Annual Report
for John Hancock Variable Series Trust I
December 31, 2003
[LOGO] John Hancock
- --------------------------------------------------------------------------------
Not FDIC Insured Not Bank Guaranteed May Lose Value
- --------------------------------------------------------------------------------
Not a Deposit Not Insured by Any Federal Government Agency
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Inception: August 31, 1999
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Large Cap Value Core(SM) Fund
Goldman Sachs Asset Management, L.P. Brown/Jones/Pinter
- --------------------------------------------------------------------------------
.. In 2003, the Fund returned 28.86%, underperforming its benchmark, the
Russell 1000 Value Index.
.. The Fund underperformed its benchmark due to sector allocation exposures
and modestly unfavorable stock selection. Stock selection detracted
especially within the industrial, information technology and financial
sectors among others.
.. The CORE themes (Momentum, Valuation, Profitability, Earnings Quality,
Analyst Sentiment and Management Impact) had mixed results for the year,
but contributed positively overall. Valuation was the biggest positive
contributor to excess returns for the year, as inexpensive companies
outperformed their more richly valued counterparts. Profitability also
helped boost relative returns, while Momentum detracted.
.. Positive absolute performance was driven mainly by strong returns in the
top-weighted Financials sector.
.. The Fund seeks to maintain size and sector weightings similar to its
benchmark. The manager seeks to add value versus the Russell 1000 Value
Index by overweighting stocks that are more likely to beat the benchmark,
while underweighting stocks that are believed to lag the Index.
.. The manager employs a CORE approach -- computer optimized, research
enhanced -- using quantitative techniques to identify cheap stocks with
good momentum, companies about which fundamental research analysts are
becoming more positive, and that have strong profit margins and sustainable
earnings that employ their capital to enhance shareholder value.
[CHART]
Line Chart
Historical Fund Return
$10,000
Investment made 8/31/99
(Fund Inception Date)
Large Cap Value CORE(SM) Fund Russell 1000(R) Value Index
----------------------------- ---------------------------
8/31/1999 $10,000.00 $10,000.00
9/30/1999 9,710.99 9,650.00
10/31/1999 10,331.58 10,205.84
11/30/1999 10,222.01 10,126.23
12/31/1999 10,357.99 10,174.84
1/31/2000 9,966.70 9,843.14
2/29/2000 9,306.14 9,111.80
3/31/2000 10,353.69 10,223.43
4/30/2000 10,235.53 10,104.84
5/31/2000 10,315.02 10,210.94
6/30/2000 9,925.40 9,744.30
7/31/2000 10,094.18 9,866.11
8/31/2000 10,735.04 10,414.66
9/30/2000 10,780.50 10,510.48
10/31/2000 10,929.67 10,769.04
11/30/2000 10,420.97 10,369.50
12/31/2000 10,888.02 10,889.02
1/31/2001 10,869.92 10,931.48
2/28/2001 10,559.13 10,627.59
3/31/2001 10,161.18 10,252.43
4/30/2001 10,769.26 10,754.80
5/31/2001 11,024.65 10,996.79
6/30/2001 10,815.74 10,752.66
7/31/2001 10,813.92 10,730.08
8/31/2001 10,328.29 10,299.80
9/30/2001 9,640.82 9,574.70
10/31/2001 9,619.47 9,492.35
11/30/2001 10,113.73 10,043.86
12/31/2001 10,370.41 10,279.89
1/31/2002 10,224.94 10,200.73
2/28/2002 10,176.05 10,217.06
3/31/2002 10,651.28 10,700.32
4/30/2002 10,357.76 10,333.30
5/31/2002 10,304.85 10,384.97
6/30/2002 9,615.15 9,788.87
7/31/2002 8,672.71 8,878.51
8/31/2002 8,841.46 8,945.98
9/30/2002 7,947.30 7,951.19
10/31/2002 8,451.42 8,540.37
11/30/2002 8,804.20 9,078.42
12/31/2002 8,482.15 8,684.41
1/31/2003 8,251.25 8,474.25
2/28/2003 8,045.22 8,247.99
3/31/2003 8,091.91 8,262.01
4/30/2003 8,680.27 8,989.07
5/31/2003 9,190.37 9,569.76
6/30/2003 9,305.10 9,689.38
7/31/2003 9,467.35 9,833.75
8/31/2003 9,688.33 9,987.16
9/30/2003 9,596.38 9,889.28
10/31/2003 10,144.78 10,494.51
11/30/2003 10,330.15 10,637.23
12/31/2003 10,930.14 11,292.49
Value on 12/31/03:
- ------------------
$10,930 Large Cap Value CORE(SM) Fund
$11,292 Russell 1000(R) Value Index
MORNINGSTAR
CATEGORY+:
.. Large Value
MORNINGSTAR
RISK+:
.. Below Average (VL/VUL)
.. Below Average (VA)
MORNINGSTAR
RATING+:
.. **** (VL/VUL)
.. *** (VA)
TOP TEN HOLDINGS (as of December 31, 2003)
% of
assets
------
Exxon Mobil Corp. 4.2%
Citigroup, Inc. 3.7%
Bank of America Corp. 3.1%
JP Morgan Chase & Co. 2.4%
Time Warner, Inc. 2.2%
Wachovia Corp. 2.0%
BellSouth Corp. 1.9%
Viacom, Inc. 1.8%
General Motors Corp. 1.5%
Prudential Financial, Inc. 1.4%
AVERAGE ANNUAL TOTAL RETURNS*
Large Cap Russell 1000(R)
Value CORE(SM) Fund Value Index
------------------- -----------------
1 Year 28.86% 30.03%
3 Years 0.13 1.22
Since Inception (8/31/99) 2.07 2.84
SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003)
% of
assets
------
Financials 35.56%
Consumer Discretionary 15.37%
Energy 11.55%
Information Technology 7.40%
Consumer Staples 7.15%
Telecommunication Services 6.81%
Healthcare 5.07%
Utilities 4.53%
Materials 3.35%
Industrials 3.22%
* Total returns are for the period ended December 31, 2003. Returns represent
past performance, assume reinvestment of all distributions and are not
indicative of future performance. Investment returns and principal value of
fund shares will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. The performance of the fund on this page
is reported net of Trust level charges (i.e. investment management fees and
operating expenses). It does not reflect expense and charges of the
applicable separate accounts and variable products, all of which vary to a
considerable extent and are described in your product prospectus.
Performance would be lower if expenses and charges of the separate accounts
and products were reflected.
+ Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life
subaccounts, VUL represents Variable Universal Life subaccounts and VA
represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were
rated against 538 VL/VUL subaccounts and 1,013 VA subaccounts in the
Morningstar Large Value category. This represents the Morningstar 3 year
rating.
STATEMENT OF ASSETS AND LIABILITIES
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
ASSETS
Long term investments at cost ....................................... $46,628
Net unrealized appreciation of investments .......................... 6,036
Short-term investments at value ..................................... 300
-------
Total investments ............................................. 52,964
Cash ................................................................ 12
Receivable for:
Dividends ........................................................ 66
Futures contracts variation margin ............................... 1
-------
Total assets ........................................................ 53,043
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LIABILITIES
Payables for:
Fund shares purchased ............................................ 6
Other liabilities ................................................ 3
-------
Total liabilities ................................................... 9
-------
Net assets .......................................................... $53,034
=======
Shares of beneficial interest outstanding ........................... 5,435
-------
Net asset value per share ........................................... $ 9.76
=======
Composition of net assets:
Capital paid-in .................................................. $53,788
Accumulated net realized loss on investments,
futures and foreign currency transactions ..................... (6,791)
Net unrealized appreciation of:
Investments ................................................... 6,036
Futures 1
-------
Net assets .......................................................... $53,034
=======
STATEMENT OF OPERATIONS
JOHN HANCOCK VARIABLE SERIES TRUST I
For the Year Ended December 31, 2003
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(000's Omitted)
INVESTMENT INCOME
Interest ...................................................... $ 18
Dividends ..................................................... 968
-------
Total investment income 986
-------
EXPENSES
Investment advisory fee ............................................. 332
Auditors fees ................................................. 6
Custodian fees ................................................ 71
Legal fees .................................................... 3
Printing & mailing fees ....................................... 4
Trustees' fees ................................................ 1
Other fees .................................................... 1
-------
Total expenses ...................................................... 418
Less expenses reimbursed ...................................... (42)
-------
Net expenses ........................................................ 376
-------
Net investment income ............................................... 610
-------
REALIZED AND UNREALIZED GAIN
Net realized gain on:
Investments ................................................... 460
Financial futures contracts ................................... 63
Change in unrealized appreciation on:
Investments ................................................... 10,555
Futures ....................................................... 1
-------
Net realized and unrealized gain .................................... 11,079
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Net increase in net assets resulting from
operations ....................................................... $11,689
=======
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
Year Ended Year Ended
December 31, December 31,
2003 2002
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment income .................................... $ 610 $ 581
Net realized gain (loss) ................................. 523 (6,253)
Change in net unrealized appreciation (depreciation) ..... 10,556 (3,791)
------- -------
Net increase (decrease) in net assets resulting from
operations ......................................... 11,689 (9,463)
Distributions to shareholders from:
Net investment income .................................... (610) (581)
Realized gains ........................................... (1,764)
------- -------
Decrease in net assets resulting from distributions ... (2,374) (581)
From fund share transactions:
Proceeds from shares sold ................................ 10,099 13,044
Distributions reinvested ................................. 2,374 581
Payment for shares redeemed .............................. (9,519) (23,648)
------- -------
Increase (decrease) in net assets from fund share
transactions ....................................... 2,954 (10,023)
------- -------
NET INCREASE (DECREASE) IN NET ASSETS ....................... 12,269 (20,067)
NET ASSETS
Beginning of Period ...................................... 40,765 60,832
------- -------
End of Period ............................................ $53,034 $40,765
======= =======
Analysis of fund share transactions:
Sold ..................................................... 1,163 1,462
Reinvested ............................................... 254 67
Redeemed ................................................. (1,112) (2,585)
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Net increase (decrease) in fund shares outstanding .......... 305 (1,056)
======= =======
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 Value CORE Fund
--------------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------------
Period from
August 31, to
December 31,
2003 2002 2001 2000 1999(e)
------- ------- ------- ------- -------------
Net Assets Value at Beginning of Period ........... $ 7.95 $ 9.83 $ 10.42 $ 10.16 $10.00
Income from Investment Operations:
Net Investment Income .......................... 0.12 0.11 0.09 0.15 0.04
Net Realized and Unrealized Gain (Loss) on
Investments(a) .............................. 2.15 (1.88) (0.59) 0.36 0.31
------- ------- ------- ------- ------
Total From Investment Operations ............... 2.27 (1.77) (0.50) 0.51 0.35
Less Distributions:
Distribution from Net Investment Income ........ (0.12) (0.11) (0.09) (0.15) (0.03)
Distribution from Net Realized Gains on
Investments ................................. (0.34) (0.06) (0.14)
Distribution from Excess of Net Investment
Income/Gains ................................ (0.03) (0.01)
Distribution from Capital Paid-in .............. (0.01) (0.01)
------- ------- ------- ------- ------
Total Distributions ............................ (0.46) (0.11) (0.09) (0.25) (0.19)
------- ------- ------- ------- ------
Net Assets Value at End of Period ................. $ 9.76 $ 7.95 $ 9.83 $ 10.42 $10.16
======= ======= ======= ======= ======
Total Investment Return(b) ........................ 28.86% (18.21)% (4.75)% 5.12% 3.58%(c)
Ratios/Supplemental Data:
Ratio of Operating Expenses to Average Net
Assets ...................................... 0.85%(f) 0.84%(f) 0.85%(f) 0.85%(f) 0.85%(d)(f)
Ratio of Net Investment Income to Average Net
Assets ...................................... 1.38% 1.18% 0.98% 1.54% 1.13%(d)
Portfolio Turnover Rate ........................ 105.62% 89.43% 74.91%(g) 59.15% 30.90%(c)
Net Assets End of Period (000s Omitted) ........... $53,034 $40,765 $60,832 $18,164 $6,371
(a) The amount shown at this caption for each share outstanding throughout the
year may not accord with the change in the aggregate gains and losses in
the portfolio securities for the year because of the timing of the
purchases and withdrawals of the shares in relation to the fluctuating
market values of the portfolio.
(b) The performance does not reflect expenses and charges of the applicable
separate accounts and variable products, all of which vary to a
considerable extent and are described in your product's prospectus.
(c) Not annualized.
(d) Annualized.
(e) Commencement of operations.
(f) Expense ratio is net of expense reimbursements. Had such reimbursements not
been made the expense ratio would have been .94%, .97%, .88%, 1.09% and
1.17% for the years ended December 31, 2003, 2002, 2001, 2000 and 1999,
respectively.
(g) Excludes merger activity.
SCHEDULE OF INVESTMENTS
(JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK
Aerospace & Defense - 0.4%
Boeing Co. * ............................................ 2,900 $ 122
Northrop Grumman Corp. .................................. 1,100 105
------
227
Airlines - 0.1%
Southwest Airlines Co. .................................. 2,600 42
Auto Components - 0.3%
Delphi Automotive Systems Corp. * ....................... 17,600 180
Automobiles - 2.8%
Ford Motor Co. .......................................... 46,200 739
General Motors Corp. * .................................. 14,400 769
------
1,508
Banks - 14.6%
Bank Hawaii Corp. ....................................... 3,100 131
Bank of America Corp. * ................................. 20,210 1,625
Bank One Corp. * ........................................ 6,000 274
Charter One Financial, Inc. ............................. 6,100 211
Comerica, Inc. .......................................... 4,300 241
FleetBoston Financial Corp. ............................. 5,900 258
JP Morgan Chase & Co. ................................... 34,000 1,249
National City Corp. * ................................... 16,100 546
Popular, Inc. ........................................... 1,100 49
Regions Financial Corp. ................................. 12,200 454
Silicon Valley Bancshares * ............................. 6,600 238
SouthTrust Corp. * ...................................... 14,800 484
Suntrust Banks, Inc. * .................................. 4,800 343
UnionBanCal Corp. ....................................... 2,600 150
US Bancorp * ............................................ 13,900 414
Wachovia Corp. * ........................................ 22,700 1,058
------
7,725
Biotechnology - 1.5%
Amgen, Inc. * ........................................... 6,600 408
Genetech, Inc. * ........................................ 1,600 150
Gilead Sciences, Inc. * ................................. 3,700 215
------
773
Building Products - 0.2%
York International Corp. ................................ 2,700 99
Chemicals - 2.1%
Dow Chemical Co. * ...................................... 12,600 524
Monsanto Co. ............................................ 20,500 590
------
1,114
Commercial Services & Supplies - 1.9%
IMS Health, Inc. * ...................................... 5,500 137
ITT Educational Services, Inc. * ........................ 4,600 216
Republic Services, Inc. - Cl. A * ....................... 4,800 123
Waste Management, Inc. * ................................ 18,500 547
------
1,023
Communications Equipment - 1.3%
Advanced Fibre Communications, Inc. * ................... 9,000 $ 181
Avaya, Inc. * ........................................... 33,900 439
Scientific-Atlanta, Inc. * .............................. 1,800 49
------
669
Computers & Peripherals - 1.8%
Hewlett-Packard Co. * ................................... 7,242 166
Intel Corp. ............................................. 14,800 477
International Business Machines Corp. ................... 2,500 232
SanDisk Corp. * ......................................... 1,200 73
------
948
Containers & Packaging - 0.4%
Owens-Illinois, Inc. * .................................. 7,400 88
Sealed Air Corp. * ...................................... 2,300 125
------
213
Credit Card - 0.4%
MBNA Corp. * ............................................ 7,900 196
Diversified Financials - 11.0%
AmeriCredit Corp. * ..................................... 3,600 57
CIT Group, Inc. * ....................................... 15,800 568
Citigroup, Inc. * ....................................... 40,300 1,956
Doral Financial Corp. ................................... 10,350 334
Friedman Billings Ramsey Group - Cl. A .................. 22,300 515
Lehman Brothers Holdings, Inc. .......................... 4,600 355
Merrill Lynch & Co., Inc. * ............................. 3,300 194
Moody's Corp. * ......................................... 8,500 515
Morgan Stanley, Dean Witter, Discover & Co. ............. 900 52
Nationwide Financial Services - Cl. A ................... 2,200 73
Nuveen Investments, Inc. - Cl. A ........................ 3,800 101
Washington Mutual, Inc. * ............................... 13,700 550
Wells Fargo & Co. * ..................................... 9,500 559
------
5,829
Diversified Telecommunication Services - 5.5%
BellSouth Corp. ......................................... 34,800 985
CenturyTel, Inc. ........................................ 5,000 163
SBC Communications, Inc. * .............................. 26,400 688
Sprint Corp. * .......................................... 41,300 678
Verizon Communications * ................................ 12,000 421
------
2,935
Electric Utilities - 4.1%
Constellation Energy Group, Inc. * ...................... 6,700 263
Edison International * .................................. 26,600 583
Entergy Corp. * ......................................... 10,500 600
Exelon Corp. * .......................................... 8,900 591
FPL Group, Inc. ......................................... 800 52
PPL Corp. ............................................... 1,400 61
------
2,150
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Electric/Gas - 0.4%
Northeast Utilities ..................................... 11,600 $ 234
Electronic Equipment & Instruments - 1.5%
Agilent Technologies, Inc. * ............................ 2,400 70
Avnet, Inc. ............................................. 11,400 247
Harman International Industries, Inc. * ................. 800 59
Ingram Micro, Inc. - Cl. A * ............................ 5,000 80
Sanmina Corp. * ......................................... 26,800 338
------
794
Energy Equipment & Services - 1.2%
Halliburton Co. * ....................................... 5,500 143
Transocean Sedco Forex, Inc. * .......................... 21,100 507
------
650
Finance - 0.2%
A.G. Edwards, Inc. * .................................... 2,400 87
Food & Drug Retailing - 0.5%
CVS Corp ................................................ 2,000 72
Sysco Corp. * ........................................... 4,700 175
------
247
Food Products - 3.2%
Archer Daniels Midland Co. * ............................ 38,800 590
Kraft Foods, Inc. - Cl. A ............................... 18,500 596
Tyson Foods, Inc. - Cl. A ............................... 36,900 489
------
1,675
Health Care Equipment & Supplies - 1.5%
Guidant Corp ............................................ 4,400 265
Zimmer Holdings, Inc. * ................................. 7,400 521
------
786
Health Care Providers & Services - 0.4%
Humana, Inc. * .......................................... 8,900 203
Household Products - 0.8%
Procter & Gamble Co. * .................................. 4,300 430
Insurance - 6.5%
American International Group, Inc. * .................... 3,115 207
American National Insurance Co .......................... 1,100 93
Chubb Corp. * ........................................... 4,500 307
Loews Corp. * ........................................... 5,100 252
MBIA, Inc. * ............................................ 9,900 586
Metlife, Inc. * ......................................... 16,700 562
Principal Financial Group. * ............................ 17,600 582
Prudential Financial, Inc. * ............................ 17,700 739
Travelers Property Casualty Corp. - Cl. B ............... 8,428 143
------
3,471
IT Consulting & Services - 1.3%
Accenture, Ltd. - Cl. A * ............................... 19,600 516
Computer Sciences Corp. * ............................... 4,000 177
------
693
Machinery - 0.3%
AGCO Corp ............................................... 3,200 $ 65
Caterpillar, Inc. * ..................................... 1,000 83
------
148
Marine - 0.1%
Overseas Shipholding Group, Inc ......................... 1,700 58
Media - 7.5%
Comcast Corp. - Cl. A ................................... 11,763 386
Cox Radio, Inc. - Cl. A * ............................... 11,300 285
Fox Entertainment Group, Inc. - Cl. A * ................. 18,800 548
Hearst-Argyle Television, Inc. * ........................ 15,100 416
Panamsat Corp. * ........................................ 5,700 123
The Walt Disney Co. * ................................... 5,000 117
Time Warner, Inc. * ..................................... 63,300 1,139
Viacom, Inc. - Cl. B * .................................. 21,200 941
------
3,955
Metals & Mining - 0.4%
Carpenter Technology Corp. * ............................ 3,000 89
Freeport-McMoran Copper & Gold, Inc. - Cl. B ............ 3,000 126
------
215
Multiline Retail - 1.6%
Federated Department Stores, Inc. * ..................... 3,500 165
Saks, Inc. * ............................................ 26,900 404
Sears, Roebuck & Co. * .................................. 6,700 305
------
874
Oil & Gas - 10.1%
Anadarko Petroleum Corp. * .............................. 4,100 209
Burlington Resources, Inc. * ............................ 1,500 83
ChevronTexaco Corp. * ................................... 4,435 383
Devon Energy Corp. * .................................... 6,100 349
Exxon Mobil Corp. * ..................................... 54,200 2,222
Marathon Oil Corp. * .................................... 18,900 625
Occidental Petroleum Corp. * ............................ 8,900 376
Sunoco, Inc. * .......................................... 10,800 553
Valero Energy Corp ...................................... 12,400 575
------
5,375
Paper & Forest Products - 1.3%
Boise Cascade Corp. * ................................... 13,700 450
Georgia-Pacific Corp. * ................................. 7,300 224
------
674
Personal Products - 1.7%
Avon Products, Inc ...................................... 6,100 412
Gillette Co ............................................. 13,600 499
------
911
Pharmaceuticals - 1.5%
American Pharmaceutical Partners, Inc * ................. 8,600 289
Endo Pharmaceuticals Holdings * ......................... 11,200 216
SCHEDULE OF INVESTMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
LARGE CAP VALUE CORE FUND
Market
Name of Issuer Shares Value
-------------- ------ -------
(000's)
COMMON STOCK - Continued
Pharmaceuticals - Continued
Johnson & Johnson ....................................... 3,900 $ 201
Medco Health Solutions, Inc. * .......................... 470 16
Merck & Co., Inc. * ..................................... 1,100 51
-------
773
Real Estate Investment Trust - 2.0%
Equity Office Properties Trust * ........................ 22,000 630
HRPT Properties Trust ................................... 16,000 161
Mack-Cali Realty LP * ................................... 6,500 271
-------
1,062
Real Estate Operations - 0.5%
LNR Property Corp ....................................... 5,400 267
Road & Rail - 0.5%
Union Pacific Corp ...................................... 4,200 292
Semiconductor Equipment & Products - 0.2%
LSI Logic Corp. * ....................................... 9,500 84
Software - 1.4%
Adobe Systems, Inc ...................................... 12,200 480
BMC Software, Inc. * .................................... 8,800 164
Computer Associates International, Inc .................. 2,600 71
Jack Henry & Associates, Inc ............................ 2,500 51
-------
766
Specialty Retail - 1.4%
AutoNation, Inc. * ...................................... 25,200 463
Blockbuster, Inc. - Cl. A ............................... 3,100 56
Staples, Inc. * ......................................... 8,300 226
-------
745
Textiles & Apparel - 0.6%
Coach, Inc. * ........................................... 8,600 325
Tobacco - 0.9%
Altria Group, Inc ....................................... 5,700 310
R.J. Reynolds Tobacco Holdings, Inc ..................... 3,300 192
-------
502
U.S. Government Agencies - 0.2%
Federal Home Loan Mortgage Corp ......................... 1,500 88
Wireless Telecommunications Services - 1.2%
AT&T Wireless Group * ................................... 36,400 291
United States Cellular Corp. * .......................... 10,100 358
-------
649
-------
TOTAL COMMON STOCK- .................................. 99.3% 52,664
Par Market
Name of Issuer Value Value
-------------- ------- -------
(000's) (000's)
SHORT-TERM INVESTMENTS - 0.6%
Investment in joint repurchase agreement
with Goldman Sachs % Co., 0.995% due
01/02/04 ............................................ $ 300 $ 300
------ -------
TOTAL INVESTMENTS- ............................... 99.9% 52,964
Cash and Receivables, less payables- ................ 0.1% 70
------ -------
NET ASSETS- ................................... 100.0% $53,034
====== =======
* Non-income producing security.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE A--ORGANIZATION
John Hancock Large Cap Value CORE Fund (the "Fund") is a diversified series
of John Hancock Variable Series Trust I (the "Trust"), an open-end investment
management company registered under the Investment Company Act of 1940. The
Trust is organized as a Massachusetts business trust and consists of thirty
different funds as of December 31, 2003. The results of this Fund are included
in this report. The results of the other Funds in the Trust are presented under
separate cover. The Trust may add or delete Funds in the future to accommodate
various investment objectives. The Trust has issued shares of beneficial
interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John
Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S
("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund
policies and contracts issued by the John Hancock Variable Life Insurance
Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"),
John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life
Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and
John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and
policies issued by John Hancock Life Insurance Company ("John Hancock" or
"JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John
Hancock Variable Life Account PPM-2 ("PPM-2").
NOTE B--ACCOUNTING POLICIES
Valuation of investments: Common stocks and other such securities traded on
national exchanges are normally valued on the basis of closing prices.
Securities traded in the over-the-counter market and securities with no sales on
the day of valuation are normally valued at their last available bid price.
Short-term investments, with a maturity not to exceed 60 days, are valued
at amortized cost, which approximates market value.
Investment securities for which no current market quotations are readily
available, including certain foreign securities, when held by the Fund, are
valued at fair value as determined in good faith by the Board of Trustees.
Investment security transactions are recorded on the date of purchase or sale.
Repurchase agreements: The Fund may enter into repurchase agreements which
are contracts under which the Fund would acquire a security for a relatively
short period (usually not more than 7 days) subject to the obligation of the
seller to repurchase and the Fund to resell such security at a fixed time and
price (representing the Fund's cost plus interest). The Fund will enter into
repurchase agreements only with member banks of the Federal Reserve System and
with "primary dealers" in United States Government Securities. The underlying
securities, which represent the collateral of the agreement, must be marked to
market daily to ensure that each repurchase agreement is fully collateralized at
all times. The Fund will not invest more than 10% of its net assets in
repurchase agreements maturing in more than 7 days.
Joint repurchase agreements: The Fund, along with other registered
investment companies having a management contract with Goldman Sachs Asset
Management (GSAM), may participate in a joint repurchase agreement pursuant to
an exemptive order issued by the Securities and Exchange Commission. Aggregate
cash balances are invested in one or more repurchase agreements, whose
underlying securities are obligations of the U.S. Government and/or its
agencies. The Fund's custodian bank receives delivery of the underlying
securities for the joint repurchase agreement on the Fund's behalf. GSAM is
responsible for ensuring that the agreement is fully collateralized at all
times.
Expenses: Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributed to the Fund are allocated on the basis of
relative net assets of the Fund.
Bank borrowings: The Fund is permitted to have bank borrowings for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. The Fund
has entered into syndicated line of credit agreements with State Street Bank and
Trust Company ("SSBT"), the
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Trust's record keeper and custodian and the Bank of New York. These agreements
enable the Fund to participate in an unsecured line of credit, which permits
borrowings up to $125 and $75 million, respectively. Interest is charged to the
Fund, based on its borrowing. In addition, a commitment fee is charged to the
Fund based on the average daily unused portion of the line of credit and is
allocated among the participating Funds in the Trust. Interest expense paid
under the line of credit is included under the caption "Other fees" in the
Statement of Operations.
The Fund had borrowings under the line of credit during the year ended
December 31, 2003 as follows:
Average Daily Loan Balance
During the Period for which Weighted Average
Loans were Outstanding Interest Rate Interest Expense
- --------------------------- ---------------- ----------------
$63 1.76% $--
Financial futures contracts: The Fund may buy and sell financial futures
contracts to hedge against the effects of fluctuations in interest rates and
other market conditions. At the time the Fund enters into a financial futures
contract, it will be required to deposit with its custodian a specified amount
of cash or U.S. government securities, known as "initial margin". Each day, the
futures contract is valued at the official settlement price of the Chicago Board
of Trade or U.S. commodities exchange. Daily adjustments, called variation
margin, arising from this "mark to market", are recorded by the Fund as
unrealized gains or losses.
When the contracts are closed, the Fund recognizes a gain or a loss. Risks
of entering into futures contracts include the possibility that there may be an
illiquid market and/or that a change in the value of the contract may not
correlate with changes in the value of the underlying securities. In addition,
the Fund could be prevented from opening or realizing the benefits of closing
out futures positions because of position limits or limits on daily price
fluctuations imposed by an exchange. At December 31, 2003, open financial
futures contracts for the Fund were as follows:
Open Unrealized
Contracts Position Expiration Month Gain
--------- -------- ---------------- ----------
S&P Mini 500 Index Futures 6 Long March 04 $1
--
$1
==
At December 31, 2003, the Fund had deposited $40 in segregated accounts to
cover initial margin requirements on open financial futures contracts.
Forward foreign currency contracts: The Fund may use forward foreign
currency contracts to facilitate transactions in foreign securities and to
manage the Fund's currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell are used to
hedge the Fund's investments against currency fluctuations. Neither type of
forward foreign currency transaction will eliminate fluctuations in the prices
of the Fund's securities or prevent loss if the price of such securities should
decline. The U.S. dollar value of a forward foreign currency contract is
determined using forward exchange rates supplied by a quotation service.
Realized gain (loss) on the purchases and sales of forward foreign currency
contracts is recognized on settlement date. At December 31, 2003, the Fund had
no open forward foreign currency contracts.
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE B--ACCOUNTING POLICIES--Continued
Federal income taxes: The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to
shareholders. Therefore, no federal income tax provision is required.
As of December 31, 2003, the Fund had approximate net tax basis capital
loss carryforwards, which may be applied against any net taxable gains, as
follows: $491, $5,508 and $616 which expire in 2009, 2010 and 2011,
respectively.
In addition, from the period November 1, 2003 through December 31, 2003,
the Fund incurred no net realized capital losses.
Dividends, Interest and Distributions: Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Realized
gains and losses from security transactions are determined on the basis of
identified cost.
Dividends of net investment income will be declared and distributed monthly
by the Fund. The Fund will distribute all of its net realized capital gains
annually, at the end of its fiscal year.
Estimates: The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
On February 5, 2003, the Board of Trustees of the Trust renewed its
Investment Advisory Agreement with John Hancock. For its services, John Hancock
receives monthly compensation at the following rate on an annual basis of the
Fund's net assets:
Between
$50 Million and Excess Over
First $50 Million $200 Million $200 Million
- ----------------- --------------- ------------
0.75% 0.65% 0.60%
In the event that normal operating expenses of the Fund, exclusive of
investment advisory fees, taxes, interest, brokerage commissions and
extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value,
John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly,
for the year ended December 31, 2003, the reimbursements paid from John Hancock
and JHVLICO were $42 to the Fund.
John Hancock has entered into a Sub-Advisory Agreement with Goldman Sachs
Asset Management, with respect to the Fund. Goldman Sachs Asset Management is an
affiliate of John Hancock, and under its supervision, is responsible for the
day-to-day investment management of the Fund.
Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the
principal underwriter and transfer agent
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES--Continued
of the Trust. Certain officers and trustees of the Trust are officers and
directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU,
JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock.
Fees for independent trustees are paid by the Trust.
NOTE D--INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities and obligations of the U.S. government, for the Fund for
the year ended December 31, 2003 were as follows:
Purchases Sales and Maturities
- --------- --------------------
$47,523 $46,518
The identified cost of investments owned by the Fund (including earned
discount on corporate short-term notes, and commercial paper) and their
respective gross unrealized appreciation and depreciation for Federal income tax
purposes at December 31, 2003 were as follows:
Identified Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Appreciation
- ---------- ------------ ------------ --------------
$47,104 $6,662 $(802) $5,860
Distribution of Income and Gains: Distributions of net investment income,
if any, are made at least annually. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually. Earnings and profits distributed to shareholders
on redemption of fund shares may be utilized by the Fund, to the extent
permissible, as part of the Fund's dividends-paid deduction on its federal
income tax returns.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. These differences primarily
relate to certain securities sold at a loss. Additionally, as a result, net
investment income (loss) and net realized gain (loss) or investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
At December 31, 2003, the Fund's components of distributable earnings on a
tax basis were as follows:
Undistributed Undistributed
Ordinary Net Long-Term Capital Loss Net Unrealized
Income Capital Gain Carryforwards Appreciation
- ------------- ------------- ------------- --------------
$-- $-- $6,615 $5,860
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
(000's Omitted)
NOTE D--INVESTMENT TRANSACTIONS--Continued
In addition, the tax character of distributions paid by the Fund are
summarized as follows:
Distributions from Distributions from
Year Ordinary Income Long-Term Capital Gain Return of Capital
- ---- ------------------ ---------------------- -----------------
2003 $593 $-- $1,781
2002 581 -- --
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)
The Board of Trustees of the Trust is responsible for overall management of
the Trust. The Board may exercise all powers of the Trust, except those powers
which are conferred solely upon or reserved to the shareholders. The Trust's
Statement of Additional Information (SAI) includes additional information about
the Trustees and is available without charge, upon request, by calling toll-free
at 1-800-576-2227.
The following table provides information about the members of the Board of
Trustees and the officers of the Trust:
Disinterested Trustees
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------------- -----------------------------------
Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana-
c/o John Hancock Variable Series Farber Cancer Institute; President,
Trust I The Advertising Club of Greater
John Hancock Place Boston
Boston, Massachusetts 02117
Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts
c/o John Hancock Variable Series Council of Churches
Trust I
John Hancock Place
Boston, Massachusetts 02117
Robert Verdonck (age 58) Trustee President and Chief
c/o John Hancock Variable Series Executive Officer, East Boston
Trust I Savings Bank
John Hancock Place
Boston, Massachusetts 02117
Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate
c/o John Hancock Variable Series Dean, The Graduate School of the
Trust I Wallace G. Carroll School of
John Hancock Place Management, Boston College
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------------- -----------------------------------
Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company; Vice Chairman,
President & Director, John Hancock
Variable Life Insurance Company
Kathleen F. Driscoll* (age 47) Vice Chairman, Senior Vice President, Signator
John Hancock Place President and Brokerage, John Hancock Life
Boston, Massachusetts 02117 Trustee Insurance Company; Vice President
Corporate Communications, John
Hancock Life Insurance Company
Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment
John Hancock Place Compliance Officer, John Hancock
Boston, Massachusetts 02117 Life Insurance Company; formerly
Second Vice President and Counsel,
Office of Business Conduct; John
Hancock Life Insurance Company;
formerly a Partner at Hale and Dorr
LLP (law firm)
Janet Wang (age 35) Assistant Compliance Compliance Specialist, John
John Hancock Place Officer Hancock Life Insurance Company
Boston, Massachusetts 02117
Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John
John Hancock Place Hancock Life Insurance Company
Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued
JOHN HANCOCK VARIABLE SERIES TRUST I
December 31, 2003
- --------------------------------------------------------------------------------
NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued
Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s)
Name, Address and Age With Trust During Past Five Years
- -------------------------------- -------------------- ------------------------------------
Karen Q. Visconti (age 50) Secretary Director, Product & Market
John Hancock Place Management, John Hancock Life
Boston, Massachusetts 02117 Insurance Company
Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department,
John Hancock Place John Hancock Life Insurance
Boston, Massachusetts 02117 company; formerly Vice President,
General Counsel and Secretary, First
Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to
her position with John Hancock Life Insurance Company (or its affiliates), the
ultimate controlling parent of the investment advisor.
Because the Trust does not hold regular annual shareholders meetings, each
Trustee holds office for an indefinite term until his successor is duly elected
and qualified or until he dies, retires, resigns, is removed or becomes
disqualified. None of the Trustees is a director of other complexes except noted
above.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Contractowners, Policyholders, and
Board of Trustees of
John Hancock Variable Series Trust I
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Large Cap Value CORE Fund (a
portfolio included in the series of John Hancock Variable Series Trust I {the
"Trust"}) as of December 31, 2003, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 2003, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Large Cap Value CORE Fund of John Hancock Variable Series Trust I at December
31, 2003, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
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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