline Capital Group * ............................ 121,500
Hilton Hotels Corp. * ................................ 436,000 7,469
La Quinta Corp. - Cl. B .............................. 10,800 69
Manufactured Home Communities, Inc. .................. 52,400 1,973
Starwood Hotels & Resorts Worldwide,
Inc. * ............................................ 237,600 8,546
Wyndham International, Inc. .......................... 179,800 120
--------
37,584
--------
TOTAL COMMON STOCK- 96.5% 228,594
Par
Value
--------
(000's)
SHORT-TERM INVESTMENTS - 2.8%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ............................... $ 6,713 6,713
-------- --------
TOTAL INVESTMENTS- ....................... 99.3% 235,307
Cash and Receivables, less payables- ........... 0.7% 1,617
-------- --------
NET ASSETS- ........................... 100.0% $236,924
======== ========
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Real Estate Equity Fund (the "Fund") is a diversified series
of John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 $ 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Federal income taxes: The Fund 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, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on annual basis of the
Fund's net assets:
Between Between
$50 Million and $100 Million and Excess Over
First $50 Million $100 Million $200 Million $200 Million
- ----------------- --------------- ---------------- ------------
1.10% 1.00% 0.90% 0.80%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, there were no reimbursements paid to the
Fund.
John Hancock has entered into Sub-Advisory Agreements with Morgan Stanley
Investment Management Inc., John Hancock Advisers and RREEF America LLC, with
respect to the Fund. Each is an affiliate of John Hancock, and under its
supervision, is responsible for the day-to-day investment management of the
Fund.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$73,628 $75,142
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$180,950 $55,554 $(1,197) $54,357
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss and to certain distributions
received from investments in Real Estate Investment Trusts. Additionally, as a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- -------------- ------------- --------------
$-- $889 $-- $54,357
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $10,296 $5,895 $--
2002 8,766 4,175 --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ------------------- ------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
* Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Real Estate Equity Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Real Estate Equity Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1994
- --------------------------------------------------------------------------------
Short-Term Bond Fund
Independence Investment LLC J. Shallcross/P. Farley
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 2.76%, outperforming its custom benchmark.
.. The Fund outperformed its benchmark from all key decisions factors,
including security selection, sector allocation and yield curve decisions.
.. Favorable sector allocation decisions were driven primarily by the Fund's
overweight to corporate bonds and mortgage-backed securities.
.. The Fund's exposure to corporate bonds and mortgaged-backed securities
contributed the most to absolute performance
.. The manager employs proprietary research and quantitative tools in a risk
controlled, benchmark-relative approach to evaluate bonds and bond sectors
that are attractively priced. Fund emphasizes higher quality U.S.
investment grade sectors.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/94
(Fund Inception Date)
Short-Term Bond Fund Short-Term Bond Benchmark (1)
-------------------- -----------------------------
5/1/1994 $10,000.00 $10,000.00
5/31/1994 9,999.10 10,013.00
6/30/1994 10,010.06 10,032.02
7/31/1994 10,109.04 10,137.36
8/31/1994 10,129.77 10,170.81
9/30/1994 10,075.07 10,116.91
10/31/1994 10,077.64 10,129.05
11/30/1994 10,032.42 10,074.35
12/31/1994 10,033.45 10,101.55
1/31/1995 10,171.65 10,258.13
2/28/1995 10,323.89 10,431.49
3/31/1995 10,367.20 10,488.86
4/30/1995 10,462.04 10,596.90
5/31/1995 10,693.65 10,843.81
6/30/1995 10,768.78 10,907.78
7/31/1995 10,779.52 10,935.05
8/31/1995 10,844.29 11,010.51
9/30/1995 10,892.08 11,072.16
10/31/1995 10,995.70 11,180.67
11/30/1995 11,097.85 11,300.30
12/31/1995 11,186.64 11,399.75
1/31/1996 11,272.67 11,502.35
2/29/1996 11,183.40 11,419.53
3/31/1996 11,142.92 11,385.27
4/30/1996 11,123.65 11,373.88
5/31/1996 11,123.35 11,380.71
6/30/1996 11,211.29 11,476.31
7/31/1996 11,237.60 11,516.47
8/31/1996 11,259.93 11,544.11
9/30/1996 11,392.29 11,668.79
10/31/1996 11,527.48 11,827.49
11/30/1996 11,607.29 11,939.85
12/31/1996 11,590.50 11,910.00
1/31/1997 11,642.19 11,963.59
2/28/1997 11,661.20 11,982.73
3/31/1997 11,631.38 11,953.97
4/30/1997 11,727.48 12,067.54
5/31/1997 11,804.67 12,154.42
6/30/1997 11,894.39 12,248.01
7/31/1997 12,057.70 12,425.61
8/31/1997 12,033.34 12,408.21
9/30/1997 12,137.82 12,522.37
10/31/1997 12,241.06 12,636.32
11/30/1997 12,247.10 12,662.86
12/31/1997 12,333.56 12,757.83
1/31/1998 12,464.31 12,905.82
2/28/1998 12,460.42 12,903.24
3/31/1998 12,503.49 12,952.27
4/30/1998 12,558.72 13,013.15
5/31/1998 12,622.10 13,088.62
6/30/1998 12,678.91 13,155.38
7/31/1998 12,737.07 13,215.89
8/31/1998 12,872.29 13,338.80
9/30/1998 13,006.90 13,522.87
10/31/1998 12,999.01 13,553.98
11/30/1998 13,019.40 13,590.57
12/31/1998 13,050.91 13,644.93
1/31/1999 13,080.52 13,721.35
2/28/1999 13,035.23 13,673.32
3/31/1999 13,105.11 13,781.34
4/30/1999 13,154.00 13,840.60
5/31/1999 13,122.05 13,823.99
6/30/1999 13,164.57 13,866.85
7/31/1999 13,191.85 13,895.97
8/31/1999 13,224.82 13,926.54
9/30/1999 13,326.59 14,028.20
10/31/1999 13,363.46 14,078.70
11/30/1999 13,411.79 14,119.53
12/31/1999 13,437.82 14,139.30
1/31/2000 13,435.28 14,146.37
2/29/2000 13,530.22 14,248.22
3/31/2000 13,598.40 14,318.04
4/30/2000 13,629.54 14,329.49
5/31/2000 13,678.74 14,379.65
6/30/2000 13,841.10 14,542.14
7/31/2000 13,928.19 14,651.20
8/31/2000 14,031.28 14,774.27
9/30/2000 14,151.78 14,905.76
10/31/2000 14,182.44 14,950.48
11/30/2000 14,329.97 15,080.55
12/31/2000 14,509.63 15,258.50
1/31/2001 14,709.17 15,493.48
2/28/2001 14,825.98 15,617.43
3/31/2001 14,933.75 15,745.49
4/30/2001 14,979.29 15,800.60
5/31/2001 15,065.25 15,909.63
6/30/2001 15,123.33 15,974.85
7/31/2001 15,312.86 16,190.52
8/31/2001 15,412.82 16,308.71
9/30/2001 15,619.98 16,517.46
10/31/2001 15,762.34 16,682.63
11/30/2001 15,701.56 16,637.59
12/31/2001 15,683.64 16,644.24
1/31/2002 15,725.75 16,700.83
2/28/2002 15,794.47 16,759.29
3/31/2002 15,683.78 16,663.76
4/30/2002 15,794.36 16,830.40
5/31/2002 15,922.72 16,779.91
6/30/2002 16,044.42 16,784.94
7/31/2002 16,212.22 16,836.97
8/31/2002 16,304.65 16,914.42
9/30/2002 16,453.70 16,806.17
10/31/2002 16,439.58 16,997.76
11/30/2002 16,418.58 17,087.85
12/31/2002 16,573.47 17,222.84
1/31/2003 16,617.83 17,688.14
2/28/2003 16,713.32 17,774.81
3/31/2003 16,747.00 17,797.92
4/30/2003 16,819.66 17,858.43
5/30/2003 16,897.74 17,901.29
6/30/2003 16,922.35 17,940.68
7/31/2003 16,857.74 17,827.65
8/31/2003 16,843.00 17,834.78
9/30/2003 16,983.85 18,023.83
10/31/2003 16,929.69 17,958.94
11/30/2003 16,940.08 17,964.33
12/31/2003 17,031.44 18,079.30
Value on 12/31/03:
- ------------------
$17,031 Short-Term Bond Fund
$18,079 Short-Term Bond Benchmark(1)
MORNINGSTAR CATEGORY+:
.. Short Term Bond
MORNINGSTAR RISK+:
.. Below Average (VL/VUL)
.. Below Average (VA)
MORNINGSTAR RATING+:
.. **** (VL/VUL)
.. *** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Federal National Mortgage Assoc. 17.5%
Federal Home Loan Mortgage Corp. 11.2%
U.S. Treasury 7.9%
Wells Fargo & Co. 3.5%
J.P. Morgan Chase & Co., Inc. 3.3%
Credit Suisse First Boston Mortgage Securities 3.2%
Residential Funding Mortgage Securities II 2.0%
LB UBS Commercial Mortgage Trust 1.9%
Government National Mortgage Assoc. 1.9%
Citigroup, Inc. 1.7%
AVERAGE ANNUAL TOTAL RETURNS*
Short-Term Short-Term
Bond Fund Bond Benchmark(1)
---------- ------------------
1 Year 2.76% 2.40%
3 Years 5.49 5.82
5 Years 5.47 5.79
Since Inception (5/1/94) 5.66 6.32
FUND COMPOSITION (as of December 31, 2003)(2)
% of
Credit Quality Assets
- ---------------------- ------
AAA Government/Agency 62.92%
AA 4.98%
A 12.12%
BBB 17.21%
BB 2.77%
Weighted Average Yield 2.59%
(1) Short-Term Bond Benchmark 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 Bond Index, May 1998 to April 2002
and now Lehman Brothers 1-3 Year Aggregate Bond from May 2002 to present.
(2) Statistics are based on bond assets only, excluding cash.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 53 VL/VUL subaccounts and 97 VA subaccounts in the
Morningstar Short-Term Bond category. This represents the Morningstar 3
year rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $30,261 of
securities loaned (Note B)) ..................................... $250,294
Net unrealized appreciation of investments ......................... 2,829
Short-term investments at value .................................... 36,084
--------
Total investments ............................................ 289,207
Receivable for interest ............................................ 2,108
--------
Total assets ....................................................... 291,315
--------
LIABILITIES
Payables for:
Fund shares purchased ........................................... 303
Collateral for securities on loan ............................... 30,912
Other liabilities ............................................... 83
--------
Total liabilities .................................................. 31,298
--------
Net assets ......................................................... $260,017
========
Shares of beneficial interest outstanding .......................... 25,656
--------
Net asset value per share .......................................... $ 10.13
========
Composition of net assets:
Capital paid-in ................................................. $257,084
Accumulated net realized gain on investments,
futures and foreign currency transactions .................... 104
Net unrealized appreciation of investments ...................... 2,829
--------
Net assets ......................................................... $260,017
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $11,076
Securities lending ............................................ 26
-------
Total investment income ............................................. 11,102
-------
EXPENSES
Investment advisory fee ....................................... 1,533
Auditors fees ................................................. 34
Custodian fees ................................................ 81
Legal fees .................................................... 17
Printing & mailing fees ....................................... 25
Trustees' fees ................................................ 9
Other fees .................................................... 11
-------
Total expenses ...................................................... 1,710
-------
Net investment income ............................................... 9,392
-------
REALIZED AND UNREALIZED LOSS
Net realized loss on investments .............................. (468)
Change in unrealized depreciation on
investments ................................................ (2,066)
-------
Net realized and unrealized loss .................................... (2,534)
-------
Net increase in net assets resulting from
operations ....................................................... $ 6,858
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ..................................... $ 9,392 $ 8,226
Net realized loss ......................................... (468) (385)
Change in net unrealized appreciation (depreciation) ...... (2,066) 2,688
-------- --------
Net increase in net assets resulting from operations ... 6,858 10,529
Distributions to shareholders from:
Net investment income ..................................... (9,367) (7,972)
Capital paid-in ........................................... (489)
-------- --------
Decrease in net assets resulting from distributions .... (9,367) (8,461)
From fund share transactions:
Proceeds from shares sold ................................. 96,185 121,761
Distributions reinvested .................................. 9,367 8,461
Payment for shares redeemed ............................... (84,143) (40,623)
-------- --------
Increase in net assets from fund share transactions .... 21,409 89,599
-------- --------
NET INCREASE IN NET ASSETS ................................... 18,900 91,667
NET ASSETS
Beginning of Period ....................................... 241,117 149,450
-------- --------
End of Period ............................................. $260,017 $241,117
======== ========
Analysis of fund share transactions:
Sold ...................................................... 9,405 11,951
Reinvested ................................................ 919 833
Redeemed .................................................. (8,235) (3,998)
-------- --------
Net increase in fund shares outstanding ...................... 2,089 8,786
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Short-Term Bond Fund
-----------------------------------------------------
Year Ended December 31,
-----------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- ------- -------
Net Assets Value at Beginning of Period ................... $ 10.23 $ 10.11 $ 9.86 $ 9.72 $ 10.05
Income from Investment Operations:
Net Investment Income .................................. 0.37 0.44 0.52 0.61 0.61
Net Realized and Unrealized Gain (Loss) on
Investments(a) ...................................... (0.10) 0.12 0.26 0.14 (0.33)
-------- -------- -------- ------- -------
Total From Investment Operations ....................... 0.27 0.56 0.78 0.75 0.28
Less Distributions:
Distribution from Net Investment Income ................ (0.37) (0.41) (0.53) (0.61) (0.61)
Distribution from Net Realized Gains on Investments .... (0.03)
-------- -------- -------- ------- -------
Total Distributions .................................... (0.37) (0.44) (0.53) (0.61) (0.61)
-------- -------- -------- ------- -------
Net Assets Value at End of Period ......................... $ 10.13 $ 10.23 $ 10.11 $ 9.86 $ 9.72
======== ======== ======== ======= =======
Total Investment Return(b) ................................ 2.76% 5.67% 8.09% 7.98% 2.96%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ...... 0.67% 0.68% 0.48% 0.36% 0.43%
Ratio of Net Investment Income to Average Net Assets ... 3.68% 4.29% 5.20%(c) 6.27% 6.25%
Portfolio Turnover Rate ................................ 58.94% 97.00% 86.39% 52.68% 100.04%
Net Assets End of Period (000s Omitted) ................... $260,017 $241,117 $149,450 $80,109 $68,844
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Had the Fund not amortized premiums and accreted discounts on debt
securities, the annual ratio of net investment income to average net assets
would have been 5.32% for the year ended December 31, 2001.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS
Aerospace & Defense - 1.0%
Boeing Capital Corp. - Sr. Notes
5.65% due 05/15/06 .................................. $1,300 $ 1,388
Raytheon Co. - Notes
6.75% due 08/15/07 .................................. 1,100 1,219
-------
2,607
Airlines - 0.3%
Popular North America, Inc.
6.125% due 10/15/06 ................................. 855 929
Auto Loan - 3.0%
Ford Motor Credit Co.
6.7% due 07/16/04 ................................... 1,000 1,026
Ford Motor Credit Co. - Notes
6.875% due 02/01/06 ................................. 1,000 1,067
Ford Motor Credit Co. - Sr. Notes
6.125% due 03/20/04 ................................. 1,500 1,514
General Motors Acceptance Corp.
7.5% due 07/15/05 ................................... 4,000 4,299
-------
7,906
Banks - 6.3%
Bank of America Corp. - Notes
4.75% due 10/15/06 .................................. 1,400 1,478
Bank One Corp. - Notes
6.875% due 08/01/06 ................................. 1,800 1,991
Credit Suisse First Boston - Ser. 2003-C3
Cl. A1
2.218% due 05/15/38 ................................. 2,818 2,765
Credit Suisse First Boston Mortgage
Securities - CTF 144A (a)
1.78% due 12/15/11 .................................. 4,838 4,836
Credit Suisse First Boston Mortgage
Securities Corp. - Cl. A1
3.801% due 06/15/06 ................................. 520 523
First Union Corp. - Notes
6.95% due 11/01/04 .................................. 500 523
7.55% due 08/18/05 .................................. 2,500 2,726
First Union National Bank Commercial &
Mortgage Trust - CTF Cl. A1
7.739% due 07/15/09
J.P. Morgan & Co., Inc. - Sr. Notes
5.75% due 02/25/04 .................................. 1,000 1,006
Washington Mutual - Ser. 2001 Cl. A
6.75% due 05/25/31 .................................. 554 553
-------
16,401
Beverages - 0.8%
Coca Cola Co. - Sr. Notes
4.0% due 06/01/05 ................................... 1,000 1,033
Pepsi Bottling Holdings, Inc. - Notes
144A (a)
5.375% due 02/17/04 ................................. 1,000 1,004
-------
2,037
Commercial Services & Supplies - 0.6%
Tyco International Group SA - Notes
5.8% due 08/01/06 ................................... $1,500 $ 1,598
Communications Equipment - 0.8%
Deutsche Telekom International Finance
8.25% due 06/15/05 .................................. 1,300 1,410
Motorola, Inc. - Notes
6.75% due 02/01/06 .................................. 715 770
-------
2,180
Construction Materials - 0.8%
ERP Operating CTD Partnership - Notes
7.1% due 06/23/04 ................................... 2,000 2,049
Credit Card - 1.0%
Citibank Credit Card Issuance Trust - Notes
4.1% due 12/07/06 ................................... 2,591 2,654
Diversified Financials - 10.4%
Bear Stearns Commercial Mortgage
Securities, Inc. - Ser. 2001 Cl. A1
5.06% due 11/15/16
Bear Stearns Cos, Inc. - Notes
3.0% due 03/30/06 ................................... 1,250 1,269
BP Capital Markets plc - Notes
4.0% due 04/29/05 ................................... 1,000 1,032
Chase Commercial Mortgage Securities
Corp. - Cl. A1
7.656% due 06/15/08 ................................. 1,663 1,801
Chase Funding Loan Acquisition Trust -
Cl. 1A3
4.541% due 02/25/23 ................................. 358 358
Chase Funding Loan Acquisition Trust -
CTF Cl. A2
1.275% due 04/25/31 ................................. 418 418
Chase Funding Loan Acquisition Trust -
CTF Cl. IA3
5.053% due 02/25/23 ................................. 926 929
Citigroup, Inc. - Notes
6.75% due 12/01/05 .................................. 4,000 4,346
GE Capital Commercial Mortgage Corp. -
CTF Cl. A1
5.033% due 12/10/35 ................................. 788 824
General Electric Capital Corp.
7.5% due 05/15/05 ................................... 3,150 3,395
Goldman Sachs Group, Inc. - Notes
7.625% due 08/17/05 ................................. 1,000 1,093
Green Tree Financial Corp. - Ser. 1996-8
Cl. A6
7.6% due 10/15/27 ................................... 300 317
Lehman Brothers Holdings, Inc. - Notes
6.625% due 02/05/06 ................................. 2,600 2,827
Morgan Stanley Group, Inc.
6.1% due 04/15/06 ................................... 800 866
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Diversified Financials - Continued
Nomura Asset Securities Corp. - Ser. 1998-
D6 A1A
6.28% due 03/17/28 .................................. $1,894 $ 2,020
PNC Mortgage Securities Corp. - CTF Ser.
1998-14
6.25% due 01/25/14 .................................. 363 372
Salomon, Inc. - Sr. Notes
7.2% due 02/01/04 ................................... 500 502
Vanderbilt & Mortgage, Inc. - Sr. Sub. CTF
Cl. A2
4.235% due 08/07/14 ................................. 848 862
Wells Fargo & Co. - Notes
6.625% due 07/15/04 ................................. 2,000 2,055
Wells Fargo & Co. - Ser. 2002-E CTF Cl. M
4.969% due 09/25/32 ................................. 1,678 1,699
-------
26,985
Diversified Telecommunication Services - 2.6%
France Telecom SA - Notes
6.85% due 10/15/04 .................................. 2,000 2,234
Sprint Capital Corp. - Note
7.9% due 03/15/05 ................................... 2,000 2,130
Verizon Global Funding Corp. - Notes
6.75% due 12/25/32 .................................. 2,303 2,499
-------
6,863
Electric Utilities - 0.8%
Firstenergy Corp. - Notes Ser. A
5.5% due 11/15/06 ................................... 1,200 1,243
Progress Energy, Inc. - Sr. Notes
6.75% due 03/01/06 .................................. 700 759
-------
2,002
Electric/Gas - 0.9%
American Electric Power, Inc. - Sr. Notes
Ser. A
6.125% due 05/15/06 ................................. 1,145 1,234
TXU Corp. - Sr. Notes
6.375% due 06/15/06 ................................. 1,000 1,057
-------
2,291
Electronic Equipment & Instruments - 0.8%
Electronic Data System Corp. - Notes
6.85% due 10/15/04 .................................. 2,000 2,070
Finance - 5.5%
Bombadier Capital, Inc. - 144A (a)
6.125% due 06/29/06 ................................. 1,000 1,064
Chase Manhattan Corp.
6.0% due 11/01/05 ................................... 2,000 2,145
Countrywide Funding Corp.
5.25% due 06/15/04 .................................. 500 508
Household Financial Corp.
6.5% due 01/24/06 ................................... 2,000 2,163
Marsh & Mclennan Cos, Inc. - Sr. Notes
6.625% due 06/15/04 ................................. $2,000 $ 2,046
Master Asset Securitization Trust - Ser.
2002-8 Cl. 1 A10
5.5% due 12/25/17 ................................... 1,976 1,981
Nisource Finance Corp. - Notes
7.625% due 11/15/05 ................................. 1,700 1,857
PNC Funding Corp. - Sr. Notes
5.75% due 08/01/06 .................................. 875 939
Vornado Realty Trust - Sr. Notes
5.625% due 06/15/07 ................................. 1,485 1,586
-------
14,289
Health Care Equipment & Supplies - 0.8%
Pfizer, Inc. - Notes
3.625% due 11/01/04 ................................. 2,000 2,037
Health Care Providers & Services - 0.4%
Columbia/HCA Healthcare Corp.
6.91% due 06/15/05 .................................. 1,000 1,057
Home Equity Loan - 2.9%
Centex Home Equity Loan Trust - Ser.
2003-B Cl. AF 2
1.838% due 06/25/20 ................................. 2,000 1,986
Chase Funding - Ser. 2002-2 Cl. IA 3
4.038% due 02/25/23 ................................. 1,500 1,519
Residential Asset Mortgage Products, Inc. -
Cl. AI2
3.38% due 03/25/29 .................................. 4,000 4,008
-------
7,513
Hotels Restaurants & Leisure - 1.3%
Harrah's Operating, Inc. - Sr. Notes
7.125% due 06/01/07 ................................. 1,000 1,114
Hilton Hotels Corp. - Sr. Notes
7.95% due 04/15/07 .................................. 1,000 1,109
Starwood Hotels & Resorts - Sr. Notes
7.375% due 05/01/07 ................................. 1,000 1,077
-------
3,300
Media - 2.7%
AOL Time Warner, Inc. - Notes
5.625% due 05/01/05 ................................. 1,500 1,570
British Sky Broadcasting Group - GTD
Notes
7.3% due 10/15/06 ................................... 1,000 1,115
Liberty Media Corp. - Sr. Notes
2.64% due 09/17/06 .................................. 1,500 1,516
The Walt Disney Co. - Sr. Notes
6.75% due 03/30/06 .................................. 1,100 1,197
Univision - Sr. Notes
2.875% due 10/15/06 ................................. 1,700 1,694
-------
7,092
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Metals & Mining - 0.4%
Minnesota Ming & Manufacturing Co.
4.15% due 06/30/05 .................................. $1,000 $ 1,035
Multi-Utilities - 1.0%
Alabama Power Co. - Sr. Notes Ser. U
2.65% due 02/15/06 .................................. 1,000 1,007
Duke Energy Field Services - Notes
5.75% due 11/15/06 .................................. 1,450 1,552
-------
2,559
Oil & Gas - 1.6%
Conoco, Inc. - Notes
5.9% due 04/15/04 ................................... 2,550 2,582
Devon Energy Corp. - Sr. Notes
2.75% due 08/01/06 .................................. 1,500 1,501
-------
4,083
Other Asset Backed - 2.8%
CWABS, Inc. Ser. 2003-5 Cl. AF 2
3.042% due 04/25/25 ................................. 1,300 1,309
Equity One ABS, Inc. - Ser. 2003-3 Cl. AF3
3.531% due 12/25/33 ................................. 900 907
Residential Funding Mortgage Securities II
- Ser. 2002 HI4 Cl. A3
3.61% due 02/25/15 .................................. 5,000 5,040
-------
7,256
Other Mortgage - 1.8%
LB UBS Commercial Mortgage Trust -
CTF Cl. A1
7.95% due 07/15/09 .................................. 1,782 1,982
LB UBS Commercial Mortgage Trust - Ser.
2003-C1 Cl. A1
2.72% due 01/17/08 .................................. 2,770 2,763
-------
4,745
Personal Products - 0.6%
Colgate Palmolive Co.
3.98% due 04/29/05 .................................. 1,500 1,551
Real Estate Investment Trust - 1.6%
CarrAmerica Realty Corp. - Notes
6.625% due 03/01/05 ................................. 1,167 1,222
Mack-Cali Realty LP - Notes
7.0% due 03/15/04 ................................... 1,500 1,516
Simon Property Group, Inc. - Notes
6.75% due 02/09/04 .................................. 1,500 1,507
-------
4,245
U.S. Government Agencies - 30.1%
Federal Home Loan Bank - Notes
7.5% due 06/01/12 ................................... 733 783
Federal Home Loan Mortgage Corp. -
Bonds
5.75% due 07/15/26 .................................. 230 230
3.907% due 11/01/33 ................................. $2,000 $ 2,035
4.0% due 03/15/26 ................................... 7,000 6,998
7.0% due 08/01/12 ................................... 548 585
7.0% due 02/01/14 ................................... 1,593 1,701
8.5% due 05/01/15 ................................... 1,638 1,790
Federal Home Loan Mortgage Corp. -
Bonds Ser. 2516 Cl. AX
8.5% due 01/15/16 ................................... 2,344 2,566
Federal Home Loan Mortgage Corp. -
Notes
2.375% due 04/15/06 ................................. 6,500 6,526
6.5% due 12/01/09 ................................... 1,143 1,213
7.0% due 12/01/10 ................................... 434 463
7.0% due 12/01/13 ................................... 2,581 2,752
7.5% due 11/01/09 ................................... 1,141 1,200
8.0% due 06/01/10 ................................... 278 298
Federal National Mortgage Assoc. - Bonds
3.638% due 09/01/33 ................................. 2,445 2,482
3.64% due 01/01/33 .................................. 3,769 3,790
6.0% due 01/01/17 ................................... 2,528 2,656
6.0% due 01/01/17 ................................... 2,093 2,199
6.5% due 04/01/17 ................................... 5,484 5,820
6.5% due 08/01/17 ................................... 5,311 5,637
7.0% due 10/01/15 ................................... 1,128 1,205
8.0% due 07/01/14 ................................... 1,496 1,610
8.0% due 09/25/16 ................................... 910 992
Federal National Mortgage Assoc. - Notes
2.25% due 05/15/06 .................................. 6,000 6,000
3.875% due 03/15/05 ................................. 2,000 2,058
6.0% due 12/15/05 ................................... 5,000 5,384
6.0% due 01/01/11 ................................... 810 853
7.0% due 07/15/05 ................................... 2,000 2,161
7.0% due 12/01/10 ................................... 399 426
7.5% due 08/01/09 ................................... 1,040 1,113
Government National Mortgage Assoc. -
Bonds
8.0% due 12/15/25 ................................... 1,865 2,049
8.5% due 11/15/15 ................................... 1,275 1,404
Government National Mortgage Assoc. -
Notes
7.0% due 12/15/08 ................................... 1,170 1,254
-------
78,233
U.S. Governmental - 7.7%
U.S. Treasury - Notes
2.625% due 11/15/06 ................................. 3,000 3,026
2.875% due 06/30/04 ................................. 3,570 3,603
3.25% due 05/31/04 .................................. 2,320 2,341
3.375% due 11/15/08 ................................. 6,500 6,552
3.625% due 03/31/04 ................................. 2,020 2,033
5.25% due 05/15/04 .................................. 2,355 2,392
-------
19,947
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SHORT-TERM BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- --------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Whole Loan CMOs - 5.5%
CWMBS, Inc. - Ser. 2002 Mortgage Pass
Thru Certs Cl. 2A3
5.0% due 12/25/17 ................................. $ 3,289 $ 3,382
GS Mortgage Securities Corp. II - Ser.
2003-Cl Cl. A1
2.904% due 01/10/40 ............................... 1,880 1,877
Merrill Lynch Mortgage Investments, Inc. -
Ser. 2003-A1 Cl. IA
3.981% due 12/25/32 ............................... 1,785 1,804
Merrill Lynch Mortgage Investments, Inc. -
Ser. 2003-C Cl .B1
1.75% due 06/25/28 ................................ 2,000 2,012
Wells Fargo Mortgage Backed Securities -
Ser. 2003-2 Cl. A6
5.25% due 02/25/18 ................................ 5,000 5,112
--------
14,187
Wireless Telecommunications Services - 0.5%
AT&T Wireless Services, Inc. - Sr. Notes
7.35% due 03/01/06 ................................ 1,300 1,422
--------
TOTAL PUBLICLY-TRADED BONDS- ...................... 97.3% 253,123
INVESTMENT COMPANIES HELD AS COLLATERAL ON LOANED
SECURITIES - 11.9%
State Street Navigator Securities Lending
Portfolio ......................................... 30,912 30,912
SHORT-TERM INVESTMENTS - 2.0%
Investment in joint trading account (Note B)
1.061% due 01/02/04 ............................... 5,172 5,172
------- --------
TOTAL INVESTMENTS- .......................... 111.2% 289,207
Payables, less cash and receivables- ........... (11.2)% (29,190)
------- --------
NET ASSETS- .............................. 100.0% $260,017
======= ========
(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, 2003, securities aggregated
$6,933 or 2.7% of net assets of the Portfolio.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Short-Term Bond (the "Fund") is a diversified series of John
Hancock Variable Series Trust I (the "Trust"), an open-end investment management
company registered under the Investment Company Act of 1940. The Trust is
organized as a Massachusetts business trust and consists of thirty different
funds as of December 31, 2003. The results of this Fund are included in this
report. The results of the other Funds in the Trust are presented under separate
cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment secutities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Mortgage Int. Networking, 0.98%, due 01/02/04 $ 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Discount and premium on debt securities: The Fund accretes discount and
amortizes 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 the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended December
31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$227 1.50% $--
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$30,261 $30,912
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
commodities exchange. Daily adjustments, called variation margin, arising from
this "mark to market", are recorded by the Fund as unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
On February 5, 2003, 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 rate of 0.60% on an annual basis of the
Fund's net assets.
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. For the year
ended December 31, 2003, there were no reimbursements paid to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Independence
Investment LLC, with respect to the Fund. Independence Investment LLC is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$262,444 $145,510
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$286,274 $3,450 $(517) $2,933
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss, premium amortization and market
discount accretion on debt securities. Additionally, as a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $-- $2,933
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions
from Distributions from
Ordinary Long-Term
Year Income Capital Gain Return of Capital
- ---- -------------- ------------------ -----------------
2003 $8,761 $54 $552
2002 7,972 -- 489
Included in the Fund's distributions from ordinary income is $1,302 in
excess of investment company taxable income, which in accordance with applicable
US tax law, is taxable to shareholders as ordinary income distributions.
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ----------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ---------------------------------
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ------------------------------ ------------------------ ----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ---------------------------- ------------------------------------
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Short-Term Bond Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, by correspondence with the custodian and brokers.
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 the
Short-Term Bond Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1996
- --------------------------------------------------------------------------------
Small Cap Emerging Growth Fund (FORMERLY SMALL CAP EQUITY FUND)
Wellington Management Company, LLP Steven C. Angeli
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 48.83%, outperforming its custom benchmark.
.. On May 1st, the sub-advisor was changed to Wellington Management Co. Since
that date, the Fund has outperformed its benchmark, the Russell 2000 Growth
Index.
.. Since May 1st, the Fund outperformed its benchmark due to favorable stock
selection decisions, while sector allocation decisions detracted. Stock
selection in the health care sector was the biggest contributor, followed
by the information technology sector. The Fund's modest allocation to cash
was the biggest detractor to relative returns, as all other sectors had
positive returns.
.. The Fund's exposure to health care was the largest contributor to absolute
performance, followed by information technology. There were no detractors
to absolute returns since all sectors had positive absolute returns.
.. The top and bottom contributors to absolute returns came from a variety of
sectors. The biggest contributors to performance were Red Hat, ASE Test,
and HealthExtras. The main detractors included Enterasys Networks and
Hollywood Entertainment Corp.
.. At year-end, the portfolio was overweight the consumer discretionary
sector, while underweight in the information technology sector.
.. The manager employs bottom-up, fundamental research to identify
attractively valued growth stocks. The Fund's sector allocations are
broadly diversified but are primarily driven by stock selection.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Small Cap
Emerging Growth Small Cap Emerging
Fund Growth Benchmark (1)
--------------- ------------------
5/01/1996 $10,000.00 $10,000.00
5/31/1996 10,231.73 10,253.00
6/30/1996 10,126.04 10,132.01
7/31/1996 9,630.09 9,592.99
8/31/1996 10,161.38 10,009.33
9/30/1996 10,449.97 10,282.58
10/31/1996 10,340.15 10,401.86
11/30/1996 10,678.01 10,961.48
12/31/1996 11,033.49 11,317.73
1/31/1997 11,114.52 11,492.02
2/28/1997 10,927.45 11,601.20
3/31/1997 10,594.17 11,290.28
4/30/1997 10,831.29 11,456.25
5/31/1997 11,818.21 12,368.17
6/30/1997 12,512.51 12,994.00
7/31/1997 13,256.14 13,539.75
8/31/1997 13,389.29 13,755.03
9/30/1997 14,242.08 14,669.74
10/31/1997 13,761.11 14,270.72
11/30/1997 13,862.77 14,427.70
12/31/1997 13,855.26 14,916.80
1/31/1998 13,513.54 14,646.80
2/28/1998 14,524.23 15,531.47
3/31/1998 15,129.82 16,162.05
4/30/1998 15,213.56 16,241.24
5/31/1998 14,450.38 15,666.30
6/30/1998 14,449.78 15,578.57
7/31/1998 13,262.11 14,358.77
8/31/1998 10,895.23 12,110.18
9/30/1998 11,407.11 12,794.41
10/31/1998 11,726.51 13,174.40
11/30/1998 12,312.68 13,531.43
12/31/1998 13,029.17 13,956.32
1/31/1999 12,708.23 13,639.51
2/28/1999 11,869.37 12,707.93
3/31/1999 11,818.92 12,602.45
4/30/1999 12,612.00 13,753.06
5/31/1999 12,790.33 14,175.28
6/30/1999 13,622.04 14,688.42
7/31/1999 13,436.12 14,340.31
8/31/1999 12,841.31 13,816.89
9/30/1999 12,612.59 13,540.55
10/31/1999 12,358.41 13,269.74
11/30/1999 12,260.42 13,338.74
12/31/1999 12,582.73 13,748.24
1/31/2000 11,847.60 13,389.41
2/29/2000 12,338.26 14,207.50
3/31/2000 12,566.66 14,274.28
4/30/2000 12,779.68 14,358.50
5/31/2000 12,662.80 14,138.81
6/30/2000 12,732.80 14,551.66
7/31/2000 12,995.66 15,036.24
8/31/2000 13,753.86 15,708.35
9/30/2000 13,766.35 15,618.82
10/31/2000 13,760.05 15,562.59
11/30/2000 10,725.63 13,964.31
12/31/2000 11,463.94 15,163.85
1/31/2001 13,016.00 15,953.88
2/28/2001 11,049.57 14,907.31
3/31/2001 10,136.03 14,178.34
4/30/2001 11,309.76 15,287.09
5/31/2001 11,648.62 15,663.15
6/30/2001 11,925.17 16,203.53
7/31/2001 11,168.88 15,326.92
8/31/2001 10,641.88 14,831.86
9/30/2001 8,692.54 12,835.49
10/31/2001 9,418.37 13,586.37
11/30/2001 10,217.98 14,637.95
12/31/2001 11,031.01 15,541.11
1/31/2002 10,623.32 15,379.48
2/28/2002 10,376.77 14,958.09
3/31/2002 11,643.45 16,160.72
4/30/2002 11,257.82 16,307.78
5/31/2002 10,623.43 15,583.71
6/30/2002 9,911.82 14,810.76
7/31/2002 8,279.77 12,574.34
8/31/2002 8,121.51 12,541.64
9/30/2002 7,365.38 11,641.15
10/31/2002 7,534.57 12,014.83
11/30/2002 8,405.94 13,086.56
12/31/2002 7,919.40 12,357.64
1/31/2003 7,581.58 12,015.33
2/28/2003 7,290.25 11,652.47
3/31/2003 7,364.33 11,802.78
4/30/2003 8,121.20 12,921.69
5/31/2003 8,985.52 14,377.96
6/30/2003 9,319.89 14,655.46
7/31/2003 9,978.95 15,763.41
8/31/2003 10,517.84 16,609.90
9/30/2003 10,170.66 16,189.67
10/31/2003 11,132.94 17,588.46
11/30/2003 11,515.98 18,161.84
12/31/2003 11,786.13 18,243.57
Value on 12/31/03:
- ------------------
$11,786 Small Cap Emerging Growth Fund
$18,244 Small Cap Emerging Growth Benchmark(1)
MORNINGSTAR CATEGORY+:
.. Small Growth
MORNINGSTAR RISK+:
.. High (VL/VUL)
.. High (VA)
MORNINGSTAR RATING+:
.. **** (VL/VUL)
.. **** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Beverly Enterprises, Inc. 2.2%
Sirius Satellite Radio, Inc. 2.1%
Yellow Roadway Corp. 2.0%
Arch Coal, Inc. 1.7%
American Tower Corp. 1.7%
Red Hat, Inc. 1.6%
Orthofix International 1.6%
Healthextras, Inc. 1.6%
Crown Castle International Corp. 1.6%
Wilson Greatbatch Technologies, Inc. 1.6%
AVERAGE ANNUAL TOTAL RETURNS*
Small Cap Emerging Small Cap Emerging
Growth Fund Growth Benchmark(1)
------------------ -------------------
1 Year 48.83% 47.63%
3 Years 0.93 6.36
5 Years -1.99 5.50
Since Inception (5/1/96) 2.17 8.16
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Information Technology 25.69%
Health Care 22.07%
Consumer Discretionary 18.64%
Industrials 15.82%
Financials 7.33%
Energy 3.61%
Telecommunication
Services 3.23%
Consumer Staples 1.89%
Materials 1.71%
(1) The Small Cap Emerging Growth benchmark represents the Russell 2000 Value
Index from May 1996 to October 2000, the Russell 2000 from November 2000 to
April 2003 and then the Russell 2000 Growth from May 2003 to present.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 338 VL/VUL subaccounts and 528 VA subaccounts in the
Morningstar Small Growth category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $19,013 of
securities loaned (Note B)) ..................................... $ 71,940
Net unrealized appreciation of investments ......................... 13,871
Short-term investments at value .................................... 20,806
--------
Total investments ............................................ 106,617
Receivable for:
Investments sold ................................................ 1,508
--------
Total assets ....................................................... 108,125
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 568
Fund shares purchased ........................................... 1,301
Collateral for securities on loan ............................... 19,675
Other liabilities ............................................... 2
--------
Total liabilities .................................................. 21,546
--------
Net assets ......................................................... $ 86,579
========
Shares of beneficial interest outstanding .......................... 10,684
--------
Net asset value per share .......................................... $ 8.10
========
Composition of net assets:
Capital paid-in ................................................. $ 94,993
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (22,285)
Net unrealized appreciation of investments ...................... 13,871
--------
Net assets ......................................................... $ 86,579
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 47
Dividends ..................................................... 253
Securities lending ............................................ 34
-------
Total investment income ............................................. 334
-------
EXPENSES
Investment advisory fee ....................................... 659
Auditors fees ................................................. 8
Custodian fees ................................................ 89
Legal fees .................................................... 4
Printing & mailing fees ....................................... 22
Trustees' fees ................................................ 2
Other fees .................................................... 2
-------
Total expenses ...................................................... 786
Less expenses reimbursed ...................................... (62)
Less custodian expense reduction offset by
commission recapture arrangement (Note C) .................. (6)
-------
Net expenses ........................................................ 718
-------
Net investment loss ................................................. (384)
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments ................................. (4,652)
Change in unrealized appreciation on
investments ................................................... 32,639
-------
Net realized and unrealized gain .................................... 27,987
-------
Net increase in net assets resulting from
operations ....................................................... 27,603
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income (loss) ......................................... $ (384) $ 114
Net realized loss .................................................... (4,652) (6,232)
Change in net unrealized appreciation (depreciation) ................. 32,639 (13,044)
-------- --------
Net increase (decrease) in net assets resulting from operations ... 27,603 (19,162)
Distributions to shareholders from:
Net investment income ................................................ (71) (114)
Realized gains ....................................................... (11,472)
-------- --------
Decrease in net assets resulting from distributions ............... (11,543) (114)
From fund share transactions:
Proceeds from shares sold ............................................ 50,786 40,696
Distributions reinvested ............................................. 11,543 114
Payment for shares redeemed .......................................... (42,137) (42,400)
-------- --------
Increase (decrease) in net assets from fund share transactions .... 20,192 (1,590)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS ................................... 36,252 (20,866)
NET ASSETS
Beginning of Period .................................................. 50,327 71,193
-------- --------
End of Period ........................................................ $ 86,579 $ 50,327
======== ========
Analysis of fund share transactions:
Sold ................................................................. 6,929 5,357
Reinvested ........................................................... 1,458 19
Redeemed ............................................................. (5,696) (5,481)
-------- --------
Net increase (decrease) in fund shares outstanding ...................... 2,691 (105)
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Small Cap Emerging Growth Fund
--------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------
2003(e) 2002 2001 2000(c) 1999
------- ------- ------- ------- -------
Net Assets Value at Beginning of Period ...................... $ 6.30 $ 8.79 $ 9.14 $ 10.92 $ 11.59
Income from Investment Operations:
Net Investment Income (Loss) .............................. (0.03) 0.01 0.01 0.14 0.09
Net Realized and Unrealized Gain (Loss) on
Investments(a) ......................................... 3.07 (2.49) (0.35) (1.13) (0.50)
------- ------- ------- ------- -------
Total From Investment Operations .......................... 3.04 (2.48) (0.34) (0.99) (0.41)
Less Distributions:
Distribution from Net Investment Income ................... (0.01) (0.01) (0.01) (0.15) (0.07)
Distribution from Net Realized Gains on Investments ....... (1.23) (0.14) (0.01)
Distribution from Excess of Net Investment Income/Gains ... (0.20) (0.18)
Distribution from Capital Paid-in ......................... (0.30)
------- ------- ------- ------- -------
Total Distributions ....................................... (1.24) (0.01) (0.01) (0.79) (0.26)
------- ------- ------- ------- -------
Net Assets Value at End of Period ............................ $ 8.10 $ 6.30 $ 8.79 $ 9.14 $ 10.92
======= ======= ======= ======= =======
Total Investment Return(b) ................................... 48.83% (28.21)% (3.78)% (8.89)% (3.43)%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ......... 1.11%(d)(f) 1.00%(d) 1.00%(d) 0.92%(d) 0.95%(d)
Ratio of Net Investment Income (Loss) to Average Net
Assets ................................................. (0.59)% 0.19% 0.06% 1.25% 0.78%
Portfolio Turnover Rate ................................... 235.48% 45.03% 60.73% 189.57% 117.33%
Net Assets End of Period (000s Omitted) ...................... $86,579 $50,327 $71,193 $70,031 $68,900
(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 fluctuating
market values of the portfolio.
(b) The performance 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 Capital Guardian
Trust Company during the period shown.
(d) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been 1.21%, 1.04%, 1.02%, .95%, and
.96%, for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
(e) The fund entered into a new sub-advisory agreement with Wellington
Management Company during the period shown.
(f) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL CAP EMERGING GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 1.3%
Moog, Inc. - Cl. A * ................................... 22,700 $1,121
Air Freight & Couriers - 1.1%
Forward Air Corp. * .................................... 34,550 950
Airlines - 2.3%
AMR Corp. * ............................................ 91,990 1,191
Arkansas Best Corp. .................................... 26,270 825
------
2,016
Banks - 2.4%
Amcore Financial, Inc. ................................. 29,770 804
First Niagara Financial Group, Inc. .................... 40,400 602
Hancock Holding Co. .................................... 12,750 696
------
2,102
Biotechnology - 4.0%
Abgenix, Inc. * ........................................ 58,000 723
Alkermes, Inc. * ....................................... 67,120 906
Ciphergen Biosystems, Inc. * ........................... 34,590 389
CV Therapeutics, Inc. * ................................ 21,900 321
Exelixis, Inc. * ....................................... 60,047 425
Kosan Biosciences, Inc. * .............................. 22,610 223
Telik, Inc. * .......................................... 19,020 437
------
3,424
Commercial Services & Supplies - 8.9%
DiamondCluster, Inc. * ................................. 96,750 987
Gevity HR., Inc. ....................................... 26,970 600
LECG Corp .............................................. 29,840 683
MDC Holdings, Inc. ..................................... 20,540 1,325
MPS Group, Inc. * ...................................... 66,260 619
Sirva, Inc. * .......................................... 34,440 673
Strayer Education, Inc. ................................ 6,210 676
The Bisys Group, Inc. * ................................ 73,200 1,089
Universal Technical Institute, Inc. * .................. 6,600 198
University of Phoenix Online * ......................... 12,220 842
------
7,692
Communications Equipment - 3.8%
American Tower Corp. - Cl. A ........................... 132,330 1,432
Plantronics, Inc. * .................................... 35,410 1,156
Polycom, Inc. * ........................................ 34,290 669
------
3,257
Computers & Peripherals - 2.1%
Dot Hill Systems Corp. * ............................... 1,730 26
Overland Storage, Inc. * ............................... 47,960 902
Tumbleweed Communications Corp. * ...................... 101,610 851
------
1,779
Construction & Engineering - 2.1%
Navigant Consulting, Inc. * ............................ 50,040 944
Washington Group International, Inc. * ................. 26,170 $ 889
------
1,833
Diversified Financials - 1.2%
Affiliated Managers Group, Inc. * ...................... 15,170 1,056
Diversified Telecommunication Services - 1.5%
Crown Castle International Corp. * ..................... 121,580 1,341
Electrical Equipment - 1.2%
Techtronic Industries, Ltd. - ADR ...................... 75,010 1,041
Electronic Equipment & Instruments - 2.6%
Asyst Technologies, Inc. * ............................. 55,280 959
ON Semiconductor Corp. * ............................... 202,680 1,307
------
2,266
Energy Equipment & Services - 0.6%
Quantum Fuel Technologies * ............................ 59,340 477
Finance - 1.2%
United Holdings Corp. .................................. 77,210 1,008
Food Products - 1.9%
Peets Coffee & Tea, Inc. * ............................. 36,490 635
Sunopta, Inc. * ........................................ 107,140 989
------
1,624
Health Care Equipment & Supplies - 7.9%
Abaxis, Inc. - Sr. Notes ............................... 38,630 700
DJ Orthopedics, Inc. * ................................. 32,640 875
Merit Medical Systems, Inc. * .......................... 53,008 1,180
Orthofix International * ............................... 27,890 1,366
Respironics, Inc. * .................................... 17,650 796
Wilson Greatbatch Technologies, Inc. * ................. 31,490 1,331
Zoll Medical Corp. * ................................... 17,140 608
------
6,856
Health Care Providers & Services - 5.5%
Amsurg Corp ............................................ 18,250 691
Beverly Enterprises, Inc. * ............................ 221,290 1,901
Genesis Healthcare Corp. * ............................. 25,100 572
Odyssey Healthcare, Inc. * ............................. 35,415 1,036
Psychiatric Solutions, Inc. * .......................... 28,900 604
------
4,804
Hotels Restaurants & Leisure - 4.5%
Cumulus Media, Inc. - Cl. A * .......................... 51,450 1,132
Rare Hospitality International, Inc. * ................. 25,830 632
Scientific Games Corp. - Sr. Notes ..................... 70,150 1,193
Wynn Resorts, Ltd. * ................................... 32,850 920
------
3,877
Insurance - 4.0%
Arch Capital Group, Ltd. * ............................. 29,540 1,177
Healthextras, Inc. * ................................... 100,660 1,349
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL CAP EMERGING GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Insurance - Continued
Platinum Underwriters Holdings ......................... 31,660 $ 950
-------
3,476
Internet Software & Services - 1.6%
Embarcadero Technologies, Inc. * ....................... 50,800 810
WebMethods, Inc. * ..................................... 63,770 584
-------
1,394
IT Consulting & Services - 1.0%
Sapient Corp ........................................... 153,920 862
Media - 4.0%
GrayTelevison, Inc. .................................... 59,990 907
Lin TV Corp. - Cl. A * ................................. 30,810 795
Sirius Satellite Radio, Inc. * ......................... 561,060 1,773
-------
3,475
Multiline Retail - 1.9%
Freds, Inc. ............................................ 22,700 703
Insight Enterprises, Inc. * ............................ 48,580 914
-------
1,617
Oil & Gas - 5.8%
Arch Coal, Inc. ........................................ 47,210 1,472
Cabot Oil & Gas Corp. - Cl. A .......................... 27,570 809
Fuelcell Energy, Inc. .................................. 37,240 484
OMI Corp. SHS .......................................... 28,800 257
Patina Oil & Gas Corp. ................................. 26,295 1,288
Whiting Petroleum Corp. * .............................. 40,200 740
-------
5,050
Pharmaceuticals - 2.9%
Atherogenics, Inc. * ................................... 37,560 562
Medicinesco ............................................ 34,980 1,030
NPS Pharmaceuticals, Inc. * ............................ 29,800 916
-------
2,508
Road & Rail - 3.7%
Old Dominion Freight Lines, Inc. * ..................... 28,020 955
Quality Distribution, Inc. Florida * ................... 26,000 508
Yellow Roadway Corp. * ................................. 48,000 1,736
-------
3,199
Semiconductor Equipment & Products - 8.7%
Aeroflex, Inc. * ....................................... 82,630 966
Artisan Components, Inc. ............................... 30,920 634
Ase Test, Ltd. * ....................................... 64,630 968
Chippac, Inc. - Cl. A * ................................ 113,280 860
Genesis Microchip, Inc. * .............................. 42,010 758
MEMC Electronic Materials, Inc. * ...................... 95,530 919
Microsemi Corp. * ...................................... 27,790 683
Pericom Semiconductor Corp. * .......................... 38,120 406
Pixelworks, Inc. * ..................................... 64,760 715
Semtech Corp. * ........................................ 26,540 603
-------
7,512
Software - 4.6%
Agile Software Corp. ................................... 62,400 $ 618
Network Associates, Inc. * ............................. 58,200 875
Red Hat, Inc. * ........................................ 74,190 1,392
Safenet, Inc. * ........................................ 25,890 797
Skillsoftpub Co., Ltd. - ADR * ......................... 38,100 330
-------
4,012
Specialty Retail - 3.9%
AC Moore Arts & Crafts, Inc. * ......................... 36,880 710
Dicks Sporting Goods, Inc. ............................. 10,270 500
Hollywood Entertainment Corp. * ........................ 95,830 1,318
Sharper Image Corp. * .................................. 25,970 848
-------
3,376
Textiles & Apparel - 0.9%
K-Swiss, Inc. - Cl. A .................................. 33,480 806
-------
TOTAL COMMON STOCK- 99.1% 85,811
Par
Value
-------
(000's)
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 22.7%
State Street Navigator Securities Lending
Portfolio .......................................... $19,675 $ 19,675
SHORT-TERM INVESTMENTS - 1.3%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ................................ 1,131 1,131
------- --------
TOTAL INVESTMENTS- .............................. 123.1% 106,617
Payables, less cash and receivables- ............... (23.1)% (20,038)
------- --------
NET ASSETS- .................................. 100.0% $ 86,579
======= ========
* Non-income producing security.
ADR-American Depository Receipts.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Small Cap Emerging Growth Fund, (formerly John Hancock Small
Cap Equity), (the "Fund") is a diversified series of John Hancock Variable
Series Trust I (the "Trust"), an open-end investment management company
registered under the Investment Company Act of 1940. The Trust is organized as a
Massachusetts business trust and consists of thirty different funds as of
December 31, 2003. The results of this Fund are included in this report. The
results of the other Funds in the Trust are presented under separate cover. 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 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 18,838
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 $ 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$382 1.75% $--
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$19,013 $19,675
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $11,459, $2,741 and $7,997 which expire in 2009, 2010 and 2011,
respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
Excess Over
First $100 Million $100 Million
- ------------------ ------------
1.05% 1.00%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $62 to the Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $6.
John Hancock has entered into a Sub-Advisory Agreement with Wellington
Management Company LLP, with respect to the Fund. Wellington Management Company
LLC is an affiliate of John Hancock, and under its supervision, is responsible
for the day-to-day investment management of the Fund.
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, JHV
LAS, 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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$158,267 $149,263
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$92,836 $15,219 $(1,438) $13,781
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $22,197 $13,781
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $ -- $-- $11,543
2002 114 -- --
NOTE E--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 meeting of
Contract owners/Policyholders held on April 4, 2003 on the following matters:
For Against Abstain
--- ------- -------
To approve, as to the Small Cap Equity Fund, a new
Sub-Investment Agreement among the Trust, John
Hancock and Wellington Management Company, LLP. 73% 20% 7%
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--OTHER MATTERS (UNAUDITED)--Continued
For Against Abstain
--- ------- -------
To approve, as to the Small Cap Equity Fund, an
amendment to the current Investment Management
Agreement between the Trust and John Hancock,
reflecting an increase in the Fund's investment 59% 36% 5%
advisory fee.
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE F--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- -----------------------------------
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Small Cap Emerging Growth Fund
(formerly, Small Cap Equity Fund) (a portfolio included in the series of John
Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2003, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Small Cap Emerging Growth Fund of John Hancock Variable Series Trust I at
December 31, 2003, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1,1996
- --------------------------------------------------------------------------------
Small Cap Growth Fund
John Hancock Advisers, LLC A. Pandit/T. Norton
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 27.88% underperforming its benchmark, the
Russell 2000 Growth Index.
.. The Fund underperformed its benchmark primarily due to unfavorable stock
selection, while sector allocation decisions also detracted. Stock
selection in the information technology sector was the biggest detractor,
followed by the health care sector. The overweight to energy was the
biggest detractor, followed by an underweight to information technology.
.. The Fund's exposure to information technology was the largest contributor
to absolute performance. The biggest detractor to absolute returns was the
Fund's exposure to the consumer staples sector, with all other sectors
having positive absolute returns.
.. The top and bottom contributors came from a variety of sectors. The biggest
contributors to performance were Engineered Support, Pharmaceutical
Research, Inc., and Lexar Media, Inc. The main detractors included Borland
Software and Triton Pcs Holdings.
.. The portfolio was on average overweight the consumer discretionary sector,
while underweight in the financials sector.
.. The manager employs bottom-up, fundamental research to identify companies
with rapid earnings growth combined with a dominant market niche and high
quality management. The Fund's sector allocations are broadly diversified
but are primarily driven by stock selection.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/96
(Fund Inception Date)
Small Cap Growth Fund Russell 2000(R) Growth Index
--------------------- ----------------------------
5/01/1996 $10,000.00 $10,000.00
5/31/1996 10,599.17 10,513.00
6/30/1996 10,294.35 9,829.66
7/31/1996 9,480.13 8,629.45
8/31/1996 10,298.31 9,268.03
9/30/1996 11,150.77 9,745.34
10/31/1996 10,169.74 9,325.31
11/30/1996 9,976.02 9,584.56
12/31/1996 9,950.35 9,771.46
1/31/1997 10,302.13 10,015.74
2/28/1997 9,637.66 9,410.79
3/31/1997 8,962.47 8,746.39
4/30/1997 8,762.88 8,644.93
5/31/1997 9,780.55 9,944.26
6/30/1997 10,513.55 10,281.38
7/31/1997 11,205.43 10,807.78
8/31/1997 11,571.21 11,132.02
9/30/1997 12,817.44 12,020.35
10/31/1997 11,834.46 11,297.93
11/30/1997 11,387.43 11,029.04
12/31/1997 11,369.73 11,035.65
1/31/1998 11,170.39 10,888.88
2/28/1998 12,061.95 11,850.37
3/31/1998 12,788.45 12,348.08
4/30/1998 12,730.11 12,423.41
5/31/1998 11,855.75 11,520.22
6/30/1998 12,365.90 11,637.73
7/31/1998 11,536.94 10,665.98
8/31/1998 8,965.63 8,204.27
9/30/1998 9,700.92 9,036.19
10/31/1998 10,229.85 9,507.87
11/30/1998 11,423.75 10,245.69
12/31/1998 13,017.10 11,172.92
1/31/1999 13,455.51 11,675.70
2/28/1999 12,383.65 10,607.37
3/31/1999 13,340.57 10,985.00
4/30/1999 13,872.71 11,954.97
5/31/1999 13,625.86 11,974.10
6/30/1999 14,903.15 12,605.14
7/31/1999 15,022.06 12,215.64
8/31/1999 14,919.53 11,758.77
9/30/1999 15,235.62 11,985.72
10/31/1999 16,337.24 12,292.55
11/30/1999 18,479.13 13,591.87
12/31/1999 22,179.09 15,986.76
1/31/2000 21,633.01 15,838.08
2/29/2000 27,927.54 19,523.61
3/31/2000 25,551.01 17,471.68
4/30/2000 21,938.96 15,707.04
5/31/2000 19,337.93 14,331.10
6/30/2000 23,397.89 16,182.68
7/31/2000 21,152.78 14,795.82
8/31/2000 23,672.80 16,352.34
9/30/2000 22,477.94 15,539.63
10/31/2000 20,010.12 14,277.81
11/30/2000 16,003.54 11,684.96
12/31/2000 17,425.36 12,400.08
1/31/2001 17,633.46 13,403.25
2/28/2001 15,433.43 11,565.66
3/31/2001 13,803.45 10,514.34
4/30/2001 15,698.64 11,801.30
5/31/2001 15,755.91 12,075.09
6/30/2001 16,042.64 12,404.74
7/31/2001 15,121.09 11,346.62
8/31/2001 14,224.44 10,637.45
9/30/2001 11,826.21 8,921.63
10/31/2001 13,088.50 9,779.89
11/30/2001 14,356.80 10,596.51
12/31/2001 15,227.42 11,256.68
1/31/2002 14,545.51 10,855.94
2/28/2002 13,656.66 10,153.56
3/31/2002 14,688.98 11,035.90
4/30/2002 14,230.89 10,797.53
5/31/2002 13,474.47 10,165.87
6/30/2002 12,526.24 9,303.81
7/31/2002 10,774.10 7,873.81
8/31/2002 10,816.88 7,869.87
9/30/2002 10,317.90 7,301.67
10/31/2002 10,702.17 7,671.13
11/30/2002 11,286.93 8,431.34
12/31/2002 10,666.88 7,849.58
1/31/2003 10,159.02 7,636.07
2/28/2003 9,878.20 7,432.19
3/31/2003 10,010.06 7,544.42
4/30/2003 10,713.68 8,258.12
5/31/2003 11,585.06 9,188.81
6/30/2003 11,814.96 9,366.15
7/31/2003 12,320.70 10,074.23
8/31/2003 13,232.99 10,615.22
9/30/2003 12,426.09 10,346.65
10/31/2003 13,376.86 11,240.60
11/30/2003 13,692.60 11,607.05
12/31/2003 13,641.24 11,659.28
Value on 12/31/03:
- ------------------
$13,641 Small Cap Growth Fund
$11,659 Russell 2000 (R) Growth Index
MORNINGSTAR CATEGORY+:
.. Small Growth
MORNINGSTAR RISK+:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR RATING+:
.. *** (VL/VUL)
.. ** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Autodesk, Inc. 2.3%
Medicinesco 2.3%
General Probe, Inc. 2.3%
OSI Pharmaceuticals, Inc. 2.1%
Digital Insight Corp. 2.1%
ScanSource, Inc. 2.0%
Affiliated Managers Group, Inc. 2.0%
Cost Plus, Inc. 1.9%
Hot Topic, Inc. 1.8%
Panera Bread Co. 1.8%
AVERAGE ANNUAL TOTAL RETURNS *
Russell
Small Cap 2000(R)
Growth Fund Growth Index
----------- ------------
1 Year 27.88% 48.53%
3 Years -7.84 -2.03
5 Years 0.94 0.86
Since Inception (5/1/96) 4.13 2.02
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Information Technology 35.80%
Health Care 22.49%
Consumer Discretionary 18.04%
Industrials 10.43%
Financials 7.47%
Energy 3.44%
Telecommunication
Services 1.39%
Materials 0.95%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 338 VL/VUL subaccounts and 528 VA subaccounts in the
Morningstar Small Growth category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $37,349 of
securities loaned (Note B)) ..................................... $119,666
Net unrealized appreciation of investments ......................... 24,996
Short-term investments at value .................................... 44,354
--------
Total investments ............................................ 189,016
Receivable for:
Investments sold ................................................ 142
Dividends ....................................................... 44
--------
Total assets ....................................................... 189,202
--------
LIABILITIES
Payables for:
Fund shares purchased ........................................... 1,098
Collateral for securities on loan ............................... 38,799
Other liabilities ............................................... 28
--------
Total liabilities .................................................. 39,925
--------
Net assets ......................................................... $149,277
========
Shares of beneficial interest outstanding .......................... 14,349
--------
Net asset value per share .......................................... $ 10.40
========
Composition of net assets:
Capital paid-in ................................................. $223,754
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (99,473)
Net unrealized appreciation of investments ...................... 24,996
--------
Net assets ......................................................... $149,277
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ..................................................... $ 57
Dividends .................................................... 252
Securities lending ........................................... 64
-------
Total investment income ............................................ 373
-------
EXPENSES
Investment advisory fee ...................................... 1,380
Auditors fees ................................................ 19
Custodian fees ............................................... 124
Legal fees ................................................... 20
Printing & mailing fees ...................................... 50
Trustees' fees ............................................... 4
Other fees ................................................... 6
-------
Total expenses ..................................................... 1,603
Less expenses reimbursed ...................................... (86)
-------
Net expenses ....................................................... 1,517
-------
Net investment loss ................................................ (1,144)
-------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments ................................ (6,450)
Change in unrealized appreciation
on investments ............................................... 40,426
-------
Net realized and unrealized gain ................................... 33,976
-------
Net increase in net assets resulting from
operations ...................................................... $32,832
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss ................................................... $ (1,144) $ (1,224)
Net realized loss ..................................................... (6,450) (35,969)
Change in net unrealized appreciation (depreciation) .................. 40,426 (17,803)
-------- --------
Net increase (decrease) in net assets resulting from operations .... 32,832 (54,996)
Distributions to shareholders from:
Realized gains ........................................................ (2,029)
--------
Decrease in net assets resulting from distributions (2,029)
From fund share transactions:
Proceeds from shares sold ............................................. 49,341 60,295
Distributions reinvested .............................................. 2,029
Payment for shares redeemed ........................................... (53,619) (73,977)
-------- --------
Decrease in net assets from fund share transactions ................ (2,249) (13,682)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS .................................... 28,554 (68,678)
NET ASSETS
Beginning of Period ................................................... 120,723 189,401
-------- --------
End of Period ......................................................... $149,277 $120,723
======== ========
Analysis of fund share transactions:
Sold .................................................................. 5,339 6,154
Reinvested ............................................................ 197
Redeemed .............................................................. (5,826) (7,603)
-------- --------
Net decrease in fund shares outstanding .................................. (290) (1,449)
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Small Cap Growth Fund
--------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net Assets Value at Beginning of Period ................. $ 8.25 $ 11.77 $ 13.47 $ 19.12 $ 12.99
Income from Investment Operations:
Net Investment Loss .................................. (0.09) (0.11) (0.08) (0.02) (0.21)
Net Realized and Unrealized Gain (Loss) on
Investments(a) .................................... 2.38 (3.41) (1.62) (4.16) 9.06
-------- -------- -------- -------- --------
Total From Investment Operations ..................... 2.29 (3.52) (1.70) (4.18) 8.85
Less Distributions:
Distribution from Net Realized Gains on
Investments ....................................... (0.14) (0.12) (2.72)
Distribution from Capital Paid-in .................... (1.35)
-------- -------- --------
Total Distributions .................................. (0.14) (1.47) (2.72)
-------- -------- -------- -------- --------
Net Assets Value at End of Period ....................... $ 10.40 $ 8.25 $ 11.77 $ 13.47 $ 19.12
======== ======== ======== ======== ========
Total Investment Return(b) .............................. 27.88% (29.95)% (12.61)% (21.43)% 70.38%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets .... 1.15%(d) 1.13% 0.91%(d) 0.82% 0.89%
Ratio of Net Investment Loss to Average Net Assets ... (0.87)% (0.83)% (0.55)% (0.50)% (0.70)%
Portfolio Turnover Rate .............................. 108.43% 77.38% 91.48%(c) 97.73% 113.11%
Net Assets End of Period (000s Omitted) ................. $149,277 $120,723 $189,401 $234,542 $179,570
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Excludes merger activity.
(d) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been 1.22% and .94% for the years
ended December 31, 2003 and 2001, respectively.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 1.1%
Engineered Support Systems, Inc. * ..................... 29,750 $1,638
Air Freight & Couriers - 1.9%
Forward Air Corp. * .................................... 39,250 1,079
United Technologies Worldwide, Inc. .................... 44,250 1,679
------
2,758
Airlines - 1.2%
Airtran Holdings, Inc. * ............................... 102,200 1,216
America West Holdings Corp. - Cl. B * .................. 51,850 643
------
1,859
Automobiles - 1.4%
Borg-Warner Automotive, Inc. ........................... 23,850 2,029
Banks - 4.4%
East West Bancorp, Inc. * .............................. 32,800 1,761
New North Nova Corp. Pennsylvania * .................... 35,384 1,254
Southwest Bancorporation of Texas, Inc. * .............. 32,700 1,271
Texas Regional Bancshares, Inc. ........................ 28,480 1,054
UCBH Holdings, Inc. .................................... 32,650 1,272
------
6,612
Biotechnology - 5.5%
Ciphergen Biosystems, Inc. * ........................... 66,750 750
General Probe, Inc. * .................................. 90,500 3,301
ILEX Oncology, Inc. * .................................. 72,500 1,541
Xoma, Ltd. * ........................................... 397,900 2,626
------
8,218
Chemicals - 0.9%
Airgas, Inc. * ......................................... 64,000 1,375
Commercial Services & Supplies - 6.5%
Corporate Executive Board Co. * ........................ 27,300 1,274
Factset Research Systems, Inc. ......................... 47,200 1,804
Global Payments, Inc. .................................. 15,900 749
Overnite Corp. * ....................................... 46,950 1,068
Stericycle, Inc. * ..................................... 30,250 1,413
Visx, Inc. * ........................................... 88,850 2,057
Waste Connections, Inc. * .............................. 36,250 1,369
------
9,734
Communications Equipment - 4.9%
Advanced Fibre Communications, Inc. * .................. 54,100 1,090
Foundry Networks, Inc. * ............................... 93,600 2,561
McData Corp. * ......................................... 112,650 1,074
Remec, Inc. ............................................ 129,750 1,091
Tekelec, Inc. * ........................................ 93,600 1,455
------
7,271
Computers & Peripherals - 2.9%
Digital River, Inc. * .................................. 65,700 1,452
ScanSource, Inc. * ..................................... 63,900 2,915
------
4,367
Diversified Financials - 1.9%
Affiliated Managers Group, Inc. * ...................... 40,850 $2,843
Diversified Telecommunication Services - 1.3%
Crown Castle International Corp. * ..................... 181,800 2,005
Electronic Equipment & Instruments - 3.8%
Advanced Energy Industries, Inc. * ..................... 10,950 285
Caliper Technologies Corp. * ........................... 127,050 836
Checkpoint Systems, Inc. ............................... 7,700 146
Imax Corp. * ........................................... 119,600 946
Itron, Inc. * .......................................... 82,600 1,516
Ixia * ................................................. 11,050 129
Trimble Navigation, Ltd. ............................... 49,700 1,851
------
5,709
Energy Equipment & Services - 1.6%
Hydril Co. * ........................................... 45,000 1,077
West Hampshire Energy Services, Inc. * ................. 83,750 1,357
------
2,434
Finance - 0.0%
Nelnet, Inc. - Cl. A * ................................. 1,900 43
Health Care Equipment & Supplies - 4.1%
Advanced Neuromodulation Systems ....................... 26,924 1,238
American Medical Systems Holdings * .................... 65,600 1,430
Integra Lifesciences Corp. * ........................... 27,450 786
Kyphon, Inc. * ......................................... 59,950 1,489
Respironics, Inc. * .................................... 25,350 1,143
------
6,086
Health Care Providers & Services - 2.1%
Advisory Co. * ......................................... 37,600 1,313
eResearch Technology, Inc. * ........................... 35,175 894
Renal Care Group, Inc. * ............................... 22,450 925
------
3,132
Hotels Restaurants & Leisure - 4.1%
Cumulus Media, Inc. - Cl. A * .......................... 57,461 1,264
Panera Bread Co. - Cl. A * ............................. 67,400 2,665
Rare Hospitality International, Inc. * ................. 32,150 786
Redeemable Robingourmet Burgers, Inc. .................. 45,050 1,371
------
6,086
Insurance - 0.9%
Arch Capital Group, Ltd. * ............................. 33,000 1,315
Internet Software & Services - 5.1%
Avocent Corp. * ........................................ 55,746 2,036
Digital Insight Corp. * ................................ 123,750 3,082
Packeteer, Inc. * ...................................... 33,350 566
Websense, Inc. * ....................................... 65,400 1,912
------
7,596
Machinery - 2.5%
Clarcor, Inc. * ........................................ 28,000 1,235
ESCO Technologies, Inc. * .............................. 28,100 1,226
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- --------
(000's)
COMMON STOCK - Continued
Machinery - Continued
Graco, Inc. * ......................................... 31,000 $ 1,243
--------
3,704
Media - 2.1%
Getty Images, Inc. * .................................. 8,000 401
Interactive Data Corp. * .............................. 8,800 146
Macrovision Corp. * ................................... 71,500 1,615
Tivo, Inc. * .......................................... 126,700 938
--------
3,100
Multiline Retail - 2.4%
Cost Plus, Inc. * ..................................... 66,600 2,731
Pacific Sunwear of California, Inc. * ................. 38,474 812
--------
3,543
Oil & Gas - 1.7%
Evergreen Resources, Inc. * ........................... 30,200 982
Remington Oil & Gas Corp. * ........................... 79,150 1,558
--------
2,540
Pharmaceuticals - 8.2%
Atrix Labs, Inc. * .................................... 105,650 2,540
Eon Labs, Inc. * ...................................... 13,950 711
Esperion Therapeutics * ............................... 39,650 1,372
Impax Laboratories, Inc. * ............................ 78,150 1,124
Medicinesco ........................................... 114,150 3,363
OSI Pharmaceuticals, Inc. * ........................... 96,050 3,094
--------
12,204
Semiconductor Equipment & Products - 6.8%
Artisan Components, Inc. .............................. 113,700 2,331
Atmi, Inc. * .......................................... 21,500 498
Conexant Systems, Inc. * .............................. 253,250 1,259
FEI Co. * ............................................. 70,800 1,593
LTX Corp. * ........................................... 135,350 2,034
Semtech Corp. * ....................................... 50,300 1,143
Skyworks Solutions, Inc. .............................. 154,300 1,342
--------
10,200
Software - 9.6%
Autodesk, Inc. * ...................................... 137,900 3,390
Barra, Inc. ........................................... 35,100 1,246
Borland Software Corp. * .............................. 39,700 386
EPIQ Systems, Inc. * .................................. 8,400 144
Hyperion Solutions Corp. * ............................ 59,550 1,795
Informatica Corp. ..................................... 147,450 1,519
Kronos, Inc. * ........................................ 3,800 150
Macromedia, Inc. * .................................... 64,700 1,154
Open Solutions, Inc. * ................................ 700 12
Progress Software Corp. * ............................. 63,100 1,291
Safenet, Inc. * ....................................... 4,200 129
Tradestation Group, Inc. .............................. 53,350 473
Transaction Systems Architects, Inc. - Cl. A * ........ 24,350 551
Verint Systems, Inc. * ................................ 89,200 $ 2,012
--------
14,252
Specialty Retail - 7.2%
AC Moore Arts & Crafts, Inc. * ........................ 41,700 803
Aeropostale * ......................................... 76,500 2,098
AnnTaylor Stores Corp. ................................ 24,700 963
Dicks Sporting Goods, Inc. ............................ 31,750 1,545
Hollywood Entertainment Corp. * ....................... 70,800 973
Hot Topic, Inc. * ..................................... 90,673 2,671
Select Comfort Corp. * ................................ 69,700 1,726
--------
10,779
Textiles & Apparel - 0.8%
Quiksilver, Inc. * .................................... 69,400 1,230
--------
TOTAL COMMON STOCK- 96.9% 144,662
Par
Value
-------
(000's)
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 26.0%
State Street Navigator Securities Lending
Portfolio .......................................... $38,799 38,799
SHORT-TERM INVESTMENTS - 3.7%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ................................ 5,555 5,555
------- --------
TOTAL INVESTMENTS- ........................... 126.6% 189,016
Payables, less cash and receivables- ............ (26.6)% (39,739)
------- --------
NET ASSETS- ............................... 100.0% $149,277
======= ========
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST 1
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Small Cap Growth Fund (the "Fund") is a diversified series of
John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 $ 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$278 1.58% $--
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$37,349 $38,799
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $2,089, $10,299, $43,738, $35,469 and $7,507 which expire in 2007,
2008, 2009, 2010 and 2011, respectively.
Included in the above, certain losses may be limited under sections 382 -
384 of the Internal Revenue Code, as amended.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, the Board of Trustees of the Trust renewed its
Investment Advisory Agreement with John
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
Hancock. For its services, John Hancock receives monthly compensation at the
rate of 1.05% on an annual basis of the Fund's net assets.
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $86 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with John Hancock
Advisers, with respect to the Fund. John Hancock Advisers is an affiliate of
John Hancock, and under its supervision, is responsible for the day-to-day
investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$138,858 $145,823
The identified cost of investments owned by the Fund (including earned discount
on corporate short-term notes, commercial paper and collateral held for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$164,391 $28,438 $(3,813) $24,625
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) or investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $99,102 $24,625
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $-- $-- $2,029
2002 -- -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ------------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ------------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ------------------------ ------------------------------------
Janet Wang (age 35) Assistant Compliance Compliance Specialist, John
John Hancock Place Officer Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Small Cap Growth Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, by correspondence with the custodian. 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 the
Small Cap Growth Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: August 31, 1999
- --------------------------------------------------------------------------------
Small Cap Value Fund
T. Rowe Price Associates, Inc. Preston G. Athey
Wellington Management Company, LLP S. O'Brien/T.McCormack
- --------------------------------------------------------------------------------
The Fund employs a multi-manager approach with two sub-advisers independently
managing portions of the Fund. As of year-end, T. Rowe Price managed
approximately 61% and Wellington managed approximately 39%.
The two managers employ distinct investment strategies. This multi-manager
approach seeks to produce more consistent investment returns over market cycles
and to reduce the risk of any one manager being out of favor in certain market
environments.
.. T. Rowe selects stocks using proprietary fundamental equity research, and
seeks companies with attractive valuations relative to industry peers and
its historical norm.
.. Wellington employs proprietary fundamental research to identify stocks
having distinct value characteristics based on industry specific valuation
criteria.
Fund Commentary
.. In 2003, the Fund returned 37.97%, underperforming its benchmark, the
Russell 2000 Value Index.
T. Rowe Price
.. This portion of the Fund underperformed its benchmark. The Fund
underperformed its benchmark primarily due to unfavorable stock selection.
In addition, sector allocation decisions were also negative due to the
Fund's modest exposure to cash.
.. All sectors within the Fund posted double-digit returns with the exception
of Telecom Services, where the Fund had no exposure. The Fund's exposure to
the Consumer Discretionary and financial sectors was the largest
contributor to absolute performance.
.. The top and bottom contributors to absolute returns came from a variety of
sectors. The top contributors included Freds and Silicon Valley Bancshare,
while the main detractors included Analogic and Midwest Express.
.. The Fund continues to modestly overweight Consumer Discretionary stocks
versus the index as well as the Materials sector, while underweighting
Financials and Information Technology.
Wellington
.. This portion of the Fund underperformed its benchmark. The Fund
underperformed its benchmark due to unfavorable sector allocation decisions
with stock selection contributing positively.
.. Sector allocation decisions detracted primarily as a result of the Fund's
modest cash allocation during the period. Security selection decisions were
most favorable in consumer discretionary and industrial sectors.
.. The Fund's exposure to the industrial, consumer discretionary and financial
sectors was the largest contributor to absolute returns.
.. On an individual name basis, the Fund's investments in Hibbett Sporting
Goods, O'Reilly Automotive and WCI Communities, all in the Consumer
Discretionary sector, were the top drivers of absolute returns. The most
significant detractor from absolute Fund returns was Orthodontic Centers of
America.
.. As of the end of the period, the Fund held overweights to the Consumer
Staples and Industrials sectors, while being most underweight the
Financials and Materials sectors relative to the benchmark.
Inception: August 31,1999
- --------------------------------------------------------------------------------
Small Cap Value Fund
T. Rowe Price Associates, Inc. Preston G. Athey
Wellington Management Company, LLP S. O'Brien/T.McCormack
- --------------------------------------------------------------------------------
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Small Cap Small Cap Value
Value Fund Fund Benchmark (1)
---------- ------------------
8/31/1999 $10,000.00 $10,000.00
9/30/1999 9,560.11 9,685.00
10/31/1999 9,442.56 9,694.69
11/30/1999 9,942.06 9,748.01
12/31/1999 10,508.24 10,080.41
1/31/2000 9,755.79 9,661.07
2/29/2000 9,775.43 9,828.20
3/31/2000 11,917.95 10,551.56
4/30/2000 12,265.51 10,547.34
5/31/2000 12,275.08 10,528.35
6/30/2000 12,414.03 10,488.35
7/31/2000 12,368.00 10,715.94
8/31/2000 13,857.01 11,277.46
9/30/2000 13,472.03 11,209.79
10/31/2000 13,914.54 11,203.07
11/30/2000 12,935.92 11,060.79
12/31/2000 14,101.31 12,175.72
1/31/2001 14,699.69 12,511.77
2/28/2001 14,807.89 12,494.25
3/31/2001 14,644.98 12,294.34
4/30/2001 16,013.47 12,863.57
5/31/2001 16,431.16 13,194.16
6/30/2001 16,674.51 13,724.57
7/31/2001 16,433.98 13,417.14
8/31/2001 15,999.10 13,370.18
9/30/2001 14,537.76 11,894.11
10/31/2001 15,075.16 12,204.55
11/30/2001 15,775.72 13,082.05
12/31/2001 16,794.27 13,882.68
1/31/2002 17,151.01 14,067.32
2/28/2002 17,409.66 14,153.13
3/31/2002 18,660.61 15,213.20
4/30/2002 19,409.00 15,748.70
5/31/2002 18,596.85 15,227.42
6/30/2002 18,042.43 14,890.89
7/31/2002 15,631.24 12,678.11
8/31/2002 15,698.47 12,622.32
9/30/2002 14,829.12 11,721.09
10/31/2002 15,095.10 11,896.90
11/30/2002 15,955.43 12,846.28
12/31/2002 15,717.45 12,297.74
1/31/2003 15,195.47 11,950.95
2/28/2003 14,849.06 11,549.39
3/31/2003 15,280.51 11,672.97
4/30/2003 16,658.95 12,781.90
5/31/2003 17,794.59 14,086.94
6/30/2003 17,489.09 14,325.01
7/31/2003 18,809.49 15,039.82
8/31/2003 18,643.22 15,611.34
9/30/2003 19,428.30 15,431.81
10/31/2003 20,411.56 16,689.50
11/30/2003 21,137.90 17,330.38
12/31/2003 21,681.46 17,957.74
Value on 12/31/03:
- ------------------
$21,681 Small Cap Value Fund
$17,958 Small Cap Value Benchmark (1)
MORNINGSTAR CATEGORY+:
.. Small Value
MORNINGSTAR RISK+:
.. Below Average (VL/VUL)
.. Below Average (VA)
MORNINGSTAR RATING+:
.. ***** (VL/VUL)
.. **** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Ishares Russell 1.7%
Casey's General Stores, Inc. 1.3%
O'Reilly Automotive, Inc. 1.3%
Texas Regional Bancshares, Inc. 1.2%
Cable Design Technologies Corp. 1.2%
United Stationers, Inc. 1.1%
WCI Communities, Inc. 1.1%
Silicon Valley Bancshares 1.0%
Allied Capital Corp. 1.0%
Reinsurance Group of America 1.0%
AVERAGE ANNUAL TOTAL RETURNS*
Small Cap Small Cap Value
Value Fund Benchmark(1)
---------- ---------------
1 Year 37.97% 46.02%
3 Years 15.42 13.83
Since Inception (8/31/99) 19.52 14.47
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Financials 26.43%
Industrials 20.32%
Consumer Discretionary 16.57%
Materials 8.44%
Information Technology 7.86%
Energy 5.81%
Health Care 5.34%
Consumer Staples 4.80%
Utilities 4.43%
Transportation 0.00%
(1) The Small Cap Value benchmark is the Russell 2500(TM) Value Index from
September 1999 to December 2000 and the Russell 2000(R) Value Index January
2001-present.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 64 VL/VUL subaccounts and 165 VA subaccounts in the
Morningstar Small Value category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $15,338 of
securities loaned (Note B)) ..................................... $149,551
Net unrealized appreciation of investments ......................... 35,117
Short-term investments at value .................................... 20,415
--------
Total investments ............................................ 205,083
Receivable for:
Investments sold ................................................ 1,297
Fund shares sold ................................................ 82
Dividends ....................................................... 191
--------
Total assets ....................................................... 206,653
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 616
Collateral for securities on loan ............................... 15,973
Other liabilities ............................................... 291
--------
Total liabilities .................................................. 16,880
--------
Net assets ......................................................... $189,773
========
Shares of beneficial interest outstanding .......................... 11,463
--------
Net asset value per share .......................................... $ 16.56
========
Composition of net assets:
Capital paid-in ................................................. $154,591
Accumulated net realized gain on investments,
futures and foreign currency transactions .................... 65
Net unrealized appreciation of investments ...................... 35,117
--------
Net assets ......................................................... $189,773
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ......................................................... $ 54
Dividends ........................................................ 2,318
Securities lending ............................................... 111
-------
Total investment income ............................................. 2,483
-------
EXPENSES
Investment advisory fee .......................................... 1,379
Auditors fees .................................................... 46
Custodian fees ................................................... 80
Legal fees ....................................................... 9
Printing & mailing fees .......................................... 10
Trustees' fees ................................................... 5
Other fees ....................................................... 6
-------
Total expenses ...................................................... 1,535
Less expenses reimbursed ......................................... (12)
Less custodian expense reduction offset by
commission recapture arrangement (Note C) ..................... (18)
-------
Net expenses ........................................................ 1,505
-------
Net investment income ............................................... 978
-------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments ................................. 7,581
Change in unrealized appreciation on
investments ................................................... 39,529
-------
Net realized and unrealized gain .................................... 47,110
-------
Net increase in net assets resulting from
operations ....................................................... $48,088
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ................................................ $ 978 $ 776
Net realized gain .................................................... 7,581 379
Change in net unrealized appreciation (depreciation) ................. 39,529 (12,133)
-------- --------
Net increase (decrease) in net assets resulting from operations ... 48,088 (10,978)
Distributions to shareholders from:
Net investment income ................................................ (980) (885)
Realized gains ....................................................... (7,128) (1,001)
Capital paid-in ...................................................... (1,231)
-------- --------
Decrease in net assets resulting from distributions ............... (8,108) (3,117)
From fund share transactions:
Proceeds from shares sold ............................................ 59,731 76,240
Distributions reinvested ............................................. 8,108 3,117
Payment for shares redeemed .......................................... (38,116) (48,416)
-------- --------
Increase in net assets from fund share transactions ............... 29,723 30,941
-------- --------
NET INCREASE IN NET ASSETS .............................................. 69,703 16,846
NET ASSETS
Beginning of Period .................................................. 120,070 103,224
-------- --------
End of Period ........................................................ $189,773 $120,070
======== ========
Analysis of fund share transactions:
Sold ................................................................. 4,095 5,465
Reinvested ........................................................... 495 244
Redeemed ............................................................. (2,697) (3,640)
-------- --------
Net increase in fund shares outstanding ................................. 1,893 2,069
======== ========
See notes to financial statements
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Small Cap Value Fund
-----------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------------------
Period from
August 31, to
December 31,
2003 2002 (h) 2001 (g) 2000 1999 (f)
-------- -------- -------- ------- -------------
Net Assets Value at Beginning of Period ............... $ 12.55 $ 13.76 $ 11.70 $ 10.13 $10.00
Income from Investment Operations:
Net Investment Income .............................. 0.09 0.08 0.09 0.01
Net Realized and Unrealized Gain (Loss) on
Investments(a) .................................. 4.66 (0.96) 2.14 3.37 0.49
-------- -------- -------- ------- ------
Total From Investment Operations ................... 4.75 (0.88) 2.23 3.38 0.49
Less Distributions:
Distribution from Net Investment Income ............ (0.09) (0.09) (0.09) (0.01)
Distribution from Net Realized Gains on
Investments ..................................... (0.65) (0.24) (0.08) (1.80) (0.36)
-------- -------- -------- ------- ------
Total Distributions ................................ (0.74) (0.33) (0.17) (1.81) (0.36)
-------- -------- -------- ------- ------
Net Assets Value at End of Period ..................... $ 16.56 $ 12.55 $ 13.76 $ 11.70 $10.13
======== ======== ======== ======= ======
Total Investment Return(b) ............................ 37.97% (6.43)% 19.10% 34.19% 5.08%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net
Assets .......................................... 1.05%(e)(i) 1.04%(e) 1.05%(e) 1.05%(e) 1.05%(d)(e)
Ratio of Net Investment Income (Loss) to Average
Net Assets ...................................... 0.67% 0.62% 0.87% 0.13% (0.12)%(d)
Portfolio Turnover Rate ............................ 29.95% 41.46% 60.36% 220.80% 51.97%(c)
Net Assets End of Period (000s Omitted) ............... $189,773 $120,070 $103,224 $29,436 $5,570
(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 fluctuating
market values of the portfolio.
(b) The performance 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 expense ratio would have been 1.06%, 1.04%, 1.08%, 1.29%, and
1.61% for the years ended December 31, 2003, 2002, 2001, 2000 and 1999,
respectively.
(f) Commencement of operations.
(g) The Fund entered into a new sub-advisory agreement with T. Rowe Price
Associates, Inc. during the period shown.
(h) The fund entered into a new sub-advisory agreement with Wellington
Management Company during the period shown.
(i) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------- ------
(000's)
COMMON STOCK
Aerospace & Defense - 1.1%
Curtiss Wright Corp. - Cl. B ............................ 30,000 $ 1,347
EDO Corp. ............................................... 26,400 651
-------
1,998
Air Freight & Couriers - 0.6%
United Technologies Worldwide, Inc. ..................... 28,100 1,066
Auto Components - 0.3%
Spartan Motors, Inc. .................................... 60,800 614
Banks - 6.8%
Bank of Bermuda, Ltd. ................................... 31,400 1,412
Century Bancorp, Inc. - Cl. A ........................... 16,100 571
Community First Bankshares, Inc. ........................ 55,600 1,609
East West Bancorp, Inc. * ............................... 32,000 1,718
Financial Federal Corp. ................................. 13,500 412
First Republic Bank * ................................... 46,100 1,650
FirstMerit Corp. ........................................ 36,600 987
Silicon Valley Bancshares * ............................. 53,400 1,926
Texas Regional Bancshares, Inc. ......................... 60,800 2,250
The Trust Company of New Jersey ......................... 7,300 290
-------
12,825
Beverages - 0.6%
Robert Mondavi Corp. - Cl. A * .......................... 15,300 594
Symyx Technologies, Inc. * .............................. 23,800 489
-------
1,083
Building Products - 2.4%
Ameron International Corp. .............................. 23,800 826
Simpson Manufacturing, Inc. * ........................... 28,100 1,429
Trex, Inc. * ............................................ 8,500 323
WCI Communities, Inc. * ................................. 95,100 1,960
-------
4,538
Chemicals - 1.5%
Airgas, Inc. * .......................................... 53,200 1,142
Arch Chemicals, Inc. .................................... 38,500 988
MacDermid, Inc. ......................................... 21,400 733
-------
2,863
Commercial Services & Supplies - 5.0%
Casella Waste Systems, Inc. - Cl. A * ................... 82,000 1,123
CSS Industries, Inc. * .................................. 33,450 1,037
G & K Services, Inc. - Cl. A ............................ 30,100 1,106
McGrath Rent Corp. ...................................... 37,000 1,008
MPS Group, Inc. * ....................................... 107,000 1,000
Right Management Consultants, Inc. * .................... 31,000 579
Standard Commercial Corp. * ............................. 56,000 1,124
United Stationers, Inc. * ............................... 49,000 2,005
Waste Connections, Inc. * ............................... 14,000 529
-------
9,511
Communications Equipment - 1.1%
Cable Design Technologies Corp. * ....................... 238,700 2,146
Construction & Engineering - 1.5%
EMCOR Group, Inc. * ..................................... 11,100 $ 487
Insituform Technologies, Inc. - Cl. A * ................. 63,100 1,041
Maximus, Inc. * ......................................... 31,600 1,237
-------
2,765
Construction Materials - 1.6%
Carlisle Cos., Inc. ..................................... 15,900 968
Florida Rock Industries, Inc. ........................... 25,900 1,420
Granite Construction, Inc. .............................. 30,900 726
-------
3,114
Containers & Packaging - 1.2%
AptarGroup, Inc. ........................................ 40,900 1,595
Myers Industries, Inc. .................................. 49,000 594
-------
2,189
Diversified Financials - 5.1%
Allied Capital Corp. .................................... 68,600 1,912
American Capital Strategies, Ltd. ....................... 63,300 1,882
First Financial Fund, Inc. * ............................ 58,200 1,029
Investment Technology Group, Inc. * ..................... 19,300 312
Ishares Russell ......................................... 20,000 3,208
Triad Guaranty, Inc. * .................................. 26,000 1,309
-------
9,652
Electric Utilities - 2.9%
Black Hills Corp. ....................................... 59,600 1,778
Cleco Corp. ............................................. 62,600 1,126
El Paso Electric Co. * .................................. 90,000 1,201
Otter Tail Power Co. .................................... 22,200 593
PNM Resources, Inc. ..................................... 32,200 905
-------
5,603
Electrical Equipment - 1.6%
Deswell Industries, Inc. ................................ 43,500 1,131
Littelfuse, Inc. * ...................................... 33,000 951
The Genlyte Corp. * ..................................... 18,000 1,051
-------
3,133
Electronic Equipment & Instruments - 3.1%
Analogic Corp. .......................................... 10,800 443
C&D Technologies, Inc. .................................. 39,600 759
Electro Rent Corp. * .................................... 92,300 1,231
Franklin Electric Co., Inc. ............................. 20,200 1,222
Methode Electronics, Inc. - Cl. A ....................... 29,100 356
Technitrol, Inc. * ...................................... 31,100 645
Ultimate Electronics, Inc. * ............................ 52,400 400
Woodward Governor Co. ................................... 13,400 761
-------
5,817
Energy Equipment & Services - 2.3%
Atwood Oceanics, Inc. * ................................. 18,900 604
Carbo Ceramics, Inc. .................................... 24,900 1,276
Lone Star Technologies, Inc. * .......................... 54,900 877
Tetra Technologies, Inc. * .............................. 45,600 1,105
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Energy Equipment & Services - Continued
West Hampshire Energy Services, Inc. * .................. 27,700 $ 449
-------
4,311
Finance - 0.4%
Sky Financial Group, Inc. ............................... 32,600 846
Food & Drug Retailing - 1.9%
Casey's General Stores, Inc. * .......................... 133,500 2,358
Sonic Corp. * ........................................... 23,000 704
Wild Oats Markets, Inc. * ............................... 37,000 478
-------
3,540
Food Products - 1.9%
American Italian Pasta Co. * ............................ 16,200 679
NBTY, Inc. * ............................................ 48,600 1,305
Riviana Foods, Inc. Delaware ............................ 15,500 425
Sensient Technologies Corp. ............................. 57,000 1,127
-------
3,536
Gas Utilities - 0.8%
New Jersey Resources Corp. .............................. 21,800 839
WGL Holdings, Inc. ...................................... 27,300 759
-------
1,598
Health Care Equipment & Supplies - 2.2%
Arrow International, Inc. ............................... 19,600 490
Landauer, Inc. .......................................... 17,500 714
Owens & Minor, Inc. ..................................... 67,900 1,488
PolyMedica Corporation * ................................ 55,400 1,457
-------
4,149
Health Care Providers & Services - 2.5%
Amerigroup Corp. * ...................................... 30,000 1,280
Amsurg Corp. ............................................ 9,400 356
Capital Senior Living Corp. * ........................... 125,000 735
Corvel Corp. ............................................ 14,700 553
Covance, Inc. * ......................................... 41,100 1,101
Healthcare Services Group, Inc. ......................... 38,100 735
-------
4,760
Hotels Restaurants & Leisure - 2.1%
CEC Entertainment, Inc. * ............................... 24,300 1,152
Interstate Hotels & Resorts * ........................... 70,200 376
Rare Hospitality International, Inc. * .................. 42,000 1,026
Ruby Tuesday, Inc. ...................................... 50,000 1,424
-------
3,978
Household Durables - 1.7%
Meritage Corp. * ........................................ 13,700 909
Skyline Corp. ........................................... 28,500 994
Stanley Furniture Co., Inc. * ........................... 27,400 863
Yankee Candle, Inc. * ................................... 14,900 407
-------
3,173
Household Products - 0.6%
Mathews International Corp. * ........................... 38,500 1,139
Insurance - 7.0%
Delphi Financial Group, Inc. - Cl. A * .................. 33,750 $ 1,215
IPC Holdings, Ltd. ...................................... 22,600 880
Markel Corp. * .......................................... 3,800 963
Max Re Capital, Ltd. .................................... 72,000 1,616
Platinum Underwriters Holdings .......................... 43,500 1,305
Proassurance Corp. * .................................... 58,200 1,871
Reinsurance Group of America ............................ 49,100 1,898
RLI Corp. ............................................... 15,400 577
Scottish Annuity & Life ................................. 85,400 1,774
Universal American Financial Corp. * .................... 115,000 1,140
-------
13,239
Internet & Catalog Retail - 0.4%
Jersey Jill Group, Inc. * ............................... 63,300 805
Internet Software & Services - 0.3%
Websense, Inc. * ........................................ 22,000 643
Leisure Equipment & Products - 0.6%
SCP Pool Corp. * ........................................ 35,000 1,144
Machinery - 4.4%
Albany International Corp. - Cl. A ...................... 40,200 1,363
IDEX Corp. .............................................. 27,600 1,148
JLG Industries, Inc. .................................... 37,900 577
Kadant, Inc. * .......................................... 53,900 1,167
Nordson Corp. ........................................... 39,800 1,374
Quixote Corp. ........................................... 43,600 1,064
Thomas Industries, Inc. ................................. 47,800 1,657
-------
8,350
Marine - 0.5%
Kirby Corp. * ........................................... 25,500 889
Media - 1.1%
Journal Register Co. * .................................. 55,000 1,138
Saga Communications, Inc. - Cl. A * ..................... 56,000 1,038
-------
2,176
Metals & Mining - 2.5%
Aber Diamond Corp. ...................................... 9,300 341
Carpenter Technology Corp. * ............................ 51,700 1,529
Gibraltar Steel Corp. ................................... 38,600 971
Meridian Gold, Inc. * ................................... 43,000 628
Penn Virginia Corp. ..................................... 23,400 1,302
-------
4,771
Multi-Utilities - 0.4%
Vectren Corp. * ......................................... 31,900 786
Multiline Retail - 0.7%
Stage Stores, Inc. * .................................... 16,200 452
Stein Mart, Inc. * ...................................... 107,600 887
-------
1,339
Oil & Gas - 2.6%
Encore Acquisition Co. .................................. 39,500 974
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL CAP VALUE FUND
Market
Name of Issuer Shares Value
-------------- ------- --------
(000's)
COMMON STOCK - Continued
Oil & Gas - Continued
Forest Oil Corp. * .................................... 45,400 $ 1,297
St. Mary Land & Exploration Co. * ..................... 51,800 1,476
Westport Resources Corp. * ............................ 37,600 1,123
--------
4,870
Paper & Forest Products - 1.5%
Deltic Timber Corp. ................................... 29,100 885
Potlatch Corp. ........................................ 39,400 1,370
Wausau-Mosinee Paper Corp. ............................ 44,200 597
--------
2,852
Pharmaceuticals - 0.3%
Diversa Corp. * ....................................... 63,600 588
Real Estate Development - 0.9%
Kilroy Realty Corp. ................................... 50,400 1,651
Real Estate Investment Trust - 7.2%
Arden Realty Group, Inc. .............................. 15,800 479
Bedford Property Investors, Inc. ...................... 53,400 1,529
Chelsea Property Group, Inc. .......................... 12,400 680
East Group Properties, Inc. ........................... 37,000 1,198
Gables Residential Trust .............................. 35,500 1,233
Getty Realty Corp ..................................... 27,700 724
Glenborough Realty Trust, Inc ......................... 28,100 561
Innkeepers USA Trust .................................. 130,000 1,088
LaSalle Hotel Properties .............................. 50,400 935
Maguire Properties, Inc. .............................. 36,300 882
PS Business Parks, Inc. ............................... 17,800 735
RAIT Investment Trust ................................. 25,000 640
Sun Communities, Inc. ................................. 45,300 1,753
Washington Real Estate Investment Trust ............... 44,000 1,285
--------
13,722
Road & Rail - 3.2%
Dollar Thrifty Automotive Group, Inc. * ............... 21,500 557
Genesee & Wyo., Inc. - Cl. A .......................... 56,000 1,764
Hub Group Inc. * ...................................... 29,700 640
Landstar Systems, Inc. * .............................. 34,000 1,293
USF Corp .............................................. 32,900 1,125
Werner Enterprises, Inc. * ............................ 39,600 772
--------
6,151
Semiconductor Equipment & Products - 2.1%
Atmi, Inc. * .......................................... 25,300 585
ESS Technology, Inc. * ................................ 61,000 1,038
Exar Corp. * .......................................... 52,000 888
Mykrolis Corp. * ...................................... 59,000 949
Pericom Semiconductor Corp. * ......................... 47,300 504
--------
3,964
Software - 1.3%
Black Box Corp ........................................ 19,300 889
Progress Software Corp. * ............................. 42,500 869
SPSS, Inc ............................................. 42,800 $ 765
--------
2,524
Specialty Retail - 5.7%
Aaron Rents, Inc. ..................................... 66,650 1,342
Building Materials Holdings Corp. - Sr.
Notes .............................................. 78,500 1,219
Gildan Activewear, Inc. - Cl. A * ..................... 800 25
Hancock Fabrics, Inc. ................................. 55,000 796
Haverty Furniture Co., Inc. ........................... 77,600 1,541
Hibbett Sporting Goods, Inc. * ........................ 51,000 1,520
O'Reilly Automotive, Inc. * ........................... 60,400 2,317
Shoe Carnival, Inc. * ................................. 30,200 537
TBC Corp. * ........................................... 61,100 1,577
--------
10,874
Textiles & Apparel - 0.9%
Culp, Inc. * .......................................... 36,200 395
Cutter & Buck, Inc. * ................................. 68,200 640
Unifi, Inc. * ......................................... 101,300 653
--------
1,688
Tobacco - 0.9%
Universal Corp. * ..................................... 38,400 1,696
--------
TOTAL COMMON STOCK- 97.3% 184,668
Par
Value
-------
(000's)
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 8.4%
State Street Navigator Securities Lending
Portfolio ........................................... $15,973 15,973
SHORT-TERM INVESTMENTS - 2.3%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ................................ 4,442 4,442
------- --------
TOTAL INVESTMENTS- ........................ 108.0% 205,083
Payables, less cash and receivables- ............ (8.0)% (15,310)
------- --------
NET ASSETS- ............................ 100.0% $189,773
======= ========
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Small Cap Value Fund (the "Fund") is a diversified series of
John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 $ 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$15,338 $15,973
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate of 0.95% on an annual basis of the
Fund's net assets.
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $12 to the Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $18.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
John Hancock has entered into Sub-Advisory Agreements with T. Rowe Price
Associates, Inc. and Wellington Management Company, LLP, with respect to the
Fund. Each is an affiliate of John Hancock, and under its supervision, is
responsible for the day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$62,910 $42,380
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$170,416 $37,355 $(2,688) $34,667
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
related to certain securities sold at a loss and to certain distributions
received from investments in Real Estate Investment Trusts. Additionally, as a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed Net Capital Loss Net Unrealized
Ordinary Income Long-Term Capital Gain Carryforwards Appreciation
- --------------- ---------------------- ------------- ---------------
$67 $449 $-- $34,667
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $2,961 $5,147 $ --
2002 885 1,001 1,231
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ---------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist,
c/o John Hancock Variable Series Dana-Farber Cancer
Trust I Institute; President, The
John Hancock Place Advertising Club of Greater
Boston, Massachusetts 02117 Boston
Diane C. Kessler (age 57) Trustee Executive Director,
c/o John Hancock Variable Series Massachusetts Council of
Trust I Churches
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- -------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ---------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East
Trust I Boston Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and
c/o John Hancock Variable Series Graduate Dean, The Graduate
Trust I School of the Wallace G.
John Hancock Place Carroll School of
Boston, Massachusetts 02117 Management, Boston College
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ---------------------------
Michele G. Van Leer* (age 46) Chairman and Senior Vice President,
John Hancock Place Trustee Product Management, John
Boston, Massachusetts 02117 Hancock Life Insurance
Company; Vice Chairman,
President & Director, John
Hancock Variable Life
Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, Senior Vice President,
John Hancock Place President Signator Brokerage, John
Boston, Massachusetts 02117 and Trustee Hancock Life Insurance
Company; Vice President
Corporate Communications,
John Hancock Life Insurance
Company
Jude A. Curtis (age 45) Compliance Vice President and Chief
John Hancock Place Officer Investment Compliance
Boston, Massachusetts 02117 Officer, John Hancock Life
Insurance Company; formerly
Second Vice President and
Counsel, Office of Business
Conduct; John Hancock Life
Insurance Company; formerly
a Partner at Hale and Dorr
LLP (law firm)
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------- ----------------------------
Janet Wang (age 35) Assistant Compliance Specialist, John
John Hancock Place Compliance Hancock Life Insurance
Boston, Massachusetts 02117 Officer Company
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 Company
Gladys C. Millan (age 57) Assistant Manager of Fund Operations,
John Hancock Place Treasurer John Hancock Life Insurance
Boston, Massachusetts 02117 Company
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock
Boston, Massachusetts 02117 Life Insurance Company
Arnold R. Bergman (age 53) Assistant Senior Counsel, Law
John Hancock Place Secretary Department, John Hancock
Boston, Massachusetts 02117 Life Insurance company;
formerly Vice President,
General Counsel and
Secretary, First Variable
Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Small Cap Value Fund (a portfolio
included in the series of John Hancock Variable Series Trust I {the "Trust"}) as
of December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Small Cap Value Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1998
- --------------------------------------------------------------------------------
Small/Mid Cap CORE(SM) Fund
Goldman Sachs Asset Management, L.P. Jones/Brown/Pinter
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 45.15% underperforming its benchmark, the
Russell 2500 Index.
.. The Fund underperformed its benchmark due to unfavorable stock selection
and sector allocation exposures. Stock selection detracted especially
within the information technology and consumer discretionary sectors.
.. The CORE themes (Momentum, Valuation, Profitability, Earnings Quality,
Analyst Sentiment and Management Impact) had mixed results for the year,
but were positive overall. Valuation was the biggest positive contributor
to excess returns for 2003, as inexpensive companies outperformed their
more richly valued industry counterparts. Profitability also contributed
positively as owning companies with strong profit margins and operating
efficiency proved to be beneficial. Management Impact, Earnings Quality and
Momentum modestly boosted relative returns, while Analyst Sentiment was the
only theme to detract for the year.
.. Positive absolute performance was driven mainly by strong returns in the
Financial and Information Technology sectors.
.. The Fund seeks to maintain size and sector weightings similar to its
benchmark. The manager seeks to add value versus the Russell 2500 Index by
overweighting stocks that are more likely to beat the benchmark, while
underweighting stocks that are believed to lag the Index.
.. The manager employs a CORE approach -- computer optimized, research
enhanced -- using quantitative techniques to identify cheap stocks with
good momentum, companies about which fundamental research analysts are
becoming more positive, and that have strong profit margins and sustainable
earnings that employ their capital to enhance shareholder value.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 4/30/98
(Fund Inception Date)
Small/Mid Cap Russell
CORE(SM) Fund 2500(TM) Index
------------- --------------
4/30/98 10,000.00 10,000.00
06/30/1998 9,721.11 9,547.44
07/31/1998 9,039.64 8,891.53
08/31/1998 7,377.35 7,214.59
09/30/1998 7,776.24 7,726.83
10/30/1998 7,960.07 8,149.48
11/30/1998 8,422.14 8,552.88
12/31/1998 9,018.54 9,071.19
01/29/1999 8,940.19 9,055.77
02/26/1999 8,305.30 8,460.80
03/31/1999 8,438.16 8,641.86
04/30/1999 9,171.89 9,415.31
05/28/1999 9,250.51 9,561.25
06/30/1999 9,810.43 10,058.43
07/30/1999 9,647.63 9,860.28
08/31/1999 9,346.73 9,551.66
09/30/1999 9,224.22 9,409.34
10/29/1999 9,430.02 9,615.40
11/30/1999 9,887.43 10,158.67
12/31/1999 10,870.98 11,260.89
01/31/2000 10,456.08 11,001.89
02/29/2000 11,807.00 12,590.56
03/31/2000 11,699.80 12,397.92
04/28/2000 11,257.23 11,730.91
05/31/2000 10,720.20 11,167.83
06/30/2000 11,414.25 11,901.56
07/31/2000 11,266.93 11,598.07
08/31/2000 12,208.17 12,596.66
09/29/2000 11,765.57 12,187.27
10/31/2000 11,467.29 11,853.34
11/30/2000 10,396.42 10,810.24
12/29/2000 11,374.55 11,741.01
01/31/2001 11,642.32 12,127.29
02/28/2001 10,940.08 11,346.29
03/30/2001 10,295.97 10,723.38
04/30/2001 11,153.18 11,670.25
05/31/2001 11,433.38 12,021.53
06/30/2001 11,546.24 12,192.23
07/31/2001 11,242.21 11,755.75
08/31/2001 10,944.71 11,370.16
09/28/2001 9,571.68 9,898.86
10/31/2001 9,991.95 10,410.63
11/30/2001 10,814.32 11,252.85
12/31/2001 11,435.35 11,884.14
01/31/2002 11,422.93 11,736.78
02/28/2002 11,362.86 11,531.38
03/30/2002 12,211.41 12,328.20
04/30/2002 12,368.07 12,297.38
05/31/2002 11,981.00 11,937.07
06/30/2002 11,396.59 11,265.01
07/31/2002 9,983.60 9,921.09
08/31/2002 10,115.87 9,950.86
09/28/2002 9,327.27 9,162.75
10/31/2002 9,531.91 9,461.46
11/30/2002 10,096.93 10,233.51
12/31/2002 9,698.01 9,770.95
01/31/2003 9,440.15 9,511.04
02/28/2003 9,165.75 9,282.78
03/30/2003 9,203.10 9,370.96
04/30/2003 9,969.24 10,205.92
05/31/2003 10,953.05 11,209.16
06/30/2003 11,168.58 11,423.25
07/31/2003 11,739.43 12,037.83
08/31/2003 12,180.83 12,595.18
09/28/2003 12,136.15 12,423.88
10/31/2003 13,152.78 13,405.37
11/30/2003 13,783.61 13,909.41
12/31/2003 14,076.75 14,216.81
Value on 12/31/03:
- ------------------
$14,077 Small/Mid Cap CORE (SM) Fund
$14,217 Russell 2500(TM) Index
MORNINGSTAR CATEGORY+:
.. Mid Cap Blend
MORNINGSTAR RISK+:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR RATING+:
.. **** (VL/VUL)
.. **** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Sunoco, Inc. 1.6%
Northeast Utilities 1.5%
Bank Hawaii Corp. 1.5%
R.J. Reynolds Tobacco Holdings, Inc. 1.5%
HRPT Properties Trust 1.5%
LandAmerica Financial Group, Inc. 1.4%
Silicon Valley Bancshares 1.4%
Kos Pharmaceuticals, Inc. 1.4%
United Stationers, Inc. 1.2%
ITT Educational Services, Inc. 1.2%
AVERAGE ANNUAL TOTAL RETURNS*
Small/Mid Cap Russell 2500(TM)
CORE(SM) Fund Index
------------- ----------------
1 Year 45.15% 45.50%
3 Years 7.36 6.59
5 Years 9.31 9.40
Since Inception (5/1/98) 6.21 6.41
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of % of
Assets Assets
------ ------
Financials 20.84% Energy 5.13%
Information Technology 17.84% Consumer Staples 5.03%
Consumer Discretionary 16.97% Telecommunication Services 2.62%
Industrials 14.46% Materials 2.59%
Health Care 11.99% Utilities 2.53%
* Total returns are for the period ended December 31, 2003. Returns
represent past performance, assume reinvestment of all distributions and
are not indicative of future performance. 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. Performance would be lower if expenses and charges of the
separate accounts and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts. VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 136 VL/VUL subaccounts and 299 VA subaccounts in the
Morningstar Mid Cap Blend category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $11,397 of securities
loaned (Note B)) ................................................ $ 77,628
Net unrealized appreciation on investments ......................... 14,928
Short-term investments at value .................................... 13,035
--------
Total investments ............................................ 105,591
Cash ............................................................... 83
Futures Segregation ................................................ 84
Receivables for:
Dividends ....................................................... 78
--------
Total assets ....................................................... 105,836
--------
LIABILITIES
Payables for:
Fund shares purchased ........................................... 77
Futures contracts variation margin .............................. 20
Collateral for securities on loan ............................... 11,835
Other liabilities ............................................... 2
--------
Total liabilities .................................................. 11,934
--------
Net assets ......................................................... $ 93,902
========
Shares of beneficial interest outstanding .......................... 8,555
--------
Net asset value per share .......................................... $ 10.98
========
Composition of net assets:
Capital paid-in ................................................. $ 79,046
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (118)
Net unrealized appreciation of:
Investments .................................................. 14,928
Futures ...................................................... 46
--------
Net assets ......................................................... $ 93,902
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 17
Dividends ..................................................... 976
Securities lending ............................................ 66
-------
Total investment income ............................................. 1,059
-------
EXPENSES
Investment advisory fee ....................................... 695
Auditors fees ................................................. 8
Custodian fees ................................................ 72
Legal fees .................................................... 4
Printing & mailing fees ....................................... 5
Trustees' fees ................................................ 2
Other fees .................................................... 2
-------
Total expenses ...................................................... 788
Less expenses reimbursed ...................................... (27)
-------
Net expenses ........................................................ 761
-------
Net investment income ............................................... 298
-------
REALIZED AND UNREALIZED GAIN
Net realized gain on:
Investments ................................................... 7,364
Financial futures contracts ................................... 413
Change in unrealized appreciation on:
Investments ................................................... 18,452
Futures ....................................................... 48
-------
Net realized and unrealized gain .................................... 26,277
-------
Net increase in net assets resulting from
operations ....................................................... $26,575
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ................................................. $ 298 $ 229
Net realized gain (loss) .............................................. 7,777 (3,813)
Change in net unrealized appreciation (depreciation) .................. 18,500 (4,661)
-------- --------
Net increase (decrease) in net assets resulting from operations .... 26,575 (8,245)
Distributions to shareholders from:
Net investment income ................................................. (308) (227)
Realized gains ........................................................ (7,773)
Capital paid-in ....................................................... (2)
-------- --------
Decrease in net assets resulting from distributions ................ (8,081) (229)
From fund share transactions:
Proceeds from shares sold ............................................. 57,643 53,157
Distributions reinvested .............................................. 8,081 229
Payment for shares redeemed ........................................... (38,459) (43,215)
-------- --------
Increase in net assets from fund share transactions ................ 27,265 10,171
-------- --------
NET INCREASE IN NET ASSETS ............................................... 45,759 1,697
NET ASSETS
Beginning of Period ................................................... 48,143 46,446
-------- --------
End of Period ......................................................... $ 93,902 $ 48,143
======== ========
Analysis of fund share transactions:
Sold .................................................................. 5,991 5,734
Reinvested ............................................................ 744 26
Redeemed .............................................................. (3,991) (4,680)
-------- --------
Net increase in fund shares outstanding .................................. 2,744 1,080
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Small Mid Cap CORE Fund
-----------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999
------- ------- ------- ------- -------
Net Assets Value at Beginning of Period ..................... $ 8.28 $ 9.82 $ 9.82 $ 9.82 $ 9.02
Income from Investment Operations:
Net Investment Income .................................... 0.04 0.04 0.05 0.05 0.02
Net Realized and Unrealized Gain (Loss) on
Investments(a) ........................................ 3.69 (1.54) 0.39 1.77
------- ------- ------- ------- -------
Total From Investment Operations ......................... 3.73 (1.50) 0.05 0.44 1.79
Less Distributions: .........................................
Distribution from Net Investment Income .................. (0.04) (0.04) (0.05) (0.05) (0.03)
Distribution from Net Realized Gains on Investments ...... (0.99) (0.32) (0.96)
Distribution from Excess of Net Investment Income/Gains... (0.05)
Distribution from Capital Paid-in ........................ (0.02)
------- ------- ------- ------- -------
Total Distributions ...................................... (1.03) (0.04) (0.05) (0.44) (0.99)
------- ------- ------- ------- -------
Net Assets Value at End of Period ........................... $ 10.98 $ 8.28 $ 9.82 $ 9.82 $ 9.82
======= ======= ======= ======= =======
Total Investment Return(b) .................................. 45.15% (15.19)% 0.53% 4.63% 20.54%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ........ 1.15%(c) 0.96%(c) 0.90%(c) 0.90%(c) 0.94%(c)
Ratio of Net Investment Income to Average Net Assets ..... 0.45% 0.50% 0.52% 0.56% 0.30%
Portfolio Turnover Rate .................................. 125.00% 125.11% 96.88% 94.78% 109.12%
Net Assets End of Period (000s Omitted) ..................... $93,902 $48,143 $46,446 $21,636 $ 8,248
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been 1.19%, 1.12%, 1.15%, 1.23%, and
2.24%, for the years ended December 31, 2003, 2002, 2001, 2000, and 1999,
respectively.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
-------------- -------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 1.3%
Curtiss Wright Corp..................................... 13,000 $ 585
Engineered Support Systems, Inc. * ..................... 7,200 396
Esterline Technologies Corp. * ......................... 2,800 75
Kaman Corp. - Cl. A .................................... 4,000 51
Sequa Corp. - Cl. A .................................... 2,000 98
------
1,205
Airlines - 0.3%
Alaska Air Group, Inc. * ............................... 7,900 216
America West Holdings Corp. - Cl. B * .................. 6,700 83
------
299
Auto Components - 0.7%
Autoliv, Inc. .......................................... 11,500 433
Dura Automotive Systems, Inc. * ........................ 6,300 81
Goodyear Tire & Rubber Co. * ........................... 12,500 98
------
612
Automobiles - 0.3%
Lithia Motors, Inc. - Cl. A * .......................... 9,400 237
Banks - 6.2%
Associated Banc-Corp. .................................. 7,550 322
BancorpSouth, Inc. ..................................... 3,175 75
Bank Hawaii Corp. ...................................... 32,800 1,384
Brookline Bancorp, Inc. ................................ 5,600 86
City National Corp. .................................... 1,400 87
Commerce Bancshares, Inc. .............................. 6,173 303
Community Bank Systems, Inc. * ......................... 1,700 83
Corus Bankshares, Inc. ................................. 4,600 145
First Citizens BancShares, Inc. - Cl. A ................ 1,200 146
Flagstar Bancorp, Inc. ................................. 19,300 413
Hancock Holding Co. .................................... 1,550 84
Hibernia Corp. - Cl. A ................................. 14,700 345
Independence Community Bank Corp. ...................... 2,200 79
IndyMac Mortgage Holdings, Inc. ........................ 5,900 176
International Bancshares Corp. ......................... 2,200 104
Omega Financial Corp. .................................. 600 23
PFF Bancorp, Inc. * .................................... 7,080 257
R&G Financial Corp. - Cl. B ............................ 6,800 271
Silicon Valley Bancshares * ............................ 35,700 1,288
Texas Regional Bancshares, Inc. ........................ 1,750 65
Trustmark Corp. ........................................ 3,200 94
United Community Financial Corp. ....................... 1,900 22
------
5,852
Biotechnology - 3.5%
Affymetrix, Inc. * ..................................... 32,900 810
Applera Corp. - Celera Genomics Group * ................ 6,400 89
Gene Logic, Inc. * ..................................... 17,700 92
General Probe, Inc. * .................................. 7,800 284
IDEXX Laboratories, Inc. * ............................. 14,300 662
Invitrogen Corp. * ..................................... 3,000 210
Neurocrine Biosciences, Inc. * ......................... 13,900 758
Biotechnology - Continued
Vicuron Pharmaceuticals, Inc. * ........................ 22,300 $ 416
------
3,321
Building Products - 1.3%
Griffon Corp. * ........................................ 19,300 391
Lennox International, Inc. ............................. 8,300 139
Universal Forest Products, Inc. ........................ 6,900 222
USG Corp. .............................................. 13,300 220
York International Corp. ............................... 7,900 291
------
1,263
Chemicals - 0.5%
Arch Chemicals, Inc. ................................... 4,500 115
Central Garden & Pet Co. ............................... 4,200 118
Lubrizol Corp. ......................................... 2,300 75
PolyOne Corp. .......................................... 18,800 120
------
428
Commercial Services & Supplies - 9.1%
Arbitron, Inc. * ....................................... 20,000 834
CDI Corp. * ............................................ 2,600 85
Consolidated Graphics, Inc. * .......................... 3,000 95
Convergys Corp. * ...................................... 54,900 959
CSG Systems International, Inc. * ...................... 27,500 343
Decode Genetics, Inc. .................................. 20,100 165
Deluxe Corp. * ......................................... 22,200 918
Factset Research Systems, Inc. ......................... 7,400 283
Gabelli Asset Management, Inc. - Cl. A * ............... 9,600 382
Ikon Office Solutions, Inc. * .......................... 11,500 136
ITT Educational Services, Inc. * ....................... 23,000 1,080
Memberworks, Inc. ...................................... 4,400 120
MPS Group, Inc. * ...................................... 28,100 263
NCO Group, Inc. * ...................................... 2,800 64
Pre-Paid Legal Services, Inc. * ........................ 14,900 389
Ruddick Corp. .......................................... 5,000 89
Standard Register Co. .................................. 3,000 50
StarTek, Inc. * ........................................ 2,200 90
Steelcase, Inc. - Cl. A ................................ 6,400 92
TeleTech Holdings, Inc. * .............................. 12,000 136
Unifirst Corp. ......................................... 4,900 116
United Stationers, Inc. * .............................. 28,200 1,154
Ventana Medical Systems, Inc ........................... 4,700 185
Watsco, Inc. ........................................... 15,500 352
West Corp. * ........................................... 8,000 186
------
8,566
Communications Equipment - 4.2%
Advanced Fibre Communications, Inc. * .................. 22,000 443
Aspect Communications Corp. * .......................... 42,200 665
Audiovox Corp. - Cl. A * ............................... 31,100 399
Avaya, Inc. * .......................................... 76,200 986
Brocade Communications Systems, Inc. * ................. 16,600 96
Computer Network Technology * .......................... 20,700 197
Metro One Telecom, Inc. * .............................. 24,500 64
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Communications Equipment - Continued
Omnicell, Inc. ........................................... 4,600 $ 75
Plantronics, Inc. * ...................................... 8,900 291
Scientific-Atlanta, Inc. * ............................... 27,300 745
------
3,961
Computers & Peripherals - 2.4%
Electronics for Imaging, Inc. ............................ 3,600 94
Gateway, Inc. * .......................................... 18,200 84
InFocus Corp. * .......................................... 18,200 176
Maxtor Corp. * ........................................... 15,300 170
NCR Corp. * .............................................. 14,700 570
Safeguard Scientifics, Inc. * ............................ 20,200 81
SanDisk Corp. * .......................................... 12,100 740
Storage Technology Corp. * ............................... 11,700 301
------
2,216
Construction & Engineering - 0.8%
CCC Information Services Group * ......................... 5,000 85
Quanta Services, Inc. * .................................. 21,900 160
Spherion Corporation * ................................... 26,400 258
Washington Group International, Inc. * ................... 7,300 248
------
751
Construction Materials - 1.0%
AMCOL International Corp. ................................ 9,100 185
Carlisle Cos., Inc. ...................................... 1,800 109
Charles River Associates, Inc. * ......................... 2,300 74
Teledyne Technologies, Inc. * ............................ 5,400 102
USEC, Inc. ............................................... 11,300 95
WSFS Financial Corp. * ................................... 7,700 345
------
910
Containers & Packaging - 0.4%
Chesapeake Corp. ......................................... 8,800 233
Owens-Illinois, Inc. * ................................... 13,600 162
------
395
Distributors - 0.6%
Handleman Co. * .......................................... 28,500 585
Diversified Financials - 4.0%
AmeriCredit Corp. * ...................................... 33,200 529
BlackRock, Inc. * ........................................ 11,300 600
Doral Financial Corp. .................................... 24,600 794
Friedman Billings Ramsey Group - Cl. A ................... 10,300 238
LaBranche & Co., Inc. * .................................. 9,000 105
New Century Financial Corp. .............................. 25,400 1,008
Novastar Financial, Inc. ................................. 2,000 86
Nuveen Investments, Inc. - Cl. A ......................... 13,600 362
------
3,722
Diversified Telecommunication Services - 1.1%
IDT Corp. * .............................................. 25,500 565
Time Warner Telecom, Inc. - Cl. A * ...................... 43,500 440
------
1,005
Electric Utilities - 0.8%
Avista Corp. ............................................. 18,100 $ 328
Duquesne Light Holdings, Inc. ............................ 5,300 97
El Paso Electric Co. * ................................... 6,700 89
Great Plains Energy, Inc. ................................ 2,600 83
PNM Resources, Inc. ...................................... 1,600 45
Puget Energy, Inc. ....................................... 3,700 88
------
730
Electric/Gas - 1.5%
Northeast Utilities ...................................... 69,800 1,408
Electrical Equipment - 0.1%
The Genlyte Corp. * ...................................... 1,600 93
Electronic Equipment & Instruments - 3.5%
Anixter International, Inc. * ............................ 12,900 334
Artesyn Technologies, Inc. ............................... 48,100 410
Avnet, Inc. .............................................. 45,344 982
Belden, Inc. * ........................................... 3,200 67
Cypress Semiconductor Corp. * ............................ 13,900 297
Franklin Electric Co., Inc. .............................. 1,500 91
Harman International Industries, Inc. * .................. 1,400 104
Methode Electronics, Inc. - Cl. A ........................ 5,300 65
PerkinElmer, Inc. * ...................................... 5,300 90
Sanmina Corp. * .......................................... 69,000 870
------
3,310
Energy Equipment & Services - 1.0%
Tetra Technologies, Inc. * ............................... 4,500 109
Universal Compression Holdings, Inc. * ................... 15,600 408
Veritas DGC, Inc. * ...................................... 43,600 457
------
974
Food & Drug Retailing - 1.9%
Charming Shoppes, Inc. * ................................. 44,300 239
Longs Drug Stores Corp. .................................. 7,500 186
Nash Finch Co. ........................................... 9,900 221
Pathmark Stores, Inc. * .................................. 8,300 63
SuperValu, Inc. * ........................................ 32,700 935
The Great Atlantic & Pacific Tea Co., Inc. * ............. 12,300 103
------
1,747
Food Products - 1.2%
Flowers Foods, Inc. * .................................... 6,200 160
Pilgrims Pride Corp. - Cl. B ............................. 9,800 160
Ralcorp Holdings, Inc. * ................................. 6,700 210
USANA Health Sciences .................................... 19,700 603
------
1,133
Gas Utilities - 0.1%
Southwest Gas Corp. ...................................... 4,900 110
Health Care Equipment & Supplies - 1.1%
Advanced Medium Optics, Inc. * ........................... 15,600 307
Alaris Medical, Inc. * ................................... 13,300 202
Cytyc Corp. * ............................................ 9,600 132
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Health Care Equipment & Supplies - Continued
Dade Behring Holdings, Inc. .............................. 8,300 $ 297
Haemonetics Corp. * ...................................... 4,400 105
------
1,043
Health Care Providers & Services - 3.6%
Apria Healthcare Group, Inc. * ........................... 9,000 256
eResearch Technology, Inc. * ............................. 21,900 557
Humana, Inc. * ........................................... 37,400 855
Kindred Healthcare, Inc. * ............................... 6,000 312
Manor Care, Inc. * ....................................... 2,900 100
Select Medium Corp. * .................................... 20,800 339
U.S. Oncology, Inc. * .................................... 91,400 983
------
3,402
Home Equity Loan - 0.5%
CompuCredit Corp. * ...................................... 23,800 506
Hotels Restaurants & Leisure - 1.6%
CBRL Group, Inc. * ....................................... 8,200 314
Choice Hotels, Inc. ...................................... 15,700 553
Dave & Busters, Inc. ..................................... 6,500 82
P.F. Chang's China Bistro, Inc. * ........................ 2,900 148
Papa John's International, Inc. * ........................ 7,000 234
Park Place Entertainment Corp. * ......................... 12,400 134
Ryan's Family Steak Houses, Inc. * ....................... 4,200 64
------
1,529
Household Durables - 0.7%
NVR, Inc. * .............................................. 1,350 629
Industrial Conglomerates - 0.7%
Enpro Industries, Inc. * ................................. 12,900 180
Regal Entertainment Group - Cl. A ........................ 23,500 482
------
662
Insurance - 3.2%
American Financial Group, Inc. ........................... 7,400 196
American Medical Security Group, Inc. * .................. 3,500 78
American National Insurance Co. .......................... 1,000 84
Amerus Group Co. * ....................................... 2,300 80
LandAmerica Financial Group, Inc. ........................ 25,000 1,307
National Western Life Insurance Co. * .................... 900 139
Protective Life Corp. .................................... 8,900 301
Stewart Information Services Corp. * ..................... 19,100 775
The Midland Co. .......................................... 1,800 43
------
3,003
Internet & Catalog Retail - 0.1%
Priceline.com, Inc. * .................................... 7,300 131
Internet Software & Services - 1.3%
EarthLink, Inc. * ........................................ 23,900 239
eCollege.com * ........................................... 6,100 113
Internet Security System, Inc. * ......................... 19,700 371
J2 Global Communications, Inc. * ......................... 2,600 64
United Online, Inc. * .................................... 23,000 $ 386
------
1,173
IT Consulting & Services - 0.3%
UNOVA, Inc. * ............................................ 12,000 275
Leisure Equipment & Products - 0.2%
Arctic Cat, Inc. ......................................... 3,600 89
K2, Inc. ................................................. 5,600 85
------
174
Machinery - 1.7%
Applied Industrial Technologies, Inc. .................... 13,400 320
Briggs & Stratton Corp. .................................. 3,600 242
Cummins Engine Co., Inc. ................................. 9,400 460
NACCO Industries, Inc. - Cl. A ........................... 5,900 528
Stewart & Stevenson Services, Inc. ....................... 1,200 17
------
1,567
Marine - 0.2%
Overseas Shipholding Group, Inc. ......................... 5,300 180
Media - 3.2%
Advo, Inc. * ............................................. 2,700 86
Cox Radio, Inc. - Cl. A * ................................ 31,400 792
Hearst-Argyle Television, Inc. * ......................... 38,200 1,053
Insight Communications Company, Inc. * ................... 9,900 102
McClatchy Newspapers, Inc. - Cl. A ....................... 1,600 110
Netflix Common, Inc. ..................................... 2,600 142
Pulitzer, Inc. ........................................... 11,100 600
World Wrestling Federation Entertainment, Inc. * ......... 9,400 123
------
3,008
Metals & Mining - 1.6%
Carpenter Technology Corp. * ............................. 10,400 307
Coeur D'Alene Mines Corp. ................................ 16,500 95
Commercial Metals Co. .................................... 7,600 231
Reliance Steel & Aluminum Co. * .......................... 3,000 100
Ryerson Tull, Inc. ....................................... 17,300 198
Schnitzer Steel Industries, Inc. - Cl. A ................. 9,600 581
------
1,512
Multiline Retail - 3.1%
Big Lots, Inc. * ......................................... 9,100 129
Footstar, Inc. * ......................................... 15,000 58
Insight Enterprises, Inc. * .............................. 19,600 368
Saks, Inc. * ............................................. 62,600 942
Shopko Stores, Inc. * .................................... 33,500 511
Stage Stores, Inc. * ..................................... 21,300 594
Zale Corp. * ............................................. 5,900 314
------
2,916
Oil & Gas - 3.9%
Houston Exploration Co. * ................................ 10,500 383
Oneok, Inc. .............................................. 4,200 93
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK - Continued
Oil & Gas - Continued
Patina Oil & Gas Corp. .................................. 13,275 $ 650
Stone Energy Corp. * .................................... 2,700 115
Sunoco, Inc. * .......................................... 29,400 1,504
Tesoro Petroleum Corp. * ................................ 49,800 725
Vintage Petroleum, Inc. ................................. 17,700 213
-------
3,683
Paper & Forest Products - 0.8%
Boise Cascade Corp. * ................................... 24,000 789
Personal Products - 0.6%
Nu Skin Enterprises, Inc. - Cl. A * ..................... 26,300 450
Perrigo Co. * ........................................... 6,000 94
-------
544
Pharmaceuticals - 3.0%
American Pharmaceutical Partners, Inc. *................. 18,650 627
Endo Pharmaceuticals Holdings * ......................... 17,800 343
Enzon, Inc. * ........................................... 18,000 216
Kos Pharmaceuticals, Inc. * ............................. 29,400 1,265
LANNETT Co., Inc. * ..................................... 3,550 60
Pharmaceutical Resources, Inc. * ........................ 4,700 306
-------
2,817
Real Estate Investment Trust - 5.1%
AMLI Residential Properties Trust ....................... 2,100 56
Arden Realty Group, Inc. ................................ 35,400 1,074
CarrAmerica Realty Corp. ................................ 2,900 86
Commercial Net Lease Realty, Inc. ....................... 4,900 87
Entertainment Properties Trust .......................... 6,700 233
FelCor Lodging Trust, Inc. .............................. 8,500 94
Glenborough Realty Trust, Inc. .......................... 4,600 92
Healthcare Realty Trust, Inc. ........................... 4,300 154
HRPT Properties Trust ................................... 133,400 1,346
LTC Properties .......................................... 10,500 155
Mack-Cali Realty LP * ................................... 20,400 849
National Health, Inc. ................................... 5,000 124
PAN Pacific Retail Properties, Inc. ..................... 2,200 105
Regency Centers Corp. ................................... 2,100 84
Senior Housing Trust .................................... 12,100 208
-------
4,747
Real Estate Operations - 1.1%
La Quinta Corp. - Cl. B ................................. 53,700 344
LNR Property Corp. ...................................... 10,400 515
Redwood Trust, Inc. ..................................... 4,300 219
-------
1,078
Road & Rail - 1.3%
Florida East Coast Industries, Inc. ..................... 2,900 96
Hunt Jersey Transport Services, Inc. .................... 17,600 475
Landstar Systems, Inc. * ................................ 1,600 61
Ryder System, Inc. ...................................... 15,000 512
Werner Enterprises, Inc. * .............................. 4,800 94
-------
1,238
Semiconductor Equipment & Products - 2.5%
Amkor Technologies, Inc. * .............................. 5,900 $ 107
Atmel Corp. * ........................................... 29,600 178
International Rectifier Corp. * ......................... 2,200 109
LSI Logic Corp. * ....................................... 85,800 761
Photronics, Inc. * ...................................... 23,000 458
Silicon Laboratories, Inc. * ............................ 16,600 718
-------
2,331
Software - 2.9%
Ascential Software Corp. ................................ 10,800 280
FileNet Corp. * ......................................... 12,100 328
Group 1 Software, Inc. .................................. 13,600 240
Gtech Holdings Corp. .................................... 13,100 648
Keane, Inc. * ........................................... 14,300 209
Kronos, Inc. * .......................................... 7,050 279
QAD, Inc. * ............................................. 7,100 87
SeaChange International, Inc. ........................... 11,500 177
Sohu.com, Inc ........................................... 4,100 123
Sybase, Inc. * .......................................... 6,200 128
Tradestation Group, Inc. ................................ 20,300 180
-------
2,679
Specialty Retail - 2.8%
Blockbuster, Inc. - Cl. A ............................... 33,400 599
Brookstone, Inc. * ...................................... 4,800 102
Hughes Supply, Inc. ..................................... 2,100 104
Movie Gallery, Inc. * ................................... 9,900 185
Petco Animal Supplies, Inc. * ........................... 25,900 789
Select Comfort Corp. * .................................. 14,000 347
Sonic Automotive, Inc. - Cl. A * ........................ 4,800 110
The Finish Line - Cl. A * ............................... 13,900 417
-------
2,653
Textiles & Apparel - 0.7%
Brown Shoe Co., Inc. * .................................. 2,700 103
K-Swiss, Inc. - Cl. A ................................... 9,400 226
Unifi, Inc. * ........................................... 45,000 290
-------
619
Tobacco - 1.5%
R.J. Reynolds Tobacco Holdings, Inc. .................... 23,400 1,361
Trading Companies & Distributors - 0.1%
ACETO Corp. ............................................. 4,700 120
Wireless Telecommunications Services - 1.4%
Telephone and Data Systems, Inc. ........................ 10,800 676
United States Cellular Corp. * .......................... 19,100 678
-------
1,354
-------
TOTAL COMMON STOCK- .................................. 98.6% 92,556
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL/MID CAP CORE FUND
Par Market
Name of Issuer Value Value
-------------- ------- --------
(000's) (000's)
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 12.5%
State Street Navigator Securities Lending
Portfolio .......................................... $11,835 $ 11,835
SHORT-TERM INVESTMENTS - 1.3%
Investment in joint repurchase agreement with
Goldman Sachs & Co., 0.995% due 01/02/04 ........... 1,200 1,200
------- --------
TOTAL INVESTMENTS- ........................... 112.4% 105,591
Payables, less cash and receivables- ............ (12.4)% (11,689)
------- --------
NET ASSETS- ............................... 100.0% $ 93,902
======= ========
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE A--ORGANIZATION
John Hancock Small/Mid Cap CORE Fund (the "Fund") is a diversified series
of John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Fair value pricing, determined in good faith by the Board of Trustees, may
be used by the Fund when current market values are unavailable or when an event
occurs after the close of the exchange on which the Fund's portfolio securities
are principally traded that is likely to have changed the value of the
securities. The use of fair value pricing by the Fund may cause the net asset
value of its shares to differ significantly from the net asset value that would
be calculated using current market values. Securities for which prices are not
available from an independent pricing service, but where an active market
exists, are valued using market quotations obtained from one or more dealers
that make markets in the securities.
Investment security transactions are recorded on the date of purchase or
sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint repurchase agreements: The Fund, along with other registered
investment companies having a management contract with Goldman Sachs Asset
Management (GSAM), 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 Fund's custodian bank receives delivery of the underlying
securities for the joint repurchase agreement on the Fund's behalf. GSAM is
responsible for ensuring that the agreement is fully collateralized at all
times.
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to each fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expenses
- --------------------------- ---------------- -----------------
$328 1.77% $--
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$11,397 $11,835
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, open financial
futures contracts for the Fund were follows:
Open Expiration Unrealized
Contracts Position Month Gain
--------- -------- ---------- ----------
Russell E Mini 2000 Index 30 Long March 04 $46
===
At December 31, 2003, the Fund had deposited $84 in cash in segregated
accounts to cover initial margin requirements on open financial futures
contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Excess Over
First $100 Million $100 Million
- ------------------ ------------
1.05% 1.00%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest,
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
brokerage commissions and extraordinary expenses, shall exceed 0.10% of the
Fund's daily net asset value, John Han-cock and JHVLICO will reimburse the Fund
for such excess. Accordingly, for the year ended December 31, 2003, the
reimbursements paid from John Hancock and JHVLICO were $27 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Goldman Sachs
Asset Management, with respect to the Fund. Goldman Sachs Asset Management is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$100,712 $81,381
The identified cost of investments owned by the Fund (including earned discount
on corporate short-term notes, commercial paper and collateral for securities
lending) and their respective gross unrealized appreciation and depreciation for
Federal income tax purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$90,735 $15,922 $(1,066) $14,856
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss and to certain distributions
received from investments in Real Estate Investment Trust. Additionally, as a
result, net investment income (loss) and net realized gain (loss) on
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $-- $14,856
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $6,248 $594 $1,239
2002 226 -- 2
Included in the Fund's 2003 distributions from ordinary income is $2,609 in
excess of investment company taxable income, which in accordance with applicable
US tax law, is taxable to shareholders as ordinary income distributions.
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- --------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- --------------------- --------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- --------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, Senior Vice President, Signator
John Hancock Place President and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Compliance Specialist, John
John Hancock Place Officer Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- --------------------------- ------------------------ ------------------------------------
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Small/Mid Cap CORE Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Small/Mid Cap CORE Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 1994
- --------------------------------------------------------------------------------
Small/Mid Cap Growth Fund
Wellington Management Company, LLP F. Boggan
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 46.87%, outperforming its benchmark, the Russell
2500 Growth Index.
.. The Fund outperformed its benchmark primarily due to favorable stock
selection decisions broadly across sectors, but most notably within the
Financials sector. Sector allocation exposures also added modest value.
Stock selection within Health Care detracted from relative performance.
.. The Fund's exposure to the Information Technology sector was the largest
contributor to absolute returns. Other major contributors included consumer
discretionary, financials and health care sectors. Sanmina SCI and
Fairchild Semiconductor, both technology companies, were among the top
drivers of absolute Fund returns, along with consumer discretionary sector
names DR Horton and Chico's FAS. Chico's FAS is a Fund holding exemplifying
a winning brand continuing to gain market share in the consumer apparel
retailing space.
.. The most significant detractors from absolute returns were Healthsouth
(health care), a stock held for an interim time during the period, and
Cambrex (materials), which was not held in the Fund as of the end of the
period.
.. As of the end of the period, the Fund held the most significant overweights
to the health care and consumer discretionary sectors, while being most
underweight the industrials sector relative to the benchmark.
.. The manager employs fundamental research to identify high quality companies
with above average growth characteristics relative to industry peers. The
Fund emphasizes companies with profitable growth characteristics, strong
balance sheets and attractive valuations. The Fund's sector allocations are
broadly diversified but are primarily driven by stock selection.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/94
(Fund Inception Date)
Small/Mid Small/Mid Cap
Cap Growth Fund Growth Benchmark(1)
--------------- -------------------
5/01/1994 $10,000.00 $10,000.00
5/31/1994 10,019.50 10,015.00
6/30/1994 10,043.35 9,584.36
7/31/1994 10,066.44 9,849.84
8/31/1994 10,359.03 10,436.89
9/30/1994 10,093.81 10,264.68
10/31/1994 10,262.89 10,442.26
11/30/1994 9,992.18 9,981.76
12/31/1994 10,055.96 10,121.50
1/31/1995 9,933.79 10,242.96
2/28/1995 10,282.83 10,787.89
3/31/1995 10,797.79 11,216.17
4/30/1995 11,069.02 11,310.38
5/31/1995 11,087.25 11,588.62
6/30/1995 11,652.14 12,115.90
7/31/1995 12,564.26 12,877.99
8/31/1995 12,807.23 13,018.36
9/30/1995 12,763.70 13,308.67
10/31/1995 12,360.78 12,971.96
11/30/1995 13,159.52 13,551.81
12/31/1995 13,672.48 13,558.58
1/31/1996 14,150.52 13,798.57
2/29/1996 14,611.97 14,320.15
3/31/1996 14,938.62 14,433.28
4/30/1996 16,010.85 15,130.41
5/31/1996 16,455.41 15,439.07
6/30/1996 16,237.46 14,972.81
7/31/1996 14,615.06 13,810.92
8/31/1996 15,484.22 14,558.09
9/30/1996 16,410.87 15,482.53
10/31/1996 16,925.95 15,301.39
11/30/1996 17,438.18 16,202.64
12/31/1996 17,819.82 15,930.43
1/31/1997 17,845.10 16,634.56
2/28/1997 16,823.68 16,268.60
3/31/1997 15,824.55 15,349.42
4/30/1997 15,365.29 15,725.48
5/31/1997 16,487.26 17,134.49
6/30/1997 16,713.17 17,609.11
7/31/1997 18,027.97 19,294.30
8/31/1997 17,686.10 19,105.22
9/30/1997 19,024.95 20,071.94
10/31/1997 18,621.68 19,066.34
11/30/1997 18,188.04 19,266.54
12/31/1997 18,432.25 19,518.93
1/31/1998 18,106.11 19,167.59
2/28/1998 19,665.51 20,969.34
3/31/1998 20,641.16 21,847.96
4/30/1998 20,584.01 22,145.09
5/31/1998 19,647.64 21,234.92
6/30/1998 20,388.83 21,835.87
7/31/1998 19,268.32 20,901.30
8/31/1998 15,226.95 16,911.24
9/30/1998 16,009.11 18,189.73
10/31/1998 16,873.70 19,528.49
11/30/1998 17,602.01 20,844.71
12/31/1998 19,466.01 23,004.23
1/31/1999 19,609.73 23,694.35
2/28/1999 18,153.72 22,535.70
3/31/1999 19,356.11 23,790.94
4/30/1999 20,434.97 24,875.80
5/31/1999 20,604.07 25,132.03
6/30/1999 21,477.65 26,908.86
7/31/1999 20,969.83 26,359.92
8/31/1999 19,347.71 25,790.54
9/30/1999 18,728.16 25,976.24
10/31/1999 18,829.07 27,241.28
11/30/1999 19,018.61 30,458.47
12/31/1999 20,467.92 36,202.94
1/31/2000 19,750.02 36,000.21
2/29/2000 20,275.43 45,234.26
3/31/2000 21,919.10 41,683.37
4/30/2000 21,322.30 37,623.41
5/31/2000 20,907.34 34,274.93
6/30/2000 22,219.14 38,806.07
7/31/2000 22,048.37 35,623.97
8/31/2000 23,960.82 40,265.78
9/30/2000 23,370.44 37,660.58
10/31/2000 23,160.63 35,333.16
11/30/2000 21,058.07 28,598.66
12/31/2000 22,361.15 30,371.77
1/31/2001 23,322.26 32,339.87
2/28/2001 21,729.27 27,349.82
3/31/2001 19,942.94 24,324.93
4/30/2001 22,007.63 28,032.05
5/31/2001 22,357.04 28,844.98
6/30/2001 22,754.01 29,499.76
7/31/2001 22,233.97 27,325.63
8/31/2001 21,517.27 25,508.48
9/30/2001 18,714.13 21,513.85
10/31/2001 20,316.30 23,635.12
11/30/2001 21,992.76 25,677.19
12/31/2001 22,993.59 27,086.87
1/31/2002 22,455.92 25,930.26
2/28/2002 21,556.79 24,327.77
3/31/2002 23,175.93 26,286.15
4/30/2002 22,520.97 25,413.45
5/31/2002 22,065.77 24,132.61
6/30/2002 20,769.21 21,914.83
7/31/2002 18,287.38 19,193.01
8/31/2002 18,235.77 19,189.17
9/28/2002 16,559.66 17,738.47
10/31/2002 17,748.94 18,758.43
11/30/2002 19,677.35 20,502.96
12/31/2002 18,135.55 19,207.17
1/31/2003 17,268.10 18,788.46
2/28/2002 17,279.54 18,350.69
3/31/2002 17,268.78 18,592.92
4/30/2003 18,749.88 20,214.22
5/31/2003 21,058.09 22,356.93
6/30/2003 21,504.05 22,817.48
7/31/2003 22,965.91 24,337.12
8/31/2003 24,242.54 25,641.59
9/30/2003 23,659.03 25,090.30
10/31/2003 25,878.07 27,152.72
11/30/2003 26,686.60 28,070.48
12/31/2003 26,635.76 28,101.36
Value on 12/31/03:
- -----------------
$26,636 Small/Mid Cap Growth Fund
$28,101 Small/Mid Cap Growth Benchmark(1)
MORNINGSTAR CATEGORY+:
.. Mid Cap Growth
MORNINGSTAR RISK+:
.. Average (VL/VUL)
.. Average (VA)
MORNINGSTAR RATING+:
.. ***** (VL/VUL)
.. ***** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
Arthur J. Gallagher & Co. 3.0%
Diagnostic Products Corp. 2.7%
Michaels Stores, Inc. 2.7%
Waters Corp. 2.6%
Pactiv Corp. 2.5%
Chesapeake Energy Corp. 2.5%
Fisher Scientific International, Inc. 2.4%
Edwards Lifesciences Corp. 2.4%
Chicos Fas, Inc. 2.2%
Pacific Sunwear of California, Inc. 2.2%
AVERAGE ANNUAL TOTAL RETURNS*
Small/Mid Small/Mid
Cap Growth Cap Growth
Fund Benchmark(1)
---------- ------------
1 Year 46.87% 46.31%
3 Years 6.00 -2.56
5 Years 6.47 4.08
Since Inception 10.68 11.28
(5/1/94)
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
Assets
------
Information Technology 27.31%
Health Care 25.82%
Consumer Discretionary 18.80%
Financials 11.86%
Industrials 6.69%
Energy 3.66%
Consumer Staples 2.65%
Materials 2.53%
Telecommunication Services 0.67%
(1) The Small/Mid Cap Growth Fund benchmark is the Russell Mid Cap(TM) Growth
Index from May 1994 to April 1999 and the Russell 2500(TM) Growth Index May
1999-present.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions, and are not
indicative of future performance. 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 480 VL/VUL subaccounts and 787 VA subaccounts in the
Morningstar Mid Cap Growth category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost (including $32,264 of
securities loaned (Note B)) ..................................... $187,411
Net unrealized appreciation of investments ......................... 33,763
Short-term investments at value .................................... 37,758
--------
Total investments ............................................ 258,932
Receivable for:
Investments sold ................................................ 1,047
Dividends ....................................................... 81
--------
Total assets ....................................................... 260,060
--------
LIABILITIES
Payables for:
Investments purchased ........................................... 2,765
Fund shares purchased ........................................... 686
Collateral for securities on loan ............................... 33,560
Other liabilities ............................................... 27
--------
Total liabilities .................................................. 37,038
--------
Net assets ......................................................... $223,022
========
Shares of beneficial interest outstanding .......................... 14,799
--------
Net asset value per share .......................................... $ 15.07
========
Composition of net assets:
Capital paid-in ................................................. $192,987
Accumulated net realized loss on investments,
futures and foreign currency transactions .................... (3,728)
Net unrealized appreciation of investments ...................... 33,763
--------
Net assets ......................................................... $223,022
========
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ......................................................... $ 519
Dividends ........................................................ 584
Securities lending ............................................... 43
-------
Total investment income ............................................. 1,146
-------
EXPENSES
Investment advisory fee ....................................... 1,676
Auditors fees ................................................. 23
Custodian fees ................................................ 97
Legal fees .................................................... 12
Printing & mailing fees ....................................... 30
Trustees' fees ................................................ 5
Other fees .................................................... 7
-------
Total expenses ...................................................... 1,850
-------
Less custodian expense reduction offset
by commission recapture arrangement
(Note C) ................................................... (10)
-------
Net expenses ........................................................ 1,840
-------
Net investment loss ................................................. (694)
-------
REALIZED AND UNREALIZED GAIN
Net realized gain on investments ................................. 16,619
Change in unrealized appreciation on investments ................. 52,166
-------
Net realized and unrealized gain .................................... 68,785
-------
Net increase in net assets resulting from
operations ....................................................... $68,091
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss .................................................. $ (694) $ (1,137)
Net realized gain (loss) ............................................. 16,619 (5,715)
Change in net unrealized appreciation (depreciation) ................. 52,166 (31,900)
-------- --------
Net increase (decrease) in net assets resulting from operations ... 68,091 (38,752)
Distributions to shareholders from:
Realized gains ....................................................... (14,419) (1,738)
-------- --------
Decrease in net assets resulting from distributions ............... (14,419) (1,738)
From fund share transactions:
Proceeds from shares sold ............................................ 77,826 56,477
Distributions reinvested ............................................. 14,419 1,738
Payment for shares redeemed .......................................... (63,853) (61,999)
-------- --------
Increase (decrease) in net assets from fund share transactions .... 28,392 (3,784)
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS ................................... 82,064 (44,274)
NET ASSETS
Beginning of Period .................................................. 140,958 185,232
-------- --------
End of Period ........................................................ $223,022 $140,958
======== ========
Analysis of fund share transactions:
Sold ................................................................. 5,839 4,608
Reinvested ........................................................... 970 156
Redeemed ............................................................. (4,848) (5,071)
-------- --------
Net increase (decrease) in fund shares outstanding ...................... 1,961 (307)
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Small/Mid Cap Growth Fund
--------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Net Assets Value at Beginning of Period ................. $ 10.98 $ 14.09 $ 13.70 $ 14.03 $ 15.94
Income from Investment Operations:
Net Investment Loss .................................. (0.02) (0.09) (0.06) (0.02) (0.07)
Net Realized and Unrealized Gain (Loss) on
Investments(a) .................................... 5.15 (2.88) 0.45 1.27 0.74
-------- -------- -------- -------- --------
Total From Investment Operations ..................... 5.13 (2.97) 0.39 1.25 0.67
Less Distributions:
Distribution from Net Realized Gains on
Investments ....................................... (1.04) (0.14) (1.43) (2.41)
Distribution from Excess of Net Investment Income/
Gains ............................................. (0.15)
Distribution from Capital Paid-in .................... (0.17)
-------- -------- -------- -------- --------
Total Distributions .................................. (1.04) (0.14) (1.58) (2.58)
-------- -------- -------- -------- --------
Net Assets Value at End of Period ....................... $ 15.07 $ 10.98 $ 14.09 $ 13.70 $ 14.03
======== ======== ======== ======== ========
Total Investment Return(b) .............................. 46.87% (21.13)% 2.83% 9.25% 5.15%
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets .... 1.06%(d) 1.07%(c) 0.91%(c) 0.85% 0.85%
Ratio of Net Investment Loss to Average Net Assets ... (0.40)% (0.72)% (0.40)% (0.20)% (0.27)%
Portfolio Turnover Rate .............................. 124.21% 130.01% 113.73% 103.19% 172.58%
Net Assets End of Period (000s Omitted) ................. $223,022 $140,958 $185,232 $190,010 $181,931
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made, the annual expense ratio would have been 1.07% and 0.91% for the
years ended December 31, 2002 and 2001, respectively.
(d) The Fund is required to calculate an expense ratio without taking into
consideration any expense reductions related to expense offset
arrangements.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL/MID CAP GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- -------
(000's)
COMMON STOCK
Aerospace & Defense - 0.2%
Precision Castparts Corp ............................... 10,700 $ 486
Air Freight & Couriers - 0.7%
EGL, Inc. * ............................................ 95,500 1,677
Airlines - 0.7%
JetBlue Airways Corp. * ................................ 55,600 1,475
Auto Components - 1.0%
Lear Corp. * ........................................... 37,000 2,269
Banks - 0.9%
Hibernia Corp. - Cl. A ................................. 88,300 2,076
Beverages - 1.2%
Constellation Brands, Inc. - Cl. A * ................... 79,300 2,611
Biotechnology - 2.9%
Abgenix, Inc. * ........................................ 70,500 878
Cephalon, Inc. * ....................................... 28,300 1,370
CV Therapeutics, Inc. * ................................ 72,400 1,061
Gene Logic, Inc. * ..................................... 71,000 369
Human Genome Sciences, Inc. * .......................... 65,000 861
Incyte Pharmacuticals, Inc. ............................ 122,000 835
Vertex Pharmaceuticals, Inc. * ......................... 100,000 1,023
-------
6,397
Commercial Services & Supplies - 6.0%
Checkfree Corp. * ...................................... 52,000 1,438
Cooper Cos, Inc ........................................ 78,600 3,704
ITT Educational Services, Inc. * ....................... 63,200 2,969
Plexus Corp. * ......................................... 36,000 618
The Bisys Group, Inc. * ................................ 144,100 2,144
University of Phoenix Online * ......................... 34,900 2,406
-------
13,279
Communications Equipment - 6.6%
3Com Corp .............................................. 127,000 1,038
Andrew Corp. * ......................................... 118,200 1,360
Brocade Communications Systems, Inc. * ................. 278,100 1,607
Comverse Technology, Inc. * ............................ 159,100 2,799
Emulex Corp. * ......................................... 28,000 747
Extreme Networks, Inc. * ............................... 105,000 757
Foundry Networks, Inc. * ............................... 28,000 766
Tekelec, Inc. * ........................................ 207,400 3,225
Utstarcom, Inc. * ...................................... 64,800 2,402
-------
14,701
Computers & Peripherals - 2.1%
Cray, Inc. * ........................................... 120,000 1,192
Maxtor Corp. * ......................................... 110,000 1,221
Network Appliance, Inc. * .............................. 40,000 821
Western Digital Corp. * ................................ 124,500 1,468
-------
4,702
Containers & Packaging - 2.5%
Pactiv Corp. * ......................................... 234,100 5,595
Diversified Financials - 6.7%
Countrywide Credit Industries, Inc. * .................. 57,933 $ 4,394
E*TRADE Group, Inc. * .................................. 259,000 3,277
Federated Investments, Inc. - Cl. B .................... 135,700 3,984
Legg Mason, Inc. * ..................................... 43,500 3,357
-------
15,012
Diversified Telecommunication Services - 0.7%
Nextel Communications, Inc. - Cl. A * .................. 53,000 1,487
Electrical Equipment - 2.8%
American Power Conversion .............................. 146,100 3,572
Benchmark Electronics, Inc. * .......................... 75,449 2,627
-------
6,199
Electronic Equipment & Instruments - 8.2%
Asyst Technologies, Inc. * ............................. 71,000 1,232
Fisher Scientific International, Inc ................... 129,900 5,374
Ingram Micro, Inc. - Cl. A * ........................... 161,800 2,573
Sanmina Corp. * ........................................ 264,600 3,336
Waters Corp. * ......................................... 171,400 5,684
-------
18,199
Food Products - 1.5%
Hain Celestial Group, Inc. * ........................... 140,100 3,252
Health Care Equipment & Supplies - 6.7%
Advanced Medium Optics, Inc. * ......................... 89,700 1,763
Celgene Corp. * ........................................ 25,000 1,126
Cytyc Corp. * .......................................... 65,000 894
Diagnostic Products Corp ............................... 130,000 5,968
Edwards Lifesciences Corp. * ........................... 175,300 5,273
-------
15,024
Health Care Providers & Services - 7.9%
Albany Molecular Research, Inc. * ...................... 266,200 3,998
Caremark Rx, Inc. * .................................... 111,100 2,814
Healthnet, Inc. * ...................................... 99,400 3,251
Oxford Health Plans, Inc. * ............................ 63,200 2,749
Triad Hospitals, Inc. * ................................ 143,700 4,781
-------
17,593
Hotels Restaurants & Leisure - 1.9%
Krispy Kreme Doughnuts, Inc. * ......................... 58,700 2,148
Shuffle Master, Inc. * ................................. 60,300 2,088
-------
4,236
Insurance - 4.1%
Ambac Financial Group, Inc ............................. 35,300 2,450
Arthur J. Gallagher & Co ............................... 206,200 6,699
-------
9,149
Internet & Catalog Retail - 0.4%
1-800 Flowers.com., Inc. - Cl. A * ..................... 74,000 818
Internet Software & Services - 1.5%
Dendrite International, Inc. * ......................... 119,200 1,868
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
SMALL/MID CAP GROWTH FUND
Market
Name of Issuer Shares Value
-------------- ------- --------
(000's)
COMMON STOCK - Continued
Internet Software & Services - Continued
DoubleClick, Inc. .................................... 35,000 $ 358
F5 Networks, Inc. * .................................. 38,000 954
Internet Security System, Inc. * ..................... 15,000 282
--------
3,462
IT Consulting & Services - 0.3%
Trizetto Group, Inc. ................................. 93,000 600
Media - 0.1%
Sirius Satellite Radio, Inc. * ....................... 100,000 316
Multiline Retail - 2.5%
Drugstore.Com, Inc. * ................................ 130,000 716
Pacific Sunwear of California, Inc. * ................ 228,700 4,830
--------
5,546
Oil & Gas - 3.6%
Chesapeake Energy Corp. .............................. 408,500 5,548
Swift Energy Co. * ................................... 151,400 2,551
--------
8,099
Pharmaceuticals - 2.9%
Biovail Corp. * ...................................... 89,300 1,919
King Pharmaceuticals, Inc. * ......................... 154,700 2,361
OSI Pharmaceuticals, Inc. * .......................... 17,000 547
Watson Pharmaceuticals, Inc. * ....................... 37,500 1,725
--------
6,552
Semiconductor Equipment & Products - 5.1%
Cabot Microelectronics Corp. ......................... 43,500 2,132
Fairchild Semiconductor Corp. - Cl. A* ............... 164,500 4,108
Genesis Microchip, Inc. * ............................ 50,000 902
Integrated Circuit Systems, Inc. * ................... 29,300 835
International Rectifier Corp. * ...................... 38,200 1,887
Skyworks Solutions, Inc .............................. 100,000 870
Varian Semiconductor Equipment
Associates, Inc. .................................. 15,000 655
--------
11,389
Software - 3.1%
Cadence Design Systems, Inc. * ....................... 123,900 2,228
Manhattan Associates, Inc. * ......................... 81,000 2,239
Red Hat, Inc. * ...................................... 60,000 1,126
Siebel Systems, Inc. * ............................... 90,800 1,259
--------
6,852
Specialty Retail - 8.9%
AC Moore Arts & Crafts, Inc. * ....................... 41,000 789
Chicos Fas, Inc. * ................................... 134,300 4,962
Michaels Stores, Inc. * .............................. 133,500 5,901
O'Reilly Automotive, Inc. * .......................... 123,300 4,730
PetsMart, Inc. * ..................................... 148,100 3,525
--------
19,907
Textiles & Apparel - 3.8%
Coach, Inc. * ........................................ 63,300 2,390
Textiles & Apparel - Continued
Columbia Sportswear Co. * ............................ 59,600 $ 3,248
Liz Claiborne, Inc. * ................................ 80,100 2,840
--------
8,478
Trading Companies & Distributors - 1.7%
CDW Corp. ............................................ 26,300 1,519
Fastenal Co. * ....................................... 44,400 2,217
--------
3,736
--------
TOTAL COMMON STOCK- 99.2% 221,174
Par
Value
-------
(000's)
INVESTMENT COMPANIES HELD
AS COLLATERAL ON LOANED
SECURITIES - 15.0%
State Street Navigator Securities Lending
Portfolio ......................................... $33,560 33,560
SHORT-TERM INVESTMENTS - 1.9%
Investment in joint trading account
(Note B)
1.061% due 01/02/04 ............................... 4,198 4,198
------- --------
TOTAL INVESTMENTS- ................................ 116.1% 258,932
Payables, less cash and receivables- ................. (16.1)% (35,910)
------- --------
NET ASSETS- .................................... 100.0% $223,022
======= ========
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Small/Mid Cap Growth Fund (the "Fund") is a diversified series
of John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. 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
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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%,due 01/02/04 20,000
Cargill Asia Pacific, 1.05%,due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 $ 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$ 838 1.65% $--
Securities lending: The Fund has entered into an agreement with SSBT to
lend its securities to certain qualified brokers who pay the Fund's negotiated
lender fees. This loan is 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, the Fund 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, 2003, the market
value of the securities loaned and the market value of the collateral for the
Fund was as follows:
Value of Securities Loaned Value of Collateral
- -------------------------- -------------------
$32,264 $33,560
Financial futures contracts: The Fund 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 Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
Federal income taxes: The Fund 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, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
In addition, from the period November 1, 2003, through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
Between
$50 Million and Excess Over
First $50 Million $200 Million $200 Million
- ----------------- --------------- ------------
1.00% 0.95% 0.90%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, there were no reimbursements paid to the
Fund.
The Fund entered into a commission recapture program, which enables it to
pay some of its operational expenses by recouping a portion of the commissions
it pays to a broker that is not a related party of the Fund. Expenses paid
through this program may include costs of custodial, transfer agency or
accounting services. The impact of this arrangement was a reduction of $10.
John Hancock has entered into a Sub-Advisory Agreement with Wellington
Management Company, LLP, with respect to the Fund. Wellington Management
Company, LLP is an affiliate of John Hancock, and under its supervision, is
responsible for the day-to-day investment management of the Fund.
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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$227,857 $213,917
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, commercial paper and collateral for
securities lending) and their respective gross unrealized appreciation and
depreciation for Federal income tax purposes at December 31, 2003 were as
follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$228,422 $35,759 $(5,249) $30,510
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax return.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $-- $30,510
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $10,380 $4,039 --
2002 -- -- $1,738
Included in the Fund's 2003 distributions from ordinary income is $5,111 in
excess of investment company taxable income, which in accordance with applicable
US tax law, is taxable to shareholders as ordinary income distributions.
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ----------------------------------- ---------------------------- ------------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ----------------------------------- ---------------------------- ----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- ----------------------------------- ---------------------------- ------------------------------------
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Small/Mid Cap Growth Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Small/Mid Cap Growth Fund of John Hancock Variable Series Trust I at December
31, 2003, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
Inception: May 1, 2003
- --------------------------------------------------------------------------------
Total Return Bond Fund
Pacific Investment Management Company LLC William H. Gross
- --------------------------------------------------------------------------------
.. Since May 1st (inception date), the Fund returned 1.99%, outperforming its
benchmark, the Lehman Brothers Aggregate Bond Index.
.. The Fund outperformed its benchmark from several key decisions factors,
including sector allocation, security selection, and yield curve
positioning.
.. Sector allocation decisions benefited performance from an exposure to
emerging market bonds, while both mortgages and inflation index bonds also
contributed. An underweight to corporate bonds relative to the index
detracted on a relative basis.
.. The Fund's exposure to emerging market bonds and governments (including
inflation-indexed bonds) were the primary contributors to absolute
performance.
.. The manager uses proprietary research, economic analysis and quantitative
tools seeking to add value across all key decisions (duration, sector,
security and derivatives) and opportunistically invests broadly across key
fixed income sectors including high yield and non-U.S. sectors.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 5/1/03
(Fund Inception Date)
Total Return Lehman Brothers
Bond Aggregate Bond Index
------------ --------------------
5/1/2003 10,000.00 10,000.00
5/31/2003 10,199.53 10,186.00
6/30/2003 10,165.07 10,165.63
7/31/2003 9,822.51 9,824.06
8/31/2003 9,898.32 9,888.90
9/30/2003 10,161.31 10,150.96
10/31/2003 10,084.14 10,056.55
11/30/2003 10,101.97 10,080.69
12/31/2003 10,199.07 10,183.51
Value on 12/31/02:
- ------------------
$10,199 Total Return Bond
$10,184 Lehman Brothers Aggregate Bond Index
MORNINGSTAR
CATEGORY+:
.. Intermediate
Term Bond
MORNINGSTAR
RISK+:
.. (VL/VUL) N/A
.. (VA) N/A
MORNINGSTAR
RATING+:
.. (VL/VUL) N/A
.. (VA) N/A
TOP TEN HOLDINGS (as of December 31, 2003)
% of
Assets
------
U.S. Treasury 47.2%
Federal National Mortgage Assoc. 14.9%
Federal Republic of Germany 13.7%
CWMBS, Inc. 6.6%
AT&T Corp. 2.0%
General Motors Corp. 1.4%
Ford Motor Credit Co. 1.4%
WAMU 1.3%
Time Warner, Inc. 1.1%
France Telecom SA 0.8%
AVERAGE ANNUAL TOTAL RETURNS*
Lehman Brothers
Total Return Aggregate Bond
Bond Fund Index
------------ ---------------
Since Inception (5/1/03) 1.99% 1.84%
FUND COMPOSITION (as of December 31, 2003)(1)
% of
Assets
------
Credit Quality
AAA Government/Agency 69.43%
AA 0.65%
A 1.67%
BBB 7.51%
BB 0.83%
B 0.50%
Not Rated/Other 19.40%
Weighted Average Yield 3.80%
(1) Statistics are based on bond assets only, excluding cash.
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. 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 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.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: Morningstar Inc. Data as of 12/31/03, this fund is not yet rated.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost .................................... $30,305
Net unrealized appreciation of investments ....................... 253
Short-term investments at value .................................. 16,464
-------
Total investments ........................................... 47,022
Cash ............................................................. 464
Foreign currency at value (cost $31) ............................. 32
Receivable for:
Fund shares sold .............................................. 16
Interest ...................................................... 393
-------
Total assets ..................................................... 47,927
-------
LIABILITIES
Payables for:
Investments purchased ......................................... 5,853
Fund shares purchased .........................................
Net payable for swap contracts ................................ 31
Written options at value (premium received $35) ............... 32
Unrealized depreciation on forward currency
contracts .................................................. 1
Other liabilities ............................................. 4
-------
Total liabilities ................................................ 5,921
-------
Net assets ....................................................... $42,006
=======
Shares of beneficial interest outstanding ........................ 4,186
-------
Net asset value per share ........................................ $ 10.04
=======
Composition of net assets:
Capital paid-in ............................................... $41,884
Accumulated net realized loss on investments,
futures and foreign currency transactions .................. (31)
Undistributed net investment income ........................... 4
Net unrealized appreciation (depreciation) of:
Investments ................................................ 253
Swap contracts ............................................. (31)
Written Option contracts ................................... 3
Translation of assets and liabilities in foreign
currencies .............................................. (76)
-------
Net assets ....................................................... $42,006
=======
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Period from May 1, 2003 (Commencement of
Operations) to December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
INVESTMENT INCOME
Interest ........................................................ $570
----
Total investment income ............................................... 570
----
EXPENSES
Investment advisory fee ......................................... 150
Auditors fees ................................................... 2
Custodian fees .................................................. 10
Legal fees ...................................................... 1
Printing & mailing fees ......................................... 2
Trustees' fees .................................................. 1
----
Total expenses ........................................................ 166
----
Net investment income ................................................. 404
----
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ..................................................... 130
Foreign currency transactions ................................... (10)
Options ......................................................... 22
Change in unrealized appreciation (depreciation) on:
Investments ..................................................... 253
Swap contracts .................................................. (31)
Options ......................................................... 3
Translation of assets and liabilities in foreign
currencies ................................................... (76)
----
Net realized and unrealized gain ...................................... 291
----
Net increase in net assets resulting from operations .................. $695
====
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Period from
May 1, 2003 (*)
to December
31, 2003
---------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income ........................................... $ 404
Net realized gain ............................................... 142
Change in net unrealized appreciation ........................... 149
-------
Net increase in net assets resulting from operations 695
Distributions to shareholders from:
Net investment income ........................................... (400)
Realized gains .................................................. (173)
-------
Decrease in net assets resulting from distributions .......... (573)
Capital contributions
From fund share transactions:
Proceeds from shares sold ....................................... 43,263
Distributions reinvested ........................................ 573
Payment for shares redeemed ..................................... (1,952)
-------
Increase in net assets from fund share transactions .......... 41,884
-------
NET INCREASE IN NET ASSETS ......................................... 42,006
NET ASSETS
Beginning of Period ............................................. -------
End of Period ................................................... $42,006
=======
Analysis of fund share transactions:
Sold ............................................................ 4,324
Reinvested ...................................................... 57
Redeemed ........................................................ (195)
-------
Net increase in fund shares outstanding ............................ 4,186
=======
(*) Commencement of operations.
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
- --------------------------------------------------------------------------------
Selected data for each share of beneficial interest outstanding throughout the
period indicated:
Total Return
Bond Fund
------------
Period from
May 1, to
December 31,
2003(e)
------------
Net Assets Value at Beginning of Period .................. $ 10.00
Income from Investment Operations:
Net Investment Income ................................. 0.12
Net Realized and Unrealized Gain on Investments(a) .... 0.08
-------
Total From Investment Operations ...................... 0.20
Less Distributions:
Distribution from Net Investment Income ............... (0.12)
Distribution from Net Realized Gains on Investments ... (0.04)
-------
Total Distributions ................................... (0.16)
-------
Net Assets Value at End of Period ........................ $ 10.04
=======
Total Investment Return(b) ............................... 1.99%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net Assets ..... 0.77%(d)
Ratio of Net Investment Income to Average Net Assets... 1.89%(d)
Portfolio Turnover Rate ............................... 537.79%(c)
Net Assets End of Period (000s Omitted) .................. $42,006
(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 fluctuating
market values of the portfolio.
(b) The performance 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) Commencement of investment operations.
SCHEDULE OF INVESTMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS
Auto Loan - 1.5%
Ford Motor Credit Co.
7.25% due 10/25/11 ................................... $ 400 $ 434
General Motors Acceptance Corp.
6.875% due 08/28/12 .................................. 200 215
-------
649
Automobiles - 0.5%
General Motors Corp. - Sr. Debs.
8.25% due 07/15/23 ................................... 200 227
Banks - 0.9%
WAMU - CTF Cl. A
1.0% due 02/27/34 .................................... 379 385
Diversified Financials - 0.6%
CIT Group, Inc. - Sr. Notes
7.75% due 04/02/12 ................................... 200 236
Diversified Telecommunication Services - 3.1%
AT&T Broadband Corp. - Notes
8.375% due 03/15/13 .................................. 200 245
AT&T Corp. - Sr. Notes
7.8% due 11/15/11 .................................... 150 173
Bellsouth Corp. - Notes
6.0% due 10/15/11 .................................... 150 163
France Telecom SA - Notes
9.25% due 03/01/11 ................................... 200 240
Sprint Capital Corp. - Notes
8.375% due 03/15/12 .................................. 200 233
Verizon Global Funding Corp. - Notes
7.25% due 12/01/10 ................................... 200 230
-------
1,284
Electric Utilities - 0.3%
Progress Energy, Inc. - Sr. Notes
6.85% due 04/15/12 ................................... 100 111
Electric/Gas - 0.6%
Dominion Resources, Inc. - Notes
5.7% due 09/17/12 .................................... 150 158
PSEG Power LLC - Sr. Notes
6.95% due 06/01/12 ................................... 100 113
-------
271
Finance - 0.6%
Household Financial Corp. - Notes
4.125% due 12/15/08 .................................. 100 101
Rabobank Capital Fund II - Notes Ser.
144A (a)
5.26% due 12/31/49 ................................... 100 100
UFJ Finance Aruba - GTD Notes
6.75% due 07/15/13 ................................... 50 53
-------
254
Food Products - 0.3%
Kraft Foods, Inc. - Notes
6.25% due 06/01/12 ................................... $ 100 $ 109
Foreign Governmental - 11.4%
Federal Republic of Germany
4.5% due 07/04/09 .................................... 3,200 4,192
Republic of Brazil - Ser. L
2.125% due 04/15/06 .................................. 214 211
Republic of Peru - Bonds
9.125% due 02/21/12 .................................. 125 138
United Mexican States
6.375% due 01/16/13 .................................. 230 239
-------
4,780
Hotels Restaurants & Leisure - 0.5%
MGM Mirage, Inc. - Ser. B
6.0% due 10/01/09 .................................... 200 206
Media - 0.8%
AOL Time Warner, Inc. - Notes
6.875% due 05/01/12 .................................. 300 338
Municipal - 0.5%
De Kalb County Georgia Water & Sewage
- Ser. A
5.0% due 10/01/35 .................................... 200 205
Paper & Forest Products - 0.2%
Weyerhaeuser Co. - Notes
6.125% due 03/15/07 .................................. 75 81
U.S. Government Agencies - 11.4%
Federal Home Loan Mortgage Corp. -
Bonds Ser. 2559 Cl. PB
5.5% due 08/15/30 .................................... 219 223
Federal National Mortgage Assoc. - Bonds
5.0% due 12/25/17 .................................... 1,500 1,529
5.5% due 02/01/32 .................................... 595 603
5.5% due 10/01/32 .................................... 300 304
5.5% due 03/01/33 .................................... 828 840
5.5% due 08/01/33 .................................... 969 983
5.5% due 12/01/33 .................................... 307 311
-------
4,793
U.S. Governmental - 34.3%
U.S. Treasury - Bills
1.02% due 04/29/04 ................................... 1,200 1,196
U.S. Treasury - Bonds
7.875% due 02/15/21 .................................. 900 1,197
U.S. Treasury - Notes
3.0% due 07/15/12 .................................... 514 561
3.125% due 10/15/08 .................................. 3,400 3,394
3.875% due 01/15/09 .................................. 1,128 1,274
4.375% due 08/15/12 .................................. 3,200 3,264
5.0% due 02/15/11 .................................... 3,300 3,544
-------
14,430
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
TOTAL RETURN BOND FUND
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
PUBLICLY-TRADED BONDS - Continued
Whole Loan CMOs - 4.8%
CWMBS, Inc. - Ser. 1999-9 Cl. A1
6.5% due 08/25/29 .................................. $ 176 $ 183
CWMBS, Inc. - Ser. 2003-J14 Cl. 2A1
6.25% due 12/25/33 ................................. 847 896
CWMBS, Inc. - Ser. 2003-R4 Cl. 2A
144A (a)
6.5% due 01/25/34 .................................. 900 944
-------
2,023
Wireless Telecommunications Services - 0.4%
AT&T Wireless Group - Notes
8.125% due 05/01/12 ................................ 150 176
-------
TOTAL PUBLICLY-TRADED BONDS- ........................ 72.7% 30,558
COMMERCIAL PAPER
Banks - 3.3%
Danske Corp.
1.075% due 02/23/04 ................................ 500 499
Lloyd's Bank plc
1.06% due 01/22/04 ................................. 400 400
1.065% due 02/26/04 ................................ 100 100
Rabobank USA Financial Corp.
1.075% due 02/24/04 ................................ 400 399
-------
1,398
Finance - 9.5%
ABN Amro America Finance
1.07% due 01/26/04 ................................. 1,000 999
CBA Delaware Finance
1.07% due 01/20/04 ................................. 1,000 999
General Electric Capital Corp.
1.12% due 02/17/04 ................................. 300 300
Genenral Electric Credit Capital Services
1.09% due 04/14/04 ................................. 400 399
HBOS Treasury Services plc .........................
1.10% due 02/25/04 ................................. 100 100
1.10% due 04/16/04 ................................. 400 399
1.11% due 03/18/04 ................................. 300 299
UBS Finance Delaware LLC ...........................
1.075% due 02/12/04 ................................ 100 100
1.085% due 02/17/04 ................................ 400 399
-------
3,994
U.S Government Agencies - 15.7%
Federal Home Loan Mortgage Corp. -
Disc. Notes
1.00% due 03/15/04 ................................. 100 100
1.06% due 01/15/04 ................................. 1,200 1,200
1.07% due 02/19/04 ................................. 900 899
1.26% due 02/26/04 ................................. 900 898
U.S Government Agencies - Continued
Federal National Mortgage Assoc. - Disc.
Notes
1.00% due 02/04/04 ................................. $ 100 $ 100
1.07% due 01/20/04 ................................. 400 400
1.075% due 03/17/04 ................................ 1,600 1,596
1.075% due 05/04/04 ................................ 1,100 1,097
1.135% due 03/03/04 ................................ 300 299
-------
6,589
U.S. Governmental - 10.7%
U.S. Treasury - Bills
1.01% due 05/27/04 ................................. 1,600 1,593
1.025% due 05/06/04 ................................ 1,400 1,395
1.031% due 06/03/04 ................................ 100 100
1.04% due 05/13/04 ................................. 1,400 1,395
-------
4,483
-------
TOTAL COMMERCIAL PAPER- ......................... 39.2% 16,464
------ -------
TOTAL INVESTMENTS- .............................. 111.9% 47,022
Payables, less cash and receivables- ............ (11.9)% (5,016)
------ -------
NET ASSETS- .................................. 100.0% $42,006
====== =======
(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, 2003, securities aggregated
$1,044 or 2.5% of net assets of the Portfolio.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Total Return Bond Fund (the "Fund"), which commenced
operations on May 1, 2003, is a diversified series of John Hancock Variable
Series Trust I (the "Trust"), an open-end investment management company
registered under the Investment Company Act of 1940. The Trust is organized as a
Massachusetts business trust and consists of thirty different funds as of
December 31, 2003. The results of this Fund are included in this report. The
results of the other Funds in the Trust are presented under separate cover. 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 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 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: 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.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, 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 Fund may enter into repurchase agreements which
are contracts under which the 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). The 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. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint trading account: Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the order permits the Fund 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 December 31, 2003 are as follows:
Name of Issuer Market Value
- -------------- ------------
Alpine Securitization Corp., 1.12%, due 01/07/04 $29,995
Alpine Securitization Corp., 1.12%, due 01/06/04 19,998
Barclays US Fund, 1.10%, due 01/05/04 29,997
Cargill Asia Pacific, 1.06%, due 01/02/04 20,000
Cargill Asia Pacific, 1.05%, due 01/02/04 25,000
Danske Corp., 1.07%, due 01/05/04 49,996
Greenwich CPL Holding Funding, 0.95%, due 01/02/04 17,654
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Name of Issuer Market Value
- -------------- ------------
Merrill Lynch & Co., Inc., 1.04%, due 01/05/04 $ 18,838
Merrill Lynch & Co., Inc., 1.05%, due 01/06/04 31,156
Mortgage Int. Networking, 0.98%, due 01/02/04 50,000
Three Pillars Funding Corp., 1.08%, due 01/06/04 49,994
UBS Finance LLC, 1.02%, due 01/02/04 3,917
UBS Finance LLC, 1.05%, due 01/02/04 4,088
UBS Finance LLC, 0.96%, due 01/02/04 35,000
--------
Joint Trading Account Totals $385,633
========
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 Fund. 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 Fund does 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 debt securities: The Fund accretes discount and
amortizes 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 the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is 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 Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the Trust's record keeper and custodian and the Bank of
New York. These agreements enable the Fund to participate in an unsecured line
of credit, which permits borrowings up to $125 and $75 million, respectively.
Interest is charged to the Fund, based on its borrowing. In addition, a
commitment fee is charged to the Fund based on the average daily unused portion
of the line of credit and is allocated among the participating Funds in the
Trust. Interest expense paid under the line of credit is included under the
caption "Other fees" in the Statement of Operations. For the year ended December
31, 2003, the Fund had no bank borrowings.
Financial futures contracts: The Fund 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
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
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 Chicago Board of
Trade or U.S. commodities exchange. Daily adjustments, called variation margin,
arising from this "mark to market", are recorded by the Fund as unrealized gains
or losses.
When the contracts are closed, the Fund recognizes a gain or a 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 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, 2003, the Fund had no open
financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's 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 December 31, 2003, the Fund 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
Currency Purchased Covered by Contract Expiration Month Gain (Loss)
- ------------------ ------------------- ---------------- -----------
Japanese Yen 58 January 04 $--
Currency Sold
Euro 31 January 04 (1)
---
$(1)
===
Options: The Fund may use option contracts to manage its exposure to the
bond market and to fluctuations in interest rates and currency values. Option
contracts tend to increase or decrease the Fund's exposure to the underlying
instrument or hedge other fund investments.
When the Fund purchases an option, the premium paid by the Fund is included
in the Fund's Statement of Assets and Liabilities as an investment and
subsequently "marked to market" to reflect the option's current market value.
Purchased options are valued at the last sale price on the market on which they
are principally traded. If the purchased option expires, the Fund realizes a
loss in the amount of the premium. If the Fund enters into a closing sale
transaction, it realizes a gain or loss, depending on whether the proceeds from
the sale are greater or less than the cost of the option. If the Fund exercises
a call option, the cost of the securities acquired by exercising the call is
increased by the premium paid to buy the call. If the Fund exercises a put
option, it realizes a gain or loss from the sale of the underlying security and
the proceeds from such sale are decreased by the premium originally paid. The
risk associated with purchasing options is limited to the premium originally
paid.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
When the Fund writes an option, the premium received by the Fund is
presented in the Fund's Statement of Assets and Liabilities as an asset and an
equivalent liability. The amount of the liability is subsequently "marked to
market" to reflect the current market value of the option written. Written
options are valued at the last sale price or, in the absence of a sale, the last
offering price on the market on which they are principally traded. If an option
expires on its stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the option was written)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a written option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received. If a written put option is exercised, the amount of the premium
originally received reduces the cost of the security which the Fund purchases
upon exercise of the option.
The risk in writing a call option is that the Fund relinquishes the
opportunity to profit if the market price of the underlying security increases
and the option is exercised. In writing a put option, the Fund assumes the risk
of incurring a loss if the market price of the underlying security decreases and
the option is exercised. In addition, there is a risk the Fund may not be able
to enter into a closing transaction because of an illiquid secondary market, or
if the counterparties do not preform under the contracts' terms.
As of December 31, 2003, the Fund had open written options as follows:
Open Strike Expiration Market
Contracts Price Month Value
--------- ------ ---------- ------
OTC EWPO 3ML 6.0 (Put) 2,000 6.0 October 04 $(15)
OTC EWPO 3ML 3.8 (Call) 2,000 3.8 October 04 (16)
----
$(31)
====
Swap Agreements: The Fund may invest in swap agreements which involve the
exchange of cash payments based on the specified terms and conditions of such
agreements. A swap is an agreement to exchange the return generated by one
investment for the return generated by another instrument. The value of each
swap is determined by the counterparty to the swap agreement using a methodology
which discounts the expected future cash receipts or disbursements related to
the swap. The Fund may also enter into interest rate swap agreements which
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, (e.g., an exchange of floating rate
payments with respect to a notional amount of principal). Interest rate swaps
are "marked-to-market" daily. Net market value is reported as an asset or a
liability in the Statement of Assets and Liabilities. The cash paid or received
on a swap is recognized as income or expense when such a payment is paid or
received.
Entering into swap agreements involves, to varying degrees, elements of
credit risk, market risk and interest rate risk in excess of the amount
recognized in the Statement of Assets and Liabilities. Such risks involve the
possibility that there is not a liquid market for these agreements, that the
counterparty to the agreements may default on its obligation to perform and that
there may be unfavorable changes in market conditions or interest rates.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Swap agreements which were open for the year ended December 31, 2003 are
summarized as follows:
Net Unrealized
Appreciation
Par Value Interest Rate Swaps: Counter Party (Depreciation)
- --------- ----------------------------------------------- --------------- --------------
3,600 To make or receive semi-annual pay- Morgan Stanley $ (7)
ments through 6/16/2009 based on the difference
between (A) the fixed rate of 4.00% and (B)
floating rate of 3 Month LIBOR, adjusted
every 3 months.
400 To make or receive semi-annual pay- Bank of America (1)
ments through 6/16/2009 based on the difference
between (A) the fixed rate of 4.00% and (B)
floating rate of 3 Month LIBOR, adjusted
every 3 months.
200,000 To make or receive semi-annual pay- Morgan Stanley (50)
(JPY) ments through 6/18/2013 based on the
difference between (A) the fixed rate of
1.645% and (B) floating rate of 6 Month LIBOR,
adjusted every 6 months.
4,600 To make or receive semi-annual pay- Merrill Lynch 27
(Euro) ments through 3/15/2007 based on the
difference between (A) the fixed rate of 4.00%
and (B) floating rate of 6 Month LIBOR,
adjusted every 6 months.
Credit Default Swaps:
300 To make quarterly fixed coupon pay- UBS --
ments through 3/6/2004 based on the annual
fixed rate of 0.5%. In the event of a
predefined "credit event notice" of the
Federative Republic of Brazil 14.5%, 10/15/2009
Note, the Fund will receive amounts specified
under the terms of the swap agreement. ----
$(31)
====
Federal income taxes: The Fund 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, 2003, the Fund had no capital loss carryforwards on a
tax basis to be applied against any future taxable gains.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred approximately $31 in net realized capital losses. As permitted
by tax regulations, the Fund intends to elect to defer these losses and treat
them as arising in the fiscal year ending on December 31, 2004.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The 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 5, 2003, 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 rate on an annual basis of the
Fund's net assets:
Between
$250 Million and Excess Over
First $250 Million $500 Million $500 Million
- ------------------ ---------------- ------------
0.70% 0.68% 0.65%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the period ended December 31, 2003, there were no reimbursements paid to the
Fund.
John Hancock has entered into a Sub-Advisory Agreement with PIMCO, with
respect to the Fund. PIMCO is an affiliate of John Hancock, and under its
supervision, is responsible for the day-to-day investment management of the
Fund.
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.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(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 the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$118,953 $88,598
As of December 31, 2003, transactions for written options were as follows:
Contracts Premium ($)
--------- -----------
Beginning of period -- --
Options opened 6,000 60
Options closed/expired (2,000) (25)
- ---------------------- ----- ---
End of period 4,000 35
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$46,768 $11,317 $(11,064) $253
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss and sales of certain foreign
currency denominated debt securities. Additionally, as a result, net investment
income (loss) and net realized gain (loss) on investment transactions for a
reporting period may differ significantly from distributions during such period.
Accordingly, the Fund may periodically make reclassifications among certain of
its capital accounts without impacting the net asset value of the Fund.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$3 $-- $-- $253
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $573 $-- $--
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
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 Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Disinterested Trustees--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
Trustee Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, President Senior Vice President, Signator
John Hancock Place and Trustee Brokerage, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- ---------------------------- ------------------------------------
Janet Wang (age 35) Assistant Compliance Officer Compliance Specialist, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
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 schedule of investments, of the Total Return Bond Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statements of operations, of
changes in net assets and the financial highlights for the period from May 1,
2003 (commencement of operations) to December 31, 2003. 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 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. Our procedures included confirmation of securities
owned as of December 31, 2003, 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 the
Total Return Bond Fund of John Hancock Variable Series Trust I at December 31,
2003, the results of its operations the changes in its net assets and the
financial highlights for the period from May 1, 2003 (commencement of
operations) to December 31, 2003, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
This page intentionally left blank
This page intentionally left blank
Officers and Trustees Investment Adviser
Michele G. Van Leer, John Hancock Life Insurance Company
Chairman of the Board of Trustees John Hancock Place
Kathleen F. Driscoll, P.O. Box 111
President and Vice Chairman Boston, MA 02117
of the Board of Trustees
Elizabeth G. Cook, Trustee
Reverend Diane C. Kessler, Trustee
Hassell H. McClellan, Trustee Independent Auditors
Robert F. Verdonck, Trustee Ernst & Young LLP
Karen Q. Visconti, Secretary 200 Clarendon Street
Arnold R. Bergman, Assistant Secretary Boston, MA 02116
Raymond F. Skiba, Treasurer
Gladys C. Millan, Assistant Treasurer
Ronald J. Bocage, Chief Legal Officer
Jude A. Curtis, Compliance Officer
Janet Wang, Assistant Compliance Officer
Sub-Investment Advisers
Capital Guardian Trust Company Pacific Investment Management Company LLC
Los Angeles, CA 90071 Newport Beach, CA 92660
Declaration Management & Research LLC RREEF America LLC
McLean, VA 22102 Chicago, IL 60611
Fidelity Management & Research Company SSgA Funds Management, Inc.
Boston, MA 02109 Boston, MA 02110
Goldman Sachs Asset Management, LP Standish Mellon Asset
New York, NY 10005 Management Company LLC
Pittsburgh, PA 15258
Independence Investment LLC T. Rowe Price Associates, Inc.
Boston, MA 02109 Baltimore, MD 21202
John Hancock Advisers, LLC T. Rowe Price International, Inc.
Boston, MA 02199 Baltimore, MD 21202
Morgan Stanley Investment Management Inc. Wellington Management Company, LLP
New York, NY 10020 Boston, MA 02109
The John Hancock Variable Series Trust I consists of funds used as investment
options for various John Hancock variable life and variable annuity contracts.
Investors are not able to invest directly in the John Hancock Variable Series
Trust I.
If the total investment return for any fund for any given year appears unusually
high, the return may be attributable to unusually favorable market conditions
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.
All of the funds (except bond funds and equity index funds) may participate in
initial public offerings (IPOs). Under certain market conditions, such
participation 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.
Please refer to the prospectus for your product for additional information about
the investment options available. Variable life insurance and variable annuities
are sold by prospectus. These reports may be used as sales literature when
preceeded or accompanied by the funds' prospectus, which detail charges,
investment objectives, and operating policies.
Insurance products are issued by John Hancock Life Insurance Company, or John
Hancock Variable Life Insurance Company* (*not licensed in New York), Boston, MA
02117. Securities products are distributed by Signator Investors, Inc., Member
NASD, SIPC, 197 Clarendon Street, Boston, MA 02116.
John Hancock [GRAPHIC]
[LOGO]
WORLDWIDE SPONSOR
[LOGO] IMSA
INSURANCE
MARKETPLACE
STANDARD
ASSOCIATION
ITEM 2. CODE OF ETHICS
2 (a) As of the end of the period covered by this report (December 31, 2003),
the Board of Trustees of John Hancock Variable Series Trust I (the "Registrant")
has adopted a "code of ethics," within the meaning of Item 2, that applies to
the Registrant's principal executive officer, principal financial officer and
principal accounting officer (or persons performing similar functions),
regardless of whether these individuals are employed by the Registrant or by a
third party.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of John Hancock Variable Series Trust I has determined
that Robert F. Verdonck and Hassell H. McClellan are each audit committee
financial experts, within the meaning of Item 3 of Form N-CSR. In making its
determination, the Board considered Mr. Verdonck's relevant experience as the
Chief Executive Officer of the East Boston Savings Bank and as Chairman of the
Board and member of the Audit Committee of the Federal Home Loan Bank of Boston,
and Dr. McClellan's relevant experience as Associate Professor and former
Associate Dean of Boston College's Carroll Graduate School of Management, as a
director with Smith Whiley & Co. and as a commercial loan officer for Harris
Bank (a trade name used by Harris Trust and Savings Bank and its affiliated
banks).
Mr. Verdonck and Dr. McClellan are each independent within the meaning of Item 3
of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
4(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years
for professional services rendered by the principal accountant for the audit of
the Registrant's annual financial statements are:
Fiscal Year 2002 - $690,000
Fiscal Year 2003 - $745,000
4(b) Audit-Related Fees. The aggregate fees billed for each of the last two
fiscal years for assurance and related services rendered by the principal
accountant that are reasonably related to the performance of the audit of the
Registrant's annual financial statements that are not reported under paragraph
(a) above are:
Fiscal Year 2002 - 0
Fiscal Year 2003 - $25,000 (For services related to SAS 99 procedures.)
4(c) TAX FEES. The aggregate fees billed for each of the last two fiscal years
for assurance and related services rendered by the principal accountant for tax
compliance, tax advice and tax planning are:
Fiscal Year 2002 - $300,000 (For services related to Fund tax distribution,
provision and return preparation.)
Fiscal Year 2003 - $333,500 ($330,000 for services related to Fund tax
distribution, provision and return preparation and $3,500 for services related
to Fund merger reviews.)
4(d) ALL OTHER FEES. The aggregate fees billed for each of the last two fiscal
years for products and services provided by the principal accountant other than
the services described above are:
Fiscal Year 2002 - 0
Fiscal Year 2003 - $120,000 (For services related to review of the market
timing/late trading policy and procedures controls of affiliated entities of
John Hancock Financial Services, Inc., which was paid for by John Hancock
Financial Services, Inc. The services also included a review of such policy and
controls of the Registrant).
4 (e)(1) The pre-approval policies and procedures of the Registrant's Audit
Committee are disclosed below:
Audit and Non-Audit Services Pre-Approval Policy
(Effective September 24, 2003)
I. Statement of Principles
Under the Sarbanes-Oxley Act of 2002 (the "Act"), the Audit Committee of the
Board of Trustees is required to pre-approve the audit and non-audit services
performed by the independent auditor in order to assure that they do not impair
the auditor's independence from the John Hancock Variable Series Trust I (the
"Trust"). To implement these provisions of the Act, the Securities and Exchange
Commission (the "SEC") has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor.
Accordingly, the Audit Committee has adopted, and the Board of Trustees has
ratified, the Audit and Non-Audit Services Pre-Approval Policy (the "Policy"),
which sets forth the procedures and the conditions pursuant to which services
proposed to be performed by the independent auditor may be pre-approved.
The SEC's rules establish two different approaches to pre-approving services,
which the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); or require the specific pre-approval
of the Audit Committee ("specific pre-approval"). The Audit Committee believes
that the combination of these two approaches in this Policy will result in an
effective and efficient procedure to pre-approve services performed by the
independent auditor. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee if it is to be provided by the auditor. Any proposed services
exceeding pre-approved cost levels or budgeted amounts will also require
pre-approval by the Audit Committee.
For both types of pre-approval, the Audit Committee will consider whether such
services are consistent with the SEC's rules on auditor independence. The Audit
Committee will also consider whether the independent auditor is best positioned
to provide the most effective and efficient services, for reasons such as its
familiarity with the Trust's business, people, culture, accounting systems, risk
profile and other factors, and whether the service might enhance the Trust's
ability to manage or control risk or improve audit quality. All such factors
will be considered as a whole, and no one factor should necessarily be
determinative.
The Audit Committee is also mindful of the relationship between fees for audit
and non-audit services in deciding whether to pre-approve any such services and
may determine for each fiscal year, the appropriate ratio between the total
amount of fees for Audit, Audit-related and Tax services for the Trust
(including any Audit-related or Tax service fees for affiliates that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Trust (including any
such services for affiliates subject to pre-approval).
The appendices to this policy describe the Audit, Audit-related, Tax and All
Other services that have the general pre-approval of the Audit Committee. The
term of any general pre-approval is 12 months from the date of pre-approval
unless the Audit Committee considers a different period and states otherwise.
The Audit Committee will annually review and pre-approve the services that may
be provided by the independent auditor without obtaining specific pre-approval
from the Audit Committee. The Audit Committee will add or subtract from the list
of general pre-approved services from time to time, based on subsequent
determinations.
The purpose of this Policy is to set forth the procedures by which the Audit
Committee intends to fulfill its responsibilities. It does not delegate the
Audit Committee's responsibilities to pre-approve services performed by the
independent auditor to management.
The independent auditor has reviewed this Policy and believes that
implementation of the policy will not adversely affect the auditor's
independence.
II. Delegation
As provided in the Act and the SEC's rules, the Audit Committee may delegate
either type of pre-approval authority to one or more of its members. The member
to whom such authority is delegated must report, for informational purposes
only, any pre-approval decisions to the Audit Committee as its next scheduled
meeting.
III. Audit Services
The annual Audit services engagement terms and fees will be subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
independent auditor to be able to form an opinion on the Trust's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a semi-annual basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Trust
structure or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the independent auditor reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1. All
other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee.
IV. Audit-related Services
Audit-related services are assurance and related services that are reasonably
related to the performance of the audit or review of the Trust's financial
statements or that are traditionally performed by the independent auditor.
Because the Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor and is consistent with
the SEC's rules on auditor independence, the Audit Committee may grant general
pre-approval to Audit-related services. Audit-related services include, among
others, accounting consultations related to accounting, financial reporting or
disclosure matters not classified as "Audit services"; assistance with
understanding and implementing new accounting and financial reporting guidance
from rulemaking authorities; agreed-upon or expanded audit procedures related to
accounting and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters; and assistance with
internal control reporting requirements under Forms N-SAR and N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix B.2.
All other Audit-related services not listed in Appendix B.2 must be specifically
pre-approved by the Audit Committee.
V. Tax Services
The Audit Committee believes that the independent auditor can provide Tax
services to the Trust such as tax compliance, tax planning and tax advice
without impairing the auditor's independence, and the SEC has stated that the
independent auditor may provide such services. Hence, the Audit Committee
believes it may grant general pre-approval to those Tax Services that have
historically been provided by the auditor, that the Audit Committee has reviewed
and believes would not impair the independence of the auditor, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the independent auditor by the Trust in
connection with a transaction initially recommended by the independent auditor,
the sole business purpose of which may be tax avoidance and the tax treatment of
which may not be supported in the Internal Revenue Code and related regulations.
The Audit Committee will consult with the Treasurer of the Trust or outside
counsel to determine that the tax planning and reporting positions are
consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the
Tax Services in Appendix B.3. All Tax services involving large and complex
transactions not listed I Appendix B.3 must be specifically pre-approved by the
Audit Committee, including tax services proposed to be provided by the
independent auditor to an executive officer or Trustee of the Trust, in his or
her individual capacity, where such services are paid for by the Trust.
VII. All Other Services
The Audit Committee believes, based on the SEC's rules prohibiting the
independent auditor from providing specific non-audit services, that other types
of non-audit services are permitted. Accordingly, the Audit Committee believes
it may grant general pre-approval to those permissible non-audit services
classified as All Other services that it believes are routine and recurring
services, would not impair the independence of the auditor and are consistent
with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix B.4.
Permissible All Other services not listed in Appendix B.4 must be specifically
pre-approved by the Audit Committee.
A list of the SEC's prohibited non-audit services is attached to this policy as
Appendix B.5. The SEC's rules and relevant guidance should be consulted to
determine the precise definitions of these services and the applicability of
exceptions to certain of the prohibitions.
VII. Pre-Approval Fee Levels or Budgeted Amounts
Pre-approval fee levels or budgeted amounts for all services to be provided by
the independent auditor will be established annually by the Audit Committee.
(Note that separate amounts may be specified for the Trust and for other
affiliates in the investment company complex subject to pre-approval). Any
proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related and Tax services for the Trust (including any
Audit-related or Tax service fees for affiliates subject to pre-approval), and
the total amount of fees for certain permissible non-audit services classified
as All Other services for the Trust (including any such services for affiliates
subject to pre-approval).
VIII. Procedures
All requests or applications for services to be provided by the independent
auditor that do not require specific approval by the Audit Committee will be
submitted to the Treasurer of the Trust and must include a detailed description
of the services to be rendered. The Treasurer of the Trust will determine
whether such services are included within the list of services that have
received the general pre-approval of the Audit Committee and shall inform the
Audit Committee on a timely basis of any such services rendered by the
independent auditor. The Treasurer of the Trust will advise the Board of the
facts and circumstances of these services so that the Audit Committee can assess
the impact of the service on the independent auditor's independence.
Requests or applications to provide services that require specific approval by
the Audit Committee will be submitted to the Audit Committee by both the
independent auditor and the Treasurer of the Trust, and must include a joint
statement as to whether, in their view, the request or application is consistent
with the SEC's rules on auditor independence.
The Audit Committee has designated the Treasurer of the Trust to monitor the
performance of all services provided by the independent auditor and to determine
whether such services are in compliance with this policy. The Treasurer of the
Trust will report to the Audit Committee on a periodic basis on the results of
its monitoring. Both the Treasurer of the Trust and management will immediately
report to the chairman of the Audit Committee any breach of this policy that
comes to the attention of the Treasurer of the Trust or any member of
management.
The Treasurer of the Trust will develop a plan that provides for the monitoring
of the independent auditor's services and update it as necessary, and in any
event at least annually. The Audit Committee will also review the Treasurer's
plan and any updates to determine that the plan provides for the monitoring of
the independent auditor's services.
IX. Additional Requirements
The Audit Committee has determined to take additional measures on an annual
basis to meets its responsibility to oversee the work of the independent auditor
and to assure the auditor's independence from the Trust, such as reviewing a
formal written statement from the independent auditor delineating all
relationships between the independent auditor and the Trust, consistent with
Independence Standards Board No. 1, and discussing with the independent auditor
its methods and procedures for ensuring independence.
Appendix B.1
Pre-Approved Audit Services for Fiscal Year 2003
Dated: September 24, 2003
Service Range of Fees
- ------------------------------------------------------ ---------------------
Trust
- ------------------------------------------------------ ---------------------
Statutory audits or financial audits for the Trust Pre-Approved-Audit/A/
- ------------------------------------------------------ ---------------------
Services associated with SEC registration Pre-Approved-Other/B/
statements, periodic Pre-Approved-OtherB reports
and other documents filed with the SEC or other
documents issued in connection with securities
offerings (e.g., consents), and assistance in
responding to SEC comment letters
- ------------------------------------------------------ ---------------------
Consultations by the Trust's management as to the Pre-Approved-Audit/A/
accounting or disclosure treatment of transactions
or events and/or the actual or potential impact of
final or proposed rules, standards or
interpretations by the SEC, FASB, or other
regulatory or standard setting bodies (Note: Under
SEC rules, some consultations may be
"audit-related" services rather than "audit"
services. In such cases, the consultation for
"audit-related" services shall be deemed to be
"Pre-Approved-Other" and subject to the limit on
fees set forth below in Note B.)
- ------------------------------------------------------ --------------------
Attest services required by statute or regulation Not Applicable
(not paid by the Trust, e.g. 17f-2 Security
Counts)
- ------------------------------------------------------ --------------------
/A/ Fees for services listed as "Pre-Approved-Audit" shall not exceed the
annual fees of $1,100,000 for audit services for fiscal year 2003 approved on
September 24, 2003.
/B/ Aggregate fees for services listed as "Pre-Approved-Other" in Appendices
B.1 - B.4 shall not exceed an amount equal to 10% of the annual fees of
$1,100,000 for audit services for fiscal year 2003 approved on September 24,
2003.
Appendix B.2
Pre-Approved Audit-Related Services
Dated: September 24, 2003
Service Range of Fees
- ------------------------------------------------------ ---------------------
Trust
- ------------------------------------------------------ ---------------------
Due Diligence services pertaining to Pre-Approved-Other/B/
potential Fund mergers
- ------------------------------------------------------ ---------------------
Issuance of SAS-70 reports on internal Pre-Approved-Other/B/
controls of a service provider
- ------------------------------------------------------ ---------------------
Consultations by the Trust's management as to the Pre-Approved-Other/B/
accounting or disclosure treatment of transactions
or events and/or the actual or potential impact of
final or proposed rules, standards or
interpretations by the SEC, FASB, or other
regulatory or standard-setting bodies (Note: Under
SEC rules, some consultations may be "audit"
services rather than "audit-related" services. In
such cases, the consultation shall be deemed part
of the "Pre-Approved - Audit" services and covered
under the fee specified in Note A, below.)
- ------------------------------------------------------ ---------------------
Review of the Trust's semi-annual financial statements Pre-Approved-Audit/A/
- ------------------------------------------------------ ---------------------
Information systems reviews not performed in Not Applicable
connection with the audit (e.g., application data
center and technical reviews)
- ------------------------------------------------------ ---------------------
General assistance with implementation of the Pre-Approved-Other/B/
requirements of SEC rules
- ------------------------------------------------------ ---------------------
Regulatory compliance assistance (e.g., Pre-Approved-Other/B/
agreed-upon procedures for Section 15(c) contract
renewals, Rule 12b-1 plan renewals)
- ------------------------------------------------------ ---------------------
/A/ Fees for services listed as "Pre-Approved -Audit" shall not exceed the
annual fees of $1,100,000 for audit services for fiscal year 2003 approved on
September 24, 2003.
/B/ Aggregate fees for services listed as "Pre-Approved - Other" in Appendices
B.1 - B.4 shall not exceed an amount equal to 10% of the annual fees of
$1,100,000 for audit services for fiscal year 2003 approved on September 24,
2003.
Appendix B.3
Pre-Approved Tax Services
Dated: September 24, 2003
Service Range of Fees
- --------------------------------------------------------- ---------------------
Trust
- --------------------------------------------------------- ---------------------
U.S. federal, state and local tax planning and advice Pre-Approved-Other/B/
- --------------------------------------------------------- ---------------------
U.S. federal, state and local tax compliance Pre-Approved-Audit/A/
- --------------------------------------------------------- ---------------------
International tax planning and advice Pre-Approved-Other/B/
- --------------------------------------------------------- ---------------------
International tax compliance (e.g., tracking sales Pre-Approved-Other/B/
of Indian securities and filing local Fund tax
returns in India by Ernst & Young Private Limited)
- --------------------------------------------------------- ---------------------
Review of federal, state, local and international Pre-Approved-Other/B/
income, franchise and other tax returns
- --------------------------------------------------------- ---------------------
Domestic and foreign tax planning, compliance, and advice Pre-Approved-Other/B/
- --------------------------------------------------------- ---------------------
Assistance with tax audits and appeals before the Pre-Approved-Other/B/
IRS and similar state, local and foreign agencies
- --------------------------------------------------------- ---------------------
Tax advice and assistance regarding statutory, Pre-Approved-Other/B/
regulatory or administrative developments (e.g.,
excise tax reviews, evaluation of Trust's tax
compliance function) (Note: Under SEC rules, some
tax reviews and evaluations may be "audit"
services rather than "Tax" services. In such
cases, the tax review and evaluation shall be
deemed part of the "Pre-Approved - Audit" services
and covered under the fee specified in Note A,
below.)
- --------------------------------------------------------- ---------------------
/A/ Fees for services listed as "Pre-Approved -Audit" shall not exceed the
annual fees of $1,100,000 for audit services for fiscal year 2003 approved on
September 24, 2003.
/B/ Aggregate fees for services listed as "Pre-Approved - Other" in Appendices
B.1 - B.4 shall not exceed an amount equal to 10% of the annual fees of
$1,100,000 for audit services for fiscal year 2003 approved on September 24,
2003.
Appendix B.4
Pre-Approved All Other Services
Dated: September 24, 2003
- ----------------------------------- --------------------------------------------
Service Range of Fees
- ----------------------------------- --------------------- ---------------------
Trust Affiliates/A/
- ----------------------------------- --------------------- ---------------------
Risk management advisory services, Pre-Approved-Other/B/ Pre-Approved-Other/B/
e.g., assessment and testing of
security infrastructure controls
- ----------------------------------- --------------------- ---------------------
Assistance with respect to SEC Pre-Approved-Other/B/ Pre-Approved-Other/B/
examinations, investigations,
inquiries and proceedings
- ----------------------------------- --------------------- ---------------------
Audit, audit-related and tax Not Applicable Pre-Approved-Other/B/
services furnished to Affiliates
that are subject to Trust
pre-approval requirements
- ----------------------------------- --------------------- ---------------------
/A/ These include the investment manager (excluding sub-investment managers) and
any entity controlling, controlled by or under common control with the
investment manager that provides ongoing services to the Trust. Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Trust's
Audit Committee must pre-approve non-audit services provided not only to the
Trust but also to the investment manager and other entities in the complex,
where such entities provide ongoing services to the Trust and the independent
accountant's services have a direct impact on the Trust's operations or
financial reporting.
/B/ Aggregate fees for services listed as "Pre-Approved -Other" in Appendices
B.1 - B.4 shall not exceed an amount equal to 10% of the annual fees of
$1,100,000 for audit services for fiscal year 2003 approved on September 24,
2003.
Appendix B.5
Prohibited Non-Audit Services
Dated: September 24, 2003
o Bookkeeping or other services related to the accounting records or
financial statements of the audit client
o Financial information systems design and implementation
o Appraisal or valuation services, fairness opinions or contribution-in-kind
reports
o Actuarial services
o Internal audit outsourcing services
o Management functions
o Human resources
o Broker-dealer, investment advisor or investment banking services
o Legal services
o Expert services unrelated to the audit
4 (e)(2) The percentage of services described in paragraphs (b) through (d) of
Item 4 were approved by the Registrant's Audit Committee pursuant to paragraph
(c) (7) (i) (C) of Rule 2-01 of Regulation S-X was 100%.
4(f) N/A
4(g) The aggregate non-audit fees billed by the Registrant's accountant for
services rendered to the Registrant, and rendered to the Registrant's investment
adviser, and any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant were:
Fiscal Year 2002 - 0
Fiscal Year 2003 - $120,000 (For services related to review of the market
timing/late trading policy and procedures controls of affiliated entities of
John Hancock Financial Services, Inc., which was paid for by John Hancock
Financial Services, Inc. The services also included a review of such policy and
controls of the Registrant).
4(h) N/A.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES
FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. CONTROLS AND PROCEDURES.
(a)(i) The Chairman and Treasurer for the John Hancock Variable Series Trust I
(the "Trust") have concluded that the disclosure controls and procedures (as
defined in Rule 30a-3(c) under the Investment Company Act of 1940) provide
reasonable assurance that material information relating to the Trust is
accumulated and made known to them on a timely basis by appropriate persons,
based on their evaluations of these controls and procedures as of a date within
90 days of the filing date of this report.
(a)(ii) There was no change in the Trust's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that
occurred during the Trust's last fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the Trust's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Code of Ethics for Senior Financial Officers.
(a)(2) Section 302 Certifications.
(b) 906 Certification.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Variable Series Trust I
(Registrant)
By: /s/ MICHELE G. VAN LEER
-----------------------------------
Michele G. Van Leer
Chairman
Date: March 2, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
John Hancock Variable Series Trust I
(Registrant)
By: /s/ MICHELE G. VAN LEER
-----------------------------------
Michele G. Van Leer
Chairman
Date: March 2, 2004
By: /s/ GLADYS C. MILLAN
-----------------------------------
Gladys C. Millan
Assistant Treasurer
Date: March 2, 2004