EX-99.(17)(D) 8 dex9917d.txt FUNDAMENTAL VALUE B FUND ANNUAL REPORT FOR THE YEAR ENDED 12/31/2003 Annual Report for John Hancock Variable Series Trust I December 31, 2003 [LOGO] John Hancock -------------------------------------------------------------------------------- Not FDIC Insured Not Bank Guaranteed May Lose Value -------------------------------------------------------------------------------- Not a Deposit Not Insured by Any Federal Government Agency -------------------------------------------------------------------------------- Inception: August 31, 1999 -------------------------------------------------------------------------------- Large Cap Value Core(SM) Fund Goldman Sachs Asset Management, L.P. Brown/Jones/Pinter -------------------------------------------------------------------------------- . In 2003, the Fund returned 28.86%, underperforming its benchmark, the Russell 1000 Value Index. . The Fund underperformed its benchmark due to sector allocation exposures and modestly unfavorable stock selection. Stock selection detracted especially within the industrial, information technology and financial sectors among others. . The CORE themes (Momentum, Valuation, Profitability, Earnings Quality, Analyst Sentiment and Management Impact) had mixed results for the year, but contributed positively overall. Valuation was the biggest positive contributor to excess returns for the year, as inexpensive companies outperformed their more richly valued counterparts. Profitability also helped boost relative returns, while Momentum detracted. . Positive absolute performance was driven mainly by strong returns in the top-weighted Financials sector. . The Fund seeks to maintain size and sector weightings similar to its benchmark. The manager seeks to add value versus the Russell 1000 Value Index by overweighting stocks that are more likely to beat the benchmark, while underweighting stocks that are believed to lag the Index. . The manager employs a CORE approach -- computer optimized, research enhanced -- using quantitative techniques to identify cheap stocks with good momentum, companies about which fundamental research analysts are becoming more positive, and that have strong profit margins and sustainable earnings that employ their capital to enhance shareholder value. [CHART] Line Chart Historical Fund Return $10,000 Investment made 8/31/99 (Fund Inception Date) Large Cap Value CORE(SM) Fund Russell 1000(R) Value Index ----------------------------- --------------------------- 8/31/1999 $10,000.00 $10,000.00 9/30/1999 9,710.99 9,650.00 10/31/1999 10,331.58 10,205.84 11/30/1999 10,222.01 10,126.23 12/31/1999 10,357.99 10,174.84 1/31/2000 9,966.70 9,843.14 2/29/2000 9,306.14 9,111.80 3/31/2000 10,353.69 10,223.43 4/30/2000 10,235.53 10,104.84 5/31/2000 10,315.02 10,210.94 6/30/2000 9,925.40 9,744.30 7/31/2000 10,094.18 9,866.11 8/31/2000 10,735.04 10,414.66 9/30/2000 10,780.50 10,510.48 10/31/2000 10,929.67 10,769.04 11/30/2000 10,420.97 10,369.50 12/31/2000 10,888.02 10,889.02 1/31/2001 10,869.92 10,931.48 2/28/2001 10,559.13 10,627.59 3/31/2001 10,161.18 10,252.43 4/30/2001 10,769.26 10,754.80 5/31/2001 11,024.65 10,996.79 6/30/2001 10,815.74 10,752.66 7/31/2001 10,813.92 10,730.08 8/31/2001 10,328.29 10,299.80 9/30/2001 9,640.82 9,574.70 10/31/2001 9,619.47 9,492.35 11/30/2001 10,113.73 10,043.86 12/31/2001 10,370.41 10,279.89 1/31/2002 10,224.94 10,200.73 2/28/2002 10,176.05 10,217.06 3/31/2002 10,651.28 10,700.32 4/30/2002 10,357.76 10,333.30 5/31/2002 10,304.85 10,384.97 6/30/2002 9,615.15 9,788.87 7/31/2002 8,672.71 8,878.51 8/31/2002 8,841.46 8,945.98 9/30/2002 7,947.30 7,951.19 10/31/2002 8,451.42 8,540.37 11/30/2002 8,804.20 9,078.42 12/31/2002 8,482.15 8,684.41 1/31/2003 8,251.25 8,474.25 2/28/2003 8,045.22 8,247.99 3/31/2003 8,091.91 8,262.01 4/30/2003 8,680.27 8,989.07 5/31/2003 9,190.37 9,569.76 6/30/2003 9,305.10 9,689.38 7/31/2003 9,467.35 9,833.75 8/31/2003 9,688.33 9,987.16 9/30/2003 9,596.38 9,889.28 10/31/2003 10,144.78 10,494.51 11/30/2003 10,330.15 10,637.23 12/31/2003 10,930.14 11,292.49 Value on 12/31/03: ------------------ $10,930 Large Cap Value CORE(SM) Fund $11,292 Russell 1000(R) Value Index MORNINGSTAR CATEGORY+: . Large Value MORNINGSTAR RISK+: . Below Average (VL/VUL) . Below Average (VA) MORNINGSTAR RATING+: . **** (VL/VUL) . *** (VA) TOP TEN HOLDINGS (as of December 31, 2003) % of assets ------ Exxon Mobil Corp. 4.2% Citigroup, Inc. 3.7% Bank of America Corp. 3.1% JP Morgan Chase & Co. 2.4% Time Warner, Inc. 2.2% Wachovia Corp. 2.0% BellSouth Corp. 1.9% Viacom, Inc. 1.8% General Motors Corp. 1.5% Prudential Financial, Inc. 1.4% AVERAGE ANNUAL TOTAL RETURNS* Large Cap Russell 1000(R) Value CORE(SM) Fund Value Index ------------------- ----------------- 1 Year 28.86% 30.03% 3 Years 0.13 1.22 Since Inception (8/31/99) 2.07 2.84 SECTOR/INDUSTRY ALLOCATION (as of December 31, 2003) % of assets ------ Financials 35.56% Consumer Discretionary 15.37% Energy 11.55% Information Technology 7.40% Consumer Staples 7.15% Telecommunication Services 6.81% Healthcare 5.07% Utilities 4.53% Materials 3.35% Industrials 3.22% * Total returns are for the period ended December 31, 2003. Returns represent past performance, assume reinvestment of all distributions and are not indicative of future performance. Investment returns and principal value of fund shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. The performance of the fund on this page is reported net of Trust level charges (i.e. investment management fees and operating expenses). It does not reflect expense and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product prospectus. Performance would be lower if expenses and charges of the separate accounts and products were reflected. + Source: MorningStar, Inc. Data as of 12/31/03. VL represents Variable Life subaccounts, VUL represents Variable Universal Life subaccounts and VA represents Variable Annuity subaccounts Hancock VL/VUL subaccounts were rated against 538 VL/VUL subaccounts and 1,013 VA subaccounts in the Morningstar Large Value category. This represents the Morningstar 3 year rating. STATEMENT OF ASSETS AND LIABILITIES JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- (000's Omitted) ASSETS Long term investments at cost ....................................... $46,628 Net unrealized appreciation of investments .......................... 6,036 Short-term investments at value ..................................... 300 ------- Total investments ............................................. 52,964 Cash ................................................................ 12 Receivable for: Dividends ........................................................ 66 Futures contracts variation margin ............................... 1 ------- Total assets ........................................................ 53,043 ------- LIABILITIES Payables for: Fund shares purchased ............................................ 6 Other liabilities ................................................ 3 ------- Total liabilities ................................................... 9 ------- Net assets .......................................................... $53,034 ======= Shares of beneficial interest outstanding ........................... 5,435 ------- Net asset value per share ........................................... $ 9.76 ======= Composition of net assets: Capital paid-in .................................................. $53,788 Accumulated net realized loss on investments, futures and foreign currency transactions ..................... (6,791) Net unrealized appreciation of: Investments ................................................... 6,036 Futures 1 ------- Net assets .......................................................... $53,034 ======= STATEMENT OF OPERATIONS JOHN HANCOCK VARIABLE SERIES TRUST I For the Year Ended December 31, 2003 -------------------------------------------------------------------------------- (000's Omitted) INVESTMENT INCOME Interest ...................................................... $ 18 Dividends ..................................................... 968 ------- Total investment income 986 ------- EXPENSES Investment advisory fee ............................................. 332 Auditors fees ................................................. 6 Custodian fees ................................................ 71 Legal fees .................................................... 3 Printing & mailing fees ....................................... 4 Trustees' fees ................................................ 1 Other fees .................................................... 1 ------- Total expenses ...................................................... 418 Less expenses reimbursed ...................................... (42) ------- Net expenses ........................................................ 376 ------- Net investment income ............................................... 610 ------- REALIZED AND UNREALIZED GAIN Net realized gain on: Investments ................................................... 460 Financial futures contracts ................................... 63 Change in unrealized appreciation on: Investments ................................................... 10,555 Futures ....................................................... 1 ------- Net realized and unrealized gain .................................... 11,079 ------- Net increase in net assets resulting from operations ....................................................... $11,689 ======= See notes to financial statements. STATEMENT OF CHANGES IN NET ASSETS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- (000's Omitted)
Year Ended Year Ended December 31, December 31, 2003 2002 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations Net investment income .................................... $ 610 $ 581 Net realized gain (loss) ................................. 523 (6,253) Change in net unrealized appreciation (depreciation) ..... 10,556 (3,791) ------- ------- Net increase (decrease) in net assets resulting from operations ......................................... 11,689 (9,463) Distributions to shareholders from: Net investment income .................................... (610) (581) Realized gains ........................................... (1,764) ------- ------- Decrease in net assets resulting from distributions ... (2,374) (581) From fund share transactions: Proceeds from shares sold ................................ 10,099 13,044 Distributions reinvested ................................. 2,374 581 Payment for shares redeemed .............................. (9,519) (23,648) ------- ------- Increase (decrease) in net assets from fund share transactions ....................................... 2,954 (10,023) ------- ------- NET INCREASE (DECREASE) IN NET ASSETS ....................... 12,269 (20,067) NET ASSETS Beginning of Period ...................................... 40,765 60,832 ------- ------- End of Period ............................................ $53,034 $40,765 ======= ======= Analysis of fund share transactions: Sold ..................................................... 1,163 1,462 Reinvested ............................................... 254 67 Redeemed ................................................. (1,112) (2,585) ------- ------- Net increase (decrease) in fund shares outstanding .......... 305 (1,056) ======= =======
See notes to financial statements. FINANCIAL HIGHLIGHTS JOHN HANCOCK VARIABLE SERIES TRUST I -------------------------------------------------------------------------------- Selected data for each share of beneficial interest outstanding throughout the period indicated:
Large Cap Value CORE Fund -------------------------------------------------------------------- Year Ended December 31, -------------------------------------------------------------------- Period from August 31, to December 31, 2003 2002 2001 2000 1999(e) ------- ------- ------- ------- ------------- Net Assets Value at Beginning of Period ........... $ 7.95 $ 9.83 $ 10.42 $ 10.16 $10.00 Income from Investment Operations: Net Investment Income .......................... 0.12 0.11 0.09 0.15 0.04 Net Realized and Unrealized Gain (Loss) on Investments(a) .............................. 2.15 (1.88) (0.59) 0.36 0.31 ------- ------- ------- ------- ------ Total From Investment Operations ............... 2.27 (1.77) (0.50) 0.51 0.35 Less Distributions: Distribution from Net Investment Income ........ (0.12) (0.11) (0.09) (0.15) (0.03) Distribution from Net Realized Gains on Investments ................................. (0.34) (0.06) (0.14) Distribution from Excess of Net Investment Income/Gains ................................ (0.03) (0.01) Distribution from Capital Paid-in .............. (0.01) (0.01) ------- ------- ------- ------- ------ Total Distributions ............................ (0.46) (0.11) (0.09) (0.25) (0.19) ------- ------- ------- ------- ------ Net Assets Value at End of Period ................. $ 9.76 $ 7.95 $ 9.83 $ 10.42 $10.16 ======= ======= ======= ======= ====== Total Investment Return(b) ........................ 28.86% (18.21)% (4.75)% 5.12% 3.58%(c) Ratios/Supplemental Data: Ratio of Operating Expenses to Average Net Assets ...................................... 0.85%(f) 0.84%(f) 0.85%(f) 0.85%(f) 0.85%(d)(f) Ratio of Net Investment Income to Average Net Assets ...................................... 1.38% 1.18% 0.98% 1.54% 1.13%(d) Portfolio Turnover Rate ........................ 105.62% 89.43% 74.91%(g) 59.15% 30.90%(c) Net Assets End of Period (000s Omitted) ........... $53,034 $40,765 $60,832 $18,164 $6,371
(a) The amount shown at this caption for each share outstanding throughout the year may not accord with the change in the aggregate gains and losses in the portfolio securities for the year because of the timing of the purchases and withdrawals of the shares in relation to the fluctuating market values of the portfolio. (b) The performance does not reflect expenses and charges of the applicable separate accounts and variable products, all of which vary to a considerable extent and are described in your product's prospectus. (c) Not annualized. (d) Annualized. (e) Commencement of operations. (f) Expense ratio is net of expense reimbursements. Had such reimbursements not been made the expense ratio would have been .94%, .97%, .88%, 1.09% and 1.17% for the years ended December 31, 2003, 2002, 2001, 2000 and 1999, respectively. (g) Excludes merger activity. SCHEDULE OF INVESTMENTS (JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- LARGE CAP VALUE CORE FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK Aerospace & Defense - 0.4% Boeing Co. * ............................................ 2,900 $ 122 Northrop Grumman Corp. .................................. 1,100 105 ------ 227 Airlines - 0.1% Southwest Airlines Co. .................................. 2,600 42 Auto Components - 0.3% Delphi Automotive Systems Corp. * ....................... 17,600 180 Automobiles - 2.8% Ford Motor Co. .......................................... 46,200 739 General Motors Corp. * .................................. 14,400 769 ------ 1,508 Banks - 14.6% Bank Hawaii Corp. ....................................... 3,100 131 Bank of America Corp. * ................................. 20,210 1,625 Bank One Corp. * ........................................ 6,000 274 Charter One Financial, Inc. ............................. 6,100 211 Comerica, Inc. .......................................... 4,300 241 FleetBoston Financial Corp. ............................. 5,900 258 JP Morgan Chase & Co. ................................... 34,000 1,249 National City Corp. * ................................... 16,100 546 Popular, Inc. ........................................... 1,100 49 Regions Financial Corp. ................................. 12,200 454 Silicon Valley Bancshares * ............................. 6,600 238 SouthTrust Corp. * ...................................... 14,800 484 Suntrust Banks, Inc. * .................................. 4,800 343 UnionBanCal Corp. ....................................... 2,600 150 US Bancorp * ............................................ 13,900 414 Wachovia Corp. * ........................................ 22,700 1,058 ------ 7,725 Biotechnology - 1.5% Amgen, Inc. * ........................................... 6,600 408 Genetech, Inc. * ........................................ 1,600 150 Gilead Sciences, Inc. * ................................. 3,700 215 ------ 773 Building Products - 0.2% York International Corp. ................................ 2,700 99 Chemicals - 2.1% Dow Chemical Co. * ...................................... 12,600 524 Monsanto Co. ............................................ 20,500 590 ------ 1,114 Commercial Services & Supplies - 1.9% IMS Health, Inc. * ...................................... 5,500 137 ITT Educational Services, Inc. * ........................ 4,600 216 Republic Services, Inc. - Cl. A * ....................... 4,800 123 Waste Management, Inc. * ................................ 18,500 547 ------ 1,023 Communications Equipment - 1.3% Advanced Fibre Communications, Inc. * ................... 9,000 $ 181 Avaya, Inc. * ........................................... 33,900 439 Scientific-Atlanta, Inc. * .............................. 1,800 49 ------ 669 Computers & Peripherals - 1.8% Hewlett-Packard Co. * ................................... 7,242 166 Intel Corp. ............................................. 14,800 477 International Business Machines Corp. ................... 2,500 232 SanDisk Corp. * ......................................... 1,200 73 ------ 948 Containers & Packaging - 0.4% Owens-Illinois, Inc. * .................................. 7,400 88 Sealed Air Corp. * ...................................... 2,300 125 ------ 213 Credit Card - 0.4% MBNA Corp. * ............................................ 7,900 196 Diversified Financials - 11.0% AmeriCredit Corp. * ..................................... 3,600 57 CIT Group, Inc. * ....................................... 15,800 568 Citigroup, Inc. * ....................................... 40,300 1,956 Doral Financial Corp. ................................... 10,350 334 Friedman Billings Ramsey Group - Cl. A .................. 22,300 515 Lehman Brothers Holdings, Inc. .......................... 4,600 355 Merrill Lynch & Co., Inc. * ............................. 3,300 194 Moody's Corp. * ......................................... 8,500 515 Morgan Stanley, Dean Witter, Discover & Co. ............. 900 52 Nationwide Financial Services - Cl. A ................... 2,200 73 Nuveen Investments, Inc. - Cl. A ........................ 3,800 101 Washington Mutual, Inc. * ............................... 13,700 550 Wells Fargo & Co. * ..................................... 9,500 559 ------ 5,829 Diversified Telecommunication Services - 5.5% BellSouth Corp. ......................................... 34,800 985 CenturyTel, Inc. ........................................ 5,000 163 SBC Communications, Inc. * .............................. 26,400 688 Sprint Corp. * .......................................... 41,300 678 Verizon Communications * ................................ 12,000 421 ------ 2,935 Electric Utilities - 4.1% Constellation Energy Group, Inc. * ...................... 6,700 263 Edison International * .................................. 26,600 583 Entergy Corp. * ......................................... 10,500 600 Exelon Corp. * .......................................... 8,900 591 FPL Group, Inc. ......................................... 800 52 PPL Corp. ............................................... 1,400 61 ------ 2,150 SCHEDULE OF INVESTMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- LARGE CAP VALUE CORE FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Electric/Gas - 0.4% Northeast Utilities ..................................... 11,600 $ 234 Electronic Equipment & Instruments - 1.5% Agilent Technologies, Inc. * ............................ 2,400 70 Avnet, Inc. ............................................. 11,400 247 Harman International Industries, Inc. * ................. 800 59 Ingram Micro, Inc. - Cl. A * ............................ 5,000 80 Sanmina Corp. * ......................................... 26,800 338 ------ 794 Energy Equipment & Services - 1.2% Halliburton Co. * ....................................... 5,500 143 Transocean Sedco Forex, Inc. * .......................... 21,100 507 ------ 650 Finance - 0.2% A.G. Edwards, Inc. * .................................... 2,400 87 Food & Drug Retailing - 0.5% CVS Corp ................................................ 2,000 72 Sysco Corp. * ........................................... 4,700 175 ------ 247 Food Products - 3.2% Archer Daniels Midland Co. * ............................ 38,800 590 Kraft Foods, Inc. - Cl. A ............................... 18,500 596 Tyson Foods, Inc. - Cl. A ............................... 36,900 489 ------ 1,675 Health Care Equipment & Supplies - 1.5% Guidant Corp ............................................ 4,400 265 Zimmer Holdings, Inc. * ................................. 7,400 521 ------ 786 Health Care Providers & Services - 0.4% Humana, Inc. * .......................................... 8,900 203 Household Products - 0.8% Procter & Gamble Co. * .................................. 4,300 430 Insurance - 6.5% American International Group, Inc. * .................... 3,115 207 American National Insurance Co .......................... 1,100 93 Chubb Corp. * ........................................... 4,500 307 Loews Corp. * ........................................... 5,100 252 MBIA, Inc. * ............................................ 9,900 586 Metlife, Inc. * ......................................... 16,700 562 Principal Financial Group. * ............................ 17,600 582 Prudential Financial, Inc. * ............................ 17,700 739 Travelers Property Casualty Corp. - Cl. B ............... 8,428 143 ------ 3,471 IT Consulting & Services - 1.3% Accenture, Ltd. - Cl. A * ............................... 19,600 516 Computer Sciences Corp. * ............................... 4,000 177 ------ 693 Machinery - 0.3% AGCO Corp ............................................... 3,200 $ 65 Caterpillar, Inc. * ..................................... 1,000 83 ------ 148 Marine - 0.1% Overseas Shipholding Group, Inc ......................... 1,700 58 Media - 7.5% Comcast Corp. - Cl. A ................................... 11,763 386 Cox Radio, Inc. - Cl. A * ............................... 11,300 285 Fox Entertainment Group, Inc. - Cl. A * ................. 18,800 548 Hearst-Argyle Television, Inc. * ........................ 15,100 416 Panamsat Corp. * ........................................ 5,700 123 The Walt Disney Co. * ................................... 5,000 117 Time Warner, Inc. * ..................................... 63,300 1,139 Viacom, Inc. - Cl. B * .................................. 21,200 941 ------ 3,955 Metals & Mining - 0.4% Carpenter Technology Corp. * ............................ 3,000 89 Freeport-McMoran Copper & Gold, Inc. - Cl. B ............ 3,000 126 ------ 215 Multiline Retail - 1.6% Federated Department Stores, Inc. * ..................... 3,500 165 Saks, Inc. * ............................................ 26,900 404 Sears, Roebuck & Co. * .................................. 6,700 305 ------ 874 Oil & Gas - 10.1% Anadarko Petroleum Corp. * .............................. 4,100 209 Burlington Resources, Inc. * ............................ 1,500 83 ChevronTexaco Corp. * ................................... 4,435 383 Devon Energy Corp. * .................................... 6,100 349 Exxon Mobil Corp. * ..................................... 54,200 2,222 Marathon Oil Corp. * .................................... 18,900 625 Occidental Petroleum Corp. * ............................ 8,900 376 Sunoco, Inc. * .......................................... 10,800 553 Valero Energy Corp ...................................... 12,400 575 ------ 5,375 Paper & Forest Products - 1.3% Boise Cascade Corp. * ................................... 13,700 450 Georgia-Pacific Corp. * ................................. 7,300 224 ------ 674 Personal Products - 1.7% Avon Products, Inc ...................................... 6,100 412 Gillette Co ............................................. 13,600 499 ------ 911 Pharmaceuticals - 1.5% American Pharmaceutical Partners, Inc * ................. 8,600 289 Endo Pharmaceuticals Holdings * ......................... 11,200 216 SCHEDULE OF INVESTMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- LARGE CAP VALUE CORE FUND Market Name of Issuer Shares Value -------------- ------ ------- (000's) COMMON STOCK - Continued Pharmaceuticals - Continued Johnson & Johnson ....................................... 3,900 $ 201 Medco Health Solutions, Inc. * .......................... 470 16 Merck & Co., Inc. * ..................................... 1,100 51 ------- 773 Real Estate Investment Trust - 2.0% Equity Office Properties Trust * ........................ 22,000 630 HRPT Properties Trust ................................... 16,000 161 Mack-Cali Realty LP * ................................... 6,500 271 ------- 1,062 Real Estate Operations - 0.5% LNR Property Corp ....................................... 5,400 267 Road & Rail - 0.5% Union Pacific Corp ...................................... 4,200 292 Semiconductor Equipment & Products - 0.2% LSI Logic Corp. * ....................................... 9,500 84 Software - 1.4% Adobe Systems, Inc ...................................... 12,200 480 BMC Software, Inc. * .................................... 8,800 164 Computer Associates International, Inc .................. 2,600 71 Jack Henry & Associates, Inc ............................ 2,500 51 ------- 766 Specialty Retail - 1.4% AutoNation, Inc. * ...................................... 25,200 463 Blockbuster, Inc. - Cl. A ............................... 3,100 56 Staples, Inc. * ......................................... 8,300 226 ------- 745 Textiles & Apparel - 0.6% Coach, Inc. * ........................................... 8,600 325 Tobacco - 0.9% Altria Group, Inc ....................................... 5,700 310 R.J. Reynolds Tobacco Holdings, Inc ..................... 3,300 192 ------- 502 U.S. Government Agencies - 0.2% Federal Home Loan Mortgage Corp ......................... 1,500 88 Wireless Telecommunications Services - 1.2% AT&T Wireless Group * ................................... 36,400 291 United States Cellular Corp. * .......................... 10,100 358 ------- 649 ------- TOTAL COMMON STOCK- .................................. 99.3% 52,664 Par Market Name of Issuer Value Value -------------- ------- ------- (000's) (000's) SHORT-TERM INVESTMENTS - 0.6% Investment in joint repurchase agreement with Goldman Sachs % Co., 0.995% due 01/02/04 ............................................ $ 300 $ 300 ------ ------- TOTAL INVESTMENTS- ............................... 99.9% 52,964 Cash and Receivables, less payables- ................ 0.1% 70 ------ ------- NET ASSETS- ................................... 100.0% $53,034 ====== ======= * Non-income producing security. See notes to financial statements. NOTES TO FINANCIAL STATEMENTS JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- (000's Omitted) NOTE A--ORGANIZATION John Hancock Large Cap Value CORE Fund (the "Fund") is a diversified series of John Hancock Variable Series Trust I (the "Trust"), an open-end investment management company registered under the Investment Company Act of 1940. The Trust is organized as a Massachusetts business trust and consists of thirty different funds as of December 31, 2003. The results of this Fund are included in this report. The results of the other Funds in the Trust are presented under separate cover. The Trust may add or delete Funds in the future to accommodate various investment objectives. The Trust has issued shares of beneficial interest exclusively to John Hancock Variable Life Account U ("JHVLAU"), John Hancock Variable Life Account V ("JHVLAV"), John Hancock Variable Life Account S ("JHVLAS"), and John Hancock Variable Annuity Account I ("JHVAAI") to fund policies and contracts issued by the John Hancock Variable Life Insurance Company ("JHVLICO"), and to John Hancock Variable Annuity Account U ("JHVAAU"), John Hancock Variable Annuity Account V ("JHVAAV"), John Hancock Variable Life Account UV ("JHVLAUV"), John Hancock Variable Annuity Account H ("JHVAAH"), and John Hancock Variable Annuity Account JF ("JHVAAJF") to fund contracts and policies issued by John Hancock Life Insurance Company ("John Hancock" or "JHLICO"), to John Hancock Variable Life Account PPM-1 ("PPM-1"), and to John Hancock Variable Life Account PPM-2 ("PPM-2"). NOTE B--ACCOUNTING POLICIES Valuation of investments: Common stocks and other such securities traded on national exchanges are normally valued on the basis of closing prices. Securities traded in the over-the-counter market and securities with no sales on the day of valuation are normally valued at their last available bid price. Short-term investments, with a maturity not to exceed 60 days, are valued at amortized cost, which approximates market value. Investment securities for which no current market quotations are readily available, including certain foreign securities, when held by the Fund, are valued at fair value as determined in good faith by the Board of Trustees. Investment security transactions are recorded on the date of purchase or sale. Repurchase agreements: The Fund may enter into repurchase agreements which are contracts under which the Fund would acquire a security for a relatively short period (usually not more than 7 days) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). The Fund will enter into repurchase agreements only with member banks of the Federal Reserve System and with "primary dealers" in United States Government Securities. The underlying securities, which represent the collateral of the agreement, must be marked to market daily to ensure that each repurchase agreement is fully collateralized at all times. The Fund will not invest more than 10% of its net assets in repurchase agreements maturing in more than 7 days. Joint repurchase agreements: The Fund, along with other registered investment companies having a management contract with Goldman Sachs Asset Management (GSAM), may participate in a joint repurchase agreement pursuant to an exemptive order issued by the Securities and Exchange Commission. Aggregate cash balances are invested in one or more repurchase agreements, whose underlying securities are obligations of the U.S. Government and/or its agencies. The Fund's custodian bank receives delivery of the underlying securities for the joint repurchase agreement on the Fund's behalf. GSAM is responsible for ensuring that the agreement is fully collateralized at all times. Expenses: Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributed to the Fund are allocated on the basis of relative net assets of the Fund. Bank borrowings: The Fund is permitted to have bank borrowings for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Fund has entered into syndicated line of credit agreements with State Street Bank and Trust Company ("SSBT"), the NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Trust's record keeper and custodian and the Bank of New York. These agreements enable the Fund to participate in an unsecured line of credit, which permits borrowings up to $125 and $75 million, respectively. Interest is charged to the Fund, based on its borrowing. In addition, a commitment fee is charged to the Fund based on the average daily unused portion of the line of credit and is allocated among the participating Funds in the Trust. Interest expense paid under the line of credit is included under the caption "Other fees" in the Statement of Operations. The Fund had borrowings under the line of credit during the year ended December 31, 2003 as follows: Average Daily Loan Balance During the Period for which Weighted Average Loans were Outstanding Interest Rate Interest Expense --------------------------- ---------------- ---------------- $63 1.76% $-- Financial futures contracts: The Fund may buy and sell financial futures contracts to hedge against the effects of fluctuations in interest rates and other market conditions. At the time the Fund enters into a financial futures contract, it will be required to deposit with its custodian a specified amount of cash or U.S. government securities, known as "initial margin". Each day, the futures contract is valued at the official settlement price of the Chicago Board of Trade or U.S. commodities exchange. Daily adjustments, called variation margin, arising from this "mark to market", are recorded by the Fund as unrealized gains or losses. When the contracts are closed, the Fund recognizes a gain or a loss. Risks of entering into futures contracts include the possibility that there may be an illiquid market and/or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. In addition, the Fund could be prevented from opening or realizing the benefits of closing out futures positions because of position limits or limits on daily price fluctuations imposed by an exchange. At December 31, 2003, open financial futures contracts for the Fund were as follows:
Open Unrealized Contracts Position Expiration Month Gain --------- -------- ---------------- ---------- S&P Mini 500 Index Futures 6 Long March 04 $1 -- $1 ==
At December 31, 2003, the Fund had deposited $40 in segregated accounts to cover initial margin requirements on open financial futures contracts. Forward foreign currency contracts: The Fund may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge the Fund's investments against currency fluctuations. Neither type of forward foreign currency transaction will eliminate fluctuations in the prices of the Fund's securities or prevent loss if the price of such securities should decline. The U.S. dollar value of a forward foreign currency contract is determined using forward exchange rates supplied by a quotation service. Realized gain (loss) on the purchases and sales of forward foreign currency contracts is recognized on settlement date. At December 31, 2003, the Fund had no open forward foreign currency contracts. NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- (000's Omitted) NOTE B--ACCOUNTING POLICIES--Continued Federal income taxes: The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no federal income tax provision is required. As of December 31, 2003, the Fund had approximate net tax basis capital loss carryforwards, which may be applied against any net taxable gains, as follows: $491, $5,508 and $616 which expire in 2009, 2010 and 2011, respectively. In addition, from the period November 1, 2003 through December 31, 2003, the Fund incurred no net realized capital losses. Dividends, Interest and Distributions: Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Realized gains and losses from security transactions are determined on the basis of identified cost. Dividends of net investment income will be declared and distributed monthly by the Fund. The Fund will distribute all of its net realized capital gains annually, at the end of its fiscal year. Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES On February 5, 2003, the Board of Trustees of the Trust renewed its Investment Advisory Agreement with John Hancock. For its services, John Hancock receives monthly compensation at the following rate on an annual basis of the Fund's net assets: Between $50 Million and Excess Over First $50 Million $200 Million $200 Million ----------------- --------------- ------------ 0.75% 0.65% 0.60% In the event that normal operating expenses of the Fund, exclusive of investment advisory fees, taxes, interest, brokerage commissions and extraordinary expenses, shall exceed 0.10% of the Fund's daily net asset value, John Hancock and JHVLICO will reimburse the Fund for such excess. Accordingly, for the year ended December 31, 2003, the reimbursements paid from John Hancock and JHVLICO were $42 to the Fund. John Hancock has entered into a Sub-Advisory Agreement with Goldman Sachs Asset Management, with respect to the Fund. Goldman Sachs Asset Management is an affiliate of John Hancock, and under its supervision, is responsible for the day-to-day investment management of the Fund. Signator Investors, Inc., a wholly owned subsidiary of John Hancock is the principal underwriter and transfer agent NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- (000's Omitted) NOTE C--INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES--Continued of the Trust. Certain officers and trustees of the Trust are officers and directors of JHVLICO, JHVLAU, JHVLAV, JHVLAS, JHVAAI, JHVLAUV, JHVAAV, JHVAAU, JHVAAH, JHVAAJF, PPM-1, and PPM-2, and some are also officers of John Hancock. Fees for independent trustees are paid by the Trust. NOTE D--INVESTMENT TRANSACTIONS Purchases and proceeds from sales and maturities of investments, excluding short-term securities and obligations of the U.S. government, for the Fund for the year ended December 31, 2003 were as follows: Purchases Sales and Maturities --------- -------------------- $47,523 $46,518 The identified cost of investments owned by the Fund (including earned discount on corporate short-term notes, and commercial paper) and their respective gross unrealized appreciation and depreciation for Federal income tax purposes at December 31, 2003 were as follows: Identified Unrealized Unrealized Net Unrealized Cost Appreciation Depreciation Appreciation ---------- ------------ ------------ -------------- $47,104 $6,662 $(802) $5,860 Distribution of Income and Gains: Distributions of net investment income, if any, are made at least annually. Net realized gains from investment transactions, in excess of available capital loss carryforwards, would be taxable to the Fund if not distributed, and, therefore, will be distributed to shareholders at least annually. Earnings and profits distributed to shareholders on redemption of fund shares may be utilized by the Fund, to the extent permissible, as part of the Fund's dividends-paid deduction on its federal income tax returns. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These differences primarily relate to certain securities sold at a loss. Additionally, as a result, net investment income (loss) and net realized gain (loss) or investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2003, the Fund's components of distributable earnings on a tax basis were as follows: Undistributed Undistributed Ordinary Net Long-Term Capital Loss Net Unrealized Income Capital Gain Carryforwards Appreciation ------------- ------------- ------------- -------------- $-- $-- $6,615 $5,860 NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- (000's Omitted) NOTE D--INVESTMENT TRANSACTIONS--Continued In addition, the tax character of distributions paid by the Fund are summarized as follows: Distributions from Distributions from Year Ordinary Income Long-Term Capital Gain Return of Capital ---- ------------------ ---------------------- ----------------- 2003 $593 $-- $1,781 2002 581 -- -- NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED) The Board of Trustees of the Trust is responsible for overall management of the Trust. The Board may exercise all powers of the Trust, except those powers which are conferred solely upon or reserved to the shareholders. The Trust's Statement of Additional Information (SAI) includes additional information about the Trustees and is available without charge, upon request, by calling toll-free at 1-800-576-2227. The following table provides information about the members of the Board of Trustees and the officers of the Trust: Disinterested Trustees
Positions Held Principal Occupation(s) Name, Address and Age With Trust During Past Five Years -------------------------------- -------------------- ----------------------------------- Elizabeth G. Cook (age 66) Trustee Expressive Arts Therapist, Dana- c/o John Hancock Variable Series Farber Cancer Institute; President, Trust I The Advertising Club of Greater John Hancock Place Boston Boston, Massachusetts 02117 Diane C. Kessler (age 57) Trustee Executive Director, Massachusetts c/o John Hancock Variable Series Council of Churches Trust I John Hancock Place Boston, Massachusetts 02117 Robert Verdonck (age 58) Trustee President and Chief c/o John Hancock Variable Series Executive Officer, East Boston Trust I Savings Bank John Hancock Place Boston, Massachusetts 02117 Hassell H. McClellan (age 58) Trustee Associate Professor and Graduate c/o John Hancock Variable Series Dean, The Graduate School of the Trust I Wallace G. Carroll School of John Hancock Place Management, Boston College Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued Trustees Affiliated with the Trust and Officers of the Trust
Positions Held Principal Occupation(s) Name, Address and Age With Trust During Past Five Years -------------------------------- -------------------- ----------------------------------- Michele G. Van Leer* (age 46) Chairman and Trustee Senior Vice President, Product John Hancock Place Management, John Hancock Life Boston, Massachusetts 02117 Insurance Company; Vice Chairman, President & Director, John Hancock Variable Life Insurance Company Kathleen F. Driscoll* (age 47) Vice Chairman, Senior Vice President, Signator John Hancock Place President and Brokerage, John Hancock Life Boston, Massachusetts 02117 Trustee Insurance Company; Vice President Corporate Communications, John Hancock Life Insurance Company Jude A. Curtis (age 45) Compliance Officer Vice President and Chief Investment John Hancock Place Compliance Officer, John Hancock Boston, Massachusetts 02117 Life Insurance Company; formerly Second Vice President and Counsel, Office of Business Conduct; John Hancock Life Insurance Company; formerly a Partner at Hale and Dorr LLP (law firm) Janet Wang (age 35) Assistant Compliance Compliance Specialist, John John Hancock Place Officer Hancock Life Insurance Company Boston, Massachusetts 02117 Raymond F. Skiba (age 58) Treasurer Director of Fund Operations, John John Hancock Place Hancock Life Insurance Company Boston, Massachusetts 02117 Gladys C. Millan (age 57) Assistant Treasurer Manager of Fund Operations, John John Hancock Place Hancock Life Insurance Company Boston, Massachusetts 02117
NOTES TO FINANCIAL STATEMENTS--Continued JOHN HANCOCK VARIABLE SERIES TRUST I December 31, 2003 -------------------------------------------------------------------------------- NOTE E--BOARD OF TRUSTEES AND OFFICERS OF THE TRUST (UNAUDITED)--Continued Trustee Affiliated with the Trust and Officers of the Trust--Continued
Positions Held Principal Occupation(s) Name, Address and Age With Trust During Past Five Years -------------------------------- -------------------- ------------------------------------ Karen Q. Visconti (age 50) Secretary Director, Product & Market John Hancock Place Management, John Hancock Life Boston, Massachusetts 02117 Insurance Company Arnold R. Bergman (age 53) Assistant Secretary Senior Counsel, Law Department, John Hancock Place John Hancock Life Insurance Boston, Massachusetts 02117 company; formerly Vice President, General Counsel and Secretary, First Variable Life Insurance Company
*Trustee who is an "interested person" as defined in the 1940 Act, due to her position with John Hancock Life Insurance Company (or its affiliates), the ultimate controlling parent of the investment advisor. Because the Trust does not hold regular annual shareholders meetings, each Trustee holds office for an indefinite term until his successor is duly elected and qualified or until he dies, retires, resigns, is removed or becomes disqualified. None of the Trustees is a director of other complexes except noted above. REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Contractowners, Policyholders, and Board of Trustees of John Hancock Variable Series Trust I We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the Large Cap Value CORE Fund (a portfolio included in the series of John Hancock Variable Series Trust I {the "Trust"}) as of December 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Large Cap Value CORE Fund of John Hancock Variable Series Trust I at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Boston, Massachusetts February 6, 2004 Officers and Trustees Investment Adviser Michele G. Van Leer, John Hancock Life Insurance Company Chairman of the Board of Trustees John Hancock Place Kathleen F. Driscoll, P.O. Box 111 President and Vice Chairman Boston, MA 02117 of the Board of Trustees Elizabeth G. Cook, Trustee Reverend Diane C. Kessler, Trustee Hassell H. McClellan, Trustee Independent Auditors Robert F. Verdonck, Trustee Ernst & Young LLP Karen Q. Visconti, Secretary 200 Clarendon Street Arnold R. Bergman, Assistant Secretary Boston, MA 02116 Raymond F. Skiba, Treasurer Gladys C. Millan, Assistant Treasurer Ronald J. Bocage, Chief Legal Officer Jude A. Curtis, Compliance Officer Janet Wang, Assistant Compliance Officer Sub-Investment Advisers Capital Guardian Trust Company Pacific Investment Management Company LLC Los Angeles, CA 90071 Newport Beach, CA 92660 Declaration Management & Research LLC RREEF America LLC McLean, VA 22102 Chicago, IL 60611 Fidelity Management & Research Company SSgA Funds Management, Inc. Boston, MA 02109 Boston, MA 02110 Goldman Sachs Asset Management, LP Standish Mellon Asset New York, NY 10005 Management Company LLC Pittsburgh, PA 15258 Independence Investment LLC T. Rowe Price Associates, Inc. Boston, MA 02109 Baltimore, MD 21202 John Hancock Advisers, LLC T. Rowe Price International, Inc. Boston, MA 02199 Baltimore, MD 21202 Morgan Stanley Investment Management Inc. Wellington Management Company, LLP New York, NY 10020 Boston, MA 02109
The John Hancock Variable Series Trust I consists of funds used as investment options for various John Hancock variable life and variable annuity contracts. Investors are not able to invest directly in the John Hancock Variable Series Trust I. If the total investment return for any fund for any given year appears unusually high, the return may be attributable to unusually favorable market conditions which will probably not be sustainable. For instance, a high total investment return may reflect participation in IPOs, "hot" industries (e.g., internet-related companies), private placements, and/or leveraging investment techniques during the period indicated. There is no assurance that any of those methods, or any other investment technique will continue to have the same impact on the fund's total investment returns. All of the funds (except bond funds and equity index funds) may participate in initial public offerings (IPOs). Under certain market conditions, such participation could significantly improve a fund's total investment return. There is no assurance that such market conditions will continue and provide the same favorable impact on future investment returns. Please refer to the prospectus for your product for additional information about the investment options available. Variable life insurance and variable annuities are sold by prospectus. These reports may be used as sales literature when preceeded or accompanied by the funds' prospectus, which detail charges, investment objectives, and operating policies. Insurance products are issued by John Hancock Life Insurance Company, or John Hancock Variable Life Insurance Company* (*not licensed in New York), Boston, MA 02117. Securities products are distributed by Signator Investors, Inc., Member NASD, SIPC, 197 Clarendon Street, Boston, MA 02116. John Hancock [GRAPHIC] [LOGO] WORLDWIDE SPONSOR [LOGO] IMSA INSURANCE MARKETPLACE STANDARD ASSOCIATION