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: August 31, 1999
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Large Cap Growth B Fund (FORMERLY LARGE CAP AGGRESSIVE GROWTH FUND)
Independence Investment LLC M. Lapman/J. Forelli
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.. 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
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(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
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(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)
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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
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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 loss ................................................ $ (20) $ (46)
Net realized gain (loss) ........................................... 2,092 (10,039)
Change in net unrealized appreciation (depreciation) ............... 5,303 (2,376)
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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)
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Increase (decrease) in net assets from fund share transactions... 3,372 (3,028)
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NET INCREASE (DECREASE) IN NET ASSETS ................................. 6,670 (15,489)
NET ASSETS
Beginning of Period ................................................ 24,249 39,738
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End of Period ...................................................... $30,919 $ 24,249
======= ========
Analysis of fund share transactions:
Sold ............................................................... 991 1,161
Reinvested ......................................................... 649
Redeemed ........................................................... (1,129) (1,704)
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Net increase (decrease) in fund shares outstanding .................... 511 (543)
======= ========
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:
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)
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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
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
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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