Annual Report
for John Hancock Variable Series Trust I
December 31, 2003
[LOGO] John Hancock
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Not FDIC Insured Not Bank Guaranteed May Lose Value
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Not a Deposit Not Insured by Any Federal Government Agency
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Inception: May 1, 1996
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International Opportunities Fund
T. Rowe Price International, Inc. Warren/Ford/Seddon/Bickford-Smith
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.. 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:
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$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
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(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
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Total investments ............................................ 142,412
Cash ............................................................... 38
Foreign currency at value (cost $989) .............................. 987
Receivable for:
Dividends ....................................................... 199
Other assets .................................................... 7
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Total assets ....................................................... 143,643
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LIABILITIES
Payables for:
Fund shares purchased ........................................... 504
Collateral for securities on loan ............................... 16,998
Other liabilities ............................................... 176
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Total liabilities .................................................. 17,678
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Net assets ......................................................... $125,965
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Shares of beneficial interest outstanding .......................... 12,787
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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
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(000's Omitted)
INVESTMENT INCOME
Interest ......................................................... $ 25
Dividends ........................................................ 2,093
Securities lending ............................................... 78
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Total investment income ............................................. 2,196
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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
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Total expenses ...................................................... 1,444
Less expenses reimbursed ......................................... (207)
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Net expenses ........................................................ 1,237
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Net investment income ............................................... 959
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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)
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Net realized and unrealized gain .................................... 30,367
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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
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(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
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Net increase (decrease) in net assets resulting
from operations .................................... 31,326 (20,582)
Distributions to shareholders from:
Net investment income .................................... (1,556) (592)
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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)
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Increase in net assets from fund share transactions ... 8,917 155
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NET INCREASE IN NET ASSETS .................................. 38,687 3,687
NET ASSETS
Beginning of Period ...................................... 87,278 83,591
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End of Period ............................................ $125,965 $ 87,278
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Analysis of fund share transactions:
Sold ..................................................... 16,865 28,860
Reinvested ............................................... 188 69
Redeemed ................................................. (15,816) (26,366)
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Net increase in fund shares outstanding ..................... 1,237 2,563
======== ========
See notes to financial statements.
FINANCIAL HIGHLIGHTS
JOHN HANCOCK VARIABLE SERIES TRUST I
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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
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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
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973
Belgium - 0.6%
DEXIA * (JP) ........................................... 29,450 507
Fortis * (JR) .......................................... 5,110 103
UCB SA * (JO) .......................................... 3,008 113
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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
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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
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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
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.
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